[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                    U.S. PATENT AND TRADEMARK OFFICE 

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON COURTS, THE INTERNET,
                       AND INTELLECTUAL PROPERTY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 27, 2008

                               __________

                           Serial No. 110-115

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov

                               ----------
                        U.S. GOVERNMENT PRINTING OFFICE 

40-926 PDF                      WASHINGTON : 2008 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
Washington, DC 20402-0001 
























































                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts   CHRIS CANNON, Utah
ROBERT WEXLER, Florida               RIC KELLER, Florida
LINDA T. SANCHEZ, California         DARRELL ISSA, California
STEVE COHEN, Tennessee               MIKE PENCE, Indiana
HANK JOHNSON, Georgia                J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio                   STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            Perry Apelbaum, Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel
                                 ------                                

    Subcommittee on Courts, the Internet, and Intellectual Property

                 HOWARD L. BERMAN, California, Chairman

JOHN CONYERS, Jr., Michigan          HOWARD COBLE, North Carolina
RICK BOUCHER, Virginia               TOM FEENEY, Florida
MARTIN T. MEEHAN, Massachusetts      LAMAR SMITH, Texas
ROBERT WEXLER, Florida               F. JAMES SENSENBRENNER, Jr., 
MELVIN L. WATT, North Carolina       Wisconsin
SHEILA JACKSON LEE, Texas            ELTON GALLEGLY, California
STEVE COHEN, Tennessee               BOB GOODLATTE, Virginia
HANK JOHNSON, Georgia                STEVE CHABOT, Ohio
BRAD SHERMAN, California             CHRIS CANNON, Utah
ANTHONY D. WEINER, New York          RIC KELLER, Florida
ADAM B. SCHIFF, California           DARRELL ISSA, California
ZOE LOFGREN, California              MIKE PENCE, Indiana
BETTY SUTTON, Ohio


                     Shanna Winters, Chief Counsel

                    Blaine Merritt, Minority Counsel
























                            C O N T E N T S

                              ----------                              

                           FEBRUARY 27, 2008

                                                                   Page

                           OPENING STATEMENTS

The Honorable Howard L. Berman, a Representative in Congress from 
  the State of California, and Chairman, Subcommittee on Courts, 
  the Internet, and Intellectual Property........................     1
The Honorable Howard Coble, a Representative in Congress from the 
  State of North Carolina, and Ranking Member, Subcommittee on 
  Courts, the Internet, and Intellectual Property................     3
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, Chairman, Committee on the 
  Judiciary, and Member, Subcommittee on Courts, the Internet, 
  and Intellectual Property......................................     4
The Honorable Robert Wexler, a Representative in Congress from 
  the State of Florida, and Member, Subcommittee on Courts, the 
  Internet, and Intellectual Property............................     5

                               WITNESSES

The Honorable Jon Dudas, Undersecretary of Commerce for 
  Intellectual Property, and Director of the U.S. Patent and 
  Trademark Office, U.S. Department of Commerce, Washington, DC
  Oral Testimony.................................................     7
  Prepared Statement.............................................    10
Ms. Robin M. Nazzaro, Director of Natural Resources and 
  Environment, U.S. Government Accountability Office, Washington, 
  DC
  Oral Testimony.................................................    31
  Prepared Statement.............................................    33
Mr. Robert D. Budens, President, Patent Office Professional 
  Association (POPA), Arlington, VA
  Oral Testimony.................................................    53
  Prepared Statement.............................................    55
Mr. Alan J. Kasper, First Vice President, American Intellectual 
  Property Law Association, Sughrue, Mion, PLLC, Washington, DC
  Oral Testimony.................................................   100
  Prepared Statement.............................................   102

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, 
  Chairman, Committee on the Judiciary, and Member, Subcommittee 
  on Courts, the Internet, and Intellectual Property.............     4

                                APPENDIX

Material Submitted for the Hearing Record........................   141


                    U.S. PATENT AND TRADEMARK OFFICE

                              ----------                              


                      WEDNESDAY, FEBRUARY 27, 2008

              House of Representatives,    
      Subcommittee on Courts, the Internet,
                         and Intellectual Property,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 1:34 p.m., in 
Room 2141, Rayburn House Office Building, the Honorable Howard 
Berman (Chairman of the Subcommittee) presiding.
    Present: Representatives Conyers, Berman, Wexler, Watt, 
Jackson Lee, Johnson, Coble, Sensenbrenner, Goodlatte, Chabot, 
and Issa.
    Staff present: Shanna Winters, Majority Chief Counsel; Eric 
Garduno, Majority Counsel; Christal Sheppard, Majority Counsel; 
Rosalind Jackson, Majority Professional Staff Member; Blaine 
Merritt, Minority Counsel.
    Mr. Berman. This hearing of the Subcommittee on Courts, the 
Internet, and Intellectual Property will come to order. I would 
like to begin by welcoming everyone to this hearing.
    I have to remember now which hearing is it that I am 
chairing. Right, Oversight Hearing on the U.S. Patent and 
Trademark Office.
    I will recognize myself for an opening statement.
    For over 200 years, inventors have relied on U.S. patents 
to protect their inventions from unauthorized use and copy. 
Patents play a essential role in spurring innovation. With the 
exclusive rights granted by patents, investors are rewarded for 
the inventions they create and are encouraged to further 
innovate. While the degree of importance that intellectual 
property plays varies by industry, patents are crucial to many 
of the industries that the U.S. economy depends on.
    That is why I take seriously threats to the patent system. 
One threat, the issuance of poor quality patents, has been a 
problem I have tried to address since at least 2002. Poor 
quality patents undermine the value of patents generally. They 
lead to a waste of resources, hinder development of new 
products as companies are forced to either take out licenses on 
junk patents or spend millions fighting them in court.
    Addressing this problem is the primary impetus of the 
patent reform legislation passed by the House last year and 
currently under consideration in the Senate. But another 
problem is the patent application backlog and the resulting 
increase in patent pendency. The number of patent applications 
awaiting initial review by an examiner has increased every year 
for the last 10 years and totaled over 760,000 applications by 
the end of 2007.
    Today, it takes on average over 25 months for a first 
office action to be issued, and almost 32 months for an 
application to complete its course through the USPTO. Average 
pendency in some of the more important technology areas like 
biotechnology, chemicals and computer architecture and software 
are well above 32 months. By the USPTO's own account, if steps 
are not taken to address patent pendency, total average 
pendency could increase to roughly 52 months by 2012.
    The implications of long patent pendency periods are 
sobering. The value in a patent is being able to use it to 
exclude others from making, using or selling an invention.
    While patent rights must be perfected through the 
application and examination process, the term of an issued 
patent begins the day the patent application is submitted. 
Thus, long pendency periods cut directly into the time an 
inventor has to make commercial use of his invention.
    If this period becomes too long, inventors may give up 
relying on the patent system altogether and use trade secrecy 
as a means to protect their inventions. This will reduce the 
technical information available to society, since some 
inventors will no longer provide public disclosure of their 
inventions through the patent system.
    Over the last few years, GAO has issued various reports 
analyzing practices of the USPTO. The most important recent 
report makes several points related to patent examiner hiring 
and retention, two of which I will highlight, and leave the 
rest to our GAO witness to discuss.
    Thanks in large part, the first part to pressure from this 
Subcommittee, there has been no diversion of USPTO fees since 
fiscal year 2005. And as a result, the USPTO has been able to 
plan and make examiner hiring decisions based on their 
projected fee collections.
    Secondly, the GAO report found there is little hope of 
diminishing the patent application backlog through hiring 
efforts. This may be due to a number of factors--examiner 
retention issues, flawed examiner production goals, the lack of 
capacity to train enough examiners, and because actions to 
address this problem are too late in coming.
    The Subcommittee is committed to make sure the USPTO has 
the resources it needs to address both patent quality and 
pendency. For instance, I introduced H.R. 2336 earlier this 
Congress, which would ensure that the USPTO permanently retains 
all fees it collects. I believe Mr. Caldwell is a co-sponsor of 
that legislation.
    Our support of the USPTO should not be misconstrued as 
giving the USPTO carte blanche to pursue any course it chooses 
and, conversely, to ignore warning signs that impact efforts to 
reduce the patent backlog. For instance, while I understand 
that the USPTO has agreed to study whether the current 
production goals are indeed unreasonable, I have to question 
why this was not done sooner, given that this very problem had 
already been identified by the GAO in 2005.
    Additionally, I am troubled about the recently promulgated 
continuation and claims rules, and wonder why a compromise 
couldn't be reached that patent users could live with and that 
would still address the pendency problem. I am very familiar 
with the difference between rhetoric and substance.
    I can't count the ways the patent reform legislation that 
passed the House last year has been unfairly criticized and 
misconstrued. Nevertheless, there may be some truth to the 
public criticisms regarding the claims and continuation rules. 
As such, there would be some middle ground that the USPTO has 
not fully considered.
    And finally, as part of our oversight responsibilities, we 
must look into all assertions being made about the USPTO. I 
have recently been made aware that there may be problems with 
various management decisions made by the USPTO leadership.
    For instance, last year the USPTO eliminated an office 
dedicated solely to intellectual property enforcement. This 
seems counter-intuitive, given the Subcommittee's actions to 
strengthen intellectual property enforcement efforts through 
the--Chairman Conyers' Pro IP Act legislation.
    The USPTO has characterized this change as a realignment 
instead of a reprogram that would require prior congressional 
notification. Regardless of the semantics, it should be clear 
that the Subcommittee would like to understand the USPTO's 
reasons behind any such decision prior to its implementations.
    I look forward to what promises to be a vigorous discussion 
with our witnesses on these and related issues, and I would now 
like to recognize our distinguished Ranking Member, Howard 
Coble, for his opening statement.
    Mr. Coble. Thank you, Mr. Chairman, and thank you, as well, 
for having scheduled this hearing. A healthy U.S. Patent and 
Trademark Office is essential for our patent system to thrive. 
Unfortunately, there is no true measure or statistic to 
evaluate the office or the system as a whole.
    On the one hand, we have some report that there may be 
troubles over the horizon. The time for average patent pendency 
and the backlog of patent applications are steadily increasing.
    And while we are losing experienced examiners, it appears 
there may be no solution in sight. Also, fairly recent internal 
reorganizations and rule changes have led to some controversy, 
which may lead to some additional concern.
    On the other hand, the U.S. Patent & Trademark Office is 
showing successes in many other areas, including projections 
for more than $2 billion in fee revenue in 2009, record numbers 
of patents being processed, and other indications that 
examiners are improving their reviews of applications, 
including a substantially lower percentage of applications 
being approved. Some think that the U.S. Patent & Trademark 
Office are obviously going well.
    Address the increasing patent pendency and the growing 
backlog of applications is a perennial challenge for the 
office, but the length of time for pendency and the magnitude 
of the backlog have grown to what some have viewed as alarming 
proportions.
    Recent improvements in examiner performance are enormous 
accomplishments. They should be recognized, but they alone will 
not overcome these historic challenges. I am hopeful that 
today's panel will help everyone better understand how the 
pendency and backlog issues can be managed.
    Also, Mr. Chairman, I am interested to hear about changes 
within the patent office and how they have or have not improved 
efficiencies. If changes were made that triggered a notice to 
Congress, that notice should have been sent. I hope we can 
clarify today when notice to Congress is required, that what 
constitutes notice or what actions trigger a notice so there is 
no confusion in the future.
    In order to work together, we must be kept abreast of these 
important changes within the office, and we must furthermore 
maintain an open dialogue, it seems to me.
    Finally, I greatly appreciate the effort of Mr. Berman, of 
you, in having scheduled this hearing. We have spent 
considerable time and resources in the first session of the 
110th Congress developing comprehensive patent reform. No 
reform, however, will be successful unless our patent system is 
strong and robust, which largely depends on the ability and the 
performance of the U.S. Patent & Trademark Office.
    Unfortunately, there are no predictions that demands our 
patent system are going to recede. As a result, the office, as 
users of the Congress, are going to have to continually and 
honestly assess the performance of the office to protect and 
ensure the future of our innovations. This honest assessment is 
essential for Members of this Subcommittee and for the future 
of the U.S. Patent & Trademark Office.
    I look forward, Mr. Chairman, as do you, to today's panel 
and learning any new sights on how we may improve or assist the 
U.S. Patent & Trademark Office in meeting its growing 
challenges.
    And I yield back, Mr. Chairman.
    Mr. Berman. Well, thank you, Mr. Coble.
    And the Chairman of the Committee on Judiciary, Mr. 
Conyers, is recognized.
    Mr. Conyers. Thank you, Chairman. I am happy to associate 
myself with the remarks of both you and Howard Coble, and I 
would ask unanimous consent to put my statement in the record.
    The only point that I would like to make is to Mr. Dudas, 
our distinguished Undersecretary. I was out at the Patent 
Office earlier this year and there is a question about hiring--
as many people as we hire, we have got a lot of people going 
out the back door.
    I was impressed with the quality of the young men and women 
that are trained out there. They were energetic and committed. 
Now, these were people going into the system. The question is, 
what happened somewhere along the way, or what goes on to 
change that enthusiasm? And I am sure we will get into that.
    And so, I am happy to join the distinguished Chairman of 
the Committee, Mr. Berman, and I look forward to the testimony 
of the witnesses.
    The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
  in Congress from the State of Michigan, Chairman, Committee on the 
   Judiciary, and Member, Subcommittee on Courts, the Internet, and 
                         Intellectual Property
    Thank you, Chairman Berman, for holding this oversight hearing on 
the USPTO.
    The GAO report, and general commentary throughout the patenting 
community is essentially unanimous that the increasing length of patent 
pendency is a serious and growing problem that harms our nation's 
competitive advantage both at home and abroad.
    However, there's much less than unanimity when it comes to figuring 
out the root causes of the increase in the time it takes to obtain a 
patent and the mechanisms that are necessary to reverse that trend.
    Many place the blame squarely on the shoulders of either the USPTO 
administration or the USPTO employees represented before us today by 
Department of Commerce Undersecretary Jon Dudas and Robert Budens, 
President of the patent examiners union, POPA.
    However, it is clear to me that the patenting community and 
advances in the complexity of technology must also shoulder some of the 
blame/burden.
    The USPTO has directly taken, head-on, the issue of patent 
pendency, patent quality and employee retention through several bold 
initiatives that we will hear more about today. Some of these efforts 
have not been met with applause--but rather with lawsuits. Others have 
been instituted and carried out without much fanfare. I speak of the 
new continuation rules, aggressive new examiner hiring efforts and the 
USPTO examiner training academy.
    Whether or not these initiatives are the optimal way to achieve our 
collective goals will be examined today; however, we all agree that a 
patent system that does not take into account the realities of the 
world around us can not survive, thus sometimes minor or major tweaks 
are necessary--doing nothing is not an option. We may disagree with the 
changes but we all see the need for correction.
    In the case of this committee, we proposed and passed the Patent 
Reform Act of 2007, which is essential to the continued vitality of 
American intellectual property in the increasingly competitive global 
marketplace.
    In the case of the USPTO, Undersecretary Dudas saw a problem with 
pendency and laid out a solution that the Administration felt would 
address the issues.
    I went to the USPTO this past January to not only to meet and speak 
with Undersecretary Dudas about his initiatives but also to meet and 
speak directly with a graduating class of new USPTO examiners. I saw, 
directly, the sincere and profound investment in training for the new 
hires.
    However, investment in increased training and additional hiring can 
not cure the problem of pendency and quality unless we also address the 
problem of attrition.
    The September 2007 GAO report stated that despite aggressive hiring 
efforts for new examiners by the USPTO that the new hires will not be 
sufficient to reduce the patent application backlog mainly due to the 
inability to retain those examiners. For nearly every two patent 
examiners that the USPTO hires and trains, at least one has left the 
agency. Between 2002 and 2006, the USPTO hired 3,672 examiners and 
1,643 left the agency during that same time period. High attrition 
levels clearly offset the increased examiner hiring.
    POPA stated that the reason is the unrealistic production goal 
schedule--insufficient time to meet production goals--which results not 
only in examiner attrition but poor quality patents.
    The USPTO states that attrition is for reasons personal to the 
examiner, such as the job is not a good fit or having to move to a new 
city because of a spouse.
    As for the GAO results, they polled people who were still at the 
agency for reasons why they would consider leaving. Although 67% 
indicated that it was the production goal schedule as POPA also stated, 
GAO is polling the wrong people. They asked people who chose to stay. 
Not those who left.
    We have to ensure that the patent laws stay relevant with the 
changing times and that the USPTO has the resources and regulations in 
place that assist in that process. I look forward to hearing the panels 
commentary today on how to maintain the US as one of the, if not the, 
best Patent Office in the World.

