    International Trade: Federal Action Needed to Help Small
    Businesses Address Foreign Patent Challenges (17-JUL-02,
    GAO-02-789).

    Small and start-up businesses are principal sources of innovation
    and are vital to U.S. economic growth. Statistics show that small
    business created more than 5.5 million new U.S. jobs during the
    1990s. In the current global economy, protecting innovations in
    the United States and abroad is an important component of small
    businesses' ability to develop overseas markets. The cost of
    obtaining, maintaining, and enforcing foreign patents is the most
    significant foreign patent impediment that small businesses
    encounter. GAO found that obtaining patents abroad is costly for
    several reasons. Companies typically seek patents in several
    other countries simultaneously and incur costs in each location.
    Also some foreign patent office fees are substantially higher
    than corresponding U.S. Patent and Trademark Office fees.
    Finally, foreign patent laws and requirements are complex and
    difficult to understand, causing companies to incur substantial
    U.S. and foreign legal fees. The businesses GAO surveyed said
    that the impediments they encounter have discouraged or prevented
    them from obtaining as much foreign patent protection as they
    would like to have. Large businesses are better equipped to deal
    with foreign patent impediments because they have more financial
    resources and foreign patent expertise and are better able to
    enforce their patents abroad. The small businesses and patent
    attorneys thought that certain federal actions could help small
    businesses overcome the impediments they face in seeking foreign
    patent protection.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-02-789
        ACCNO:   A04025
      TITLE:     International Trade: Federal Action Needed to Help Small
    Businesses Address Foreign Patent Challenges
         DATE:   07/17/2002
      SUBJECT:   International economic relations
    	     International trade
    	     Patents
    	     Small business

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    GAO-02-789

    A

    Report to Congressional Requesters

    July 2002 INTERNATIONAL TRADE Federal Action Needed to Help Small Businesses
    Address Foreign Patent Challenges

    GAO- 02- 789

    Letter 1 Results in Brief 2 Background 4 Small Businesses Encounter Cost and
    Other Impediments When

    Seeking Foreign Patents 6 Impediments Negatively Affect Small Businesses?
    Foreign Patent

    Decisions 21 Several Federal Actions Could Help Small Businesses Overcome
    Impediments 25

    Conclusions 32 Recommendation for Executive Action 33 Agency Comments and
    Our Response 34

    Appendixes

    Appendix I: Objectives, Scope, and Methodology 36 The Expert Panel 36 The
    Small Business Survey 39

    Appendix II: Information about the Small Business Survey Population 45 Size
    of Businesses Surveyed 45 Industries of Businesses Surveyed 46 Locations of
    Businesses Surveyed 47 Patent Behavior of Businesses Surveyed 48

    Appendix III: Members of GAO?s Patent Attorney Panel 50

    Appendix IV: Results of the Patent Attorney Panel Surveys 53 Phase I 53
    Phase II 53 Phase III 79

    Appendix V: Results of the Small Business Survey 82

    Appendix VI: Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario 88 Estimated Cost of U. S. Patent 89
    Filing for a Foreign Patent 90 Obtaining a Foreign Patent Using PCT 92
    Maintaining a Foreign Patent 99 U. S. Attorney and Foreign Representative
    Fees 101 Total Scenario Costs 102 Scope and Methodology 103

    Appendix VII: Comments from the U. S. Patent and Trademark Office 106 GAO
    Comment 107

    Appendix VIII: Comments from the Small Business Administration 108 GAO
    Comment 110

    Appendix IX: GAO Contacts and Staff Acknowledgments 111 GAO Contacts 111
    Staff Acknowledgments 111

    Glossary 112 Tables Table 1: Minimum Estimated Costs for a Small Business to
    Obtain

    and Maintain U. S. and Foreign Patent Protection for a Single Invention 12
    Table 2: Statistics on the Number of Small Businesses Screened and

    Selected for GAO?s Survey 42 Table 3: Foreign Patent Experience of the Small
    Businesses That

    GAO Surveyed 43 Table 4: Descriptive Statistics on Impediments That
    Businesses

    Face in Seeking Foreign Patent Protection 55 Table 5: Descriptive Statistics
    on Suggestions for Small Businesses to Consider When Seeking, Obtaining, and
    Maintaining

    Foreign Patent Protection 67 Table 6: Descriptive Statistics on Public
    Assistance Options to Help

    Small Businesses Overcome Impediments to Seeking, Obtaining, and Maintaining
    Foreign Patents 74 Table 7: Estimated Costs to Obtain and Maintain U. S.
    Patent for 20

    Years 90 Table 8: Estimated International Stage Patent Costs 97 Table 9:
    Estimated National Stage Patent Costs 99 Table 10: Estimated Costs Involved
    in Maintaining a Foreign Patent

    in Nine Countries for 20 Years 101 Table 11: Estimated U. S. Attorney and
    Foreign Representative

    Fees 102 Table 12: Estimated Total Foreign Patent Costs 103

    Figures Figure 1: Small Businesses? and Patent Attorneys? Views on Types of
    Foreign Patent Impediments That Small Businesses

    Face 8

    Figure 2: Small Businesses? and Patent Attorneys? Views on the Stages of
    Foreign Patent Costs as Impediments to Foreign Patent Protection 9 Figure 3:
    Small Businesses? and Patent Attorneys? Views on Company Characteristics as
    Impediments to Foreign

    Patent Protection 14 Figure 4: Small Businesses? and Patent Attorneys? Views
    on Differences among Foreign Patent Systems as

    Impediments to Foreign Patent Protection 17 Figure 5: Small Businesses? and
    Patent Attorneys? Views on Individual Country Characteristics as Impediments
    to

    Foreign Patent Protection 20 Figure 6: Patent Attorneys? Views on Small
    Businesses? Level of

    Foreign Patent Protection 23 Figure 7: Patent Attorneys? Views on the
    Differences in Impediments That Large and Small Businesses Face 24

    Figure 8: Small Businesses? and Patent Attorneys? Views about Possible
    Federal Actions to Overcome Foreign Patent Impediments 26

    Figure 9: Patent Attorneys? Views on the Usefulness and Feasibility of
    Federal Financial Assistance for Reducing Foreign Patent Costs 30 Figure 10:
    Patent Attorneys? Views on Usefulness of Information

    That Federal Government Could Provide to Small Businesses 32 Figure 11:
    Number of Employees in Small Businesses That GAO

    Surveyed 45 Figure 12: Industries of Small Businesses That GAO Surveyed 46
    Figure 13: Locations of Small Businesses That GAO Surveyed 47 Figure 14:
    Number of U. S. and Foreign Patents Held and Pending

    among the Small Businesses That GAO Surveyed 48 Figure 15: Foreign Countries
    or Locations in Which Small

    Businesses That GAO Surveyed Held Patents 49 Figure 16: Patent Attorney
    Reponses to Questions 11 and 12 of

    Phase II 63 Figure 17: Patent Attorney Responses to Questions 13, 14, and 15
    of

    Phase II 65 Figure 18: Patent Attorney Responses to Questions 17 and 18 of

    Phase II 71 Figure 19: Patent Attorney Responses to the Four Questions in

    Phase III 80

    Figure 20: The International and National Stages of the PCT Process 94

    Abbreviations

    EPO European Patent Office IP intellectual property PCT Patent Cooperation
    Treaty SBA Small Business Administration USPTO U. S. Patent and Trademark
    Office WIPO World Intellectual Property Organization

    Letter

    July 17, 2002 The Honorable Christopher S. Bond Ranking Minority Member
    Committee on Small Business

    and Entrepreneurship United States Senate

    The Honorable Donald A. Manzullo Chairman, Committee on Small Business House
    of Representatives

    Small and start- up businesses 1 are principal sources of innovation and
    therefore play an important role in technological development. These firms
    are also vital to U. S. economic growth- statistics show that small
    businesses created more than 5.5 million new U. S. jobs during the 1990s. 2
    In order to prosper, small businesses, particularly those in high-
    technology

    industries, must be able to protect and profit from the innovations that
    flow from their research and development expenditures. In the current global
    economy, protecting innovations in the United States and abroad is an
    increasingly important component of small businesses? ability to develop
    markets in other countries. One way to globally protect innovations is to
    obtain U. S. and foreign patents. While small businesses held about 11

    percent of the U. S. patents granted to U. S. entities in 2000, available
    research indicates that small businesses are less likely than large
    businesses to seek patents overseas, even when their inventions are of
    similar value. 3

    Concerned that some small businesses, particularly high- technology firms,
    were not obtaining patent protection overseas and thus were losing potential
    sales in foreign markets, you asked us to analyze (1) whether

    1 Under 13 C. F. R. part 121, the Small Business Administration (SBA)
    established various size standards, based on economic activity or industry,
    for determining what is a small business for purposes of eligibility for its
    programs. Based on the SBA standards, we defined a small business for
    purposes of conducting our work as having 500 or fewer employees.

    2 See U. S. Bureau of the Census, Statistics of U. S. Businesses
    (Washington, D. C.: n. d.), available at http:// www. census. gov/ epcd/
    www/ smallbus. html (table 2d). 3 Mogee Research and Analysis Associates,
    Foreign Patenting Behavior of Small and Large Firms, prepared under contract
    for the Office of Advocacy, U. S. Small Business Administration (Reston,
    Virginia: Mar. 5, 1996). An update to this study is forthcoming.

    small businesses face impediments in obtaining foreign patent protection;
    (2) what impact any impediments have on their foreign patent decisions; and
    (3) whether any federal actions could help small businesses overcome

    the impediments they may face in obtaining foreign patents. To meet our
    objectives, we convened a Web- based panel of 39 U. S. patent attorneys with
    expertise in obtaining foreign patents for both small and large businesses.
    In the panel?s three phases, the patent attorneys identified and assessed a
    range of foreign patent impediments and possible federal actions to address
    them. Based on the attorneys? input, we then developed a questionnaire that
    we administered to a random sample of small businesses that had obtained or
    considered obtaining foreign patents in the last 5 years. The 38 businesses
    that participated in our survey operated in a cross- section of industries;
    more than 80 percent of them held foreign patents. Although we initially
    randomly selected the sample of small

    businesses, the number we ultimately consulted was limited because
    information was not available for a substantial number of businesses.
    Therefore, the information in this report does not represent the overall set
    of small businesses that seek foreign patent protection. (App. I provides
    further details about our methodology and its limitations. App. II contains
    information about the businesses we surveyed, and app. III lists the members
    of the patent attorney panel.)

    Results in Brief The cost of obtaining, maintaining, and enforcing foreign
    patents is the most significant foreign patent impediment that small
    businesses

    encounter, according to the small businesses and patent attorneys that we
    consulted. Patenting abroad is a costly endeavor for several reasons. For
    example, (1) companies typically seek patents in several other countries
    simultaneously and incur costs in each location; (2) some foreign patent
    office fees are substantially higher than corresponding U. S. Patent and
    Trademark Office fees; and (3) foreign patent laws and requirements are
    complex and difficult to understand, causing companies to incur substantial
    U. S. and foreign legal fees. As a result, foreign patent protection is more
    expensive to acquire than U. S. patent protection. We developed a
    hypothetical scenario to estimate patent costs and determined that a small
    business could pay about $10,000 to obtain and maintain a U. S. patent on a
    single invention for 20 years. However, it could pay at least $160,000 to
    $360,000 to obtain and similarly maintain patents in nine other countries
    for the same invention (this amount of foreign patent coverage could be
    considered typical for a small business). Small businesses would incur such
    costs for each patent they seek to file outside of the United States.

    Other factors impede small businesses? efforts to patent abroad as well,
    according to the groups we surveyed. For example, the businesses and patent
    attorneys said that small businesses tend to have limited resources to pay
    foreign patent costs, a limited overseas presence to enforce their patents,
    and limited knowledge about foreign patents. In addition, differences among
    other countries? patent laws, standards, and procedures heighten the level
    of complexity associated with obtaining foreign patents. Finally,
    unfavorable business climates and the lack of enforcement in some countries
    also impede small businesses, according to our survey results.

    The businesses we surveyed said that the impediments they encounter have
    discouraged or prevented them from obtaining as much foreign patent
    protection as they would like to have. A majority of the patent attorneys
    said that most small businesses hold fewer foreign patents than they need,
    primarily because the impediments are too difficult for them to overcome.
    Most of the attorneys believed that large and small businesses generally
    encounter many of the same impediments to acquiring foreign patents, but the
    impediments have a more negative effect on small businesses. Large
    businesses are better equipped to deal with foreign patent impediments, the
    attorneys said, because they have more financial resources and foreign
    patent expertise and are better able to enforce their patents abroad.

    The small businesses and patent attorneys thought that certain federal
    actions could help small businesses overcome the impediments they face in
    seeking foreign patent protection. More than 70 percent of the survey

    respondents in both groups supported federal efforts to promote
    harmonization among the world?s patent laws and systems and to seek patent
    cost reduction. Patent law harmonization efforts have been ongoing in the
    World Intellectual Property Organization for at least 20 years, and while
    some success has been achieved, many differences among member countries?
    patent laws remain. Harmonization could provide many advantages, such as
    agreement on the types of innovations that can be patented, acceptance among
    national patent offices of one another?s work,

    and substantially reduced costs. However, achieving harmonization could
    require significant changes to U. S. patent laws. In addition to supporting
    harmonization efforts, nearly 70 percent of the businesses thought that
    federal financial assistance to help defray the costs of foreign patents
    would be helpful, but less than 50 percent of the patent attorneys held this
    view. Most of the patent attorneys regarded federal financial assistance as
    an indirect solution to the broader problem of a lack of uniformity among
    global patent systems. Conversely, nearly 70 percent of the attorneys, but
    only about 40 percent of the businesses, thought that making information

    about foreign patents available to small businesses, particularly those that
    are just beginning to consider foreign patents, would be useful. In this
    report, we recommend that the government assess the advantages and
    disadvantages to U. S. businesses of various options for further patent
    harmonization. However, given the long- term nature of these efforts, we
    also recommend that the government make information about key aspects of
    obtaining foreign patent protection available to small businesses to assist
    their efforts.

    Commenting on a draft of this report, the U. S. Patent and Trademark Office
    and the Small Business Administration indicated that they agreed with our
    recommendations but lacked the expertise to independently develop
    information about foreign patent protection. We agreed and modified the
    recommendation to direct the agencies to collect and make available existing
    information about foreign patents.

    Background A patent is the grant of a property right that a national
    government or an international intergovernmental authority issues for an
    invention. Patents

    cover inventions of new products as well as new processes to make or use new
    or existing products. While patent rights vary by country, a patent
    typically gives an inventor the right to exclude others from commercially
    making, using, offering to sell, or importing the invention in the country
    that granted the patent during the patent term, usually a 20- year period
    from the application date. Any violation of that right is considered a
    patent infringement. Patent owners that wish to address the infringement of,
    or to

    ?enforce,? their patent rights must initiate a legal action in the country
    or countries where the infringement occurred. (Our glossary defines the
    patent- related terms we use in this report.) U. S. companies and inventors
    that seek patent protection in the United States file patent applications
    with the U. S. Patent and Trademark Office (USPTO). They are typically
    represented by a patent attorney, who drafts their patent application and
    responds to USPTO questions about the application. Before granting a patent,
    USPTO will search for relevant ?prior art? (all patent and nonpatent
    literature that helps determine whether a new patent will be granted) and
    examine applications to, among other things, determine whether the claimed
    invention is ?new and nonobvious.? USPTO provides information about the U.
    S. patent system to independent

    inventors that are considering whether to obtain a U. S. patent, but it
    provides little information about foreign patent systems.

    U. S. companies and inventors that seek foreign patent protection may file
    either (1) separate patent applications with each national or regional
    patent office where they desire patent protection, or (2) an international
    patent application under the Patent Cooperation Treaty 4 (PCT) that the
    World Intellectual Property Organization (WIPO) administers. 5 While the PCT
    process does not culminate in a ?world patent,? because such a patent does
    not exist, it does enable applicants to indicate the countries where they
    might like to seek patent protection and to undergo a single prior art
    search and single examination before deciding whether and in which countries
    they wish to obtain patents. In order to preserve their rights to the
    invention they seek to patent, U. S. companies and inventors must file all
    foreign patent applications related to the invention, including PCT
    applications, within 1 year from the date on which their U. S. application
    was filed. If they do not file with this 1- year period, companies and
    inventors lose certain rights that an international treaty provides, which
    may in turn affect their ability to obtain patent protection abroad. 6
    Foreign

    patent applications must conform to the patent laws and requirements in the
    countries where protection is sought.

    U. S. companies and inventors that seek to patent abroad incur costs to
    apply for, obtain, maintain, and enforce their patents. For example,

    4 The PCT, adhered to by 115 countries, is an international system that
    facilitates the filing of multiple patent applications and allows nationals
    or residents of PCT member countries to simultaneously seek patent
    protection in other PCT member countries. PCT applications are generally
    filed with the applicant?s national patent office. The International
    Searching

    Authority chosen by the applicant (a national patent office or
    intergovernmental organization) conducts a prior art search. If the
    applicant desires, an International Preliminary Examination Authority chosen
    by the applicant (also a national patent office or intergovernmental
    authority) examines the application. Applicants that choose this route must
    still file patent applications in the countries where they wish to hold
    patents, but the treaty allows them to delay filing these applications for
    up to 30 months from the applicant?s original filing date.

    5 WIPO was established in 1970 and is one of 14 specialized agencies in the
    United Nations system. Based in Geneva, Switzerland, and composed of 171
    member states, WIPO promotes intellectual property protection, facilitates
    adoption of intellectual property treaties, and plays an important role in
    the global administration of intellectual property regulations.

    6 Under the 1883 Convention for the Protection of Industrial Property (known
    as the Paris Convention), as amended, 163 countries give limited recognition
    to each other?s patent application filing dates. Under the convention, for 1
    year after the date of filing of a U. S. patent application, basically the
    same application may be filed as a foreign counterpart application in any
    country that is a convention member. Applicants? rights are similarly

    protected if they file a PCT application within 1 year of their original
    filing date.

    national patent offices typically charge fees when patent applications are
    filed, as well as when they search for prior art, examine applications, and
    grant patents. In addition, companies and inventors may incur costs to have
    patent applications translated into other languages. National patent offices
    also charge fees to maintain or keep a patent active after it has been
    granted. Whereas most USPTO fees are reduced by half for small entities
    (defined as a small business, independent inventor, or not- for- profit
    entity), most foreign patent offices do not offer similar fee reductions. In
    addition to varying national patent office charges, companies and inventors
    must pay for the services of U. S. and foreign patent attorneys or agents
    throughout the process, particularly if they take any enforcement action
    related to their patents.

    Small Businesses Small businesses face many obstacles in obtaining foreign
    patents, but cost

    Encounter Cost and is the greatest impediment, according to the small
    businesses and the panel

    of patent attorneys we surveyed. Certain characteristics of small Other
    Impediments

    businesses themselves are also great impediments, the survey respondents
    When Seeking Foreign

    said. These latter include the amount of resources that small businesses
    Patents

    can allocate for foreign patent costs and the tendency for these businesses
    to have a limited overseas presence. In addition, the patent attorneys
    believe that small businesses lack sufficient knowledge about foreign
    patents. This causes them to make inappropriate decisions about obtaining
    and managing their patents. Both groups believe that differences among
    foreign patent systems, such as variations in the extent and type of
    protection that other countries? patent systems provide, create challenges.
    Finally, certain aspects of individual countries, predominantly a country?s
    market or business climate and the extent to which it enforces its patents,

    can present significant impediments for small businesses. (App. IV contains
    the results of the patent attorney panel. App. V contains the small business
    survey results.)

    Cost Is the Primary The impediments that the small businesses and patent
    attorneys rated fell

    Impediment for Small into six broad, overlapping categories: (1) costs
    associated with foreign

    Businesses Seeking Foreign patents, (2) characteristics of companies, (3)
    differences among foreign

    Patent Protection patent systems, (4) characteristics of individual
    countries, (5) factors

    related to USPTO (such as the quality and timeliness of its work), and (6)

    availability of advice about foreign patents. 7 About 80 percent of both the
    small businesses and patent attorneys believe that the costs associated with
    foreign patents- including costs to acquire, maintain, and enforce them-
    greatly impede small businesses? efforts to patent abroad (see fig. 1). 8
    (We asked the businesses and the patent attorneys to indicate whether the
    foreign patent impediments that they identified in each category affected
    small businesses to a very great extent, a great extent, a moderate extent,
    some extent, or little to no extent.) The two groups also held fairly
    consistent views about the relative importance of other types of
    impediments. For example, less than 25 percent of both the small businesses
    and patent attorneys thought that USPTO- related factors and the
    availability of U. S. or foreign legal advice about foreign patents were
    great impediments to small businesses. However, the patent attorneys were
    more likely than the small businesses to view company characteristics,
    differences between foreign patent systems, and individual country
    characteristics as areas that greatly impeded small businesses? foreign
    patent efforts.

