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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a

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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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 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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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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