    Mr. Berman. I thank the Chairman.
    Okay. Without objection, I recognize the gentleman from 
Florida, Mr. Wexler, for opening comments.
    Mr. Wexler. Thank you, Mr. Chairman.
    I just want to read a list of senior title positions. 
Commissioner for Patents. Commissioner for Trademarks. Deputy 
Commissioner for Patents. Deputy Commissioner for Patent 
Operations. Administrator for External Affairs. Chief of Staff 
for the Undersecretary of Commerce. Chief Financial Officer. 
Deputy Financial Officer. Director of Patent Quality. Chief 
Information Officer. Deputy Information Officer. Director of 
Enforcement.
    All of these positions were filled, as I understand it, by 
career professionals. Collectively, they represent literally 
hundreds of years of experience, Federal experience in 
scientific, legal and technical fields. And if I have the right 
information, they have all been removed by Mr. Dudas or his 
predecessor, most by the current occupant.
    The numbers are disturbing, and I hope that the hearing 
will tell us why this is happening.
    And thank you, Mr. Chairman, for holding the hearing.
    Mr. Berman. Thank the gentleman.
    And we will now go to the witnesses.
    John Dudas is Undersecretary of Commerce for Intellectual 
Property and Director of the United States Patent & Trademark 
Office, a post he has held since 2004. Prior to that, Mr. Dudas 
served as acting undersecretary and director and deputy 
undersecretary and deputy director.
    Before joining the Bush administration, Mr. Dudas served 
for 6 years as counsel here to the U.S. House Judiciary 
Committee's Subcommittee on Courts and Intellectual Property, 
and staff director and deputy general counsel to the House 
Judiciary Committee. Mr. Dudas holds a law degree from the 
University of Chicago.
    Robin Nazzaro is a director with the Natural Resources and 
Environment team of the United States Government Accountability 
Office. She is currently responsible for GAO's work on Federal 
land management issues--so it is obvious why you are here. No.
    Recently, she oversaw GAO's work on federally funded R&D, 
which includes responsibility for the USPTO and other 
Government programs. Ms. Nazzaro received a bachelor's degree 
from the University of Wisconsin and a certificate in senior 
management and government from the John F. Kennedy School of 
Government at Harvard University.
    Robert Budens is president of the Patent Office 
Professional Association, and has served on this executive 
committee since 1998. He also currently serves on the Patent 
Public Advisory Committee.
    Mr. Budens has been with the USPTO since 1990 and has been 
a primary patent examiner since 1994. He holds advanced degrees 
in microbiology and immunology from Brigham Young University 
and the University of Texas Southwestern Medical Center, 
respectively.
    Alan Kasper is first vice president of the American 
Intellectual Property Law Association. He is also the director 
of Sughrue Mions International Department, and a member of the 
firm's management committee. Mr. Kasper's practice includes 
domestic and international patent law.
    Prior to joining Sughrue Mions, Mr. Kasper was an attorney 
for the Communications Satellite Corporation, and was a patent 
examiner in the U.S. Patent & Trademark Office. He received his 
law degree from the Georgetown University Law Center.
    Gentlemen and lady, your written statements will be made 
part of the record in their entirety. I would ask you to 
summarize your testimony in 5 minutes or less. To help you stay 
within that time, there is a timing light at your table. When 1 
minute remains, the light will switch from green to yellow, and 
then red when the 5 minutes are up.
    Mr. Dudas, would you lead the panel with your testimony?