    7 Based on the patent attorneys? responses to the first phase of our panel,
    we developed a list of 46 types of impediments that we grouped into six
    categories. We then asked the patent attorneys and small businesses to rate
    the items in each category. We imputed each group?s views about the
    significance of each category based on their ratings of individual items in
    the category.

    8 This conclusion is consistent with the results of another study, Joseph J.
    Cordes, Henry R. Hertzfeld, and Nicholas S. Vonortas, Survey of High
    Technology Firms, a study prepared for the Office of Advocacy, Small
    Business Administration (Washington, D. C.: George Washington University,
    February 1999).

    Figure 1: Small Businesses? and Patent Attorneys? Views on Types of Foreign
    Patent Impediments That Small Businesses Face

    Note: Percentages reflect the number of respondents who rated items within
    each category as posing a great or very great impediment. Thirty- eight
    small businesses responded to our survey, and 39 patent attorneys
    participated in our panel. The number of respondents who rated individual
    items may be lower. See appendixes IV and V for the actual number of
    respondents to each item.

    Source: GAO analysis of small business surveys and patent attorney panel
    questionnaires.

    Foreign Patent Acquisition We asked the small businesses and patent
    attorneys to rate several costs

    Costs Are Considered to Be associated with foreign patents, including patent
    acquisition, maintenance,

    More Problematic Than and enforcement costs, in order to understand whether
    certain patent

    Maintenance or stages pose more of an impediment than others (for example,
    whether

    Enforcement Costs small businesses can afford to obtain foreign patents but
    cannot afford to keep or enforce them). As shown in figure 2, nearly 90
    percent of the

    businesses and attorneys regarded patent acquisition costs as a great
    impediment and thus rated these costs somewhat higher than maintenance or
    enforcement costs.

    Figure 2: Small Businesses? and Patent Attorneys? Views on the Stages of
    Foreign Patent Costs as Impediments to Foreign Patent Protection

    Note: Percentages reflect the number of respondents rating each item as
    posing a great or very great impediment. Thirty- eight small businesses
    responded to our survey, and 39 patent attorneys participated in our panel.
    The number of respondents who rated individual items may be lower. See
    appendixes IV and V for the actual number of respondents to each item.

    Source: GAO analysis of small business surveys and patent attorney panel
    questionnaires.

    According to the businesses and patent attorneys and our analysis, several
    factors cause foreign patents to be expensive and typically more costly than
    U. S. patents.

     Companies typically file in several countries at a time, but the exact
    number depends on the company?s business needs and strategies. For example,
    the overall patent strategies of two- thirds of the businesses we surveyed
    ranged from obtaining patents in multiple countries in one region to
    patenting virtually worldwide. The remaining one- third of the businesses
    said they typically patent in only one or a few selected countries.

     Applicants incur multiple costs in each country, and many countries?
    patent office fees are higher than comparable U. S. fees. Moreover, many of
    these foreign charges are redundant. For example, applicants may

    incur multiple search and examination fees, because each national patent
    office where they file may conduct its own prior art search and its own
    examination. Even applicants that use the PCT process to initially obtain a
    single search or examination may still be required to pay additional
    examination fees to the national patent offices where they choose to file
    applications.

     Most patent applications that are filed abroad must be translated into a
    foreign language at some point. Nearly all of the patent attorneys we
    surveyed regarded the cost of such translations as a great impediment for
    small businesses. Several businesses and patent attorneys estimated

    that translating an application into Japanese, for example, can cost about
    $8,000-$ 10,000 or more.

     Applications must be customized to meet the patent laws and requirements
    of each country, and businesses must be represented by foreign patent
    attorneys or agents in each country where they file applications. These
    requirements add to the cost of the U. S. and foreign legal fees that
    businesses incur.

    Based on this information, we developed a hypothetical scenario to estimate
    the minimum cost for a small business of obtaining and maintaining patent
    protection for a single invention of minimal complexity in the United States
    and nine major countries. 9 Such a foreign patent strategy could be
    considered typical for a small business, according to the attorneys we
    consulted. As shown in table 1, while the minimum cost to obtain and
    maintain patent protection in the United States on the invention

    in our scenario would be about $10,000, the minimum foreign costs could
    range from about $160,000 to $330, 000. 10 These costs include foreign
    patent office and U. S. or foreign attorney charges for developing and
    filing a patent application, obtaining an issued patent, and maintaining an
    issued

    9 To develop a rough estimate of foreign patent costs, we created a
    relatively straightforward foreign patent scenario that several patent
    attorneys on our panel advised us could be considered typical for a small
    business. In our scenario, a fictitious business sought patent protection
    for an invention in Canada, France, Germany, Ireland, Italy, Japan, South
    Korea, Sweden, and the United Kingdom, countries where U. S. patent
    applicants may be likely to file (see app. VI).

    10 These estimates are expressed in current year dollars because of a lack
    of information about the timing and amount of future expenditures for patent
    maintenance and attorney fees. For additional information on our scope and
    methodology in developing these estimates, see app. VI.

    patent for 20 years. 11 Actual patent costs for a patent filing strategy
    similar to our scenario could be far higher because we assumed that the
    patent application would not face a difficult examination process in any of
    the countries. Thus, our scenario eliminated many patent office and legal
    costs that companies incur in trying to obtain a patent. Actual patent costs
    would also vary if certain key assumptions were modified. For example, if
    foreign patent protection was desired in more than nine countries, the costs
    would increase. Also, if a patent application was longer or more complex
    than the one in our scenario (25 pages in length), the cost to obtain patent
    protection abroad would rise because translation expenses and some foreign
    patent office charges would be higher. Conversely, if patent protection was
    not maintained for the full 20- year term in each of the countries, official
    fees and attorney fees to maintain the patent would decrease. 12 The latter
    condition would reduce the overall cost of foreign patent protection
    relative to the U. S. cost. (App. VI contains more information about our
    scenario.)

    11 In our scenario, we assumed that the patents would be held for the full
    20- year term in each country to show what the maximum maintenance costs
    might be. However, most patents are not held for the full term. 12 U. S.
    patent maintenance costs are fully paid by the end of the twelfth year from
    the date

    the application was filed, whereas foreign patent maintenance costs continue
    to be incurred through the twentieth year from the date of application.
    Thus, holding foreign patents for shorter periods of time reduces the cost
    of foreign patent protection relative to U. S. costs.

    Table 1: Minimum Estimated Costs for a Small Business to Obtain and Maintain
    U. S. and Foreign Patent Protection for a Single Invention

    United States Nine other countries a Tot al U. S.

    Total foreign Stage of patent costs Official fees b Attorney fees c costs
    Official fees d Attorney fees e costs

    Estimated minimum costs to $1,010 $5, 402 $6, 412 $15,517 $< 40,000 -

    $< 55, 517 - obtain patent 100,000 115, 517

    Estimated minimum costs to $3,000 $528 $3, 528 $83,543 $20,000 -

    $103, 543 - maintain patent for 20- year

    130,000 213, 543 period f

    Total estimated minimum $4,010 $5, 930 $9, 940 $99,060 $< 60,000 -

    $< 159, 060 - costs to obtain and

    230,000 329, 060 maintain patent

    Note 1: The U. S. application is assumed to consist of 25 pages, five
    drawings, and 15 claims (including two independent claims).

    Note 2: The patents are assumed to be maintained for 20 years in the United
    States and the nine other countries.

    Note 3: U. S. costs are based on USPTO small entity fees and on median
    attorney costs contained in the American Intellectual Property Law
    Association?s Report of Economic Survey 2001.

    Note 4: The foreign application is assumed to be filed under Chapter II of
    the World Intellectual Property Organization?s Patent Cooperation Treaty.

    Note 5: Foreign costs are based on USPTO?s PCT fee schedule, Global IP
    Estimator data on national patent office fees and translation costs (Global
    IP Estimator (Kihei, HI: Global I. P. Net, 2002) is a software package that
    provides cost estimates of international patent applications), and estimates
    of U. S. and foreign attorney fees that we received from four of our patent
    attorney panelists. a Canada, France, Germany, Ireland, Italy, Japan, South
    Korea, Sweden, and the United Kingdom.

    b Includes USPTO small- entity fees to file, allow (or grant), and maintain
    a utility patent. c Includes U. S. attorney costs to prepare and file the
    application, issue the allowed patent, and pay U. S. maintenance fees.

    d Includes PCT fees; national patent office filing, issuance, and
    maintenance fees; and translation costs. e Includes estimates of U. S. and
    foreign attorney costs to file the PCT application, represent the

    applicant before each national patent office, and pay maintenance fees. f U.
    S. maintenance fees are levied three times during the 20- year patent term,
    while most foreign

    maintenance fees are levied annually during that period. Source: GAO
    analysis.

    Resource and Other Nearly 40 percent of the small businesses and 50 percent
    of the patent Limitations within Small

    attorneys believed that certain characteristics of small businesses
    Businesses Can Impede

    themselves greatly impede these companies? efforts to obtain foreign Their
    Efforts to Patent

    patents (see fig. 1). Of the items within this category, about 70 percent of
    the businesses and about 90 percent of the attorneys thought that small
    Abroad

    businesses? limited financial resources relative to the high costs of
    foreign

    patents was a great impediment, as shown in figure 3. (Among the businesses
    we surveyed, some had no revenue yet, so they covered their foreign patent
    costs using investor- provided funds. Others allocated 5 percent or less of
    their annual revenue to patents.) The two groups? views on other items in
    this category diverged, and the attorneys regarded company characteristics
    as serious impediments more frequently than the small businesses themselves
    did.

    Figure 3: Small Businesses? and Patent Attorneys? Views on Company
    Characteristics as Impediments to Foreign Patent Protection

    Note: Percentages reflect the number of respondents rating each item as
    posing a great or very great impediment. Thirty- eight small businesses
    responded to our survey, and 39 patent attorneys participated in our panel.
    The number of respondents who rated individual items may be lower. See
    appendixes IVand V for the actual number of respondents to each item.

    Source: GAO analysis of small business surveys and patent attorney panel
    questionnaires.

    About half of the small businesses and patent attorneys believed that the
    tendency for small businesses not to have overseas operations greatly
    impedes their efforts to patent abroad. The lack of an overseas presence can
    make it difficult to detect patent infringement and take enforcement actions
    in other countries, several attorneys said. In that regard, more than

    half of the businesses indicated that the fear of losing control over their
    technology through infringement greatly impeded their company?s efforts to
    patent overseas.

    More than half of the patent attorneys believed that limited knowledge among
    small businesses about foreign patents greatly impedes their efforts to hold
    patents overseas. Several patent attorneys said that the various foreign
    laws and systems that regulate patent acquisition and enforcement are highly
    complex and difficult to understand. In addition, small

    businesses may not be aware of the multiple patent- filing processes and
    cost- saving strategies that exist. Unlike large companies, which typically
    employ their own patent attorneys, small businesses often lack internal
    expertise about obtaining and managing foreign patents, several attorneys

    said. As a result, patent attorneys believed that small businesses may be
    highly dependent on outside patent counsel. Unfortunately, they said,
    quality advice about foreign patents is expensive and may not be readily
    available to small businesses.

    About one- third of the businesses we surveyed also believed that limited
    knowledge about foreign patents among small businesses is a great
    impediment. For example, the executive director of a laboratory said that
    his company did not know it would have to obtain patents abroad in order to
    protect its inventions outside of the United States, incorrectly assuming
    that its U. S. patent offered worldwide protection. The company also
    initially believed it would be able to obtain one patent to cover all of
    Europe, which is not possible. 13 Moreover, officials from an oil drilling
    products manufacturer said they were surprised to learn that they could not
    file foreign patent applications in English. 14 Officials from several
    companies discussed their uncertainty about the various fees and processes
    that other patent offices require. For example, the vice president of
    technology for a ceramic fiber insulation company said that small businesses
    are able to make decisions about where to patent but often do

    13 The 1973 European Patent Convention, which created the European Patent
    Office, established a single procedure for granting patents in the 24 member
    countries on the basis of a uniform body of substantive patent law. An
    application to the European Patent Office is, in effect, a group of national
    patent applications that are processed together, but become separate patents
    that are separately maintained and enforced. In July 2000, the European
    Commission proposed the creation of a single patent that would be legally
    valid throughout the European Union, but member states continue to debate
    various aspects of the proposal.

    14 Patent applications can be filed in English in countries where English is
    a national language, such as Canada, Ireland, and the United Kingdom.

    not understand what costs are involved. He said that his company, which had
    grown to 1,000 employees by the time of our study, could not have embarked
    on its efforts to patent abroad without the help of an outside patent
    attorney. Many of the businesses we contacted also said they rely on their
    outside patent attorney to tell them what they need to know about foreign
    patents.

    Differences among Foreign About 30 percent of the small businesses and 45
    percent of the patent

    Patent Systems Present attorneys we surveyed regarded differences among
    foreign patent systems

    Challenges to Small as a great impediment for small businesses (see figure
    1). Foreign patent Businesses

    systems differ from the U. S. system and from each other in many ways,
    including the breadth of protection that their patents afford, the types of
    technology that may be patented, and the national patent offices? language
    requirements and other procedures. Figure 4 shows the two groups? views on
    the extent to which items in this category impede small businesses. About 40
    percent of the small businesses and patent attorneys we surveyed similarly
    regarded differences in the level of patent protection afforded among
    countries as a great impediment. About 60 percent of the patent

    attorneys identified the multiple languages in which foreign patents must be
    processed and the overall lack of harmonization among national patent
    systems as great impediments.

    Figure 4: Small Businesses? and Patent Attorneys? Views on Differences among
    Foreign Patent Systems as Impediments to Foreign Patent Protection

    Note: Percentages reflect the number of respondents rating each item as
    posing a great or very great impediment. Thirty- eight small businesses
    responded to our survey, and 39 patent attorneys participated in our panel.
    The number of respondents who rated individual items may be lower. See
    appendixes IV and V for the actual number of respondents to each item.

    Source: GAO analysis of small business surveys and patent attorney panel
    questionnaires.

    The differences among patent laws and systems throughout the world can
    affect small businesses? ability to obtain foreign patent protection that is
    comparable to their U. S. patent protection, as illustrated in the following
    examples:

     The United States allows patent applicants a 1- year grace period between
    the first public disclosure of an invention and the initial patent
    application date. Many other countries will not award patents if the

    inventor makes a public disclosure before submitting an application. Because
    of this difference, U. S. companies that disclose their inventions before
    applying for a U. S. patent may be ineligible to receive foreign

    patent protection in certain countries. Many of the patent attorneys thought
    that small businesses were generally not aware of this distinction.

     Some technologies or processes that can be protected in the United States
    by a patent, such as business method inventions and certain software
    processes and biotechnological inventions, cannot be similarly protected
    elsewhere. In addition, some countries tend to only allow claims (the
    definitions in the patent application for the invention) that are narrower
    or more restricted than what is typically allowed in the United States. As a
    result, foreign patents may offer different or less protection than a
    corresponding U. S. patent.

     The act of translating patent applications into other languages, as many
    countries require, can degrade the technical content of the application and
    affect the scope of desired protection when translations are inaccurate or
    incomplete. Examination or enforcement problems can result.

    Another prominent difference concerns the treatment of competing applicants.
    In the United States, when more than one applicant seeks to patent the same
    technology or process, the patent is granted to the individual or entity
    that can demonstrate that it was the first to invent the technology or
    process (commonly referred to as a ?first- to- invent? system). All other
    countries, in cases of competing applications for the same invention by
    different inventors, grant the patent to the first inventor to file the
    application for that invention (commonly referred to as a ?first- to- file?
    or ?first- inventor- to- file? system).

    The overall lack of harmonization among the world?s patent systems also
    increases the difficulty and expense of obtaining foreign patent protection
    for small businesses, according to our patent attorney panelists. This lack
    of harmonization not only creates a need for expertise about the various
    laws and systems among those who wish to patent abroad, but it also creates
    repetitive requirements, such as multiple prior art searches and application
    examinations. Officials from several of the small businesses we surveyed
    said that they have neither the time nor the ability to develop the
    expertise needed to understand and navigate foreign patent systems. As a
    result, small businesses must often turn to outside experts. This increases
    their costs, according to the president of a conveyor belt manufacturer we
    interviewed. Officials from several of the businesses we surveyed expressed
    a desire for more uniformity among foreign patent laws and

    systems or, ideally, a single patent that would be recognized throughout the
    world.

    Business Climate and Lack About 30 percent of the small businesses and 40
    percent of the patent

    of Enforcement in Some attorneys we surveyed regarded individual country
    characteristics, such as

    Countries Also Present business climates, aspects of countries? legal and
    patent systems, and

    Challenges cultural or language differences, as great impediments for small

    businesses? efforts to obtain foreign patents (see fig. 1). Of the items
    within this category (see fig. 5), the most significant impediment,
    according to the small businesses, was other countries? market and business
    climates (63 percent viewed this as a great impediment). The most
    significant impediment, according to the patent attorneys, was inadequate or
    difficult patent enforcement in other countries (72 percent viewed this as a
    great impediment). The attorneys regarded more items within this category as
    serious impediments than the small businesses did.

    Figure 5: Small Businesses? and Patent Attorneys? Views on Individual
    Country Characteristics as Impediments to Foreign Patent Protection

    Note: Percentages reflect the number of respondents rating each item as
    posing a great or very great impediment. Thirty- eight small businesses
    responded to our survey, and 39 patent attorneys participated in our panel.
    The number of respondents who rated individual items may be lower. See
    appendixes IV and V for the actual number of respondents to each item.
    Source: GAO analysis of small business surveys and patent attorney panel
    questionnaires.

    The patent attorneys described several enforcement issues that may impede
    small businesses from seeking foreign patent protection in certain
    countries. For example, they said enforcing patents in some countries is
    difficult, because the countries have weak or nonexistent patent enforcement
    laws. In addition, the attorneys said that some countries have acceptable
    patent enforcement laws, but the enforcement process is slow and
    ineffective. Finally, the attorneys noted that the remedies available in
    some countries (such as injunctions to stop infringement or damages to
    compensate a company for its losses) differ from what is available in the
    United States and may not be sufficient to counteract the effects of any
    patent infringement. Ineffective enforcement and limited remedies can be
    found in developed as well as developing countries, the attorneys said.

    Impediments The many impediments small businesses face have a negative
    impact on

    Negatively Affect Small their foreign patent decisions. Many of the
    businesses we surveyed said

    that the impediments they encounter have discouraged or prevented them
    Businesses? Foreign

    from obtaining as much foreign patent protection as they would like to
    Patent Decisions

    have. A majority of the patent attorneys reinforced this view, saying that
    most small businesses hold fewer foreign patents than they need, primarily
    because the impediments are too difficult for them to overcome. While large
    and small businesses generally face the same impediments, according to the
    attorneys, large businesses are better equipped to deal with foreign patent
    impediments because they have more financial resources and

    foreign patent expertise and are better able to enforce their patents
    abroad. Impediments Cause Small

    According to some of the small businesses we surveyed, the high cost of
    Businesses to Limit the

    foreign patents has caused them to limit the number of countries in which,
    Number of Foreign Patents

    or the number of products for which, they seek foreign patent protection.
    They Hold

    For example, the chief executive officer of a company that develops motion
    control technology, the president of a window shade manufacturer, and the
    president of an aquaculture supply company told us that their firms

    have avoided or stopped obtaining patents in certain Asian and European
    countries with potentially important markets for their products because of
    high costs and concerns about enforcement. Several businesses said that, in
    an attempt to manage their foreign patent costs, they had abandoned patent
    applications before the patent was granted or let certain foreign patents
    expire. Many of the businesses identified countries where they would like to
    hold foreign patents for marketing purposes or said that they

    generally would prefer to have broader foreign patent protection.

    The challenges of patent enforcement also affected the businesses? foreign
    patent decisions. Some companies do not hold patents in countries where,
    according to their patent attorneys, enforcement is costly or difficult,
    such

    as China, Japan, South Korea, and Taiwan. The vice president for research
    and development at a company that makes rechargeable batteries and power
    packs told us that his company?s products would probably be highly
    marketable in certain Asian countries. However, his company is not pursuing
    China, Taiwan, or South Korea as markets because of enforcement concerns.
    The window shade manufacturer encountered

    patent infringement in South Korea but decided not to enforce its patent
    because of the high cost of pursuing an enforcement case. Instead, according
    to the company?s president, it backed out of the market. The decision to
    limit their foreign patent protection has affected some businesses? ability
    to develop foreign sales. For example, two businesses told us that the lack
    of foreign patent protection in certain countries caused them to lose
    markets to their competitors. In one instance, competitors used the
    company?s unprotected technology to develop the market. Another business
    told us that it stops developing products for market when

    it cannot get the foreign patent protection it needs. The patent attorneys
    also recognized that impediments affect small businesses? foreign patent
    decisions. More than half of the attorneys on our panel said that most small
    businesses hold fewer foreign patents than they need (as shown in fig. 6),
    primarily because the impediments they face are too difficult to overcome.
    Most of the businesses we surveyed held 1- 10 foreign patents, but some held
    more (see figure 14 in appendix II).

    Figure 6: Patent Attorneys? Views on Small Businesses? Level of Foreign
    Patent Protection

    Legend N = 36 Note: Percentage may not add to 100 due to rounding. Source:
    GAO analysis of patent attorney panel questionnaires.

    However, some of the patent attorneys believed that small businesses hold
    more foreign patents than they need. Small businesses that patent abroad
    should carefully select the countries in which they will file applications
    and

    not apply in more countries than necessary, the attorneys said. Further,
    some attorneys said that these businesses should consider whether the funds
    they allocate to foreign patents could be put to better use, such as funding
    additional research and development or acquiring more U. S. patents.
    Finally, several attorneys advised that foreign patents might not be
    appropriate for all small businesses.

    Impediments Affect Small A majority of the patent attorneys believed that
    impediments to acquiring

    Businesses More Negatively foreign patents have a more negative impact on
    small businesses than on

    Than Large Businesses large ones. Fifty- eight percent of the attorneys said
    that small businesses

    generally face the same impediments as large ones, but are affected
    differently, as shown in figure 7. All of the attorneys who held this view
    believed that small businesses are affected more negatively by the
    impediments than large businesses. Among the reasons that the attorneys
    cited for the difference in effect were that large businesses (1) have more
    resources with which to pay foreign patent costs and to understand foreign
    patent laws and systems, (2) are more likely to have overseas operations
    that allow them to market their products and monitor their patents, and (3)
    are better equipped to enforce their patents.

    Figure 7: Patent Attorneys? Views on the Differences in Impediments That
    Large and Small Businesses Face

    Legend N = 36 Source: GAO analysis of patent attorney panel questionnaires.

    Several Federal Both the small businesses and the patent attorney panel
    viewed federal

    Actions Could Help efforts to further promote international patent
    harmonization and cost

    reduction as the most promising way to help small businesses overcome Small
    Businesses

    the impediments they face to obtaining foreign patents. Among other Overcome

    possible federal actions that we asked them to rate, both groups also
    Impediments

    believed that informing and educating Congress about the need for patent
    harmonization would be very useful. However, the small businesses and the
    patent attorneys held different views about other possible federal actions.
    For example, 68 percent of the businesses believed that providing federal
    financial assistance to small businesses to address the high costs of
    foreign patents would greatly help them obtain such patents, whereas only 48
    percent of the patent attorneys held this view. Conversely, 67 percent of
    the attorneys thought that providing information and education to small
    businesses about foreign patents would be useful, but only 39 percent of the
    businesses found value in having such information. No federal

    programs currently exist to provide this type of information to small
    businesses.

    Federal Efforts to Promote We asked the small businesses and patent
    attorneys whether the federal

    Patent Harmonization Could government should take any actions to help small
    businesses overcome the

    Reduce Foreign Patent foreign patent impediments they face. (We asked the
    businesses about the

    Costs and Complexity extent to which certain federal actions would help
    their company?s efforts

    to patent abroad, and we asked the patent attorneys to what extent certain
    federal actions would be useful and feasible.) As shown in figure 8, about
    70 percent of the businesses and about 90 percent of the attorneys rated
    legislation or other government activity to promote international patent
    harmonization and international patent cost reduction as the most helpful or
    useful actions that the federal government could take.

    Figure 8: Small Businesses? and Patent Attorneys? Views about Possible
    Federal Actions to Overcome Foreign Patent Impediments

    Note: Percentages reflect (1) the number of small businesses that rated
    federal actions as likely to help their foreign patent efforts to a great or
    very great extent and (2) the number of patent attorneys who rated federal
    actions as a mostly useful or extremely useful way to help small businesses
    patent abroad. Thirty- eight small businesses responded to our survey, and
    39 patent attorneys participated in

    our panel. The number of respondents who rated individual items may be
    lower. See appendixes IV and V for the actual number of respondents to each
    item.

    Source: GAO analysis of small business surveys and patent attorney panel
    questionnaires.

    While patent harmonization efforts have been ongoing for several decades,
    WIPO member countries began two specific initiatives in recent years. First,
    WIPO members started negotiations in 1995 to streamline and harmonize
    national and regional patent office requirements related to filing patent
    applications and maintaining patents. As a result of this effort, WIPO
    members adopted the Patent Law Treaty in June 2000. However, this treaty is
    not yet in force. The treaty will simplify the requirements for obtaining a
    filing date; harmonize the information that national patent offices can
    require to be provided on patent applications, both in form and content; and
    provide additional time for filing translations, among other things. These
    changes are expected to result in easier access to worldwide patent
    protection and some cost savings for applicants. The United States has
    signed the treaty, but has not yet presented it to Congress for
    ratification. The treaty will not enter into force until at least 10 WIPO
    member countries have ratified it. Only 3 have ratified it to date,
    according to USPTO officials.

    Despite these developments, however, many substantive differences among
    countries? patent laws remain. WIPO member countries undertook a second
    initiative in 2000 to try to harmonize these differences. According to USPTO
    officials, substantive patent law harmonization could produce many
    advantages. For example, the United States would like other countries to
    offer patent protection for certain technologies, such as certain software
    processes and biotechnological inventions, that can currently only be
    patented in the United States and certain other countries. In addition, if
    countries adopted more uniform standards and approaches for examining and
    granting patents, then national patent offices could begin to accept the
    results of each other?s prior art searches and examinations. Such a
    development would not only reduce the patent offices? workloads, it could
    also produce time and cost savings for patent applicants.

    Despite the potential benefits, however, prior attempts to achieve
    substantive patent law harmonization were not successful. For example,
    negotiations that began in the 1980s ended in 1991 because divergent views
    on major issues could not be resolved. In particular, the United States was
    not willing to change its first- to- invent system or give up its grace
    period. Much debate has occurred on the advantages and disadvantages of the
    first- to- invent and first- to- file systems. Supporters of the first- to-
    invent system argue that first- to- file systems encourage a ?race to the
    patent office? among patent applicants that disadvantages those with fewer
    resources, such as some small businesses. However, some patent experts
    maintain that small entities, which they say can act more quickly than large

    businesses, can readily secure patent rights in a first- to- file system. 15
    Supporters of first- to- file systems believe they are simpler and more
    efficient. According to USPTO officials, because these negotiations will
    address many controversial issues, they should be regarded as a long- term
    effort. Therefore, they said, the United States may want to consider other
    ways of making progress on patent law harmonization. They also said that
    shorter- term efforts to help small businesses may need to be considered.

    Financial Assistance Could Nearly 70 percent of the businesses indicated
    that federal financial

    Help, but Many Concerns assistance would greatly help their company?s
    efforts to obtain foreign

    Exist patent protection. However, several businesses and most of the patent

    attorneys expressed concerns about the appropriateness of such assistance.
    In particular, they questioned the basis on which such assistance would be
    awarded and stated that financial assistance is an indirect solution to the
    underlying causes of foreign patent costs.

    There was no consensus among the small businesses about what type of federal
    financial assistance would be most useful. They made various suggestions,
    including government loans, grants, or tax credits, or

    modifying existing federal programs that fund research costs. Several
    businesses believed that receiving federal loans or grants would help them
    file for more patents abroad or maintain foreign patents for a longer
    period. While several businesses stated that they were not aware of any
    federal loans that could be used to cover foreign patent costs, Small
    Business Administration officials told us that loans obtained through their
    ExportExpress program could be used for this purpose. 16 Some businesses
    said that tax credits for foreign patent costs would enable them to devote
    more of their own resources to this activity. Others noted that tax credits
    are not useful to companies that are still in the product development phase

    15 Supporters maintain, for example, that small entities can easily and
    cheaply secure their rights to their inventions by filing ?provisional
    applications? with USPTO, an option USPTO began offering in 1995.
    Provisional applications can contain less information about the invention
    than standard patent applications, are not examined for their merits, and
    allow the applicant 1 year to submit a more complete application. The small
    entity fee to file such an application is $80, compared with $370 to file a
    standard patent application.

    16 The ExportExpress loan is designed to help small businesses obtain
    adequate export financing. Recipients can use its proceeds for a wide range
    of activities or purposes. Small businesses apply with participating
    lenders, and SBA guarantees the lenders 85 percent of the loan up to a
    maximum of $150,000, making it easier for small businesses to obtain the
    financing.

    and thus have little or no revenue. Finally, several businesses that had
    received funding to cover their research under the Small Business Innovation
    Research Program said that allowing companies to use these funds to cover
    foreign patent costs would help.

    However, a number of company officials expressed concerns about the
    appropriateness or usefulness of federal financial assistance. For example,
    several company officials said that federal financial assistance might

    inappropriately encourage companies that should not seek foreign patent
    protection to do so. One official said that foreign patent costs are an
    appropriate market barrier, because only companies with good business sense
    are able to afford them. Another said that companies with valuable ideas
    will figure out how to pay the costs to protect their ideas. Several company
    officials that had applied for or obtained federal funding for technology
    development in the past also expressed concerns that federal funding
    programs usually entail burdensome paperwork requirements. Finally, some
    company officials expressed misgivings about a federal program that might
    increase their taxes.

    Many of the patent attorneys also had concerns about the idea of providing
    federal financial assistance to small businesses for foreign patent costs.
    Slightly more patent attorneys doubted the usefulness of such assistance, as
    shown in figure 9, and 70 percent of them thought that financial assistance
    would not be feasible. In explaining their views, 92 percent of the
    attorneys said that financial assistance would be an indirect solution to
    the larger problem of lack of patent law harmonization and the high costs
    that result. One of the attorneys opposed federal financial assistance for
    foreign patents because such assistance would support the current cost
    structure and be, in effect, a transfer of U. S. taxpayer funds to foreign
    governments. About half of the attorneys said that financial assistance for
    foreign patents would be an inappropriate or inefficient use of government
    funds. Several attorneys questioned how the government would decide which
    inventions to support. About half of the attorneys also said federal
    financial assistance would not likely be significant enough to help small
    businesses overcome their cost- related impediments.

    Figure 9: Patent Attorneys? Views on the Usefulness and Feasibility of
    Federal Financial Assistance for Reducing Foreign Patent Costs

    Note: Percentages reflect the number of patent attorneys who provided the
    indicated answers. Thirtytwo of the 39 patent attorney panelists
    participated in this phase of the panel. The number of respondents who rated
    individual items may be lower. See appendix IV for the actual number of

    respondents to each item. Source: GAO analysis of patent attorney panel
    questionnaires.

    Patent Attorneys Thought Nearly 60 percent of the patent attorneys believed
    that small businesses

    That Information and lack sufficient knowledge about foreign patents (see
    figure 3). Many of the

    Education for Small attorneys stated that small businesses often make poor
    decisions about

    Businesses Could Help foreign patents, in part because they do not
    understand the differences

    Their Efforts to Patent between U. S. and foreign patent laws and standards.
    In particular, they do

    not understand how disclosing information about an invention prior to Abroad

    filing a foreign application may cause them to lose foreign patent rights.
    Many attorneys also believed that because small businesses lack information
    and knowledge about foreign patents, they (1) fail to assess a broad range
    of factors that the attorneys felt should be considered when making foreign
    patent decisions, (2) do not thoroughly weigh foreign patent costs against
    potential benefits, and (3) do not develop a good business plan for their
    foreign patents.

    Nearly 70 percent of the patent attorneys thought that taking steps to
    inform and educate small businesses about foreign patents would be a useful
    federal action (see fig. 8). About 60 percent of them also believed

    that doing so would be extremely feasible. We asked the attorneys to rate
    seven types of information that they thought might be useful; their
    responses are shown in figure 10. One of the attorneys suggested that we
    should make the information that we obtained from the patent attorney

    panel available to small businesses. 17 These various types of information,
    the attorneys said, would help small businesses become better educated about
    foreign patents and improve their foreign patent decisions. (See table 5,
    app. IV, for a list of things that the patent attorneys believed small
    businesses could do better as they seek to hold foreign patents.) About 40
    percent of the businesses also thought that additional information would
    help their company?s efforts to patent overseas. (There were no discernable
    similarities among the businesses that held this view- they operated in
    various industries, ranged in size from 1 to 600 employees, and most held 1-
    10 foreign patents.)

    17 A GAO report on the factors that small businesses should consider when
    making foreign patent decisions and on other advice that the attorneys
    provided is forthcoming.

    Figure 10: Patent Attorneys? Views on Usefulness of Information That Federal
    Government Could Provide to Small Businesses

    Note: Percentages reflect the number of patent attorneys who rated items as
    mostly useful or extremely useful ways to help small businesses patent
    abroad. Thirty- nine patent attorneys participated in our panel. The number
    of respondents who rated individual items may be lower. See appendix IV for
    the actual number of respondents to each item.

    Source: GAO analysis of patent attorney panel questionnaires.

    Upon being provided with the preliminary results of our study, SBA and USPTO
    officials said that it would be feasible and fairly easy to make information
    about foreign patents available to small businesses. Both agencies have
    Internet sites where they could post such information, the officials said,
    along with links to other information about foreign patents.

    Conclusions Seeking and obtaining foreign patents is an important, and
    sometimes necessary, strategic action for most of the small businesses we
    surveyed. However, few of them were fully satisfied with the extent of
    foreign patent

    protection they have acquired, and most would hold more foreign patents if
    doing so were less expensive and less complicated. The existence of multiple
    and varied foreign patent laws and systems is a major contributor

    to both the expense and complexity of obtaining foreign patents. Reducing
    foreign patent costs and simplifying the processes for obtaining them are
    the primary reasons that WIPO member countries have engaged in efforts

    to harmonize their patent laws and systems. WIPO?s Patent Law Treaty is an
    important step toward reaching that goal and, once ratified, should benefit
    small businesses that need foreign patent protection. The completion of
    current or future negotiations to address the remaining substantive
    differences among countries? patent laws could produce

    substantial additional benefits for small businesses seeking to patent
    abroad. However, these negotiations are a long- term effort, and their
    success is uncertain.

    The groups we surveyed supported other steps that would also address the
    expense and complexity of obtaining foreign patents, including federal
    financial assistance and information programs. While financial assistance
    might help some companies? efforts to patent abroad, survey respondents
    raised many concerns about its appropriateness as a policy measure.
    Developing information about other countries? patent laws, foreign patents
    costs and strategies for managing these assets could also help small
    businesses, the surveys disclosed. Such information could make the process
    less complex, particularly for those businesses that are beginning to
    consider whether foreign patents are appropriate for their operations.
    Unlike other possible federal actions, the government could establish
    information programs at low cost and with relative ease. These programs
    would provide immediate assistance to small businesses seeking to patent

    abroad. Recommendation for

    In order to address the impediments that small businesses face in obtaining
    Executive Action

    foreign patents, we recommend that the Director of the U. S. Patent and
    Trademark Office obtain input from small businesses, experts in global
    patent issues, and other interested parties in order to assess the
    advantages and disadvantages of various options for achieving additional
    patent law harmonization.

    In addition, we recommend that the Administrator of the Small Business
    Administration, with assistance from the Director of the U. S. Patent and
    Trademark Office, collect and make available information about key aspects
    of foreign patent laws, requirements, procedures, and costs that would be
    useful to small businesses that are considering whether to obtain foreign
    patent protection.

    Agency Comments and We requested comments on a draft of this report from the
    U. S. Patent and

    Our Response Trademark Office and the Small Business Administration. USPTO
    and the

    SBA provided written comments, which are reprinted in appendixes VII and
    VIII. USPTO also provided technical comments, which we incorporated as
    appropriate. In their comments, both agencies recognized the important roles
    of small businesses as innovators and contributors to the U. S. economy.
    USPTO did not either agree or disagree with either of our

    recommendations, but instead provided suggestions that slightly modified the
    scope and intent of the recommendations. For example, USPTO suggested that
    the first recommendation should be modified to recommend that USPTO
    ?continue to consider? the advantages and disadvantages of various
    harmonization options based on input from small businesses and

    others. While we recognize that USPTO has obtained some input from small
    businesses about patent law harmonization, most of this input has been in
    the form of responses to federal register requests for comment from the
    public. We have retained our recommendation as written because we believe
    that USPTO needs to be more active in obtaining input about harmonization
    from small businesses. USPTO?s suggestions for the second recommendation
    indicated that it was not comfortable helping to develop

    original, specific information about foreign patent laws, requirements,
    procedures, and costs. We agreed with SBA?s concerns and modified the
    recommendation to direct the agencies to collect and make available existing
    information.

    SBA said it would be pleased to disseminate information about foreign patent
    protection to small businesses, but lacked the expertise to develop this
    information. We agreed with SBA?s concern, which is similar to USPTO?s
    concern, and modified the recommendation.

    As agreed with your office, unless you publicly announce its contents
    earlier, we plan no further distribution of this report until 30 days after
    its date. At that time, we will send copies of this report to the Chairman
    of the Senate Small Business and Entrepreneurship Committee, the Ranking
    Minority Member of the House Committee on Small Business, and other

    interested congressional parties; the Administrator of the Small Business
    Administration; and the Director of the U. S. Patent and Trademark Office.
    Copies will be made available to other interested parties upon request. In

    addition, the report will be available at no charge on the GAO Web site at
    http:// www. gao. gov.

    If you or your staff have any questions concerning this report, please call
    me at (202) 512- 4346. Additional GAO contacts and staff acknowledgments are
    listed in appendix IX.

    Loren Yager, Director International Affairs and Trade

    Appendi Appendi xes x I

    Objectives, Scope, and Methodology The Ranking Member of the Senate
    Committee on Small Business and Entrepreneurship and the Chairman of the
    House Committee on Small Business asked us to analyze (1) whether small
    businesses face impediments in obtaining foreign patent protection, (2) what
    impact any impediments have on their foreign patent decisions, and (3)
    whether any federal actions could help small businesses overcome the
    impediments they may face in obtaining foreign patents. We collected
    information on these objectives in two ways. First, we identified and
    solicited information

    on each objective from a panel of 39 U. S. patent attorneys with expertise
    in obtaining foreign patents. Second, we surveyed a small sample of small
    businesses that had obtained or had considered obtaining foreign patent
    protection in the last few years, asking them to provide information on each
    of our three objectives. We formulated the questions in our small business
    survey based on the information we obtained from the patent attorney panel.
    In our analysis, we took into account the possibility that some of the
    information we collected might reflect self- interest on the part of the
    patent attorneys and small businesses.

    The Expert Panel To identify potential panelists with recognized expertise
    in obtaining foreign patents, we invited recommendations from participants
    at

    intellectual property conferences we attended in 2001. We also sought
    recommendations from officials of several intellectual property
    organizations, including the American Intellectual Property Law Association,
    the Intellectual Property Owners Association, and the

    Intellectual Property Committee of the American Bar Association, as well as
    from former high- level U. S. Patent and Trademark Office (USPTO) officials.
    We contacted 55 of these potential panelists to ascertain their areas of
    professional expertise.

    We selected our panelists using predetermined criteria, which included the
    (1) number of times that we received recommendations about individuals, (2)
    number of years of experience they had in obtaining foreign patents, (3)
    extent of their experience in filing patent applications on behalf of small
    businesses, (4) evidence of their having published articles in professional
    journals or having made presentations at intellectual property- related
    conferences, and (5) evidence of their having chaired committees of
    professional intellectual property associations. In addition to these
    criteria,

    we made sure that our final panel included representative patent attorneys
    from (1) major industries where patenting in the United States is important,
    (2) major geographic regions of the United States, (3) law firms where they
    were ?in- house? counsel (that is, patent attorneys who were employed

    directly by a company) or ?outside? counsel (patent attorneys who advised
    one or more clients), and (4) law firms that specialize in intellectual
    property as well as general practice law firms that offer intellectual
    property services.

    After applying these criteria, we invited 39 patent attorneys to be on our
    expert panel. All accepted. At the time they were invited to be members of
    our panel, about 46 percent of the panelists were in- house counsel for
    large or small companies, while about 54 percent were outside counsel.
    Nearly 90 percent of the attorneys on our panel had experience advising
    small businesses about patent issues. The combined expertise of the
    attorneys on our panel covered a broad spectrum of technologies, including
    electrical, mechanical, chemical, pharmaceutical, biotechnology,
    semiconductors and computers, consumer products, medical products,
    manufacturing, and oil.

    We obtained the patent attorneys? views through an iterative Web- based
    panel that consisted of three phases (the results are contained in app. IV).
    All 39 attorneys participated in the first phase, in which we posed
    openended questions. In the second phase, 36 attorneys (92 percent)
    responded to a close- ended questionnaire that we developed from the patent
    attorneys? responses in the first phases. For the third phase, 32 attorneys
    (82 percent) expanded upon particular issues that arose in the second phase.

    The First Phase In the first phase of the expert panel, which ran from July
    19 to August 28, 2001, we asked the attorneys to respond to seven open-
    ended questions

    about broad issues concerning foreign patents and small businesses. We
    developed these questions from the findings of prominent studies on patent
    issues that we reviewed and from interviews we held with several U. S.
    patent attorneys and small businesses. Specifically, we asked the attorneys
    about  factors that businesses should consider in deciding whether or not
    to

    seek, obtain, and maintain foreign patent protection;  impediments that
    businesses face in seeking, obtaining, and maintaining foreign patent
    protection;

     possible differences in impediments between small and large businesses;

     likely missteps that small businesses might typically make in seeking,
    obtaining, and maintaining foreign patent protection;  the likelihood that
    small businesses are generally seeking, obtaining,

    and maintaining an amount of foreign patent protection that is appropriate
    for their business needs and plans;

     possible things that small businesses could do better when they consider
    whether to seek, obtain, and maintain foreign patent protection; and

     whether any public assistance (for example, grants, technical assistance,
    and so on) or legislation should be introduced to help small businesses
    overcome any foreign patenting challenges.