    TESTIMONY OF THE HONORABLE JON DUDAS, UNDERSECRETARY OF 
 COMMERCE FOR INTELLECTUAL PROPERTY, AND DIRECTOR OF THE U.S. 
   PATENT AND TRADEMARK OFFICE, U.S. DEPARTMENT OF COMMERCE, 
                         WASHINGTON, DC

    Mr. Dudas. Thanks very much, Chairman Berman. Thank you, 
Ranking Member Coble, Congressman Wexler, and Congressman Issa. 
It has been over 2 years since I have had the opportunity to 
update this Subcommittee officially at an oversight hearing, 
and I appreciate this opportunity to do so today.
    Mr. Chairman, I am pleased to report that both fiscal year 
2006 and fiscal year 2007 were record-breaking years for the 
USPTO, due in part to the women and men at the United States 
Patent & Trademark Office. For 2 years in a row we have met or 
exceeded our highest production goals ever with a 21 percent 
increase in production in the last 2 years.
    We have the highest hiring in the history of the office, 
both in terms of percentage and in terms of raw numbers. Over 
1,200 examiners hired in Patents each of the last 2 years.
    We have the highest number of examiners working from home. 
In the last 2 years, we went from zero working almost full-time 
from home to over 1,000, and we are adding 500 a year.
    We now have the highest usage of electronic filing. We used 
to measure in terms of 2 and 3 percent. We are up to 70 percent 
in electronic filing, and the highest percentage of electronic 
processing in the history of the office.
    For each of these accomplishments in 2006, we met or 
exceeded those records in 2007. And for those achievements, it 
is clear we must thank the 8,500 hard-working women and men of 
the United States Patent & Trademark Office. They are high 
achievers. We are a performance-based organization. They are 
performance-focused, and they are always up for the challenge.
    On behalf of our employees, I also want to thank this 
Subcommittee, and the Chairman and Ranking Member in 
particular, all of your colleagues. We are pleased especially 
that the Administration and Congress have worked together to 
ensure that the USPTO has had access on a yearly basis to all 
anticipated fee collections. The President's budget request 
continues full funding for the fifth consecutive year this 
year.
    Full access to fees gives us the resources we need to 
continue to improve upon our record-breaking successes, but 
there certainly are challenges ahead.
    Mr. Chairman, my written statements describes the wide 
range of initiatives that we have underway and updates our 
activity since our last oversight hearing. Quality is the 
driving force in everything we do, from our daily activities to 
our long-term strategic planning.
    All of us in the room and all stakeholders want a quality 
examination process that results in quality patents and quality 
trademarks. That quality starts with the highest quality 
people, and I am proud that our 8,500 employees do this on a 
daily basis with true dedication to their jobs.
    We recognize that, to recruit and retain the highest 
quality people, we must provide an employment package with 
benefits and a working environment that beats--not just meets, 
but beats what our competitors are offering, and we do have 
competitors within Government and the private sector who are 
constantly looking to hire the people with the same skill sets 
that we are looking for, and also hiring people that have the 
experience after having been a patent examiner.
    Quite frankly, I believe the offerings that we have are 
more than competitive, and we seek to improve them. Others find 
our environment to be good, as well.
    We have been honored for 2 years in a row, that Business 
Week Magazine chose the United States Patent & Trademark Office 
as one of the best places in the United States to launch a 
career. We have been chosen by Business Week magazine as one of 
the best places to round out your career, and one of the best 
places to have an internship. Washington Families magazine 
called the USPTO one of the best places to work in the 
Washington area if you have a family.
    Our flex time, our tele-work and Hotelling programs 
continue to be a model for Federal agencies. Eight-five percent 
of eligible trademark examining attorneys work from home.
    As I mentioned, we now have over 1,000 patent examiners 
working from home, and we are adding 500 per year. Our vision 
is to create a workplace where an examiner has every 
opportunity and every flexibility to succeed as they want to 
succeed, and they can do that, we hope, from anywhere in the 
country. They can choose where they go, is our vision.
    But we have some legislative hurdles. We want examiners to 
be able to work from home in Detroit, Austin, Florida, Los 
Angeles, Greensboro, Roanoke, for that matter, Mr. Goodlatte. 
Good to see you.
    Mr. Chairman, we recognize the importance of making every 
reasonable effort to retain our examiners. It takes a number of 
years to effectively train and guide our examiners to full 
signature authority.
    We don't want to lose them to our competitors when they 
have developed marketable expertise. We want them to come to 
the USPTO and want to stay there. And I will go in much more 
detail about the specific statistics and what we are doing.
    But I can tell you, the Bureau of Labor Statistics does 
numbers. Attrition rate throughout the Federal Government is 
11.2 percent. The attrition rate across the board at the USPTO 
is 8.5 percent, 32 percent lower than throughout the rest of 
Federal Government.
    Our average attrition rate for patent examiners with 0 to 3 
years of experience is quite high, and that is where we really 
need to focus. But our examiners with experience beyond 3 
years, between 3 to 30 years, that drops to below 40 percent. 
Our focus on examiner retention and recruitment in those first 
few years has borne fruit in the first years that we have done 
that.
    So BLS, Bureau of Labor Statistics, reports up to 45 
percent attrition for engineers and computer scientists 
throughout the private sector. Over the last 10 years, first-
year attrition at the USPTO has been about 20 percent. With 
targeted retention and recruitment efforts with the new 
training academy and other things we have put in place, we have 
lowered that 25 percent to 15 percent for first years, and in 
targeted areas we have lowered it to 10 percent.
    So by targeting retention efforts, we think we have really 
found something. We don't have enough numbers yet to give years 
and years of data, but we have had much success on that.
    So I look forward to talking about all the issues that you 
have raised. I believe we have come a long way and enjoyed many 
successes since our last oversight hearing. There is lots of 
room for improvement. There are challenges that lie ahead, and 
we fully intend to do all we can, with your continued support, 
to build on these successes.
    Thank you.
    [The prepared statement of Mr. Dudas follows:]
            Prepared Statement of the Honorable Jon W. Dudas

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                               ATTACHMENT

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Berman. Thank you.
    And Ms. Nazzaro?

 TESTIMONY OF ROBIN M. NAZZARO, DIRECTOR OF NATURAL RESOURCES 
    AND ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE, 
                         WASHINGTON, DC

    Ms. Nazzaro. Thank you, Mr. Chairman and Members of the 
Committee. I am pleased to be here today to discuss the U.S. 
Patent & Trademark Office.
    As the Chairman noted, my current portfolio does not 
include USPTO, but I have had over 10 years experience where I 
did have responsibility for Federal research and development 
programs, including intellectual property and the oversight of 
USPTO. I am here today pitch-hitting for one of my colleagues 
who is undergoing cancer treatment.
    My testimony today will be based on a report that we issued 
last September entitled, ``U.S. Patent & Trademark Office: 
Hiring Efforts Are Not Sufficient To Reduce The Patent 
Application Backlog.''
    Specifically, I will discuss (1) USPTO's process for making 
its annual hiring estimates and the relationship of these 
estimates to the patent application backlog; (2) the extent to 
which patent examiner hiring has been offset by attrition; and 
(3) the factors that may contribute to this attrition, and the 
extent to which USPTO's retention efforts align with examiners' 
reasons for staying with the agency.
    First, as a result of its increased workload relative to 
its existing workforce, USPTO determined that it would need to 
hire additional patent examiners each year. However, the agency 
identified its projected annual hiring estimates primarily on 
the basis of available funding levels and its institutional 
capacity to train and supervise examiners and not on existing 
backlog or the expected patent application workload. Although 
this process is generally consistent with the Office of 
Personnel Management's workforce planning strategies, the 
process does not consider how many examiners are needed to 
reduce the existing patent application backlog or address the 
inflow of new applications. Consequently, the patent 
application backlog has continued to increase, and it is 
unlikely that the agency will be able to reduce the backlog 
simply to its hiring efforts.
    Second, in addition to the patent examiner attrition, which 
has continued to significantly offset PTO's hiring process from 
2002 through 2006, one patent examiner left the agency for 
every two patent examiners hired. Of those who left, 70 percent 
had been at the agency for less than 5 years. This represents a 
significant loss to the agency, because these new examiners are 
primarily responsible for the actions to remove applications 
from the backlog. According to USPTO management, patent 
examiners leave the agency primarily for personal reasons, such 
as the job not being a good fit or the need to relocate in the 
event of a spouse's job. We also surveyed a random sample, 
though, of over 1,400 patent examiners, in which we received an 
80 percent response rate. In contrast, 67 percent of the patent 
examiners we surveyed identified the agency's production goals 
as one of the primary reasons examiners may choose to leave 
USPTO. These goals are based on the number of applications 
patent examiners must complete during a 2-week period. However, 
the assumptions underlying these goals were established over 30 
years ago and have not been adjusted to reflect changes in the 
complexity of patent applications. Moreover, 70 percent 
reported working unpaid overtime during the past year in order 
to meet these production goals.
    On the other hand, a number of different retention 
incentives offered from 2002 through 2006, such as a special 
pay rate, performance bonuses and a flexible workplace were the 
primary reasons patent examiners identified for staying with 
the agency. According to USPTO management, their most effective 
retention efforts were those related to compensation and an 
enhanced work environment. GAO's survey of patent examiners 
indicates that most patent examiners generally approve of the 
retention efforts and ranked the agency's salary, which can be 
more than 25 percent above Federal salaries for comparable 
positions, and the flexible work schedule among the primary 
reasons for staying with the agency.
    In conclusion, despite its efforts to hire more patent 
examiners and implement retention incentives, USPTO has had 
limited success in retaining new patent examiners. Because 
production goals appear to be undermining its efforts to hire 
and retain a highly qualified workforce, we believe the agency 
will continue to be limited in its ability to meet the 
increasing demand for U.S. patents and reduce the growth of the 
patent application backlog, and ultimately may be unable to 
fulfill its mission of ensuring U.S. competitiveness. Thus, we 
recommended that USPTO undertake a comprehensive evaluation of 
how it establishes these goals and revise its goals as 
appropriate. USPTO agreed to implement this recommendation once 
it determines the effect of recent initiatives designed to 
increase the productivity of the agency through a more 
efficient and focused patent examination process. We are 
interested in timeframes and strategies that the agency has in 
place to try to implement this recommendation.
    Mr. Chairman, this concludes my prepared statement. I would 
be happy to respond to any questions that you or Members of the 
Subcommittee may have at this time.
    [The prepared statement of Ms. Nazzaro follows:]
                 Prepared Statement of Robin M. Nazzaro

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Berman. Thank you very much.
    Mr. Budens?