    We pretested the questions for the first survey phase with three of the
    panelists to ensure that the questionnaire (1) was clear and unambiguous and
    that the terms we used were precise, (2) did not place an undue burden on
    individuals completing it, and (3) was independent and unbiased. We
    performed a content analysis of the first phase that identified major

    themes within each question and grouped the themes into several categories.
    To maintain standards of methodological integrity, two coders independently
    performed the content analysis and then met to reconcile differences. Any
    issues that the two original coders could not reconcile were referred to
    other independent coders for a final determination. After analyzing
    questions for the first survey phase, we crafted close- ended questions for
    the second phase.

    The Second Phase In the second phase, which ran from November 5 to 26, 2001,
    we asked the panelists to respond to about 40 close- ended questions that
    contained over 125 specific items. The purpose of the second phase was to
    provide the panelists with the opportunity to consider the other panelists?
    responses to the first phase and to respond in a structured, quantifiable
    way. The questions for the second phase covered most, but not all, of the
    questions from the first phase. In a few cases, we found the responses to
    two questions covered similar themes, and in another case, we found that we
    could use the responses without asking the questions during a second phase.

    For the second phase, we framed very detailed questions on the attorneys?
    responses to impediments to patenting overseas (question 2 from the first
    phase), things small businesses could do better (question 6 from the first
    phase), and possible public assistance and legislation (question 7 from the
    first phase). For these questions, we presented the panelists with lists of
    themes grouped into categories. We asked the panelists to rank these items
    on five- point scales according to dimensions such as the items? importance
    and feasibility. To obtain reactions to the first phase?s question on

    differences between large and small businesses (question 3 from the first
    phase), and the degree of patent protection that these businesses received
    (question 5 from the first phase), we crafted a few close- ended questions

    that encapsulated the major issues that the panelists raised. We pretested
    the questions for the second phase with two of the panelists, using the same
    methods as those we employed for the first phase.

    The Third Phase In the third phase, which ran from January 14 to February 8,
    2002, we asked the panelists to expand on their views about the usefulness
    and feasibility

    of federal financial assistance to specifically address the cost- related
    impediments that small businesses face. We presented the panelists with
    statistical results from the second phase and noted that while the panelists
    viewed cost- related impediments as the most significant barriers that small
    businesses face, they also viewed financial assistance as the least useful
    of the federal assistance actions that they rated. We posed three close-
    ended questions to better understand the panelists? views about financial
    assistance. We also posed one open- ended question asking the panelists to
    discuss how, in the absence of federal financial assistance, small
    businesses could address the cost- related impediments that they face. We
    did not pretest the third- phase questions.

    In this report, we present (1) the results of the close- ended questions
    from the second and third patent attorney survey phases and (2) illustrative
    examples taken from their responses to the open- ended questions in the
    first survey phase.

    The Small Business To answer our three report objectives, we also conducted
    a survey of small Survey

    U. S. businesses. Because we wanted to understand how small businesses make
    decisions about whether or not to obtain foreign patents and to gain their
    views on our study objectives, we surveyed businesses that had

    patented inventions in the United States and had also obtained or considered
    obtaining foreign patents.

    There is no database of U. S. small businesses that have obtained patents
    overseas. To help us identify and enumerate these businesses, USPTO provided
    us with a database of issued U. S. patents for which applications were filed
    in 1997 by applicants that claimed small entity status. We chose 1997 as the
    application year in order to maximize the possibility that the set of small
    businesses had applied for and received foreign patents based on their U. S.
    patents by the time of our study. 18 While this database contained reliable
    information on patents issued in the

    United States, USPTO officials reported, it had major limitations as a frame
    from which we could draw a representative sample of small U. S. businesses
    that had patented overseas. In particular, the officials noted

    major limitations as to whether the database contained only small
    businesses, whether the businesses were U. S. owned, and whether the
    businesses had an interest in obtaining patents overseas.

    Consequently, in order to survey small U. S. businesses that had patented
    overseas, we were required to locate and screen all the patent owners in the
    USPTO?s database. We had to screen the patents owners to find out if they
    were (1) small businesses, (2) U. S. companies, and (3) interested in
    patenting overseas. As there were more than 10,000 patents issued to
    applicants identifying themselves as small businesses in the 1997 database,
    we realized that it would be impractical to conduct a large, generalizable
    survey of the entire database. Instead, we decided to conduct a small,
    randomly selected sample of small businesses that had obtained or considered
    obtaining overseas patents in the last few years.

    Our initial goal was to survey a minimum of 30 companies. Because the
    importance of patents varies by industries, we wanted to ensure that we
    contacted small businesses from a broad range of major industries.
    Therefore, we selected from the USPTO database a random sample of 600

    18 Under the 1883 Convention for the Protection of Industrial Property
    (Paris Convention), as amended, patent applicants must file foreign patent
    applications within 1 year of the date on which they filed their domestic
    applications. In 2000, the average pendency period for patent applications
    filed with USPTO was 25 months from the time of application, while the
    average pendency period for applications filed with the European Patent
    Office was 73 months from the time of application. Similar statistics for
    Japan, another major patent

    jurisdiction, were not available.

    companies stratified equally across the six USPTO technology centers that
    existed in 1997. 19 USPTO officials explained to us that they assign patents
    for examination according to the invention?s area of technology and that
    choosing sample patents from within each technology center would be a
    reasonable way to get a broad array of companies and industries. Our
    selection method ensured that we gave equal weight to all six technology
    centers.

    We screened our sample and removed entities that appeared to be foreign
    companies or universities. Working sequentially through our randomly sorted,
    stratified list of companies, we conducted Web searches on 278 businesses to
    locate information about them. The distribution across the technology
    centers of these 278 businesses we researched is shown in table 2, row 1. We
    stopped conducting Web searches when we had found contact information for at
    least 25 businesses in each technology center, as shown in row 2, at which
    point we had a total of 156 businesses.

    19 In fiscal year 1997, USPTO?s technology centers and codes were the
    following: 1600 - Biotechnology, Organic Chemistry & Designs; 1700 -
    Chemical and Material Engineering; 2700 - Communications and Information
    Processing; 2800 - Physics, Optics, System Components & Electrical
    Engineering; 3600 - Transportation, Construction & Agriculture; and 3700 -
    Mechanical Engineering, Manufacturing & Products. In fiscal year 2001, the
    2700 technology center was split into two groups: 2100 - Computer
    Architecture, Software & Electronic Commerce; and 2600 - Communications.

    Table 2: Statistics on the Number of Small Businesses Screened and Selected
    for GAO?s Survey USPTO Technology Center code Type of business 1600 1700
    2700 2800 3600 3700 Total

    1. Businesses for which GAO 45 42 45 41 49 56 278

    conducted Web search 2. Businesses for which GAO found 25 26 25 27 26 27 156

    contact information 3. Businesses that met criteria for 15 15 17 10 14 9 80

    the survey and agreed to participate in the survey

    a. Businesses with no interest in 1 17 24 318 obtaining foreign patents b.
    Businesses with an interest in

    14 14 10 8 10 6 62

    obtaining foreign patents that GAO surveyed or asked to pretest survey

    4. Businesses that responded to our 8 11465438 survey Legend

    1600 = Biotechnology, Organic Chemistry & Designs 1700 = Chemical and
    Material Engineering 2700 = Communications and Information Processing 2800 =
    Physics, Optics, System Components & Electrical Engineering 3600 =
    Transportation, Construction & Agriculture 3700 = Mechanical Engineering,
    Manufacturing & Products

    Note: We pretested our survey with 2 of the 62 businesses but did not
    include these responses in our survey results. We modified the survey and
    pretested with a third business, whose responses we included in the survey
    results.

    Source: GAO small business survey.

    We conducted telephone screening interviews with the 156 businesses for
    which we found contact information. In these interviews, we asked the
    businesses what their current size was based on the number of their
    employees, whether they had obtained or considered obtaining foreign
    patents, and whether they would be willing to participate in our survey. Of
    the businesses we contacted, 80 met our criteria and agreed to participate
    in our survey, as shown in table 2, row 3. Of these, 18 businesses said that
    they did not have an interest in obtaining foreign patents, primarily
    because the U. S. market sufficiently met their needs or there were no
    foreign markets for their products. We decided not to include these
    businesses in

    our survey.

    Sixty- two businesses said that they did have an interest in obtaining
    foreign patents. Of these, 46 said they had done so, and 16 said they had
    considered obtaining foreign patents (see table 3).

    Table 3: Foreign Patent Experience of the Small Businesses That GAO Surveyed
    USPTO Technology Center code Type of foreign patent experience 1600 1700
    2700 2800 3600 3700 Total

    Number of businesses that 13 11 7 6 5 4 46

    had obtained foreign patents

    Number of businesses that 1 3 3 25 216 had considered obtaining foreign
    patents

    Total number of 14 14 10 8 10 6 62 businesses Legend

    1600 = Biotechnology, Organic Chemistry & Designs 1700 = Chemical and
    Material Engineering 2700 = Communications and Information Processing 2800 =
    Physics, Optics, System Components & Electrical Engineering 3600 =
    Transportation, Construction & Agriculture 3700 = Mechanical Engineering,
    Manufacturing & Products

    Note: We pretested our survey with 2 of the 62 businesses but did not
    include their responses in our survey results. We modified the survey and
    pretested with a third business, whose responses we included in the survey
    results.

    Source: GAO small business survey.

    We developed the small business survey based on the patent attorneys?
    responses to the second phase of the patent attorney panel survey. We asked
    the businesses to rate the extent to which, in making their decisions

    about foreign patents, they considered 13 broad categories of factors and
    faced 32 broad categories of impediments. We also asked them to indicate the
    extent to which nine types of possible federal assistance options would help
    them to patent abroad. Respondents were asked to rate each question on a
    five- point scale.

    We pretested the survey with two of the businesses that had agreed to
    participate to ensure that the questionnaire (1) was clear and unambiguous
    and that the terms we used were precise, (2) did not place an undue burden
    on the businesses completing it, and (3) was independent and unbiased. Based
    on the results of these pretests, we modified the survey design and
    questions. We pretested the modified survey with a third business,

    following the procedures described above, and did not make further
    modifications. We included this pretest in our overall survey results. We
    faxed the survey to 59 businesses in December 2001. In all, 38 of the 59
    companies we surveyed responded. (See app. V for the entire survey and

    the results.) Although we initially randomly selected the sample of small
    businesses, the number we ultimately consulted was limited because
    information was not available for a substantial number of businesses.
    Therefore, the information in this report does not represent the overall set
    of small businesses that seek foreign patent protection. After receiving
    these responses, we conducted follow- up telephone interviews with 18 of the
    small businesses to obtain more detailed comments about their answers, to
    understand more about their foreign patent decisions, and to discuss the
    impact of foreign patent impediments on those decisions. In this report, we
    present (1) the results of the close- ended questions from

    the small business survey and (2) illustrative examples from our telephone
    interviews of small businesses.

    We did our work from May 2001 to June 2002 in accordance with generally
    accepted government auditing standards.

    Information about the Small Business Survey

    Appendi x II

    Population Thirty- eight small businesses responded to our survey about
    issues related to foreign patents. These businesses ranged in size based on
    number of employees, operated in a cross- section of industries, were based
    throughout the United States, and had various levels of experience with
    foreign patents. This appendix provides descriptive information about

    these small businesses. Size of Businesses

    We selected potential businesses for our survey based on their claim in a
    Surveyed

    1997 U. S. patent application that they were a small business (having 500 or
    fewer employees), as shown in figure 11. While most of the businesses that
    responded to our survey continued to meet this definition at the time of our

    survey (December 2001), some were larger. Many of the surveyed companies had
    grown in size since filing their 1997 patent application, some through
    acquisitions of or by, or joint ventures with, other companies. However,
    others had become smaller since 1997.

    Figure 11: Number of Employees in Small Businesses That GAO Surveyed

    Source: GAO analysis of small business surveys.

    Industries of We identified the businesses we surveyed based on the
    technological

    Businesses Surveyed classification of a U. S. patent they had applied for in
    1997. However, the technology areas in which businesses obtain patents do
    not necessarily

    correspond to the industry the business is in. We asked the businesses to
    self- identify their industry, as shown in figure 12.

    Figure 12: Industries of Small Businesses That GAO Surveyed

    Source: GAO analysis of small business surveys.

    Locations of The 38 businesses that responded to our survey were based in 19
    states

    Businesses Surveyed throughout the United States, as shown in figure 13.

    Figure 13: Locations of Small Businesses That GAO Surveyed

    Source: GAO analysis of small business surveys.

    Patent Behavior of The businesses that we surveyed held a range of U. S. and
    foreign patents. Businesses Surveyed

    About three- fourths held 20 or fewer U. S. patents, and about 60 percent
    held 20 or fewer foreign patents. Nearly 90 percent of the businesses had
    pending U. S. patent applications, while about 80 percent had pending

    foreign patent applications. See figure 14.

    Figure 14: Number of U. S. and Foreign Patents Held and Pending among the
    Small Businesses That GAO Surveyed

    Note: Some of the 38 survey respondents did not provide information on the
    number of U. S. and foreign patents held and pending.

    Source: GAO analysis of small business surveys.

    The businesses that held foreign patents had obtained patent coverage in 33
    countries or locations outside the United States, as shown in figure 15.

    Figure 15: Foreign Countries or Locations in Which Small Businesses That GAO
    Surveyed Held Patents

    Source: GAO analysis of small business surveys.

    Appendi x III

    Members of GAO?s Patent Attorney Panel Andrew C. Aitken, Partner, Venable,
    Baetjer, Howard & Civiletti, Washington, D. C. Robert A. Armitage, Vice
    President and General Patent Counsel, Eli Lilly and Company, Indianapolis,
    Indiana

    Charles Berman, Partner, Oppenheimer, Wolff & Donnelly, Los Angeles,
    California

    Robert P. Blackburn, Vice President and Chief Patent Counsel, Chiron
    Corporation, Emeryville, California

    Margaret A. Boulware, Shareholder, Jenkens & Gilchrist, Houston, Texas
    Michael J. Buchenhorner, Esq., PA, Palo Alto, California Jay L. Chaskin, Of
    Counsel, Cantor Colburn LLP, Norwalk, CT; Retired International Patent
    Counsel, General Electric Company, Fairfield, Connecticut Todd Dickinson,
    Partner, Howrey Simon Arnold & White, Washington, D. C. Mary Ann Dillahunty,
    Partner, Burns, Doane, Swecker & Mathis LLP,

    Redwood Shores, California James A. Forstner, Esq., Private Consultant,
    Arlington, Virginia Kathleen Fowler, Senior Patent Counsel, Immunex
    Corporation, Seattle, Washington

    J. William Frank, III, Partner, McCracken and Frank, Chicago, Illinois Gary
    L. Griswold, Chief Intellectual Property Counsel, 3M; President, 3M
    Innovative Properties Company, St. Paul, Minnesota

    Samson Helfgott, Director of Patents, Katten Muchin Zavis Rosenman, New
    York, New York

    Max D. Hensley, Vice President of Intellectual Property, Gilead Sciences,
    Inc., Foster City, California

    David W. Hill, Partner, Finnegan, Henderson, Farabow, Garrett & Dunner, L.
    L. P., Washington, D. C. John H. Hornickel, Chief Intellectual Property
    Counsel, Bridgestone/ Firestone Americas Holding, Inc., Akron, Ohio

    Alan J. Kasper, Partner, Sughrue Mion, P. L. L. C., Washington, D. C. Irwin
    M. Krittman, Vice President for Patent Administration, Thomson Multimedia
    Licensing Inc., Princeton, New Jersey

    Maria C. H. Lin, Partner, Morgan & Finnegan, L. L. P., New York, New York
    Nancy J. Linck, Senior Vice President, General Counsel, and Secretary,
    Guilford Pharmaceuticals Inc., Baltimore, Maryland

    Doug Luftman, Corporate Counsel, CIENA Corporation, Cupertino, California

    Gregory J. Maier, Senior Partner, Oblon, Spivak, McClelland, Maier &
    Neustadt, P. C., Arlington, Virginia

    Michael Meller, Partner, Anderson Kill & Olick, P. C., New York, New York
    Ann M. Mueting, Mueting, Raasch & Gebhardt, Minneapolis, Minnesota Stephen
    L. Noe, Assistant General Patent Counsel - Europe, Caterpillar Inc.,
    Peterborough, England

    Michael J. Pantuliano, Counsel, Clifford Chance Rogers & Wells LLP, New
    York, New York John B. Pegram, Principal, Fish & Richardson P. C., New York,
    New York

    John H. Pilarski, Group Technology Counsel, Illinois Tool Works, Glenview,
    Illinois Peter W. Roberts, Founding Member, Roberts, Mlotkowski & Hobbes, P.
    C., Fairfax, Virginia

    Bernard F. Rose, Ph. D., Partner, Lyon & Lyon, LLP, San Jose, California

    John M. Sanders, Sughrue Mion, P. L. L. C., San Diego, California Victor
    Siber, Partner, Clifford Chance Rogers & Wells LLP, New York, New York

    Liza K. Toth, Vice President for Intellectual Property, Matrix
    Semiconductor, Inc., Santa Clara, California

    Ann S. Viksnins, Esq., Shareholder, Schwegman, Lundberg, Woessner & Kluth,
    P. A., Minneapolis, Minnesota

    Michael Walker, Associate General Counsel, Intellectual Property, E. I. du
    Pont de Nemours and Company, Wilmington, Delaware

    Harold C. Wegner, Partner, Foley and Lardner, Washington, D. C. Elizabeth C.
    Weimar, Esq., Of Counsel, Morgan, Lewis & Bockius LLP, Washington, D. C.

    Daniel N. Yannuzzi, Vice President, Chief Intellectual Property Counsel,
    Conexant Systems, Inc., Newport Beach, California

    Appendi x IV

    Results of the Patent Attorney Panel Surveys This appendix presents the
    results from the expert panel of patent attorneys. Included here are the
    questions and results from the three questionnaires that were completed by
    members of the panel selected for this study (referred to as ?phase I,?
    ?phase II,? and ?phase III?). We administered the questionnaires for phase I
    and II over the Internet; we administered phase III via E- mail.

    Phase I Phase I consisted entirely of open- ended questions on several
    related themes. The questions addressed

    1. factors businesses should consider in deciding whether to seek, obtain,
    and maintain foreign patent protection;

    2. impediments businesses face in seeking, obtaining, and maintaining
    foreign patent protection;

    3. differences between large and small businesses in seeking, obtaining, and
    maintaining foreign patent protection;

    4. missteps small businesses typically make in seeking, obtaining, and
    maintaining foreign patent protection;

    5. amount of foreign patent protection that small businesses hold; 6.
    suggestions for small businesses seeking foreign patent protection; and 7.
    potential public assistance options to help small businesses overcome

    impediments to foreign patenting challenges. Phase II We analyzed the
    responses to questions 2, 3, 5, 6, and 7 above and used

    them as a foundation to develop the phase II questionnaire. We also analyzed
    questions 1 and 4 but chose not to pursue these themes in phase II. Phase II
    consisted of several series of closed- ended questions on items related to
    the themes. In phase II, panelists rated these items on various dimensions
    (for example, importance, usefulness, feasibility) depending upon the theme.
    As part of the analysis, we calculated various descriptive statistics on the
    responses to the phase II questionnaire. We report on these statistics in
    this appendix.

    Impediments Businesses In the phase I questionnaire, we asked each member of
    the patent attorney

    Face in Seeking, Obtaining, panel to ?[ p] lease identify and briefly
    describe the impediments that

    businesses 20 face in seeking, obtaining, and maintaining foreign patent and
    Maintaining Foreign

    protection.? We compiled a list of the impediments that the attorneys Patent
    Protection (question

    identified and categorized them within six main groups. We then presented 2
    in phase I) the list of impediments to the patent attorneys in phase II and
    asked them to rate the extent to which the impediments prevent small
    businesses from receiving foreign patent protection. The ratings were made
    on a five- point scale ranging from ?to little or no extent? to ?to a very
    great extent? (panelists were also given the option of responding ?don?t
    know/ no opinion?). Within the main categories of impediments, subcategory

    impediments were also presented. For example, within the first main category
    of ?differences among patent systems,? subcategory items included
    ?differences in laws, requirements, and standards for patenting between
    countries,? ?differences in patenting procedures between countries,?
    ?differences in the level of patent protection afforded by national patent
    offices,? and so on.