    TESTIMONY OF ROBERT D. BUDENS, PRESIDENT, PATENT OFFICE 
         PROFESSIONAL ASSOCIATION (POPA), ARLINGTON, VA

    Mr. Budens. Mr. Chairman, Ranking Member Coble, Members of 
the Subcommittee, POPA represents more than 5,800 patent 
professionals at the USPTO, including more than 5,500 patent 
examiners.
    Mr. Berman. Is your mic on?
    Mr. Budens. Oh, sorry. You want me to start over?
    Mr. Berman. Fifty eight hundred.
    Mr. Budens. Fifty eight hundred patent professionals at the 
USPTO, including more than 5,500 patent examiners. POPA's 
members take great pride in the work they do, and are committed 
to maintaining the quality and integrity of America's patent 
system.
    The USPTO has received much criticism in recent years for 
failing to allow high quality patents in a timely manner. Many 
proposed solutions represent radical changes that go far beyond 
what is necessary to fix the patent system.
    As with any product, it is better to build quality in right 
up front than to try and repair problems after the product has 
left the factory. Patent examiners need the time and the tools 
to do their job right the first time. Years of inadequate 
funding and restrictions on hiring left the USPTO severely 
understaffed.
    Fortunately, since 2005, the agency has been permitted to 
keep its fees, and appropriators have lifted restrictions on 
hiring, actually requiring more hiring, not less. The agency 
now brings on 1,200 new examiners each year. It is doing a good 
job hiring people. It is just not keeping them.
    Statistics we have seen show that about 30 to 44 percent of 
each year's new examiners leave the agency within 3 years. To 
compensate for overall annual examiner attrition, the agency 
must hire almost two examiners for each one it retains.
    Frankly, we don't recognize the attrition statistics cited 
in the agency response to the GAO report. The one thing 
management could do to increase retention it has consistently 
refused to do for more than 30 years--provide examiners with 
the time to do the job right. More than any other factor, the 
reason examiners leave the USPTO is the unrelenting stress 
caused by the agency's outdated production system.
    Patent examination is a labor-intensive job, mentally and 
physically. Automation can accelerate processes, such as 
searching large databases, but it cannot make the examiner read 
and understand the results of those searches any faster.
    After years of trying to do the job faster and cheaper, the 
USPTO now finds itself facing the same criticism that any 
manufacturer faces when it cuts corners--perception by end 
users that the product lacks the quality it needs to do the job 
it was supposed to do.
    The USPTO's production goals have remained essentially 
unchanged since they were put in place in 1976. Since then, the 
patent applications have more technologically complex, have 
larger specifications, and higher numbers of claims.
    Studies by Professor Dennis Crouch show that the size of 
issued patent specifications increased by 85 percent since 
1987. The data also shows significant increases in the number 
of independent claims and total claims. Trying to do a high 
quality job in 2008 in the amount of time examiners were given 
in 1976 has left examiners angry, stressed out and demoralized.
    A POPA survey revealed that one-third of examiners worked 
unpaid overtime just to keep their jobs. Another third of 
examiners work unpaid overtime to earn performance awards. The 
GAO found similar results in its September 2007 report. This 
excessive use of unpaid overtime establishes a need for the 
USPTO to provide more time.
    What employees need--we need fee retention. POPA encourages 
this Subcommittee to continue working with the Appropriations 
Committee and the Administration to ensure that the USPTO has 
access to all its fees. But POPA believes that this access, 
however, must not be obtained at the expense of the oversight 
responsibilities of the Judiciary and Appropriations 
Committees.
    We need to put an end to outsourcing searches. The USPTO 
has wasted considerable resources in prior attempts to 
outsource patent searches, and now with the applicant quality 
submission.
    Outsourcing searches will not result in better quality 
patents, and will likely create conflicts of interest for 
applicants. The Subcommittee should put an end to this waste by 
passing legislation that clearly establishes patent searching 
and examination as inherently governmental functions.
    We need more time. POPA asks that the Subcommittee provide 
more time for examiners by putting a fence around the patent 
filing fees and directly allocating these fees to providing 
time for examiners to examine patent applications.
    Finally, we need tools. The USPTO needs to reverse its 
policy of neglecting the U.S. classification system and 
restoring its funding. We need automated tools that allow 
examiners to classify and add foreign and non-patent references 
to USPTO databases. There are very few former classifiers left 
in the agency. Before their institutional memory is lost 
forever, they need to be put back to work training new 
classifiers and examiners.
    Thank you very much for this opportunity to present our 
views.
    [The prepared statement of Mr. Budens follows:]
                 Prepared Statement of Robert D. Budens

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Berman. Well, thank you very much, Mr. Budens.
    And Mr. Kasper, why don't you conclude for us, and then we 
will have questions?

  TESTIMONY OF ALAN J. KASPER, FIRST VICE PRESIDENT, AMERICAN 
  INTELLECTUAL PROPERTY LAW ASSOCIATION, SUGHRUE, MION, PLLC, 
                         WASHINGTON, DC

    Mr. Kasper. Thank you very much, Mr. Chairman and Members 
of the Subcommittee. I am pleased to have the opportunity to 
present the views of AIPLA at this oversight hearing on the 
U.S. Patent & Trademark Office, an entity vital to maintaining 
American innovation.
    Since my time is limited, I will highlight only a few of 
the points made in my written statement. I will focus on 
current procedures, practices and administration of the patent 
examination process that I and other practitioners find are 
resulting in delays and added costs to applicants, and we 
believe to the office, as well.
    First, I would like to express my appreciation to the 
thousands of dedicated patent examiners in the USPTO without 
whom the system simply could not function. We believe, however, 
that their jobs and their efficient processing of applications 
could be facilitated if steps are taken to change the 
adversarial culture that appears to exist in the USPTO.
    For example, if examiners, following their detailed review 
of a claimed invention and a prior ART that their search has 
identified, were encouraged to make suggestions to applicants 
for amendments to the claims. We believe that more applications 
could be examined better and more efficiently.
    While such suggestions may not be accepted in every case, 
they would surely lead to a rapid narrowing of issues and a 
meeting of the minds as to what language best defines the 
patentable subject matter. Extended prosecution through RCEs or 
continuations could be avoided in many cases.
    Second, overly formalistic rules that are strictly applied 
and result in frequent notices of noncompliant responses 
requiring written replies within specified periods should be 
relaxed. Often, the ensuing delays and costs to correct these 
deficiencies could be avoided with an informal communication to 
the applicant, permitting the examiner to amend or annotate the 
application, showing a correction of the error. This too would 
speed processing.
    While formal errors in papers filed by applicants should 
not occur, the rigidity with which the office approaches them 
is in dramatic contrast to the manner in which it treats 
deficiencies in communications from the office. For example, 
the failure to list relevant prior ART in certain forms, or a 
failure to fully complete other forms, requires applicants to 
make unnecessary requests for correction so that a complete and 
accurate record in the file history is obtained.
    A greater stress on thorough and competent supervision of 
the entire work product before it is mailed from the USPTO 
would enhance the overall quality of the examination process 
and save both applicants and the office time and money. The 
greater emphasis on avoiding formal errors and resolving them 
more expeditiously at all levels should be coupled with 
appropriate metrics for the examiner, support staff and 
supervisor performance, and matched with better training of and 
incentives for all PTO employees.
    My final comments on USPTO procedures concerns the pre-
appeal submission process outlined in Director Dudas's 
testimony. This procedure was intended to avoid unnecessary 
appeals and save costs. It was universally welcomed by 
applicants when announced. However, its full potential has not 
been realized in practice.
    In reality, the reviewing panel of preferably three persons 
typically includes the examiner and his supervisor, thereby 
skewing the process against applicants. At least two senior 
examiners not involved with the application should be part of 
any reviewing panel.
    Lastly, in my experience as an examiner, in-house attorney 
and outside counsel, I found the European practice of placing 
reference characters from the description into the claims to be 
immensely helpful as a roadmap to efficiently understanding the 
invention as claimed. We have recommended that this practice be 
adopted by all three trilateral patent offices.
    Unfortunately, current U.S. law as interpreted by the 
courts effectively precludes such practice by allowing courts 
to reach restrictive claim interpretations or impose an 
estoppel. A legislative fix to this problem is needed so that 
reference characters can be placed in the claims of U.S. patent 
applications and issued patents.
    Such a legislative fix, together with an amendment 
relieving applicants from a statutory obligation to include 
certain legends in applications rather than accompanying 
documents would facilitate adoption of an international common 
application format with attendant cost savings.
    I wish to thank the Subcommittee for the opportunity to 
present these views, and I would be pleased to answer any 
questions you may have.
    [The prepared statement of Mr. Kasper follows:]
                  Prepared Statement of Alan J. Kasper