    We calculated basic descriptive statistics on the impediments rated in the
    phase II questionnaire. These statistics included the mean (average),
    median, and standard deviation as well as the frequency distribution (that

    is, the percentages in each rating category), as shown in table 4. The main
    categories are numbered 1 through 6. Subcategory items are numbered 1.1,
    1.2, 1.3, and so on.

    20 For this question, we did not make a distinction between large and small
    businesses, intending instead to initially obtain the broadest possible
    perspective about impediments that all businesses face. We asked the patent
    attorney panel to make distinctions between

    small and large businesses in phase I, and we made further queries about
    this distinction in phase II.

    Table 4: Descriptive Statistics on Impediments That Businesses Face in
    Seeking Foreign Patent Protection Rating

    (8) (4)

    (5) (6)

    (7) To a To little

    To To a

    To a very (3)

    or no some

    moderate great

    great (9) (1)

    (2) Standard

    extent extent

    extent extent

    extent Number of No. Factor Mean Median

    deviation (%)

    (%) (%)

    (%) (%)

    respondents Main category

    1 Differences among patent 3. 39 3 1. 2 6% 22% 25% 22% 25% 36 systems (e.
    g., differing laws, lack of harmonization)

    2 Company- specific 3.50 4 1. 0 0 19 28 36 17 36

    impediments (e. g., management skill level, foreign patenting knowledge,
    resources)

    3 Country- specific impediments 3.64 4 1. 1 3 14 22 39 22 36 (e. g., level
    of patent protection and enforcement, language

    and cultural barriers) 4 USPTO- related impediments

    1.86 1 1. 1 51 23 17 6 3 35 (e. g., lack of foreign patenting assistance,
    quality of USPTO work and services)

    5 Limited availability of foreign 2.75 3 1. 4 25 17 31 14 14 36 patenting
    advice (e. g., limited number of U. S. and foreign

    patent attorneys/ agents with extensive foreign patent expertise)

    6 Costs associated with foreign 4.61 5 0. 6 0 0 3 33 64 33 patenting
    Subcategory

    1 Differences among patent systems

    1.1 Differences in the laws, 3.25 3 1. 2 8 19 31 22 19 36

    requirements, and standards for patenting between countries (e. g., first-
    to- invent vs. first- to- file, absolute novelty)

    (Continued From Previous Page)

    Rating (8) (4)

    (5) (6)

    (7) To a To little

    To To a

    To a very (3)

    or no some

    moderate great

    great (9) (1)

    (2) Standard

    extent extent

    extent extent

    extent Number of No. Factor Mean Median

    deviation (%)

    (%) (%)

    (%) (%)

    respondents

    1. 2 Differences in the patenting 2.60 3 1. 1 17 29 37 11 6 35 procedures
    between countries (e. g., when patent

    maintenance fees are paid, when applications should be filed)

    1.3 Differences in the level of 3.27 3 1. 0 0 28 31 28 14 36 patent
    protection afforded by national patent offices (e. g.,

    claims coverage, what is patentable) 1.4 Differences in the languages

    3.72 4 1. 3 8 11 17 28 36 36 used in patent process/ required translations

    1.5 Level of patent harmonization 3.61 4 1. 2 6 11 25 33 25 36

    (e. g., lack of commonly accepted or global patent search and examination,
    lack of commonly accepted

    regional or global patent, and lack of regional or global patent
    enforcement)

    2 Company- specific impediments

    2. 1 Insufficient resources 4.39 4.5 0. 7 0 0 11 39 50 36 allocable to
    foreign patents (e. g., limited ability to pay for foreign patenting costs
    and experienced legal

    representation) 2.2 Limited knowledge about

    3.75 4 0. 9 0 6 36 36 22 36 overseas patenting (e. g., information about
    international patent protection, foreign patent systems, filing options and
    strategies, patent

    maintenance and enforcement, and patent costs and cost- saving measures).
    2.3 Limited use of marketing and

    3.46 4 1. 1 3 20 23 37 17 35 cost/ benefit analyses

    (Continued From Previous Page)

    Rating (8) (4)

    (5) (6)

    (7) To a To little

    To To a

    To a very (3)

    or no some

    moderate great

    great (9) (1)

    (2) Standard

    extent extent

    extent extent

    extent Number of No. Factor Mean Median

    deviation (%)

    (%) (%)

    (%) (%)

    respondents

    2.4 Limitations on patent asset 3.64 4 1. 0 0 11 36 31 22 36

    management capabilities (e. g., sophistication of patenting and patent
    management techniques, ability to leverage and manage resources for
    patenting, experience in certain countries, long- term

    considerations about patent portfolio, assessments of patent value in
    certain countries)

    2.5 Inappropriate timing of 3.44 3 1. 1 3 17 33 28 19 36 patenting decisions
    (e. g., whether or not company has filed for/ obtained the U. S. patent, has
    begun process

    early enough/ missed deadlines, or has disclosed invention prior to filing
    patent application)

    2.6 Life cycle of product/ invention 2.78 3 0. 8 3 36 44 14 3 36 relative to
    patent processing times or patent term

    2.7 Fear of technology being 2.61 3 0. 9 11 33 42 11 3 36 stolen or
    infringed upon (e. g., subject matter prone to design- arounds, fear of
    patent

    application being a template for infringement) 2.8 Limited overseas presence
    3.4 3. 5 1.0 0 22 28 33 17 36

    (e. g., level of business experience in certain countries, ability to detect

    infringement overseas)

    (Continued From Previous Page)

    Rating (8) (4)

    (5) (6)

    (7) To a To little

    To To a

    To a very (3)

    or no some

    moderate great

    great (9) (1)

    (2) Standard

    extent extent

    extent extent

    extent Number of No. Factor Mean Median

    deviation (%)

    (%) (%)

    (%) (%)

    respondents

    3 Country- specific impediments

    3.1 Nature of national patent 3.36 3 0. 9 0 17 42 31 11 36

    systems (e. g., nature of country?s intellectual property laws, strength and
    competency of national patent office)

    3.2 Nature of legal infrastructure 3.51 4 1. 2 3 23 20 29 26 35 (e. g.
    nature of overall legal infrastructure, sophistication of judges, extent to
    which system allows discovery/ due process/ traditional appeals)

    3.3 Nature of patent protection 3.19 3 1. 0 0 25 42 22 11 36 available (e.
    g., difficulty and uncertainty obtaining a patent; lack of, inadequate, or
    narrow patent protection; statutory exclusions of certain subject matter/
    claims; and short patent term)

    3.4 Barriers to filing and 3.31 3 1. 1 6 14 39 28 14 36

    prosecuting patent (e. g., lack of a grace period; regulatory burdens
    associated with filing, such as apostille, notarization, legalization; long
    processing times or delays in establishing rights; and country not a

    member of the PCT) 3.5 Poor quality or difficult patent

    2.69 3 1. 0 8 39 31 19 3 36 examinations (e. g., lack of substantive or
    effective examinations, uniquely

    stringent examination practices, and poorly trained examiners)

    3.6 Inadequate or difficult patent 3.91 4 0. 9 0 9 20 43 29 35 enforcement
    (e. g., nonexistent, ineffective, or unpredictable enforcement)

    (Continued From Previous Page)

    Rating (8) (4)

    (5) (6)

    (7) To a To little

    To To a

    To a very (3)

    or no some

    moderate great

    great (9) (1)

    (2) Standard

    extent extent

    extent extent

    extent Number of No. Factor Mean Median

    deviation (%)

    (%) (%)

    (%) (%)

    respondents

    3.7 Market and business climate 3.33 3 1. 2 8 14 31 31 17 36

    (e. g., market difficult to access or predict, government restricts product
    marketing, prevalence of corruption or protectionism, lack of transparency)

    3.8 Country- specific 2.06 2 1. 1 36 36 17 8 3 36

    characteristics (e. g., monetary conversion/ payment differences, time zone
    differences) 3.9 Cultural differences (e. g.,

    3.40 4 1. 3 6 26 14 31 23 35 language barriers and need for translations)

    3.10 Negative bias against foreign 2.20 2 1. 1 26 46 14 11 3 35 patentees 4
    USPTO- specific impediments

    4.1 Lack of foreign patenting 2.11 2 1. 2 37 34 14 9 6 35 assistance/
    information from USPTO (e. g., lack of

    assistance with the PCT process provided by USPTO, lack of information/ poor
    quality

    information provided by USPTO on foreign patent systems and foreign filing)
    4.2 Quality of work provided by 2.11 2 1. 3 42 31 11 8 8 36

    USPTO (e. g., timeliness and quality of work that may be of value to other
    patent offices)

    4.3 Insufficient resources at 2.42 2 1. 3 28 36 14 11 11 36

    USPTO (e. g., number of staff, level of funds) 5 Limited availability of
    foreign patenting advice

    5.1 Limited availability of 2.67 3 1. 1 17 28 33 17 6 36 experienced and
    knowledgeable U. S. patent attorneys (i. e., attorneys that know about and
    are able to

    advise on foreign patenting)

    (Continued From Previous Page)

    Rating (8) (4)

    (5) (6)

    (7) To a To little

    To To a

    To a very (3)

    or no some

    moderate great

    great (9) (1)

    (2) Standard

    extent extent

    extent extent

    extent Number of No. Factor Mean Median

    deviation (%)

    (%) (%)

    (%) (%)

    respondents

    5.2 Limited availability of 2.06 2 1. 1 3. 9 31 17 14 0 36 experienced or
    knowledgeable foreign patent attorneys/ agents

    6 Costs associated with foreign patenting

    6.1 Costs related to obtaining 4.51 5 0. 8 0 3 9 23 66 35

    foreign patents (e. g., patent search expenses, national stage filing fees,
    PCT fees, U. S. and foreign attorney fees, patent agent fees, translation
    costs, etc.)

    6.1a Patent search expenses 2.16 2 1. 0 31 31 28 9 0 32 (private) 6.1b
    National stage filing fees

    3.47 3 1. 1 3 18 32 24 24 34 (official fees for a particular country)

    6.1c PCT fees (official fees) 2. 71 3 1.0 9 37 31 20 3 35 6.1d Prosecution
    fees (official fees

    3.46 3 1. 0 3 14 34 31 17 35 for a particular country) 6.1e U. S. attorney
    fees (i. e., for

    3.26 3 0. 9 0 20 43 29 9 35 legal services rendered, consultations,
    opinions, preparing and processing documents, responding to

    office actions, etc.) 6.1f Foreign attorney/ patent agent

    3.69 4 1. 1 3 9 34 26 29 35 fees (i. e., for legal services rendered,
    consultations, opinions, preparing and

    processing documents, responding to office actions, etc.)

    6.1g Translation costs 4. 57 5 0.8 0 6 0 26 69 35 6.2 Costs related to
    maintaining

    3.97 4 1. 1 0 12 21 26 41 34 foreign patents (e. g., maintenance fees, U. S.
    and foreign attorney fees, patent agent fees, etc.)

    6.2a Maintenance fees through the 3.71 4 1. 1 3 11 29 26 31 35 life of the
    patent (official fees)

    (Continued From Previous Page)

    Rating (8) (4)

    (5) (6)

    (7) To a To little

    To To a

    To a very (3)

    or no some

    moderate great

    great (9) (1)

    (2) Standard

    extent extent

    extent extent

    extent Number of No. Factor Mean Median

    deviation (%)

    (%) (%)

    (%) (%)

    respondents

    6.2b U. S. attorney fees (i. e., for 2.54 2 1. 2 20 31 31 9 9 35

    legal services rendered, consultations, opinions, preparing and processing
    documents, etc.)

    6.2c Foreign attorney/ patent agent 2.91 3 1. 34 17 23 29 14 17 35

    fees (i. e., for legal services rendered, consultations, opinions, preparing
    and processing documents, etc.) 6.3 Costs related to enforcing

    3.91 4 1. 2 0 18 18 21 44 34 foreign patents (e. g., U. S. and foreign
    attorney fees, patent agent fees, other enforcement costs, etc.)

    6.3a U. S. attorney fees (i. e., for 3.03 3 1. 3 6 39 21 12 21 33

    legal services rendered, consultations, opinions, preparing and processing
    documents, etc.)

    6.3b Foreign attorney/ patent agent 3.64 4 1. 1 3 15 2 4 3 0 27 33

    fees (i. e., for legal services rendered, consultations, opinions, preparing
    and processing documents, etc.) 6.3c Translation fees 3. 61 4 1. 3 6 16 19
    26 32 31 6.3d Official fees and other costs 2. 97 3 1.0 6 25 41 22 6 32

    6. 4 Total foreign patenting costs 4.46 5 0. 8 0 3 11 23 63 35 (i. e., for
    obtaining, maintaining, and enforcing foreign patents)

    Legend PCT = Patent Cooperation Treaty USPTO = U. S. Patent and Trademark
    Office

    Note: Percentages may not add to 100 due to rounding. Source: GAO analysis
    of patent attorney panel questionnaires.

    Differences Between Large In phase I, we asked panelists: ?[ Do] the
    impediments you identified differ

    and Small Businesses in between small and large businesses?? After analyzing
    those responses, we

    Seeking, Obtaining, and followed up in phase II with the following series of
    questions. (For ease of

    Maintaining Foreign Patent presentation, this portion of the questionnaire
    is reproduced in figure 16.

    ?N? indicates the number of patent attorneys answering the question.
    Protection (question 3 in

    Responses are presented as a percentage of those that answered the phase I)

    question.)

    Figure 16: Patent Attorney Reponses to Questions 11 and 12 of Phase II

    Source: GAO analysis of patent attorney panel questionnaires.

    Amount of Foreign Patent In phase I, we asked panelists: ?[ D] o you believe
    that small businesses are

    Protection Small Businesses generally seeking, obtaining, and maintaining an
    amount of foreign patent Hold (question 5 in phase I)

    protection that is appropriate for their business needs and plans?? After
    analyzing the narrative responses to that question, we followed up with the
    following series of questions. (For ease of presentation, this portion of
    the questionnaire is reproduced in figure 17. ?N? indicates the number of
    patent attorneys answering the question. Responses are presented as a
    percentage of those that answered the question.)

    Figure 17: Patent Attorney Responses to Questions 13, 14, and 15 of Phase II

    Source: GAO analysis of patent attorney panel questionnaires.

    Suggestions for Small In phase I, we asked panelists: ?What could small
    businesses do better as

    Businesses Seeking Foreign they consider whether or not to seek, obtain, and
    maintain foreign patent

    Patent Protection protection?? Table 5 presents a consolidated list of the
    suggestions that the

    panelists offered. In phase II, we presented this list and asked the
    attorneys: ?How important are each of the following suggestions for small
    businesses to consider?? Response options ranged from ?least important? to
    ?most important? (see columns (4) through (8)), in addition to a ?don?t
    know/ no opinion? option. The items are presented in rank order by the

    mean rating (column (1)). We calculated basic descriptive statistics on the
    patent attorneys? ratings for each suggestion.

    Table 5: Descriptive Statistics on Suggestions for Small Businesses to
    Consider When Seeking, Obtaining, and Maintaining Foreign Patent Protection
    Rating

    Suggestions for (4)

    (5) (6)

    (8) small businesses (3)

    Least Somewhat

    Moderately (7)

    Most (9) seeking foreign

    (1) (2)

    Standard important

    important important

    Important important

    Number of No.

    patent protection Mean Median deviation

    (%) (%)

    (%) (%)

    (%) respondents

    1 Avoid divulging 4. 83 5 0. 4 0% 0% 0% 17% 83% 36 information about the
    invention prior to filing a U. S. application

    2 Be familiar with key 4.58 5 0. 7 0 3 3 28 67 36 dates and deadlines that
    are specified under U. S., foreign, and international law, and take foreign
    filing actions accordingly

    3 Only file in countries 4. 19 4.5 1. 0 0 11 8 31 50 36 where protection
    will be meaningful and patent will produce

    a return on investment

    4 Consider the 4.14 4 0. 8 0 6 8 53 33 36

    company?s longrange business plan

    5 Manage patent 4. 14 4 0. 8 0 3 14 50 33 36 portfolio as an asset, and
    regularly

    review overseas portfolio

    6 Become more 4. 06 4 0. 9 0 3 26 34 37 35 knowledgeable about the total
    cost

    of seeking, obtaining, maintaining, and enforcing foreign patent protection

    7 Consider the nature 4. 06 4 0. 8 0 6 14 50 31 36 and patentabilty of the
    product

    (Continued From Previous Page)

    Rating Suggestions for

    (4) (5)

    (6) (8)

    small businesses (3) Least

    Somewhat Moderately

    (7) Most

    (9) seeking foreign

    (1) (2)

    Standard important

    important important

    Important important

    Number of No.

    patent protection Mean Median deviation

    (%) (%)

    (%) (%)

    (%) respondents

    8 Obtain experienced 4. 06 4 0. 9 0 6 20 37 37 36 U. S. patent counsel that
    is familiar with foreign patenting

    9 Realistically 3. 94 4 0. 9 0 6 25 39 31 36

    consider company?s willingness and ability to enforce

    patents abroad 10 Obtain experienced 3.94 4 1. 1 0 14 17 31 39 36

    foreign patent representation 11 Consider using PCT

    3. 94 4 1. 0 3 3 22 42 31 36 and other treaties 12 Do a thorough

    3. 86 4 0. 8 0 6 22 53 19 36 market analysis (i. e., company?s interest in
    overseas markets, current and potential size of foreign markets, nature of
    competition, etc.)

    13 Become more 3. 78 4 0. 9 0 6 33 39 22 36

    knowledgeable about foreign patent laws and practices and how they differ
    from U. S. patent laws and practices

    14 Begin to consider 3. 75 4 1. 1 3 17 6 53 22 36 foreign patenting options
    early, such as in the R& D phase, and seek legal advice at that time

    15 Involve top company 3.75 4 1. 0 0 14 19 44 22 36

    officials in patenting decisions 16 Estimate cradle- tograve 3.61 4 1. 2 3
    19 19 31 28 36

    foreign patenting costs, and do a thorough cost/ benefit analysis

    (Continued From Previous Page)

    Rating Suggestions for

    (4) (5)

    (6) (8)

    small businesses (3) Least

    Somewhat Moderately

    (7) Most

    (9) seeking foreign

    (1) (2)

    Standard important

    important important

    Important important

    Number of No.

    patent protection Mean Median deviation

    (%) (%)

    (%) (%)

    (%) respondents

    17 Consider alternative 3.61 4 1. 2 6 14 17 42 22 36 ways of commercializing
    foreign patent (i. e., licensing, joint

    ventures, partner with other U. S. or foreign firms, etc.) 18 Consider
    strategic

    3.58 4 1. 0 3 14 22 44 17 36 options in the development of foreign patent
    applications (i. e., file shorter applications,

    design applications to meet foreign requirements, modify claims, consider
    utility patents where available, etc.)

    19 Seek training 3.39 3 1. 2 3 25 25 25 22 36 opportunities on foreign
    patent protection for any inhouse

    counsel and other staff 20 Seek advice and 2. 91 3 1. 1 12 24 29 32 3 34

    partner with other businesses

    Legend PCT = Patent Cooperation Treaty R& D = research and development

    Note: Percentages may not add to 100 due to rounding. Source: GAO analysis
    of patent attorney panel questionnaires.

    Potential Federal Actions to In phase I, we asked the patent attorney panel:
    ?[ Do] you think any public Help Small Businesses

    assistance (e. g., grants, technical assistance, etc.) or legislation should
    be Overcome Impediments to introduced to help small businesses overcome the
    foreign patenting

    Obtaining Foreign Patents challenges that you identified? If so, what should
    these be?? As with other

    themes discussed, some of the main categories here also contained related
    (question 7 in phase I) subcategory options. In phase II, we first asked
    panelists two close- ended questions about whether they believed public
    assistance measures were needed to address impediments that small businesses
    faced in seeking foreign patent protection. These two questions are
    presented below. (For ease of presentation, this portion of the
    questionnaire is reproduced in figure 18. ?N? indicates the number of patent
    attorneys answering the question. Responses are presented as a percentage of
    those that answered the question.)

    Figure 18: Patent Attorney Responses to Questions 17 and 18 of Phase II

    Source: GAO analysis of patent attorney panel questionnaires.

    After posing these questions, we then asked the patent attorney panel to
    rate a list of the public assistance options we developed based on their
    responses in phase I (presented in table 6). We asked them to rate the
    options on two dimensions: usefulness and feasibility. We calculated basic
    descriptive statistics on the patent attorneys? ratings for each dimension.