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Berman. Well, thank you very much. A number of issues 
raised.
    I will recognize myself for 5 minutes.
    There is a tension here between pendency and all of the 
negatives caused by that, and quality. And in a way, all of you 
have spoken to this issue.
    At this point, I would like to just engage, maybe even in a 
bit of a dialogue back and forth, Mr. Dudas, Ms. Nazzaro and 
Mr. Budens on how we can accommodate this tension, deal with 
the terrible pendency problem and deal with some of the quality 
issues that you address in the context of goals and working 
conditions and requirements. So let me just ask a few 
questions.
    First, to Ms. Nazzaro, I want to clarify one point in your 
report. Your report found that, within a 1-year period, 70 
percent of patent examiners worked unpaid overtime to meet 
their production goals.
    Did these examiners occasionally or consistently work 
unpaid overtime to meet their goals? Was this a--sort of a once 
in a while kind of situation, or was this a regular? And to 
what extent, if you know, did examiners work unpaid overtime to 
make production bonuses?
    Ms. Nazzaro. The second part I can answer quicker. We don't 
know whether the intent of working the overtime was to meet the 
production goals. We didn't ask that question. But of the 70 
percent that said that they worked overtime, five said they 
worked less than 1 hour, 62 percent said they had worked 1 to 
10 hours, 23 percent said----
    Mr. Berman. Over what period of time?
    Ms. Nazzaro. It is over the past 12-month period how much 
overtime worked per biweek.
    Mr. Berman. Okay.
    Ms. Nazzaro. Twenty-three percent said they had worked 
between 11 to 20 hours, 5 percent said they worked 21 to 30 
hours, and 5 percent said they had worked more than 30 hours. 
So that is worked per biweek in the 12-month period.
    Mr. Berman. Okay.
    Mr. Dudas, after the GAO report came out, the USPTO issued 
a press release in October stating that it will review 
assumptions the agency uses to establish production goals for 
patent examiners. What steps thus far has the agency taken to 
study these assumptions? When do you think we will have the 
results of your study? And will these results be made publicly 
available?
    Mr. Dudas. Since that time, we have begun to look 
particularly at breaking down attrition and retention numbers 
not just across the board but specifically based on year. And 
we found that, as things are more focused, when you get more 
focus on things, you see patterns that begin to develop.
    I will ask that we put up a chart that shows that attrition 
throughout the USPTO is high in the first 3 years. As it gets 
past the first 3 years, it drops to about eight, six, four, 
three, two, one, and drops down dramatically. So we recognize--
that is not the right one, the one--the chart that has got 
the--shows retention over 30 years, our attrition over 30 
years.
    The bottom line on that front is is that we have high 
attrition in the first 3 years. That attrition lowers down 
dramatically after 3 years, and then again lowers down--one of 
the things we are focusing on is specifically why are people 
leaving in the first year, the second year, the third year?
    We do actual exit interviews. I think it is important what 
GAO did, where they asked the question, ``If you were to leave, 
why would you leave?'' Best practice--yes?
    Mr. Berman. But is that responsive, though, to the issue of 
reviewing the assumptions and establishing the production 
goals?
    Mr. Dudas. Oh, yes. On that front, well, we are certainly--
everything we are doing is looking at the assumption under the 
production goals. Patent is doing that review across the board.
    And again, even on that basis, you have to understand that 
the production goals, that process has begun. That process is 
looking at examiner's production--some examiners do roughly 
2\1/2\ times more production than other examiners. It is based 
on the level of experience the examiner has. It is also based 
on the number of hours that are given per complexity for the 
technology.
    So yes, that study has begun. Patents is looking at that. 
They want to look at that over time, and they want to look at 
that. So yes, we are happy to make those results public as we 
go through that process.
    But what I am trying to focus on particularly is we have to 
make--go beyond what the study did in the GAO report, and we 
have gone beyond that for the last several years, to focus on 
specifically where do we have attrition issues. We know that we 
have attrition issues certainly in the first 3 years. We are 
also putting things in place to try to address those attrition 
issues.
    We have actually lowered the attrition for first-years, 
where we have our highest, by far. We have lowered that by 25 
percent. We targeted that area with retention and recruitment 
bonus and actually cut it in half.
    But for the last 10 years, the PTO has lost about 20 
percent of their first year examiners. We have lowered that to 
10 percent where we have targeted retention and recruitment 
bonuses, and to 15 percent across the board.
    Mr. Berman. All right. I am going to give myself, and then 
give other people, an additional minute to just finish my three 
questions. And then, when--if there is a second round, although 
I do--I should mention that we have to be out of here at 3.
    Mr. Budens, the USPTO study--let us assume, when that study 
is completed, and I am not quite sure when that is supposed to 
be, but when it is completed, it finds an increase in 
examination time is warranted, and the increase is implemented. 
How do you believe this will impact patent pendency? Is there 
any way to accurately calculate how incremental increases to 
examination time would address examiner attention?
    Mr. Budens. Well, first of all, I think that increasing--
giving examiners more time will directly impact retention. I go 
down--I get talked to by examiners every day and get stopped in 
the hallways, go--thank you for getting us some more money, but 
what we really need now is more time. We have got to have more 
time to do the work.
    I believe the results of the study from the GAO because it 
correlates with everything I hear and I see in the hallways. We 
did a very similar study----
    Mr. Berman. I also believe in the studies that correlate 
with what I already believe, too.
    Mr. Budens. We--interestingly enough, before the GAO study 
came out, we had actually done a survey of our own--of 
examiners ourselves, which ended up having results essentially 
analogous to what they found.
    And one of the questions you asked of Ms. Nazzaro, what we 
found--because we actually asked the question, what we found 
was roughly a third of examiners--and we asked a similar size 
cohort, about 1,200, 1,300 examiners--about a third of them 
were working unpaid overtime, significant amounts, just to keep 
their jobs.
    Another third were working significant amounts of unpaid 
overtime in order to make outstanding ratings and get bonus 
awards. So hopefully that--and that is a statistic I think 
would--correlates perfectly with what the GAO found.
    Dealing with how increasing those times is going to hit 
pendency, obviously the short answer would be it has got to hit 
pendency early on. But there are a number of factors that I 
think are coming together at this point in time that may change 
that.
    The recent court case in KSR that may change where 
obviousness goes, the fact that, if we can increase quality, if 
we can start keeping the examiners and getting these people 
experienced and examining and making the best rejections they 
can, applicants are going to start seeing that it is not just 
kind of a turkey shoot to go into the Patent office, and they 
are going to stop filing and wasting their time and money. It 
is not cheap to get a patent. They are going to stop filing 
that.
    I think those combination of things actually could lower 
pendency in time. But pendency has been a problem that took us 
20 years to get here. I don't think it is--I can't--I don't 
know of any solution that is going to make it go away in a 
year, or overnight.
    Mr. Berman. My time has more than expired.
    I recognize the Ranking Member, Mr. Coble.
    Mr. Coble. Thank you, Mr. Chairman.
    Good to have you all with us.
    Attrition is a bad word. None of us embraces attrition. But 
I am pleased to learn, Mr. Dudas, that your attrition rate is 
more favorable than the Federal Government at large. I did not 
know that. So that is the good news about attrition.
    Now, you indicate, Mr. Dudas, that we cannot hire our way 
out of the pendency and backlog problems. Are these problems 
manageable?
    Mr. Dudas. I think these problems are manageable, but there 
are changes that are going be--need to be made, and I want to 
support something that Robert Budens said.
    If we could put up a chart that shows the allowance rate at 
the Patent & Trademark Office, this is the number of patent 
applications that ultimately lead to a patent issue. As you can 
see, in year 2000, 70 percent of all applications led to a 
patent. First quarter last year, it was 44 percent.
    There is a dramatic drop in the number of applications that 
have come in the door. Some of that is quality initiatives. 
Some of those are things outside. But it is one of the things 
we think--and I think Robert hit it on the head--KSR makes a 
difference, that--what applications that come in the door are 
sometimes quite problematic. And we have gone from having 70 
percent approvals to 44 percent approvals.
    That has also led to a behavior that is basically do-overs. 
I will try again and again. I will ask for my continuation if I 
don't like your answer. I will ask again. I will ask again. I 
will ask again.
    Unlimited do-overs we have right now. If there were no do-
overs, no continuing applications--and there are legitimate 
reasons for them--that is 30 percent of our applications right 
now, and that is growing.
    Mr. Coble. Thank you, sir.
    Mr. Dudas. So yes, we need better applications, as well.
    Mr. Coble. Thank you.
    Mr. Kasper, in your statement you say that the industry are 
Trilateral, in which AIPLA participates, recommended a common 
application format to the Trilateral patent offices. You 
furthermore estimate that adoption of this format would yield a 
savings of $300 million annually to patent applicants, but that 
certain substantive issues prevent most of these savings from 
being realized.
    Expand on that, if you will.
    Mr. Kasper. Yes. The common application format would assume 
that there is a single format acceptable by all three 
Trilateral offices. There are a number of components to that, 
some very formal, such as common titles, common organizations. 
Others are substantive, such as the content of the claims.
    Now, in the study by the Industry Trilateral, in 
preparation for discussions with the Trilateral offices, we 
identified five different areas that were significant. One I 
mentioned earlier in my testimony, it deals with adding numbers 
to claims, where it is popular in Europe but not popular in the 
United States.
    Another is legends that are required under U.S. law. In 
Europe there is a requirement that, once an application is 
filed, there must be a description of the then-most pertinent 
prior ART in the specification. Similarly, the claims must be 
changed to comport with the specification. And finally, in 
Japan, you have a requirement that the prior ART be listed in 
the specifications.
    Those are the major areas where costs would be saved if 
they could be unified. So $300 million based upon each of those 
requirements and those different jurisdictions would be saved 
in the event that they could be eliminated or made uniform.
    Mr. Coble. Thank you, sir.
    Ms. Nazzaro or Mr. Budens, either one, what compensation-
related incentives are the most cost-efficient and attractive 
to step the tide of attrition? Either of you? Either or both.
    Ms. Nazzaro. I was going to say, we have not done any 
analysis as to which ones are most cost effective.
    Mr. Coble. Mr. Budens?
    Mr. Budens. I think that, right now from my point of view, 
our most cost effective use of money has been in higher 
salaries for examiners, which has kept them in the 
neighborhood. Washington is not a cheap place to live.
    And the use of recruitment bonuses. One area I would 
challenge Mr. Dudas on is that he keeps referring to 
recruitment and retention bonuses. We are using recruitment 
bonuses to get people in the door. I am not aware that we are 
using--that any senior examiners have received retention 
bonuses at all, and I think that is some place where we could 
expand usage.
    The recruitment bonuses, it is a little early yet, from my 
view, to say that they are going to work, because they are 
spread out over 4 years. But they are certainly an incentive to 
get people in the door. But it is the higher salaries that we 
have gotten with the special pay rates and that we need to 
maintain in time that I think keep people in the door.
    Mr. Coble. I want to try to beat that red light 
illumination with this question, Mr. Budens. How does 
outsourcing searches waste time and resources at the PTO, and 
how do you feel it diminishes patent quality?
    Mr. Budens. The first problem I have, the resources that 
have been wasted is the fights that we have had ongoing on this 
issue for years. We fought this battle in 2005, and then we are 
fighting it again now with applicant quality submissions.
    My belief is that those things are not going to put better 
ART in front of examiners because an applicant themselves is 
probably going to most likely be searching the same databases 
that the examiner searches. They are going to be finding 
roughly the same ART in a narrow area of their invention.
    The problem with that is that examiners don't look at just 
their invention. We give claims that have broader, reasonable 
interpretation, and we may go out and find ART that reads on 
the claims that their reading that the applicant doesn't think 
about. Their view is more focused.
    And I just don't believe in any way that it is going to put 
more ART in. We already have the rules in place that, if 
applicant knows about a Norwegian telecommunications ART or 
something, they are supposed to be giving it to us. we need to 
enforce that so BlackBerry cases don't come up again.
    Mr. Coble. And I thank the Chairman for not penalizing me 
for not beating the red light. I yield back.
    Mr. Berman. The gentleman from Michigan, Mr. Conyers.
    Mr. Conyers. Thank you, Chairman Berman .
    You are a union man, Mr. Budens, Patent Office Professional 
Association. What is the problem here? We have got tremendously 
talented people here.
    Mr. Undersecretary, you have been through this and helped 
prepare us for many years. And I sense, quite frankly, that 
this isn't complex. I mean, there is something more simple than 
is coming forward.
    Can you give me an idea about this, Mr. Budens? What is 
going on underneath the radar for people that really want to 
understand why we can't resolve the problem?
    Now, I know that, for years, there was no replacement 
money, and there were backlogs generated. Here we have a part 
of our Government winning all kind of awards, and yet there is 
a lot of severe criticism.
    How do we sort these disparate facts out here and get to 
the bottom of this? Start me off, please.
    Mr. Budens. Well, first of all, I think that we have a--
somewhat of an atmosphere of conflict in the office. There is 
certainly the normal kinds of conflicts that you always have 
between management and labor.
    But I think one of the biggest problems that we have that I 
see plaguing us is that we don't have enough interaction 
between each other on where the agency is going, how it wants 
to solve problems.
    When you really need to find out how to get the job done, 
you go to the trenches. You go get the people who are actually 
making the widgets involved in the process, in developing 
better ways to do things and developing--and deciding the paths 
you can go. This is something we haven't done.
    Mr. Dudas says that they have started undertaking a goal 
study of examiner goals. My viewpoint is POPA should be 
involved in that study from day one, and I am just finding out 
about it, that it is going on right now today at this table.
    When the GAO report first came out, I met with the 
commissioner of patents and the deputy commissioner for 
operations, and I asked them, ``Okay, we have got this study 
out. It clearly shows what the problem is. When are we going to 
sit down, and let us start talking about what we can do with 
goals.''
    Their response to me is, ``Well, we can't really do that 
right now because we need to see what efficiency gains we can 
get from the rules change packages and the applicant quality 
submission and other things--initiatives that we have got going 
on, and we really won't know how to do the goals.
    Well, the rules change packages is tied up in court. AQS is 
tied up here in the Congress. In the meantime, examiners just 
keep working, but we are not--we are not being involved in the 
processes early on. We get things basically shoved at us at the 
last minute and are told, ``Have a nice day.''
    Mr. Conyers. Ms. Nazzaro, what do you see underneath the 
radar screen that can help us out here? We want to help the 
Patent and Trademark Office. Everybody is conscious of the 
importance of what they do.
    Ms. Nazzaro. I think my comment would be very similar to 
Mr. Budens'. I mean, we have gotten an agreement from PTO that 
they are going to look at the production goals, but we don't 
have any time frame.
    We don't know really what they are doing. This is the first 
I have heard as well, and I did ask my staff before coming in 
here, you know, what reaction have we gotten from the agency, 
what response have we got, because we do track all of our 
recommendations. And we had no idea that they were doing 
something, as well.
    We are not against production-based goals. Setting goals is 
a good thing. You can't measure performance if you don't have 
goals, so we are not against production goals. We just think 
they have to be reasonable.
    The agency has not met its goals for the 5-year period that 
we looked at USPTO 2002 to 2006. So if they are not even 
meeting these goals, they are unrealistic goals.
    And yet, the number of staff who are very concerned with 
these goals to me seems to be really off the radar screen. They 
are very appreciative of all the initiatives that the agency 
has taken, and we applaud them because they are in the 
forefront of making a family-friendly workplace.
    Being a woman myself, I know having an on-site daycare and 
all of these things are commendable, being able to tele-work in 
the Washington, D.C. area, all commendable. But they are 
missing the point. When 67 percent of the agency says they have 
a problem with production goals, it seems like they should at 
least study it.
    Mr. Conyers. Mr. Chairman, could I get enough time to ask 
the undersecretary to respond after Mr. Kasper?
    Mr. Berman. I think it makes sense.
    Mr. Conyers. All right.
    Mr. Kasper, please, do you have anything to add to this?
    Mr. Kasper. Thank you.
    From my perspective, as I said, as an ex-examiner and 
certainly now outside, one of the things that is most important 
is to have enough funding for the examiners, enough training 
for the examiners, and to provide them with proper supervision 
so that they can do their jobs in a consistent way so that, to 
the outside world, they appear to be uniform and provide a high 
quality output.
    Thank you.
    Mr. Conyers. Mr. Undersecretary?
    Mr. Dudas. Thanks very much.
    I do think that much of the issue at hand is what Chairman 
Berman raised earlier, which is there is an inherent tension 
between quality and production. We could certainly get rid of 
the backlog overnight by cutting time in half. It would be 
ridiculous. Quality would be terrible.
    We had a 2004 study done by the inspector general who 
concluded the opposite of what the GAO study was, which is that 
we are giving too much time, because so many of our examiners, 
more than 60 percent of our examiners actually achieved 
productions standards of 10 percent higher than what is 
required of them. It is beyond the goal.
    We didn't instantly run in and say, well, let us, you know, 
raise the goal for examiners, because we recognized there are a 
lot of challenges, and there are many, many challenges. 
Balancing that is critically important.
    But I think, again, we believe very strongly in studying 
all the assumptions under the production goals. They are 25 
years old. I do listen to examiners.
    We talk a great deal, everything from official functions 
and brown-bag lunches. So quite honestly, I learn a whole lot 
at the gym, talking to examiners about what kinds of issues 
there are.
    The claims package that is now being held up in court were 
ideas that came from examiners because they look at too many 
claims, and they said, ``This is a quality problem. It is a 
production problem.''
    I think where I see attention is I think the conclusion 
that has come from the GAO study for many people is that what 
we need to do is lower standards across the board. And I would 
have to tell you, the USPTO disagrees that we need to lower 
standards for examiners. We are a performance-based 
organization with high achievers.
    And let me tell you what this means. It means that 60 
percent of all of our folks work beyond the level they need, 
beyond 10 percent and beyond, to get higher bonuses. What we 
need to do is not lower standards. We need to increase 
opportunity.
    We need to increase flexibility. We need to let examiners 
have the opportunity to do what they do best from wherever they 
want, whenever they want, and however they want.
    And let me tell you about just three programs where this 
has been put in place in the last 2 years. Tele-working, which 
we didn't have in patents but had in trademarks, 1,000 patent 
examiners are now working from home.
    Eighty-three percent increased in morale. Eight-seven 
percent say they would be more likely to work more years--
retention. And 10 percent increase on average in production 
because they have the opportunity to work from home. When they 
had more time, they chose to do more work and have more 
flexibility.
    A flat goal program, where we say, ``Listen, you get paid 
per patent beyond a certain amount.'' Less people apply. It is 
a voluntary program. Over 150 people. Eighty-three percent of 
examiners reported higher job satisfaction. Over three-
quarters, which is not enough to conclude there is a 5 percent 
increase in production across the board. Again, something 
voluntarily chosen.
    And laptop programs. This should have made sense a long 
time ago. We said to patent examiners, ``Have a laptop. Take it 
home.''
    Mr. Conyers. Well, this impresses me, but does it pass the 
test with Budens? That is the question.
    Mr. Dudas. He is a tough, tough grader. I haven't passed--
--
    Mr. Conyers. What do you say?
    Mr. Budens. I appreciate Mr. Dudas's comments, and we do 
agree that some of the things they have done have been very 
good. Laptop program was very well received. It was a little of 
a concern to us because we knew that examiners would be using 
it to work more unpaid overtime, but examiners wanted it 
because they are a dedicated bunch.
    We are not necessarily opposed to production goals, by the 
way, like the GAO is, either. We understand their needs. But 
there are a lot of things that just aren't meshing.
    You mentioned the flat goal program. The flat goal program, 
almost all examiners just find that program reprehensible and 
are scared to death that the agency is going to implement it 
and pretty much run most of us out the door because it is not 
unrealistic. We believe it is illegal. We are fighting it.
    He made a--my brain went dead.
    Mr. Conyers. Well, would going to the gym more with Dudas 
help you or hurt you?
    Mr. Budens. Well, one look at me says it may help me in 
some ways. I am not sure that it would necessarily improve our 
relationship all that much.
    Actually, Mr. Dudas and I get along very well, I think, 
one-on-one. We have had a lot of good conversation. Where the 
real problems are is in the real development of where--and 
direction of where the agency is going.
    The employees need to be empowered. We need to be involved 
in that process.
    We are a very dedicated bunch. We believe in this system. 
We want it to be successful, and we want to do a good job for 
the American people. We need--we have one of the smartest, 
highly educated workforces in the country. Put us--let us help 
design where the agency is going and design the right tools 
that we need and the right direction that we need to go to be 
able to do the job that the American people deserve.
    Mr. Berman. Very good.
    The gentleman from Ohio. Again, 3 is our flat production 
goal.
    Mr. Chabot. Thank you, Mr. Chairman. I had another meeting 
that conflicted with this. That is why I am a little bit late. 
If I am repeating my questions, anything that you already 
covered or anything my colleagues already covered, I apologize 
in advance for that.
    Mr. Undersecretary, I will begin with you. And if any of 
the other witnesses want to either supplement or disagree with 
or add to my questions to the undersecretary, that is fine. But 
I will direct the questions to him.
    Why did the USPTO wait until the 2007 GAO report to 
initiate a study on patent examiner production goals when a 
2005 GAO report identified unrealistic production goals as a 
problem?
    Mr. Dudas. Again--and you are not asking a--it is a new 
question.
    Essentially, we are--we have not agreed with the conclusion 
that has come from GAO that it was intimated in 2005, and I 
think more directly said in 2007, the conclusion that what we 
need to do is adjust production goals and that that will 
somehow really increase production.
    And the reason being--and so, in 2004, I mentioned earlier, 
the inspector general did a report that said the opposite, 
essentially. It said we need to raise our production goals, not 
lower them.
    So I think what we are constantly looking at what should 
production goals be and how do they work. We are also looking 
in terms of what does it really mean in terms of attrition.
    What the GAO study did was gave a lot of good, raw data, 
but we have spent a lot of time doing--digging deeper under 
that data since earlier than 2005, really trying to find out 
what really is--what matters most for attrition and retention 
by year.
    So I had mentioned earlier that what we found is that we do 
exit interviews. Everyone who leaves, we ask them why did you 
leave, and they will come in and--not everyone chooses to do 
them, but of those that do, we have a higher response rate than 
generally in industry.
    And what we have found is that the primary reason why 
people are leaving in their first couple years, 41 percent said 
the primary reason is the nature of the work. That agrees with 
what the GAO says, what Robert Budens has said there.
    We found in years 3 to 10, though, that no one said that it 
was the nature of the work. They said that they think it was 
supervisor issues or management issues, along those lines.
    So what we have started to do, we have had 2 years in a row 
where we have had a management competence, working with our 
managers to work, ``How can we address that problem?'' We have 
looked at----
    Mr. Chabot. I tell you what. I have only got 5 minutes.
    Mr. Dudas. I am sorry.
    Mr. Chabot. That is all right. Let me cut you off there and 
ask if any of the other witnesses want to supplement that 
answer, or----
    Ms. Nazzaro. Well, maybe there is a misunderstanding of why 
GAO believes the way it does. I mean, what the testimony we 
have heard today is that the more senior employees are the more 
productive employees. Over 70 percent of the workload is done 
by the more senior employees.
    If you consistently have turnover, particularly among those 