    Table 6: Descriptive Statistics on Public Assistance Options to Help Small
    Businesses Overcome Impediments to Seeking, Obtaining, and Maintaining
    Foreign Patents

    (1) No. Public assistance option Mean

    1 Information and education for small businesses about Useful 3.89 foreign
    patenting Feasible 3.67

    1a Information explaining the business rationale and value Useful 4.11 of
    foreign patenting Feasible 3.66

    1b Information explaining patent value in certain countries Useful 4. 26
    Feasible 3.88 1c Information describing foreign patent laws and

    Useful 4.03 differences in foreign patent systems Feasible 3.94

    1d Information describing foreign patenting strategies and Useful 4.43
    filing options (e. g., when to file, what is patentable where, how best to
    file (PCT, national))

    Feasible 4.00 1e Information explaining the impediments to foreign

    Useful 4.03 patenting Feasible 3.69

    1f Information describing the cost of foreign patenting Useful 4. 57
    Feasible 4.14 1g Information explaining foreign patent enforcement Useful
    4.29

    Feasible 3.77 2 Financial assistance to small businesses for foreign

    Useful 3.06 patenting Feasible 2.31

    2a Financial assistance for the research and development Useful 3.37 of
    inventions Feasible 2.62

    2b Financial assistance for foreign patenting in general Useful 3. 11
    Feasible 2.26 2c Financial assistance for the cost of obtaining foreign

    Useful 3.26 patents Feasible 2.35

    (6) (8) (5)

    Moderately (7)

    Extremely (3)

    (4) Least useful

    useful or Mostly useful or

    useful or (9) (2)

    Standard Not useful or

    or feasible feasible

    feasible feasible

    Number of Median

    deviation feasible (%)

    (%) (%)

    (%) (%)

    respondents

    4 1. 1 0% 14% 19% 31% 36% 36 4 1. 261122332836 4 0. 9 0 9 11 40 40 35

    4 1. 1 6 11 9 60 14 35 4 0. 909 3434635 4 1. 166 9532634 4 1. 001114344035

    4 1. 001411403435 5 0. 703 6375435

    4 1. 1 6 6 11 37 40 35 4 0. 9 0 3 31 26 40 35

    4 1. 1 6 9 17 49 20 35 5 0. 803 9177135 4 1. 0 3 6 11 34 46 35 5 0. 9 0 3 17
    29 51 35 4 1. 1 6 3 29 34 29 35 3 1. 4 20 17 14 34 14 35

    2 1. 3 31 34 14 11 9 35 3 1. 262026292035

    2.5 1. 2 18 32 26 18 6 35 3 1. 2 11 23 20 34 11 35 2 1. 1 26 41 18 9 6 34 4
    1. 3 12 21 15 35 18 34

    2 1. 2 26 35 24 6 9 34

    (1) No. Public assistance option Mean

    2d Financial assistance for the cost of enforcing foreign Useful 3. 00
    patents Feasible 1.91

    3 Technical assistance to small business for foreign Useful 3. 29 patenting
    (i. e., assistance with issues surrounding obtaining, maintaining, and
    enforcing patents)

    Feasible 2.79 4 Legal assistance to samll business for foreign

    Useful 3. 34 patenting (i. e., legal assistance with obtaining, maintaining,
    and enforcing patents)

    Feasible 2.51 5 Better funding of USPTO to increase quality of work Useful
    3. 14

    and assistance provided to small businesses for foreign patenting

    Feasible 2.85 6 Information and education for legislators about the

    Useful 3. 66 impediments small businesses face in foreign patenting

    Feasible 3.38 7 Information and education for legislators about the

    Useful 4. 24 need for patent harmonization Feasible 3.91

    8 Legislation to promote international patent cost Useful 4. 28 reduction
    Feasible 3.06

    9 Legislation and other government activity to promote Useful 4. 47
    international patent harmonization Feasible 3.53

    9a U. S. government activity to increase international Useful 4. 64 patent
    cooperation (e. g., increasing cooperation among Trilateral Offices,
    creating regional and commonly accepted patents, and reducing translation
    costs)

    Feasible 4.17 9b U. S. government activity to promote harmonization in
    Useful 4. 44

    Europe (i. e., promoting the creation of common patent, patent law, and
    patent court in Europe)

    Feasible 3.53

    (6) (8)

    (5) Moderately

    (7) Extremely

    (3) (4)

    Least useful useful or

    Mostly useful or useful or

    (9) (2)

    Standard Not useful or

    or feasible feasible

    feasible feasible

    Number of Median

    deviation feasible (%)

    (%) (%)

    (%) (%)

    respondents

    3 1. 3 18 21 18 32 12 34 2 1. 1 47 29 12 9 3 34 3 1. 103126261735

    3 1. 19382424634 3 1. 291434202335

    2 1. 2 20 40 20 9 11 35 3 1. 5 14 28 17 14 28 36

    2 1. 5 18 35 15 9 24 34 4 1. 131129312635

    3 1. 132129291834 5 1. 0 0 9 12 26 53 34

    4 1. 1 3 9 16 38 34 32 4.5 0. 9 3 3 8 36 50 36

    3 1. 3 14 23 20 29 14 35 5 0. 806 6256436

    4 1. 102225312236 5 0. 703 6177536

    4 0. 9 0 8 11 36 44 36 5 0. 806 6286136

    4 1. 3 11 14 14 33 28 36

    (1) No. Public assistance option Mean

    9c U. S. government activity to promote creation of uniform Useful 4.69
    standard, laws, and requirements across countries (e. g., globalizing or
    eliminating (where applicable) grace periods, patent forfeiture bars, prior
    art, and translation requirements; and harmonizing patenteligible subject
    matter)

    Feasible 3.78 9d U. S. government activity to promote creation of global
    Useful 4.14

    patent Feasible 2.77

    (6) (8)

    (5) Moderately

    (7) Extremely

    (3) (4)

    Least useful useful or

    Mostly useful or useful or

    (9) (2)

    Standard Not useful or

    or feasible feasible

    feasible feasible

    Number of Median

    deviation feasible (%)

    (%) (%)

    (%) (%)

    respondents

    5 0. 603 0227536 4 1. 3 6 17 8 33 36 36 4 1. 139 6374635

    2 1. 63120 9202035 Legend PCT = Patent Cooperation Treaty USPTO = U. S.
    Patent and Trademark Office

    Note: Percentages may not add to 100 due to rounding. Source: GAO analysis
    of patent attorney panel questionnaires.

    Phase III In Phase II, the patent attorney panel was split on the need for
    public assistance measures to help small businesses overcome impediments
    and,

    on average, ranked financial assistance as the least useful option for
    addressing impediments. In phase III, we developed a series of questions to
    better understand the patent attorneys? views on whether federal financial
    assistance would be a useful or feasible way to help small businesses
    address cost- related impediments to foreign patents.

    We sent an E- mail questionnaire consisting of four questions to each member
    of the patent attorney panel. Thirty- two attorneys (82 percent of the 39
    panelists) responded to our questions. Their answers are summarized in
    figure 19. (? N? indicates the number of attorneys answering the question.
    We present responses as a percentage of those that answered the question.)

    Figure 19: Patent Attorney Responses to the Four Questions in Phase III

    Source: GAO analysis of patent attorney panel questionnaires.

    Appendi x V

    Results of the Small Business Survey Small Business Foreign Patenting Survey

    Thank you for agreeing to participate in GAO s small business foreign
    patenting study. Your answers are very valuable to us.

    At the beginning of each section below, you will find general information
    and instructions for completing the survey. If you have any questions
    regarding this survey, please contact Shirley Brothwell, ( 202) 512- 3865,
    or Jody Woods, ( 202) 512- 3738. The information you provide will be
    confidential. We will only use your responses in aggregate form. If
    possible, please complete the survey and fax it back to Jody Woods at ( 202)
    512- 9088 by January 4, 2002. After we receive your completed survey, we may
    contact you with some additional questions.

    I) Company Information - Please confirm the responses your company provided,
    and supply additional information where requested. Write in any changes or
    responses.

    1) Company information.

    Contact Name( s) Position( s) Company Name Address Phone Fax Web Address
    Number of employees Average: 170, Median: 60, Range: 1- 1500

    2) Number of issued U. S. patents that your company currently holds: 3)
    Number of U. S. patent applications pending:

    The results of questions

    4) Number of issued foreign patents that your company currently holds: 2- 5
    are in appendix II, figure 14

    5) Number of foreign patent applications pending:

    6) Countries in which foreign patents are held: European Union (Austria,
    Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
    Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom),
    Argentina, Australia, Brazil, Canada, Chile, Hong Kong, Israel, Japan,
    Malaysia, Mexico, New Zealand, Norway, Poland, Singapore, South Africa,
    South Korea, Taiwan, Thailand

    7) Of the following five options, would you say that your company s overall
    foreign patenting strategy is to: A. 34% Patent only in one or a few select
    countries B. 8% Patent in multiple countries in one region C. 37% Patent in
    multiple countries in a region and in one or more additional countries D.
    13% Patent in multiple regions E. 8% Patent virtually worldwide

    1

    Small Business Foreign Patenting Survey

    II) Factors to Consider in Patenting Abroad - Please check the boxes that
    apply. 8) Based on your company' s overall foreign patenting experiences, to
    what extent does your company typically

    consider the following types of factors when making decisions about foreign
    patent protection?

    Factor Extent scale Little to Some

    Moderate Great

    Very N none

    ( % ) ( % )

    ( % ) great

    ( % ) ( % ) 8.1) Costs associated with foreign patenting 5% 3% 27% 32% 32%
    37

    8.2) Benefits associated with foreign patenting 0 8 19 44 28 36 8.3)
    Location and size of possible foreign markets 0 3 11 41 46 37 8.4) Location
    of your company s or your competitors possible

    16 16 16 22 30 37 manufacturing/ assembly/ R& D sites 8.5) Foreign legal
    systems and regulatory environments 8 24 29 26 13 38

    8.6) Foreign patent systems and patent laws 8 24 22 27 19 37 8.7) Foreign
    patent enforcement/ infringement 3 19 19 38 22 37 8.8) The nature of the
    technology/ invention/ product 5 5 27 27 35 37 8.9) The attributes and scope
    of the patent and the claims 8 11 22 32 27 37 8.10) The composition of your
    company' s patent portfolio and

    16 5 24 35 19 37 any related business strategies 8.11) The composition of
    your competition' s patent portfolio and

    35 19 19 11 16 37 any related business strategies 8.12) Patent timing and
    deadlines 27 16 24 22 11 37

    8.13) Cultural and demographic factors in other countries 34 29 11 20 6 35
    8.14) Other:

    000000 8.15) Other:

    000000 Legend N = Number of responses

    Note: Percents were calculated by removing any Don t Know/ Not Applicable
    responses from the total number of responses ( N ) . Percents in this
    appendix may not correspond to those listed in the body of the report due to
    rounding.

    2

    Small Business Foreign Patenting Survey

    III) Impediments to Patenting Abroad - Please check the boxes that apply. 9)
    Based on your company' s overall foreign patenting experiences, to what
    extent does your company regard the following items as impediments to
    foreign patent protection? ( We define impediment as anything that prevents,

    , limits, or discourages your company from obtaining foreign patent
    protection. )

    Impediment Extent scale Little to Some

    Moderate Great

    Very great N none

    ( % ) ( % )

    ( % ) ( % ) ( % )

    9.1) Differences among patent systems

    9.11) Differences in the laws, requirements, and 14% 14% 46% 14% 14% 37
    standards for patenting between countries 9. 12) Differences in the
    patenting procedures between

    14 25 39 11 11 36 countries 9. 13) Differences in the level of patent
    protection

    81632241937 afforded by national patent offices 9. 14) Differences in the
    languages used in patent

    26 26 17 14 17 35 process/ need for translations 9. 15) Lack of
    harmonization in patent search,

    11 26 34 11 17 35 examination, issuance, and enforcement 9.2) Factors
    related to the company

    9. 21) Amount of resources allocable to foreign patents 8 0 22 33 36 36 9.
    22) Company s overall knowledge about foreign

    25 19 25 19 11 36 patenting 9. 23) Company s use of marketing and cost/
    benefit

    26 23 29 14 9 35 analyses 9.24) Company s patent asset management
    capabilities 41 15 29 9 6 34

    9. 25) Timing of company s patenting decisions 36 14 25 19 6 36 9.26) Life-
    cycle of product/ invention relative to patent

    23 20 29 20 9 35 processing times or patent term 9. 27) Fear of technology
    being stolen or infringed upon 17 14 14 31 23 35

    9. 28) Limited overseas presence 14 8 31 42 6 36

    9.3) Factors related to specific countries

    9. 31) Nature of national patent systems 9 18 45 21 6 33 9. 32) Nature of
    legal infrastructure 9 21 39 24 6 33 9. 33) Nature of patent protection
    available 6 20 29 37 9 35 9.34) Patent filing and prosecution burdens, such
    as

    6234023935 regulatory requirements or processing delays 9.35) Poor quality
    or difficult patent examination 18 24 35 12 12 34

    9. 36) Inadequate or difficult patent enforcement 9 15 30 27 18 33 9. 37)
    Market and business climate 3 9 26 46 17 35

    3

    Small Business Foreign Patenting Survey

    Impediment Extent scale Little to Some

    Moderate Great

    Very N none

    ( % ) ( % )

    ( % ) great

    ( % ) ( % )

    9.3) Factors related to specific countries ( cont. )

    9. 38) Currency and time zone differences 76% 16% 5% 3% 0% 38 9. 39)
    Cultural and language differences 29 39 21 3 8 38 9. 310) Negative bias
    against foreign patentees 44 28 19 9 0 32

    9.4) Factors related to the U. S. Patent and Trademark Office ( U. S. PTO)

    9.41) Lack of foreign patenting assistance/ information from 47 21 9 18 6 34
    USPTO 9.42) Quality and timeliness of USPTO work that other patent

    47 19 13 9 13 32 offices use 9. 43) Insufficient staff and funding resources
    at USPTO 48 16 10 13 13 31

    9.5) Limited availability of foreign patenting advice

    9.51) Limited availability of experienced and knowledgeable 58 26 5 11 0 38
    U. S. patent attorneys 9.52) Limited availability of experienced or
    knowledgeable

    56 25 6 14 0 36 foreign patent attorneys/ agents 9.6) Costs associated with
    foreign patenting

    9.61) Costs related to obtaining foreign patents 038395038 9.62) Costs
    related to maintaining foreign patents 3 5 16 38 38 37 9. 63) Costs related
    to enforcing foreign patents 61111234935 9. 64) Total foreign patenting
    costs 3 3 8 34 53 38

    9.7) Other: 000000

    9.8) Other: 000000

    Legend N = Number of responses

    Note: Percents were calculated by removing any Don t Know/ Not Applicable
    responses from the total number of responses ( N ) . Percents in this
    appendix may not correspond to those listed in the body of the report due to
    rounding.

    4

    Small Business Foreign Patenting Survey

    IV) Assistance Options and Strategies Please check the boxes that apply. 10)
    To what extent would the following public assistance options or strategies
    be helpful to your company' s efforts to

    obtain foreign patent protection?

    Option Extent scale

    Little to Some

    Moderate Great

    Very N none

    ( % ) ( % )

    ( % ) great

    ( % ) ( % ) 10.1) Information and education for small businesses about

    foreign patenting ( i. e. , information about foreign patent 18 18 24 21 18
    38 laws and systems; foreign patenting options and

    strategies) 10.2) Financial assistance to small businesses for foreign

    11 13 8 32 37 38 patenting ( i. e. , loans, grants, tax credits) 10.3)
    Technical assistance to small businesses for foreign

    patenting ( i. e. , assistance with issues surrounding 11 21 18 29 21 38

    obtaining and enforcing patents) 10.4) Legal assistance to small businesses
    for foreign

    patenting ( i. e. , legal assistance with obtaining and 16 13 24 21 26 38

    enforcing patents) 10.5) Better funding to USPTO to increase quality of work

    and assistance provided to small businesses for foreign 11 28 22 17 22 36

    patenting 10.6) Information and education for legislators about the

    11 20 29 11 29 35 impediments small businesses face in foreign patenting
    10.7) Information and education for legislators about the need

    9 9 29 23 31 35 for international patent harmonization 10. 8) Legislation or
    other government activity to promote

    5 3 22 32 38 37 international patent cost reduction 10. 9) Legislation or
    other government activity to promote

    6 3 20 31 40 35 international patent harmonization 10. 10) Other:

    0000 00 10. 11) Other:

    0000 00 Legend N = Number of responses

    Note: Percents were calculated by removing any Don t Know/ Not Applicable
    responses from the total number of responses ( N ) . Percents in this
    appendix may not correspond to those listed in the body of the report due to
    rounding.

    5

    Small Business Foreign Patenting Survey

    V) Additional Information.

    11) Please provide any comments you would like to share with us regarding
    your foreign patenting experiences.

    We are paying a lot of money for foreign patents without having a clue about
    the protection it buys us. Almost unaffordable for small businesses. My
    opinion about the U. S. patent system is not much better. Costs extremely
    high.

    Very expensive. Need specialized patent attorney firms to handle foreign
    applications. Time lag even worse than USPTO. Largely unenforceable anyway.
    As a small company we use an independent patent law firm to write and file
    all U. S. and foreign patent applications. This patent law firm has a
    network of foreign patent associates in each country which files our patent
    applications. Therefore, we see little direct impact of differences between
    countries, but we do see the very high costs associated with filing and
    maintaining foreign patents. Our foreign patent experience is good because
    we have an outside attorney who is responsible for coordinating and advising
    activities. The firm is knowledgeable and has established good associations
    with local foreign attorneys who help with local laws and issues. Mexico is
    a pain. Corporate minutes and all kinds of proof of authorship is required-
    not worth it! Japan is also difficult. Very costly for small companies and/
    or individuals to properly protect themselves. Patent decisions are cost and
    market driven - nothing else of consequence.

    The costs do become a burden. We have had no experience yet with
    international license or infringement. Addressing these costs would be
    beneficial to us. A second concern is the publication of PCT pending
    applications-- that is detrimental to small businesses, but it appears the
    cat is out of the bag. Note-- If financial assistance is provided, tax
    credits would be of limited help as we and other start- ups often face these
    expenses before we are profitable. Consider having assistance available
    through SBIR (the Small Business Administration?s Small Business Innovation
    Research program)-- e. g. a phase III commercialization grant on 1: 1 match
    against company or other private sector payment of PCT filing fees and
    perhaps some legal fees, or low interest loans. Don't know much about it,
    but what I do hear is that it is very expensive for a small consulting
    outfit like mine. My patents are mostly a marketing tool, and would be
    difficult to enforce against a deep- pocketed infringer. Foreign patents
    would be even more expensive to obtain, and impossible to enforce without
    millions for lawyers. So why bother. Our answers to certain questions vary
    from country to country. We are unaware of any USPTO- provided assistance/
    information. Regarding federal assistance options, we need information and
    technical assistance. Otherwise, government should stay out of foreign
    patenting. It is currently a confusing quagmire. I feel as if we are
    throwing money down the drain for no benefit. Is there really anything that
    will really protect a small company? We couldn't afford to enforce a foreign
    patent-- we'd drop it! Our only real concern is the high costs of obtaining
    and maintaining foreign patents. Not typically worth the cost.

    Thank you for participating in this survey.

    6

    Processes and Costs Involved in Obtaining Foreign Patent Protection: A
    Hypothetical

    Appendi x VI

    Scenario Companies may obtain foreign patent protection in several ways. The
    costs associated with obtaining such protection vary depending on the
    process followed, the nature of the patent sought, and the extent of global
    patent coverage desired. This appendix presents a hypothetical scenario that
    we developed for a small business seeking to patent a single invention
    abroad. Our goal was to illustrate a common foreign patent process and to
    estimate the costs that a small U. S. business 21 might incur when filing
    for, obtaining, and maintaining foreign patent protection in the United
    States and nine other countries. We based this hypothetical scenario, in
    part, on what

    several patent attorneys advised us could be considered a ?typical? small
    business patent application and process.

    Our scenario depicts a small company filing for foreign patent protection
    for one of its products in six European countries (France, Germany, Italy,
    Ireland, Sweden, and the United Kingdom), Canada, Japan, and South Korea.
    Patent laws in each of the nine countries cover the technology for this
    product, which can be protected with a single patent. The hypothetical
    company has already filed its U. S. application for this product. The U. S.
    patent application on which the company will base its foreign applications
    was relatively short and straightforward, consisting of 25 pages, 5
    drawings, and 15 claims (claims define the invention and are what make the
    patent legally enforceable). Patents will ultimately be issued in each
    country where the company is pursuing protection. In order to keep its
    patents in force, the company must pay recurring fees (referred to as
    ?maintenance fees?) to each national patent office. In our scenario, the
    company opts to keep each patent in force for its full term, which is 20
    years from the date of patent application filing. (Additional information
    about our scenario and methodology can be found at the end of this
    appendix.)

    Given this scenario, the estimated cost of the U. S. patent, maintained for
    a period of 20 years, is about $10, 000 (in current year dollars). 22 The

    21 Under 13 C. F. R. part 121, the Small Business Administration (SBA) has
    established various size standards, based on economic activity or industry,
    for determining what a small business is for purposes of eligibility for SBA
    programs. Based on SBA standards, we defined a small business for purposes
    of conducting our work as having 500 or fewer employees.