junior staff, you are never going to be developing that senior 
cadre. What we see is the problem with the attrition among the 
people who have less than 3 years, it takes 4 to 6 years for 
someone to really become a journeyman or become proficient in 
that profession. It is also taking the senior people more time 
to provide that on-the-job training then, too.
    So I mean, we really see a problem with this whole 
attrition. And until they can effectively reduce that 
attrition, I don't think we are going to work out of the 
problem. And so, that is where we are saying that, if they are 
continuing to say production goals are driving us out because 
the nature of the work is too competitive, too production-
oriented, we need to figure out a way to have a happy medium.
    Mr. Chabot. Okay, thank you.
    Let me ask my second question, Mr. Dudas. Was there any 
discussion within the USPTO management team over whether 
Congress should have been notified of the re-organization of 
the Office of External Affairs?
    Mr. Dudas. Absolutely. In fact, we look at--there are three 
different types of changes that might trigger different 
requirements, a re-organization, a re-alignment and a 
reprogramming. So we certainly have that discussion every time 
we make a change.
    A realignment is, if you will, changing people within a 
box. A re-organization is changing boxes on the org chart, 
getting rid of a different type of a thing. And a reprogramming 
is a significant change in funding.
    So there is no question. We had our chief financial officer 
in every one of these cases. We have done five realignments in 
the last year. On each one of those cases, our chief financial 
officer gets together with our office of general counsel as 
needed, our office of government affairs, to determine is this 
the kind of thing that triggers that appropriations requirement 
to notify the Appropriations Committee that this is a re-
organization.
    So we definitely have that conversation every time. There 
have been a number of times where re-organizations in the last 
few years. I have got examples of when wee determine that they 
are re-organizations. We have come up and notified Congress 
officially, and in each case it is a re-organization.
    I have examples of when it has been a reprogramming, and we 
have come up and notified the Appropriations Committee and 
others of what change is going to be made. But a realignment, 
we don't do that, but we certainly have discussions n that in a 
very formal way with a lot of----
    Mr. Chabot. Let me squeeze my last question in quickly 
here. What has been the effect of the re-organization of the 
Office of External Affairs on USPTO, Intellectual Property 
Enforcement efforts?
    And my time has expired, so, if you would keep your answer 
relatively brief, and I would like to go to the others quickly 
if they have some response to that.
    Mr. Dudas. Higher efficiency, essentially. We had an 
organization that had Government Affairs, International Affairs 
and Enforcement all in one. Five years ago we change that and 
split them out among three.
    And what we found is our people were bumping up against 
each other. Enforcement people and International Affairs people 
often do very much the same thing. We have stationed people in 
the embassy in Thailand. We had people that were working in 
that. That was from International Affairs.
    We had people that were working from Enforcement bumping 
into each other. What we have now is a team of more lawyer. No 
on transferred out of the office or into the office. More 
lawyers who can work on our global intellectual property 
academy and gear themselves toward enforcement or gear 
themselves toward the international relations or policy.
    So it is a more efficient operation. We made a mistake 5 
years ago when we split them into three. We should have split 
them into two. Government Affairs should be separate--
International Relations.
    Mr. Chabot. Thank you. Any of the other witnesses need to 
comment on anything? Okay. Thank you. I yield back the balance 
of my time, Mr. Chairman. Thank you.
    Mr. Berman. I recognize the gentleman from Florida, Mr. 
Wexler.
    Mr. Wexler. Thank you, Mr. Chairman.
    Mr. Dudas, if I could go back to the list that I had read 
at the beginning in terms of, if my understanding is correct, 
at least a dozen senior people in your office have left 
involuntarily, not voluntarily. These involuntary dismissals 
represent an extraordinary degree of talent, expertise, 
technical knowledge developed over decades.
    And it raises the question why so many career 
professionals, if my understanding is correct, have 
involuntarily been dismissed. So could you please tell us what 
the numbers are in terms of this level? We are talking about 
commissioners, deputy commissioners, administrators, chiefs of 
staff, financial officers, deputy financial officers 
information officers, chief information officers, deputy 
information officers. What is going on?
    Mr. Dudas. Yes. And you are talking about at the senior 
elective service. This is the highest level within leadership 
in our organization.
    There haven't been a lot of involuntary dismissals. A lot 
of people have chosen to leave. There have been some folks that 
I have said, ``I don't think performance is where it should 
be.''
    I am really glad you asked this question because I worked 
on this Committee in 1999 when the USPTO was made a 
performance-based organization. We were about performance. And 
our examiners had been under performance standards for a long 
time. Our management wasn't always under performance standards.
    When I came into the office, the Appropriations Committee 
report came through, and Congress said, ``PTO management has 
not been sufficiently innovative. Finally, we lack full 
confidence in the information provided by PTO management 
regarding its needs and performance.''
    So the first thing we did was look at what is happening 
within this office. Why aren't we achieving our goals? And we 
looked at Government, performance and results----
    If I can show you here, this is the history of the office. 
The blue line going up, we met on average 25 percent of our 
goals at the Patent & Trademark Office before 2004. We are now 
up to 90 percent.
    I am embarrassed to say that last line doesn't go up to 100 
percent. All of our major goals that we report to the 
Administration and the Congress, we have moved up from an 
average of 25 percent to over 100 percent.
    I will also show you the line that moves more downward. 
That is the ratings outstanding for senior elective service 
people in our organization. In 1999 we met 18 percent of our 
goals, and 82 percent of the senior executives were ranked 
outstanding. We don't even--we don't have about half of our 
patent examiners ranked outstanding, and they have tight 
production standards.
    So the bottom line is it became a little harder to work 
there. We said--and if you see, as our goals met went up, our 
ratings of SESrs went down. A number of people left, quite 
honestly just said, ``It is too hard. You have strategic plans. 
I don't want to do this. I have other places I can work.''
    There were others. I waited 3 years to have full 
discussions where I said, ``I would like to reassign you 
because I don't think we are meeting our goal. I want people in 
place who will meet their goal.''
    So I am happy to go over any individual, but I will say 
there is little question that I came in with a sense of what 
this Committee wanted and what that law said, is to become a 
performance-based organization, and that is what we have done.
    I am proud to say we brought down the ratings to a point 
that I think is more reasonable. And in the last year, last 2 
years where we have broken records, literally 12 records, 
historical records at the Patent & Trademark Office, that yes, 
we started to see some of those outstanding ratings go up.
    Mr. Wexler. So if I just sum up your testimony then, in 
regard to these senior managers, it is your testimony some have 
left voluntarily, for whatever their reasons, and those that 
have left involuntary--on an involuntary fashion have been 
dismissed because they failed to meet your guidelines, they 
failed to meet the levels of required expertise?
    Mr. Dudas. Yes. I would say--I can't think of the people 
that I actually--that I went through a process of actually 
dismissing, going through the process of firing, et cetera. I 
had hard conversations with a lot of our managers, where we sat 
down and discussed whether or not we were meeting our goals and 
what kind of support that I had given.
    In the patents organization, at one point I sat down with 
some leaders of the organization and said I would plan to 
reassign you, and did make reassignments, which is--so that is 
not a dismissal, but that is me saying that I think that the 
fact that we have missed these goals, I would like to get 
people in place who are--and quite honestly, I felt that I had 
been asking for, wanting information for some time that would 
help us meet our goals, and that we weren't doing that.
    Mr. Wexler. Just to follow up and be done, is this 
quantifiable in terms of individuals? If they--is there 
something in writing that says they haven't met their goals?
    Mr. Dudas. Well, we certainly do performance appraisal 
plans and the like. And like I said, in many cases, it is not, 
``You have not met your goals, and you are not doing the 
findings.'' In many cases it is a sit-down conversation of, 
``Why aren't we being sufficiently innovative? Why aren't we 
doing the things that Congress has been asking us to do?''
    I mean, again, I will tell you, I hold senior executives to 
a very high standard because we certainly hold our examiners to 
a very high standard.
    Mr. Wexler. Thank you very much.
    Mr. Berman. Thank the gentleman.
    From what I heard from the Chairman and from what I see in 
the audience, we are going to have a gig that implicates the 
performance right soon, so we are going to have to start 
wrapping up.
    But Mr. Watt is recognized.
    Mr. Watt. I will be very quick because I am going to ask 
Mr. Dudas to provide some information in writing, if I can. You 
said you anticipated what the oversight hearing would be about, 
but I doubt you have a chart with you that will reflect what I 
am getting ready to ask you.
    As a new Member of this Subcommittee, I have noticed the 
same thing that I have noticed as a Member of the Financial 
Services Committee, on which I also sit, that there doesn't 
seem to be a lot of diversity in what is going on.
    So if you could just send us the information about the 
diversity of your workforce at the Patent office----
    Mr. Dudas. Congressman, I am happy to, but I can answer you 
if you want me to. I am happy----
    Mr. Watt. Well, in the interest of time, I would rather see 
it in writing anyway. If it is not going to take you any longer 
than it would take you to answer it, then I am going to be 
disappointed anyway. I would rather be disappointed in private 
than in public. And you would probably rather for me to be 
disappointed in private.
    Mr. Dudas. Right. I don't think you will be disappointed. 
Let me just--54 percent diversity.
    Mr. Watt. Four percent?
    Mr. Dudas. Fifty-four.
    Mr. Watt. Fifty-four. Well, I want to see the numbers up 
and down the line.
    Mr. Dudas. That is fine. We will give it to you broken 
down, and we will give it to you whatever way you want.
    Mr. Watt. Yes.
    Mr. Dudas. And if you want more information, we are happy 
to give you more information.
    Mr. Watt. I appreciate it.
    Mr. Dudas. Thank you.
    Mr. Watt. That is the only question I have. I appreciate 
it. I yield back, because I want to hear the whinings [sp] 
also.
    Mr. Berman. The gentleman from Georgia, Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Dudas, as a follow up to Mr. Watts' questions, in your 
testimony you state that the various recruitment efforts, you 
state the various recruitment efforts made to attract science 
and engineering students to create a pool of potential 
examiners for the agency. Could you please tell us your efforts 
in ensuring the diversity in this pool of potential candidates?
    And I will rest with that.
    Mr. Dudas. Like many large organizations, we recognize that 
diversity is something that is of great benefit to our agency. 
So I can go into specific programs. The U.S. government is 
about 32 percent diverse. The USPTO is 54 percent diverse. Our 
examiners are 51 percent diverse. And in the last 2 years, our 
recruiting classes have been 52 percent diverse.
    That is broken down by a number of different categories. We 
have been improving in a number of categories, seeking that 
type of diversity. We have partnered with the Minority Business 
Development Administration to help us with outreach because we 
are hiring 1,200 examiners a year. We want to work with them to 
do that.
    We have now gone to--much more to historically Black 
colleges and had I think 145 people hired at historically black 
colleges in the last few years. We have partnerships with 
minority student engineering societies at some of the major 
schools we go to, MIT, some of the big universities where we 
traditionally--not just said let us go in through the 
recruiting, but let us work with the minority student 
engineering societies that they have there as well.
    We have a Community Day every year where we basically 
celebrate the variety of cultures and the variety of 
ethnicities we have, and celebrate that we are all at the 
USPTO. We held 26 events specifically focused on minority 
recruitment last year. And as I mentioned--in the last 2 years, 
I am sorry--it is 145 people that we have recruited from 
historically Black colleges.
    We are challenged in recruitment on gender in the same way 
that the industry for engineers are challenged. We need to 
improve in terms of how many women that we are recruiting. We 
are trying to expand that as well. That is something that you 
see in the engineering professions throughout, but we are 