    22 These estimates are expressed in current year dollars because of a lack
    of information about the timing and amount of future expenditures for patent
    maintenance and attorney fees. Additional information on our scope and
    methodology in developing these estimates can be found at the end of this
    appendix.

    estimated cost of the foreign patents, maintained for a similar length of
    time, would range from about $160,000 to about $330,000 (in current year
    dollars). These are minimum estimates that include patent application filing
    and issuance fees, translation fees for applicable foreign patent offices,
    maintenance fees, and estimates of attorney and foreign patent agent fees
    associated with work related to the filing and paying of these

    fees. Actual patent costs for a patent filing strategy similar to our
    scenario could be far higher because we assumed that the patent application
    would not face a difficult examination process in any of the countries.
    Thus, our scenario eliminated many patent office and legal costs that
    companies incur in trying to obtain a patent. Actual patent costs would also
    vary if certain key assumptions were modified. For example, filing
    applications in

    more than nine countries would increase the cost of obtaining foreign
    protection. Also, if a patent application were longer or more complex than
    the one in our scenario, the cost to obtain patent protection abroad would

    rise because translation expenses and some foreign patent office charges
    would be higher. Conversely, if patent protection was not maintained for the
    full 20- year term in each of the countries, official fees and attorney fees
    to maintain the patent would decrease. 23 The latter condition would reduce
    the overall cost of foreign patent protection relative to the U. S. cost.
    Finally, these estimates do not include costs that could be incurred from
    legal fees payable for litigation associated with possible infringement and
    defense of a patent. We use a variety of terms in this appendix. See the
    glossary for definitions.

    Estimated Cost of U. S. The scenario assumes that the small business has
    already filed its U. S. Patent

    patent. As shown in table 7, the minimum cost to obtain that patent would be
    about $6,412. This includes U. S. Patent and Trademark Office (USPTO) small
    entity filing and issuance fees, as well as attorney charges to prepare and
    file the patent application and obtain the issued patent. The minimum cost
    to maintain the patent for a 20- year term would be about $3,528. This
    includes USPTO maintenance fees that are charged 3 times during the 20year
    term after the patent is granted, as well as attorney charges to pay

    23 U. S. patent maintenance costs are fully paid by the end of the twelfth
    year from the date the application was filed, whereas foreign patent
    maintenance costs continue to be incurred through the twentieth year from
    the date of application. Thus, holding foreign patents for shorter periods
    of time reduces the cost of foreign patent protection relative to the cost
    of U. S. protection.

    those fees. In this scenario, 65 percent of the costs are incurred to obtain
    the patent and 35 percent to maintain it.

    Table 7: Estimated Costs to Obtain and Maintain U. S. Patent for 20 Years
    Type and stage of fee Cost in U. S. dollars

    Application USPTO basic filing fee

    $370 Attorney charges to prepare and file patent application

    5,002 Issuance

    USPTO issue fee $640 Attorney charges 400

    Total application and issuance costs $6,412

    Maintenance USPTO fee at year 3.5

    $440 USPTO fee at year 7.5

    1,010 USPTO fee at year 11.5

    1,550 Attorney charges to pay 3 maintenance fees

    528

    Total maintenance costs $3, 528 Total cost to obtain and maintain the patent
    $9,940

    Note 1: All USPTO fees are small entity fees effective October 1, 2001. Note
    2: Attorney charges are based on the American Intellectual Property Law
    Association?s Report of Economic Survey 2001 and reflect the median charges
    for the subject item.

    Source: GAO analysis of USPTO fees and American Intellectual Property Law
    Association data.

    Filing for a Foreign A company can acquire foreign patent protection in two
    ways: (1) by filing

    Patent separately in each country or region where protection is desired or
    (2) by filing for patent protection in 116 countries at the same time
    through an

    international application established by the 1970 Patent Cooperation Treaty
    (PCT), as amended. 24

    Companies may file separately in each country where protection is desired
    under the rules established by the 1883 Paris Convention, as amended. Also
    known as the Convention for the Protection of Industrial Property, this
    treaty is adhered to by 163 countries and gives limited recognition to one

    24 Much of the technical information presented in this appendix is drawn
    from Stephen Elias, ed., Patent, Copyright, & Trademark: A Desk Reference to
    Intellectual Property Law (Berkeley: Nolo Press, 1996).

    another?s country patent application filing dates. Applicants choosing this
    route must file foreign patent applications within 1 year of the date on
    which they filed their domestic patent application (known as the ?priority
    date?). Applicants will face the requirements and costs that each country
    imposes upon filing their patent applications. As a result, filing
    separately may be cost- effective for those interested in holding patents in
    only a few countries.

    The second process for foreign filing is through an international patent
    application under the Patent Cooperation Treaty (PCT), which the World
    Intellectual Property Organization (WIPO) in Geneva, Switzerland,
    administers. This treaty is adhered to by 115 countries and facilitates the
    international filing of patent applications by centralizing filing
    procedures and standardizing the application format. The PCT enables
    applicants to obtain an international search report or ?prior art search? 25
    and preliminary examination. 26 This is commonly called the ?international
    stage? of a PCT application. 27 Following this stage, PCT applicants then
    decide in which countries they want to hold patents and enter processes in
    these countries to obtain such patents. This is commonly called the
    ?national stage? of a PCT application. Applicants incur PCT fees during the
    international stage and national patent office fees during the national
    stage. 28 However, by filing through the PCT, applicants can delay paying
    the national stage fees for up to 30 months from their patent priority date.
    29 This delay allows applicants more time to assess the value of their
    invention and the likelihood of obtaining a patent in a particular country
    before incurring the costs associated with obtaining patent protection in
    that country.

    25 Prior art is the body of information, including patent and nonpatent
    literature, that patent offices consult to determine the patentability of an
    invention. 26 An examination is a process in which a patent examiner will
    correspond with applicants and decide whether inventions deserve patents
    based on claims. 27 The expression ?international phase? or ?stage? is not
    officially used in the PCT, but according to WIPO, it has become customary
    and is used in its Patent Cooperation Treaty guide (http:// www. wipo. int/
    pct/ guide/ en/).

    28 The expression ?national phase? or ?stage? is not officially used in the
    PCT, but according to WIPO, it has become customary and is used in WIPO?s
    PCT guide (http:// www. wipo. int/ pct/ guide/ en).

    29 Most patent offices, including those in our scenario, provide for a delay
    of 30 months. However, some will allow a 31- month delay from the priority
    date.

    If an applicant desires patent protection in a region such as Europe,
    Eurasia, or Africa, the applicant may file with a regional patent office or,
    if filing through the PCT, designate a regional office. The European Patent
    Convention and the Eurasian Patent Convention are examples of regional
    patent treaties that allow applicants to file one single application for the
    contracting states within those regions. For instance, the European Patent
    Convention and its associated office, the European Patent Office, consist of
    24 member states. 30 Obtaining a Foreign

    In our scenario, the company uses the Patent Cooperation Treaty process
    Patent Using PCT

    for filing its foreign patents. We chose to illustrate the PCT process
    because it is a widely used and ?typical? method for obtaining foreign
    patent protection, according to patent attorneys we interviewed. The PCT
    process consists of two main phases, the international stage and the
    national stage.

    International Stage: PCT The international stage of the PCT process is
    comprised of several steps, as

    Processes and Costs shown in figure 20. First, applicants file a PCT
    application and pay

    associated filing fees to a PCT receiving office, as shown in box 1 of
    figure 20. The receiving office, which is a contracting state, is the
    authority to which nationals or residents of that state submit their
    international applications. 31 Second, applicants select an International
    Searching Authority 32 to prepare an international search report that will
    provide information on relevant prior art based on the claims of the
    application. 33 The International Searching Authority conducts a prior art
    search and

    30 The European Patent Convention member states include Austria, Belgium,
    Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France,
    Germany, Greece, Ireland, Italy, Liechtenstein, Luxembourg, Monaco, the
    Netherlands, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey, and the
    United Kingdom.

    31 Applicants may also file with the International Bureau of WIPO regardless
    of the state of which the applicant is a resident or national. Residents or
    nationals who are party to regional patent conventions may file
    international applications with the regional offices that the conventions
    established.

    32 An International Searching Authority is a national office or
    intergovernmental organization that is highly experienced in examining
    patent applications and is specified by the receiving office. The
    International Searching Authority establishes documentary search reports on
    prior art with respect to inventions that are the subject of applications.

    33 See The World Intellectual Property Organization, Patent Cooperation
    Treaty: chapter 1, article 15 (Geneva: WIPO, http:// www. wipo. int/ pct/
    en/ index. html, downloaded in May 2002).

    issues a search report for the applicant?s review, as shown in box 2 of
    figure 20. Based on the results of the report, the applicant may decide to
    continue or discontinue the patent process in certain countries.
    Discontinuing the patent process because of an unfavorable search report
    allows the applicant to save on the costs of processing the application in
    various countries. However, the applicant may amend the claims of his or her
    application and maintain only those that are favorable and likely to result
    in the grant of a patent.

    Figure 20: The International and National Stages of the PCT Process

    a This figure illustrates the process and timetable in cases where an
    applicant has first filed a U. S. patent application. However, applicants
    may file their initial application under the PCT. In these cases, the steps
    would be the same, but the timetable would differ. b The PCT application is
    due at month 12, and the fees are due at month 13. Source: GAO analysis.

    Once WIPO publishes the international application, as shown in box 3 of
    figure 20, the applicant has the option of obtaining an international
    preliminary examination report. 34 The preliminary report provides an
    initial and nonbinding opinion about whether the claimed invention appears
    to be

    34 The international preliminary examination report is produced by an
    International Preliminary Examination Authority, which is appointed in the
    same fashion as the International Searching Authority.

    novel, nonobvious, and industrially applicable. 35 If the applicant decides
    not to obtain this preliminary report, the applicant will enter the national
    stage of the patent process. If the applicant decides to obtain an
    international preliminary examination report, he or she must file a ?PCT
    chapter II demand.? The issuance of the international preliminary
    examination report, as shown in box 4 of figure 20, allows the applicant to
    assess the chances of obtaining a patent in a particular country before
    incurring the costs associated with pursuing patent protection in that
    country.

    The costs associated with the international stage include fees payable to
    the receiving office for work related to filing the international
    application, obtaining the international search report, and designating the
    national patent offices where applicants may decide to file during the
    national stage.

    Applicants will also incur U. S. patent attorney fees for filing and any
    applicable work corresponding to the PCT process. We will address these
    costs in the final section of this appendix. The receiving office sets the
    transmittal fee. This fee is payable for the tasks associated with the
    receipt and checking of the international application. The fee also covers
    the transmittal of application copies to WIPO and the International
    Searching Authority. The International Searching Authority sets and receives
    the search fees for establishing the international search report. The
    international fee accrues to WIPO and is the sum of the basic fee and the
    designation fees. The basic fee is for tasks that include the publication of
    the international application and the communication of notifications to the
    applicant, the receiving office, the International Searching Authority, the
    International Preliminary Examination Authority, and national and/ or
    regional offices. The designation fee is payable for the first five national
    or regional offices designated in the application. There is no charge for
    designations beyond five.

    Our scenario assumes that the United States operates as the receiving
    office, as well as the International Searching Authority and the
    International Preliminary Examination Authority, for the hypothetical
    company?s patent application. Table 8 shows the fees associated with the
    international stage of the foreign filing process through the PCT. The
    company would pay four designation fees: one each for Canada, Japan, South
    Korea, and the European Patent Office. In our scenario, the company

    35 See The World Intellectual Property Organization, Patent Cooperation
    Treaty: chapter 2, article 33 (Geneva: WIPO, http:// www. wipo. int/ pct/
    en/ index. html, downloaded in May 2002).

    chooses to pursue national stage entry after chapter II processing. This
    means that the business will incur the additional costs of having
    preliminary examination conducted by an International Preliminary
    Examination Authority to further assess the chances of obtaining a patent
    for its invention in the desired countries or regions. The additional costs
    include two fees payable to the International Preliminary Examination
    Authority. The first of these is a preliminary examination fee that accrues
    to the International Preliminary Examination Authority for carrying out and
    establishing the international preliminary examination report. The second is
    a handling fee that accrues to WIPO for carrying out various tasks related
    to the international preliminary examination report. The estimated total
    cost of the international stage, given this scenario, is $2,100.

    Table 8: Estimated International Stage Patent Costs Type of fee Cost in U.
    S. dollars

    PCT chapter I fees Transmittal fee a $240 Search fee b 450 International
    fees (basic fee and designation fees) Basic fee 407 Designation fee ($ 88x4)
    352 Certified copy fee 15

    Total PCT chapter I fees $1, 464

    PCT chapter II fees Preliminary examination fee c $490 Handling fee 146

    Total PCT chapter II fees $636 Total international stage fees (PCT chapter I
    and chapter II $2, 100 fees) Note: U. S. and foreign patent attorney fees
    not included.

    a USPTO is the receiving office. b USPTO is the International Searching
    Authority. c USPTO is the International Preliminary Examination Authority.

    Source: USPTO fee schedule.

    National Stage: National The national stage is the second of the two main
    phases of the PCT patent Patent Office Processes and

    procedure. For official entry into the national stage, the applicant will be
    Costs

    responsible for paying the required fees to each national or regional patent
    office elected, 36 along with the fees associated with furnishing a
    translation of the international application where applicable, as shown in
    box 5 of figure 20. The applicant may also be required to appoint a patent
    attorney or agent in each of the designated offices. (A patent agent is a
    nonattorney with technical training who is legally permitted to draft, file,
    and prosecute patent applications on behalf of inventors.) Such appointment
    may be required if the applicant is a nonresident of the designated office?s

    respective country. The deadlines for these requirements are generally by
    month 30 after the priority date, but some PCT contracting states may extend
    this deadline to month 31. Once these steps are completed, the company will
    officially enter the national stage via chapter I or chapter II. 37 Next,
    the designated offices will carry out an examination of the

    application and either issue or deny the national or regional patent based
    on their respective national laws, as shown in box 6 of figure 20.

    The costs associated with the national stage include official fees payable
    to each designated office for filing the patent application, examining the
    application, and granting the patent. The applicant may also incur fees for
    the translation of the patent application. In addition, the applicant will
    incur costs for any work involving a U. S. patent attorney or a foreign
    patent attorney or agent (hereafter referred to as ?foreign
    representatives?). We will address these costs in the final section of this
    appendix.

    Our scenario assumes that the company will be pursuing patents through three
    national offices-- Canada, Japan, and South Korea. The company is also
    pursuing patents in six European Patent Office member states- France,
    Germany, Ireland, Italy, Sweden, and the United Kingdom. Table 9 shows the
    fees associated with the national stage of the foreign filing process
    through PCT. Official fees include the filing fee, state designation fees in
    the case of the European Patent Office, examination fees, and

    36 The PCT defines a national or regional office as ?designated? in chapter
    I and ?elected? in chapter II. 37 Effective April 1, 2002, the entry date
    for chapter I was changed from 20 months to 30 months from the priority date
    pursuant to PCT Article 22. Officials from USPTO noted that many contracting
    countries of PCT have indicated that the change is incompatible with their
    current national laws. Therefore, they will not recognize the change until
    their respective national laws have been changed.

    patent granting fees. The company will incur translation fees for Japan,
    South Korea, and the non- English speaking countries designated in the
    European Patent Office; namely, France, Germany, Italy, and Sweden. The
    total estimated cost of the fees associated with the national stage, given
    our scenario, is $13,417. This does not include costs associated with either
    U. S.

    attorney or foreign representative work.

    Table 9: Estimated National Stage Patent Costs National or regional

    Tot al patent office Official fees Translation fees a (cost in U. S.
    dollars)

    Canada $314 $0 $314

    EPO 3,237 1, 739 4,976

    Japan 1, 699 2,999 4,698

    South Korea 1, 229 2,200 3,429 Total $6,479 $6,938 $13, 417

    Legend EPO = European Patent Office Note: Exchange rates used by Global IP
    Estimator software: British pounds = 0.6876 to the U. S. $; Euro = 1.1193 to
    the U. S. $; German marks = 2.1893 to the U. S. $; Japanese yen = 131.71 to
    the U. S. $; Canadian dollar = 1.5913 to the U. S. $; Korean won = 1,317. 8
    to the U. S. $.

    a Translation fees vary according to the length of the application. Our
    estimate assumes 25 pages of translation. Source: Global IP Estimator
    (software package that provides cost estimates of international patent
    applications). (Kihei, HI: Global I. P. Net, 2002).

    Maintaining a Foreign Maintenance fees, also referred to as ?annuities? or
    ?renewal fees,? are paid

    Patent to each patent office where a patent has been obtained. Maintenance
    fees

    would be applicable if the business decided to keep a patent granted to it
    in force, regardless of how the company filed. Maintenance fees keep the
    patent in effect and must be paid on a recurring basis, usually annually for

    up to 20 years after the priority date, as shown in box 7 of figure 20.
    Patent holders can expect an annual increase in fees charged by each
    national patent office for maintaining the patent. If a business decides not
    to maintain any of its patents and therefore not enforce them for a full
    term, the maintenance fees for each patent would cease from the last year
    during which the patent was kept in force.

    Our scenario assumes that the company seeks to keep the patent it obtained
    through the PCT process in force in each of the nine countries for

    a term of 20 years from the priority date. 38 Table 10 provides the total
    maintenance fees over 20 years that would be payable to the patent offices
    in our scenario, not including attorney fees. The fees would be payable to
    Japan, Canada, South Korea, and each country that the company designated
    through the European Patent Office. The total estimated cost to the business
    for full- term foreign maintenance is $83,543. This does not include costs
    associated with either U. S. attorney or foreign representative work.

    38 We assumed that the patents would be held for the full 20- year term in
    each country to show what the maximum maintenance costs might be. However,
    most patents are not held for the full term.

    Table 10: Estimated Costs Involved in Maintaining a Foreign Patent in Nine
    Countries for 20 Years

    Country Cost in U. S. dollars

    Canada $1, 510 France 5,001 Germany 13, 520 Ireland 4,637 Italy 6,002 Japan
    22, 783 South Korea 18, 910 Sweden 5,552 United Kingdom 4, 903 EPO renewal
    fees 725

    Tot al $83, 543

    Legend EPO = European Patent Office Note 1: Exchange rates are based on data
    from DRI- WEFA, World Outlook Comparison Tables, Forecast Data, 2001, fourth
    quarter, and DRI- WEFA, Monthly World Outlook (Philadelphia: DRI- WEFA, Feb.
    15, 2002). Exchange rates are based on an average exchange rate forecast for
    years 2001- 2005 and years 2006- 2020.

    Note 2: Maintenance fees are expressed in current year dollars because of a
    lack of information about the timing and amount of future expenditures for
    patent maintenance.

    Note 3: Renewal fees are payable to the European Patent Office for the years
    before the European Patent Office grants the patent. In our scenario, we
    assume the European Patent Office grants the patent in year 5. As a result,
    the company must pay a renewal fee of $351 in year 3 and $374 in year 4 to
    the European Patent Office. The figure for European Patent Office renewal
    fees in the table reflects fees for years 3 and 4 and the maintenance fees
    for designated member states for years 5- 20.

    Sources: Canadian Intellectual Property Office, European Patent Office,
    German Patent and Trademark Office, Irish Patents Office, Italian Patent and
    Trademark Office, Japanese Patent Office, Korean Intellectual Property
    Office, United Kingdom Patent Office, and WIPO.

    U. S. Attorney and Throughout the foreign patent process, the company will
    incur fees for U. S.

    Foreign Representative attorneys and foreign patent representatives. Unlike
    national patent office

    fees, which governments typically publish in fee schedules, U. S. attorney
    Fees

    and foreign representative costs may vary widely, depending on a number of
    factors. Therefore, they are difficult to estimate reliably. For example,
    items such as the nature of the patent sought, the extent of global patent

    coverage desired, the foreign patent process followed, and the amount of
    time patent attorneys spend modifying patent applications to meet the
    expectations of individual patent offices will affect the cost of U. S.
    patent

    attorney and foreign representative services. U. S. patent attorney fees
    will also vary throughout the United States. For these reasons, our
    estimates of U. S. patent attorney and foreign representative costs are, at
    best, approximate.

    We presented our foreign patent scenario to, and obtained cost estimates
    from, four of the patent attorneys on our panel. 39 We asked them to
    estimate the U. S. attorney and foreign representative fees that the
    hypothetical company might incur at the international and national stages
    and throughout the maintenance phase. Their estimates for the U. S. attorney
    and foreign representative charges during the international and national
    stages were similar, but their estimates of these costs during the
    maintenance phase covered a broader range. As shown in table 11, the total
    cost of U. S. attorney and foreign representative fees for the company could

    range from under $60, 000 to $230, 000.

    Table 11: Estimated U. S. Attorney and Foreign Representative Fees Tot al
    International

    National Maintenance

    (cost in U. S. stage stage phase

    dollars)

    U. S. attorney <$ 10,000 $ <$ 10,000$ <$ 10, 000$

    <$ 30, 000-

    fees 20,000 30,000 60,000 $110, 000

    Foreign 0 $20,000$

    $10, 000$

    $30, 000-

    representative 50,000 70,000 $120, 000

    fees

    Total fees <$ 10, 000$ <$ 30,000$ <$ 20, 000$ <$ 60, 000- 20,000 80,000
    130,000 $230, 000

    Source: GAO analysis of patent attorney cost estimates.