trying to increase that number--that level of diversity as 
well.
    And I will throw just one more thing that wasn't intended, 
necessarily, to be a diversity effort. But Chairman Conyers 
came down and spoke to a recruitment class that we had, and he 
came down right around Martin Luther King Day and shared with--
his efforts, what he managed to do to make Martin Luther King 
Day a holiday.
    That was something that we had about 200 people in that 
academy that were graduating that day. They were inspired. But 
the word spread throughout, just about how we are bringing 
people in from outside traditionally USPTO environment, and 
that was something that was inspirational to many of our folks.
    So there is a lot that we are trying to do not only to 
recruit, but also to make sure that it is an environment where 
people want to stay.
    Mr. Johnson. Thank you.
    Mr. Dudas. Thank you.
    Mr. Berman. The gentlelady from Texas, Ms. Sheila Jackson 
Lee.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman. I know 
the pending issue of importance that is about to come upon us, 
so let me rush through and welcome the witnesses, thank them 
for their presentation, and basically focus on the good friend 
and assistant secretary of the office.
    First of all, the President has put forward his budget for 
forthcoming. And are you here applauding the budget, or are you 
prepared to see it tweaked because there is a greater need, 
particularly in the inspectors--examiners, rather?
    Mr. Dudas. We are actually quite pleased with the budget 
because it is the fifth year in a row that the President's 
budget has said that all of the fees that come into the agency 
should stay with the agency. And Congress has followed that 
lead 4 years in a row.
    And so to us, we are a fee-funded agency. Our goal is 
really to see that those fees stay within for the inventors, 
and so we have been pleased.
    Ms. Jackson Lee. So that framework, it gives you the 
sufficient amount of money?
    Mr. Dudas. Yes. Well, it gets us all of our fees. It gets 
us all our fees.
    Ms. Jackson Lee. All right. I know I can probe that in a 
further letter.
    Let me just quickly--if I could follow up on Mr. Watt's 
question and ask you, in the breakdown of his request regarding 
diversity. If you can also categorize it by GS level, how many 
are 13s, how many are coming at that level, because I would 
imagine that you are taking some laterals, and it is very 
important to see the ability of people moving up. Can you 
provide it in that manner?
    Mr. Dudas. I think we can. I am almost certain we can.
    Ms. Jackson Lee. Management is important.
    Let me also suggest that you--actually you talk about 
minority engineering societies, very important. But I would 
encourage you to formulate a direct program with Hispanics 
serving in historically Black colleges, which the President has 
a framework, the college--the Congress has a framework. We have 
worked--and so those frameworks are already in place.
    One, the knowledge of them, the organizations are there, 
and we would like you to have a report back if you utilize 
those resources of students. And I might, just for the record, 
throw out Purview A&M in Texas.
    My other question is--quickly is what efforts are being 
undertaken by the USPTO in the area of enforcement, 
particularly with respect to China? And what has been your 
challenges? What have been your success rates, because I can 
tell you that many of our businesses and constituents, and they 
fall on different sides of the lot on this.
    Certainly there are some successful, but others are 
complaining that the trade imbalance, the infringement, rather, 
which Mr. Conyers has worked on extensively, the Judiciary 
Committee has worked on extensively. I don't know what progress 
we have been able to make.
    Mr. Dudas. The challenge, as I think you are implying, is 
very clearly that, with all the efforts that are underway, 
including a World Trade Organization action against China, the 
metrics still show that China is responsible for 80 percent of 
all of the counterfeit goods that are attempting to come in the 
United States, and we see similar numbers in Japan and in 
Europe.
    And so there is no question. The challenge is that the 
results are that counterfeiting is happening in China, that 
their laws need to change, and that more needs to be done.
    How are we involved? We are involved very directly. 
Sometimes--we actually have a very unique position in the U.S. 
government. Sometimes we are shaking our finger or telling 
China, ``Listen, there is more that needs to be done.'' This 
needs to be done, and we support the WTO case and work with the 
U.S. trade representative.
    But we also come in and work very carefully with all of the 
agencies in China. We work with the customs people. we work 
with the police. We talk to the Supreme Court justices. We have 
a number of programs where we bring in hundreds of Chinese 
officials to help train them and teach them and work with them 
about how intellectual property is an important point.
    We have had very successful relationships, particularly 
with the head of office in the Chinese intellectual property 
office. So what we do is we partner very closely with the 
people who are pro-intellectual property in China, and we 
develop and we help strengthen those ties. That is where we 
have been very successful, particularly.
    Ms. Jackson Lee [continuing]. I don't want to leave you out 
of my last question. Can you give me an assessment of the 
professional workers and the issues or--of your association, or 
treatment of your association, or comfort level that you have 
with the office at this point?
    Mr. Budens. As I said before, the examiners are very highly 
educated and highly skilled force, and they are highly 
dedicated to the patent system. We want to do the job right. We 
really understand the importance of patents in driving 
innovation in this country and throughout the world.
    I think there is a sense of frustration that we are not 
more involved in developing the kinds of things and tools and 
policies and stuff that we need to be able to do the job right.
    In I think several areas of the office, I think we are very 
pleased with this Administration, some of the initiatives they 
have put forward. The Hotelling program has been well received. 
The laptop program has been well received.
    On the flip side of that, we are in the middle of a 
contract negotiation right now for our term contract in where 
the positions of the agency on many very important things like 
grievance rights and performance appraisal stuff, the agency 
has taken very decidedly anti-employee positions on those 
areas. And we are scared to death of what is coming out of that 
negotiation.
    We are starting mediation on that next Tuesday, I believe, 
and expect the agency to have us at the impasses panel very 
quickly. And I don't think--I don't see right now anything good 
coming out of those mediation. I hope I am wrong, because I 
think it is going to be a decidedly negative impact on 
examiners if nothing happens, if the positions of the parties 
don't change right now.
    Ms. Jackson Lee. Mr. Chairman, let me thank you very much 
for your indulgence, and just conclude by saying Mr. Budens' 
comments disturb me. And I believe if we are to have an 
efficient, effective and professional office and staff, if we 
are to build on our recruitment, obviously the Federal 
Government needs to be a leader in respecting worker's rights 
or opportunities to have--express a grievance.
    So I don't know what statement that Congress can make at 
this point, but I hope that we can make a statement that 
indicates that we are watching, and we are concerned. And I 
hope that we can get a report back that our parties have come 
together, and they have done the right thing. Otherwise, I hope 
maybe we will have a hearing on the issue.
    Mr. Berman. We will take a closer look at the current round 
of bargaining on this issue.
    I will now thank the gentlelady, and I will recognize 
myself. I am told we have a little bit more time, so, Mr. 
Kasper, I would like to go to your testimony to examine one 
particular statement. Page five where, in the middle paragraph, 
where you start out, ``In the vast majority of cases, 
inventions relate to actual products or processes that have 
been developed by the inventor or his employer.''
    And you talk about two major goals for such applicants, and 
you have one, and then you have the second one, and that is the 
one I want you to focus on, ``To secure claims directed to the 
particular features of the commercial embodiment of a product 
that contains the invention to protect against the copying of 
that product.'' You see where I am talking?
    Is what you are saying here, the phrase, ``The particular 
features,'' is the particular features is the invention, but 
the claims may be defined broader to cover and include the 
commercial embodiment that contains that inventive feature. Is 
that basically what you are intending?
    Mr. Kasper. Chairman Berman, the intention was to show 
that, in some cases, you can have a claim that is broad enough 
to cover both the commercial embodiment as well as competitors' 
embodiments. So in other words, the scope of protection is 
broad, and stops many competitors from entering the field.
    Mr. Berman. Can the scope of the claim be written to cover 
sort of the commercial embodiment, and therefore is broader 
than the description of the inventive feature?
    Mr. Kasper. Yes, it can be broader. You may--and typically, 
it is broader than the description of the invention. However, 
sometimes the applicant will take a much narrower scope of 
protection that covers only what he has in the marketplace. He 
doesn't care about a competitor's product or getting the 
broadest possible protection, as long as his widget, as it is 
sold, is actually covered. So he is prepared to compromise and 
to truncate the prosecute----
    Mr. Berman. And in that case, the claim would only cover 
the inventive feature.
    Mr. Kasper. Correct.
    Mr. Berman. All right. And then, one last--I have a lot of 
questions, but I am not going to do that. But I just--in your 
testimony, you speak about many applications your firm files 
every year. We hear--I hear that part of the patent pendency 
problem stems from overly aggressive lawyering on behalf of 
applicants, where the lawyers exploit the system in ways that 
create many burdens on the examiner despite the current rules.
    What additional duties, if any, would you impose on 
applicants to improve the patent examination process?
    Mr. Kasper. Well, certainly the additional duties could 
involve more full description of the features of the invention 
during the application prosecution process. In some cases, for 
example, the applicant may simply say there is a difference 
between the invention and the prior ART, and then leave it to 
the appeal process to have that worked out by the Board of 
Appeals.
    What I believe is that, in a dialogue between the examiner 
and the applicant, if that dialogue could be open and free, 
without concern for inequitable conduct, you would have an 
opportunity to have the important inventive features 
identified, recited in a claim, and eventually have the claim 
and the application issued as a patent in a much more 
expeditious manner.
    Mr. Berman. All right. Unless there is some reason to the 
contrary, we are--votes have been called. I appreciate very 
much--they are not all the--there are a lot of issues out 
there. In fact, I just will make an observation for Mr. Dudas 
on one very specific point that was raised by you and commented 
by one of the Members.
    When you split the Office of External Affairs into three 
offices 5 years ago, that was--this was Mr. Chabot, I think was 
pursuing this line of questioning--that you considered an 
executive reorganization. So wouldn't it follow that the 
collapse of those three offices into two would be considered an 
executive reorganization?
    Mr. Dudas. It is not, and I will tell you why. The 
difference between it is it is a--when the split came in 
first--I am not certain if it was a reorganization, but I will 
tell you the difference between that split and the flip back 
was.
    There was a specific position that was Administrator for 
External Affairs. When we decided to put it into three, we said 
that position should rest in the deputy undersecretary. And the 
deputy undersecretary--at that level, this is policy for the 
entire Patent & Trademark Office, lead advisor to the President 
and others.
    That statement--that right there stayed the same in this 
realignment. It is still the deputy undersecretary that leads 
that organization. So that would have been a change from 
someone who reports to deputy undersecretary to someone who is 
within.
    I can tell you, I am happy to go into----
    Mr. Berman. I will think about your statement on the 
matter.
    Mr. Dudas [continuing]. Sure, that is----
    Mr. Berman. Okay.
    The Committee hearing is adjourned. I thank you all for 
coming, and there are things to follow up both on your part and 
on our part, which we will do. Appreciate it.
    [Whereupon, at 3:07 p.m., the Subcommittee was adjourned.]





























                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

       Prepared Statement of the Honorable Sheila Jackson Lee, a 
    Representative in Congress from the State of Texas, and Member, 
    Subcommittee on Courts, the Internet, and Intellectual Property

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

 Prepared Statement of the Honorable Betty Sutton, a Representative in 
 Congress from the State of Ohio, and Member, Subcommittee on Courts, 
                the Internet, and Intellectual Property

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

 Prepared Statement of the Honorable Darrell Issa, a Representative in 
  Congress from the State of California, and Member, Subcommittee on 
            Courts, the Internet, and Intellectual Property

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                 