    Total Scenario Costs The total estimated foreign patent costs to the company
    in our scenario ranged from about $160,000 to about $330,000, as shown in
    table 12. In this

    scenario, the company would incur about 35 percent of the lifetime costs to
    file and obtain the foreign patents and about 65 percent of the costs to
    maintain the foreign patents for their full 20- year term.

    39 These attorneys were based in San Jose, Calif.; Washington, D. C.;
    Minneapolis, Minn.; and New York City.

    Table 12: Estimated Total Foreign Patent Costs Stage Cost in U. S. dollars

    International stage costs $2, 100 U. S. attorney and foreign representative

    <10, 000- 20, 000 fees at the international stage National stage costs 13,
    417

    U. S. attorney and foreign representative <30, 000- 80, 000 fees at the
    national stage Maintenance fees 83, 543

    U. S. attorney and foreign representative <20,000- 130, 000 fees during the
    maintenance stage Total <$ 159,060-$ 329, 060

    Source: GAO analysis.

    Scope and To estimate the U. S. patent costs that a small business might
    incur, we

    Methodology obtained relevant fees from the USPTO schedule of patent fees,
    effective

    October 1, 2001. We used the small entity fees because the company in our
    scenario would be eligible to pay these lower fees. We obtained estimates
    for attorney costs from the American Intellectual Property Law Association?s
    Report of Economic Survey 2001. This survey is done every 2 years and, among
    other things, provides statistics on billing rates and typical charge for
    representative intellectual property services. The data in the 2001 report
    is based on 1,829 responses. We used the median costs contained in the
    survey for actions that corresponded to our scenario.

    To estimate the foreign patent costs that a small business might incur, we
    developed our hypothetical foreign patent scenario based on information that
    we obtained from our small business survey and patent attorney panel, as
    well as on input from several patent attorneys. We took this route because
    few of the studies that we analyzed about foreign patent costs were tailored
    to small businesses. Moreover, because many caveats exist in the foreign
    patent process, a scenario enabled us to better estimate costs. Based on
    this information and input, we developed what the patent attorneys advised
    was a reasonably typical foreign patent scenario for a

    small business. This scenario included filing a patent application of
    average length and complexity in a limited number of important countries,
    reflecting the choices that small businesses have to make because of cost
    considerations. We also chose to illustrate the PCT process because it is a
    commonly used process that small businesses might follow.

    The scenario included a range of assumptions to help narrow the scope of
    cost estimates as much as possible, particularly for the patent attorneys
    who estimated U. S. and foreign patent attorney charges. These hypothetical
    foreign patent scenario assumptions are as follows:

    1. The U. S. application consists of 25 pages, 5 drawings, and 15 claims,
    including 2 independent claims.

    2. Prior art is relevant to the first independent claim and its dependent
    claims, but not to the other independent claim.

    3. The first independent claim and its dependent claims are ultimately
    allowed after amendment.

    4. One office action occurs. 5. No appeals, opposition, invalidation, scope
    trials, or the like occur. 6. The issued patent contains 15 claims. 7. The
    company keeps each of its patents in force for 20 years. 8. The PCT
    application is filed in the United States. USPTO acts as the receiving agent
    and conducts the search and examination.

    We included the nine countries in our scenario for various reasons. We
    selected Japan because it is an important market, and because we wanted to
    illustrate the higher costs that companies face when they seek patent
    protection in Japan. We selected Canada because U. S. small businesses are
    eligible for lower fees there and can file their applications in English,
    thereby avoiding translation charges. We selected South Korea to represent
    developing markets where companies may wish to obtain patent protection. We
    opted to include six European countries to represent

    reasonable but still limited protection in this major foreign market. We
    obtained information about the cost of filing a PCT application in the
    United States from the USPTO schedule of PCT fees. We used the Global IP
    Estimator software published by Global I. P. Net to obtain information on
    patent fees in each country included in our scenario. This software

    provides estimates of national patent office fees for countries throughout
    the world, including translation costs where applicable. We obtained
    information about these fees and costs from Global IP Estimator in January

    2002. We validated the information in the Global IP Estimator by examining
    the WIPO?s PCT applicant guides and published fees and the various national
    patent office Web sites. We obtained information about maintenance fees from
    WIPO, the European Patent Office, and the national patent office Web sites.
    Since many of these sources presented the fees in the national currency of
    the respective patent office, we used average

    exchange rates for years 2001- 2005, and 2006- 2020, provided by DRI- WEFA,
    an economic consulting firm.

    To obtain information about the cost of U. S. and foreign patent attorney
    services throughout the process, we surveyed four patent attorneys who were
    members of our patent attorney panel. The attorneys estimated, within ranges
    of $10,000, the U. S. patent attorney and foreign

    representative costs for the international and national stages and the
    maintenance phase of our scenario. Although the American Intellectual
    Property Law Association?s Report of Economic Survey 2001 contained data on
    U. S. patent attorney charges for these services, we did not use this data
    because it did not include foreign representative costs.

    We have expressed all costs in current dollars due to a lack of information
    about the timing and amount of future expenditures for patent maintenance
    and attorney fees. We collected information on the patent maintenance fees
    for the United States and foreign countries for the patent scenario
    described in this appendix. However, we do not have a breakdown of the costs
    on an annual basis, which would enable us to convert this

    stream of payments into present value terms. Since a larger share of foreign
    patent costs in this scenario accrue in the later years as compared to the
    U. S. costs, a present value calculation will result in a greater percentage

    reduction in foreign costs than in U. S. costs. Nevertheless, foreign patent
    costs still remain substantially higher than U. S. costs.

    We also shared our analysis with USPTO officials, who provided assistance
    and technical comments.

    Comments from the U. S. Patent and

    Appendi x VII

    Trademark Office Note: GAO comments supplementing those in the report text
    appear at the end of this appendix.

    See comment 1.

    The following is GAO?s comment on the U. S. Patent and Trademark Office?s
    (USPTO) letter dated July 2, 2002. GAO Comment 1. The enclosure to USPTO?s
    letter mainly provided technical comments

    that were designed to clarify our discussion of U. S. and international
    patent laws. Therefore, we chose not to reproduce them in this appendix. In
    commenting on the first recommendation, USPTO suggested that we recommend
    that USPTO ?continue to consider? the advantages and disadvantages of
    various options for further patent law harmonization. While we recognize
    that USPTO has obtained some input from small businesses or certain
    organizations that represent them about patent law harmonization, most of
    this input has been in the form of responses to Federal Register requests
    for comment from the public. We retained our recommendation as written
    because we believe that USPTO needs to be more active in obtaining input
    about harmonization from small businesses. USPTO?s suggestions for the
    second recommendation indicated that it was not comfortable helping to
    develop original, specific information about foreign patent laws,
    requirements, procedures, and costs. We agreed with their concerns and
    modified the recommendation to direct the agencies to collect and make
    available existing information about foreign patents.

    Comments from the Small Business

    Appendi x VIII

    Administration Note: GAO comments supplementing those in the report text
    appear at the end of this appendix.

    See comment 1.

    The following is GAO?s comment on the Small Business Administration?s (SBA)
    letter dated July 8, 2002. GAO Comment 1. We recognize that SBA does not
    have the requisite expertise on foreign

    patent laws to independently develop such information. We modified the
    recommendation to direct SBA and USPTO to collect and make available
    existing information about foreign patent protection.

    Appendi x IX

    GAO Contacts and Staff Acknowledgments GAO Contacts Elizabeth Sirois (202)
    512- 8989 Shirley Brothwell (202) 512- 3865 Staff

    In addition to those named above, Martin de Alteriis, Gezahegne Bekele,
    Acknowledgments

    Alan Frazier, Brandon Haller, Ernie Jackson, Rona Mendelsohn, Melissa
    Pickworth, and Jody Woods made key contributions to this report.

    Glossary Annuities See Maintenance Fees. Anticipated Invention An invention
    is said to be anticipated when it is too similar to an earlier

    invention to be considered novel. Because novelty is a requirement for
    patentability, anticipated inventions are not patentable. An invention may
    be anticipated by prior publication, prior invention, sale, public use, or
    display of the invention more than a year prior to filing the patent
    application.

    Basic Fee A fee that is paid for obtaining a foreign patent upon entrance
    into the international stage and the national stage. Claims Claims define
    the invention and are what are legally enforceable. The

    specification must conclude with a claim particularly pointing out and
    distinctly defining the subject matter that the applicant regards as his or
    her invention or discovery.

    Designated Office The office of a contracting state in which the protection
    for an invention is desired. See Designation.

    Designation An indication that the applicant makes, in the request for an
    international application filed under the Patent Cooperation Treaty, as to
    the contracting

    states in which protection for an invention is desired. Elected Office The
    national office or intergovernmental organization of, or acting for, the

    contracting state that the applicant elects under chapter II of the Patent
    Cooperation Treaty.

    Election An indication that the applicant makes, in the demand for an
    international application filed under the Patent Cooperation Treaty, as to
    the contracting

    states in which the applicant intends to use the results of the
    international preliminary examination.

    European Patent A convention, concerning the granting of European patent
    protection, Convention

    signed in Munich in 1973 within the scope of the European Economic
    Community. The aim of the convention is to make the protection of inventions
    in the member states easier, cheaper, and more reliable by creating a single
    European procedure for the grant of a patent on the basis of a uniform body
    of substantive patent law.

    European Patent Office EPO, founded in 1977 under the European Patent
    Convention, issues

    (EPO) ?European patents? that are valid in the 24 European member states (as
    of

    June 1, 2002) on the basis of a single application and an examination
    procedure using uniform standards.

    Examination A process in which a patent examiner will review a patent
    application, correspond with applicants, and decide whether inventions
    deserve

    patents based on claims. Filing Date Date sent on a ?filing receipt? from
    the U. S. Patent and Trademark Office

    (USPTO). The date is usually 1 to 4 days after the patent application is
    mailed to USPTO. The date starts the period within which a patent
    application must be filed in other countries to receive patent protection.
    The date also closes the 1- year period during which an inventor can
    publicly use, work, describe, or place the invention on sale in the United
    States without the anticipation rule being applied to bar a patent on the
    invention. Any developments that occur after this date will not be
    considered as prior art that would preclude the granting of a patent. Filing
    Fees Fees that an inventor pays to the designated or elected office for
    filing a

    patent application. First- to- File System A system whereby a patent is
    awarded to the first inventor to file a patent

    application. This system is used by every country in the world except the
    United States.

    First- to- Invent System A system whereby a patent is awarded to the
    inventor who files a patent application and establishes the earliest
    invention date. The United States is

    the only country in the world that uses this system. Grace Period A fixed
    period of time immediately preceding the filing of a patent

    application during which certain disclosures of the invention to the public
    are permitted without prejudicing the patentability of the invention.

    Grant A grant occurs when a designated or elected office issues a patent on
    an invention. The office sometimes charges a fee for a grant.

    Independent Claim A claim that by itself describes an aspect of an invention
    without reference to any other claim.

    International Preliminary An examination governed by chapter II of the
    Patent Cooperation Treaty in

    Examination which a preliminary and nonbinding opinion is given about
    whether the

    claimed invention appears to be novel, to involve an inventive step
    (nonobvious), and to be industrially applicable.

    International Preliminary Experienced patent offices appointed to carry out
    international searches

    Examination Authority and the international preliminary examination. These
    offices include patent

    offices in Australia, Austria, China, Japan, Russia, South Korea, Sweden,
    the United States, and the European Patent Office.

    International Searching National office or intergovernmental organization
    that carries out the

    Authority (ISA) international search. The tasks of ISA include establishing
    documentary

    search reports on prior art with respect to inventions that are the subject
    of patent applications. The Assembly of the Union of the Patent Cooperation
    Treaty appoints the International Searching Authorities.

    International Search Report A report that an International Searching
    Authority produces that lists citations of published documents that might
    affect the patentability of the

    invention claimed in an international patent application. Issue Fee A fee
    that the national patent office charges after approving a patent.
    Maintenance Fees Fees that inventors pay to patent offices in order to keep
    an issued patent

    in effect. Fees are generally required annually from the 3rd year to the
    20th year of the patent term. Multiple Claims Multiple claims are sometimes
    included in patent applications because

    inventors are seeking protection for different aspects and/ or uses of the
    same invention or for closely related inventions.

    National Stage (National The second of the two main phases of the Patent
    Cooperation Treaty

    Phase) procedure. The national stage consists of the processing of the

    international application before each office of, or acting for, a
    contracting state that the inventor designated in the international
    application.

    Office Action A notification from a patent office regarding an examiner?s
    decision on a patent application. The office action states reasons for any
    adverse decision, objection, or requirement and provides information that
    may assist the applicant in judging whether to pursue the patent
    application. Paris Convention Also known as the Convention for the
    Protection of Industrial Property, the

    1883 Paris Convention is a treaty adhered to by 163 countries that give
    limited recognition to one another's patent application filing dates. For 1
    year after the date of filing of a U. S. patent application, essentially the
    same patent application may be filed as a "foreign counterpart" application
    in any or all other countries that subscribe to the convention. Any foreign
    counterpart application that is filed in this way will be treated in the
    foreign country in question as though it had been filed on the U. S.
    priority date and not on the actual date of filing in the foreign country in
    question.

    Patent The grant of a property right that a national government or an
    international intergovernmental authority issues for an invention, giving
    the inventor the

    right to exclude others from commercially making, using, or selling the
    invention during the patent term. Inventions that patents cover typically
    include products as well as processes for making or using new or existing
    products.

    Patent Agent A nonattorney with technical training who is legally permitted
    to draft, file, and prosecute patent applications on behalf of inventors.
    Patent Cooperation Treaty

    PCT came into force on January 24, 1978, and presently has 115 countries
    (PCT)

    as adherents, including the United States. The treaty facilitates the filing
    of applications for patents on the same invention in member countries by
    providing, among other things, for centralized filing procedures and a

    standardized application format. The World Intellectual Property
    Organization in Geneva, Switzerland, administers PCT.

    Patent Harmonization A multilateral effort to standardize patent procedures.
    Patent Pendency Patent pendency is the amount of time it takes for a patent
    to be issued or

    the patent application to be finally rejected. Patent Term The duration of
    the patent protection. PCT Chapter I The first, mandatory phase under the
    Patent Cooperation Treaty that

    includes performance of an international search, issuance of an
    international search report, and publication of the patent application and
    search report by the international bureau of the World Intellectual Property
    Organization.

    PCT Chapter II The second, optional phase under the Patent Cooperation
    Treaty that includes examination of the international application and
    issuance of an

    international preliminary examination report. Prior Art The body of
    information, including patent and nonpatent literature, that is

    consulted to determine the patentability of an invention. Prosecution The
    full scope of procedures that must be followed to actually obtain the

    patent. Receiving Office The national patent office or intergovernmental
    organization where the inventor files the international application of the
    Patent Cooperation Treaty and pays the international stage filing fees.

    Scope of Patent Protection The scope of patent protection outlines the
    boundaries of the invention for which the inventor is seeking exclusive
    rights.

    Search A search of previous and existing patents and other documents that
    might describe the conceived invention. Searches are carried out to discover
    whether the invention is novel and nonobvious over the prior art to qualify

    for a patent. Search Fee A fee that a patent office or intergovernmental
    organization charges to

    conduct a search of previous and existing patents. Translation Fees Fees
    that patent applicants incur to translate a patent application into the

    language of the designated country. Transmittal Fee A fee that a patent
    office charges for the patent application to be sent or conveyed to the
    patent office by means of a transmittal letter required in the patent
    application.

    U. S. Patent and Trademark An administrative branch of the U. S. Department
    of Commerce, USPTO is

    Office (USPTO) charged with overseeing and implementing the federal laws on
    patents and

    trademarks. The agency is responsible for examining, issuing, classifying,
    and maintaining records of all patents issued in the United States. USPTO
    also serves as the filing agency for Patent Cooperation Treaty applications.

    World Intellectual Property An intergovernmental organization of the United
    Nations system, WIPO is

    Organization (WIPO) responsible for promoting the protection of intellectual
    property

    throughout the world and for administering various multilateral treaties
    dealing with the legal and administrative aspects of intellectual property.

    (320031)

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    GAO United States General Accounting Office

    Why GAO Did This Study

    Small businesses are important to the U. S. economy for their roles in
    technological development and job creation. To fully protect and profit from
    their innovations, small businesses may need to obtain patents in other
    countries. Congressional requesters asked GAO to identify whether small
    businesses encounter any impediments in seeking patents abroad and to
    determine whether any federal actions could help small businesses overcome
    those impediments. To answer these questions, GAO convened an expert panel
    of U. S. patent attorneys and surveyed a limited number of small businesses.

    July 2002 INTERNATIONAL TRADE Federal Action Needed to Help Small Businesses
    Address Foreign Patent Challenges

    This is a test for developing highlights for a GAO report. The full report,
    including GAO's objectives, scope, methodology, and analysis is available at
    www. gao. gov/ cgi- bin/ getrpt? GAO- 02- 789. For additional information
    about the report, contact Loren Yager (202- 512- 4346). To provide comments
    about this test highlights, contact Keith Fultz (202- 512- 3200) or email
    HighlightsTest@ gao. gov.

    Highlights of GAO- 02- 789, a report to the Ranking Minority Member of the
    Senate Committee on Small Business and Entrepreneurship and the Chairman of
    the House Committee on Small Business. United States General Accounting
    Office

    What GAO Found

    Foreign patent costs are the most significant impediment that small
    businesses face in trying to protect their inventions abroad, according to
    the small businesses and patent attorneys GAO contacted. The minimum cost to
    a small business to obtain and maintain a relatively simple patent in the
    United States for 20 years could be about $10, 000, based on a scenario that
    GAO developed. However, extending this patent to nine other countries, which
    could be a typical small business foreign patent strategy, could cost
    between $160,000 and $330,000, according to GAO?s research. Other
    impediments that the businesses and attorneys identified included companies?
    limited resources and limited foreign patent knowledge; differences among
    foreign patent systems, which increase costs and make the process more
    complex; and the existence of challenging business climates and weak patent
    enforcement in certain countries. Large businesses also face some of these
    impediments, but have more resources and expertise to address them than
    small businesses do.

    Over 70 percent of both the small businesses and the patent attorneys that
    GAO surveyed believed that federal efforts to promote harmonization (i. e.,
    reduce differences) among U. S. and foreign patent systems and to reduce the
    high cost of foreign patents would be the best way to help small businesses.
    Member states of the World Intellectual Property Organization, including the
    United States, have taken some steps to harmonize their patent systems and
    are currently negotiating to reduce the more substantive differences that
    remain among them. A majority of small businesses also thought that federal
    financial assistance to help defray the high costs of foreign patents would
    be useful, but many on the patent attorney panel did not support this step.
    Instead, a majority of the patent attorneys believed that informing and
    educating small businesses about foreign patents would be worthwhile. G A O
    Accountability Integrity Reliability

    Highlights What GAO Recommends

    GAO recommends that the U. S. Patent and Trademark Office obtain input from
    small businesses and other interested parties to assess the advantages and
    disadvantages of various patent harmonization options. GAO also recommends
    that the Small Business Administration make information about key aspects of
    foreign patent laws, procedures, and costs readily available to small
    businesses.

    The U. S. Patent and Trademark Office and the Small Business Administration
    agreed with our recommendations.

    Page i GAO- 02- 789 Foreign Patent Challenges

    Contents

    Contents

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    Contents

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    Contents

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    Page 1 GAO- 02- 789 Foreign Patent Challenges United States General
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    Appendix I

    Appendix I Objectives, Scope, and Methodology

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    Appendix I Objectives, Scope, and Methodology

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    Appendix I Objectives, Scope, and Methodology

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    Appendix I Objectives, Scope, and Methodology

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    Appendix I Objectives, Scope, and Methodology

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    Appendix I Objectives, Scope, and Methodology

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    Appendix I Objectives, Scope, and Methodology

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    Appendix I Objectives, Scope, and Methodology

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    Appendix II

    Appendix II Information about the Small Business Survey Population

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    Appendix II Information about the Small Business Survey Population

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    Appendix II Information about the Small Business Survey Population

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    Appendix II Information about the Small Business Survey Population

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    Appendix III

    Appendix III Members of GAO?s Patent Attorney Panel

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    Appendix III Members of GAO?s Patent Attorney Panel

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    Appendix IV

    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix IV Results of the Patent Attorney Panel Surveys

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    Appendix V

    Appendix V Results of the Small Business Survey

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    Appendix V Results of the Small Business Survey

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    Appendix V Results of the Small Business Survey

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    Appendix V Results of the Small Business Survey

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    Appendix V Results of the Small Business Survey

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    Appendix VI

    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Appendix VI Processes and Costs Involved in Obtaining Foreign Patent
    Protection: A Hypothetical Scenario

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    Protection: A Hypothetical Scenario

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    Appendix VII

    Appendix VII Comments from the U. S. Patent and Trademark Office

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    Appendix VIII

    Appendix VIII Comments from the Small Business Administration

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    Appendix VIII Comments from the Small Business Administration

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    Appendix IX

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    Glossary Page 113 GAO- 02- 789 Foreign Patent Challenges

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