Intellectual Property: Improvements Needed to Better Manage	 
Patent Office Automation and Address Workforce Challenges	 
(08-SEP-05, GAO-05-1008T).					 
                                                                 
The United States Patent and Trademark Office (USPTO) is	 
responsible for issuing patents that protect new ideas and	 
investments in innovation and creativity. However, the volume and
complexity of patent applications to the agency have increased	 
significantly in recent years, lengthening the time needed to	 
process patents and raising concerns about the validity of the	 
patents that are issued. Annual applications have grown from	 
about 185,000 to over 350,000 in the last 10 years and are	 
projected to exceed 450,000 by 2009. Coupled with this growth is 
a backlog of about 750,000 applications. Further complicating	 
matters, the agency has faced difficulty in attracting and	 
retaining qualified staff to process patent applications. USPTO  
has long recognized the need to automate its patent processing	 
and, over the past two decades, has been engaged in various	 
automation projects. More recently, in its strategic plan, the	 
agency articulated its approach for accelerating the use of	 
automation and improving workforce quality. In two reports issued
in June 2005, GAO discussed progress and problems that the agency
faces as it develops its electronic patent process, its actions  
to attain a highly qualified patent examination workforce, and	 
the progress of the agency's strategic plan initiatives. At	 
Congress's request, this testimony summarizes the results of	 
these GAO reports.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-1008T					        
    ACCNO:   A36077						        
  TITLE:     Intellectual Property: Improvements Needed to Better     
Manage Patent Office Automation and Address Workforce Challenges 
     DATE:   09/08/2005 
  SUBJECT:   Employee retention 				 
	     Hiring policies					 
	     Human capital management				 
	     Human capital planning				 
	     Intellectual property				 
	     Internal controls					 
	     Labor force					 
	     Mechanization					 
	     Office automation					 
	     Patents						 
	     Personnel recruiting				 
	     Quality assurance					 
	     Strategic information systems planning		 
	     Strategic planning 				 
	     Systems design					 
	     Trademarks 					 
	     Timeliness 					 
	     PTO Automated Patent System			 

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GAO-05-1008T

United States Government Accountability Office

GAO Testimony

Before the Subcommittee on Courts, the Internet, and Intellectual
Property, Committee on the Judiciary, House of Representatives

For Release on Delivery

Expected at 1:00 p.m. EDT INTELLECTUAL

Thursday, September 8, 2005

PROPERTY

Improvements Needed to Better Manage Patent Office Automation and Address
                              Workforce Challenges

Statement of Anu K. Mittal, Director
Science and Technology Issues
and
Linda D. Koontz, Director
Information Management Issues

GAO-05-1008T

[IMG]

September 8, 2005

INTELLECTUAL PROPERTY

Improvements Needed to Better Manage Patent Office Automation and Address
Workforce Challenges

  What GAO Found

As part of its strategy to achieve an electronic patent process, USPTO had
planned to deliver an operational patent system by October 2004. It has
delivered important capabilities, for example, allowing patent applicants
to electronically file and view the status of their applications and the
public to search published patents. Nonetheless, after spending over $1
billion on its efforts from 1983 through 2004, the agency has not yet
developed the fully integrated, electronic patent process articulated in
its automation plans, and when and how it will achieve this process is
uncertain. Key systems that the agency is relying on to help reach this
goal-an electronic application filing system and a document imaging
system-have not provided capabilities that are essential to operating in a
fully electronic environment. Contributing to this situation is the
agency's ineffective planning for and management of its patent automation
initiatives, due in large measure to enterprise-level, systemic weaknesses
in its information technology investment management processes. Although
the agency has begun instituting essential investment management
mechanisms, such as its enterprise architecture framework, it has not yet
finalized its capital planning and investment control process, or
established necessary linkages between the process and its architecture to
guide the development and implementation of its information technology.
The Under Secretary of Commerce for Intellectual Property and the agency's
chief information officer have acknowledged the need for improvement.

USPTO has taken steps to attract and retain a highly qualified patent
examination workforce by, for example, enhancing its recruiting efforts
and using many of the human capital benefits available under federal
personnel regulations. However, it is too soon to determine the long-term
success of the agency's efforts because they have been in place only a
short time and have not been consistently sustained because of budgetary
constraints. Long-term uncertainty about the agency's hiring and retention
success is also due to the unknown impact of the economy. In the past, the
agency had more difficulty recruiting and retaining staff when the economy
was doing well. Further, USPTO faces three long-standing challenges that
could undermine its efforts: the lack of an effective strategy to
communicate and collaborate with examiners, outdated assumptions in
production quotas that it uses to reward examiners, and the lack of
required ongoing technical training for examiners. Patent examiners said
the lack of a collaborative work environment has lowered morale and
created an atmosphere of distrust between management and patent examiners.

Overall, USPTO has made more progress in implementing its strategic plan
initiatives aimed at increasing its patent processing capability through
workforce and process improvements than in its initiatives to decrease
patent pendency and improve electronic processing. It has fully or
partially implemented all 23 capability initiatives, but only 8 of 15
initiatives to reduce patent pendency and improve electronic processing.
The agency cited a lack of funding as the primary reason for not
implementing all initiatives.

                 United States Government Accountability Office

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to participate in your oversight hearing
of the United States Patent and Trademark Office's (USPTO) efforts to
modernize its patent application processing capability. Our testimony
focuses on several critical aspects of the agency's overall goal: (1) its
ongoing initiative to achieve a paperless, electronic patent process, (2)
its actions to attract and retain a highly qualified patent examiner
workforce and address human capital challenges, and (3) the implementation
of critical initiatives outlined in its 21st Century Strategic Plan-issued
in 2002 in response to a congressional requirement that the agency improve
patent quality, implement electronic government, and reduce the number of
pending patent claims.1

Rapid growth in both the volume and complexity of patent applications to
USPTO has lengthened the time needed to process patents and has raised
concerns among intellectual property organizations, patent holders, and
others about the quality of the patents that are issued. Over the last 10
years, the number of patent applications filed annually has increased 91
percent, from about 185,000 in 1994 to over 350,000 in 2004. Along with
this growing workload is a 28-month backlog of approximately 750,000
applications. Further complicating this picture, is that USPTO's resources
have not kept pace with the increases in its patent workload. Agency
officials acknowledge that, at times, they have had difficulty competing
with the private sector to attract and retain staff with the high degree
of scientific, technical, and legal knowledge required to be patent
examiners.

Recognizing the need to improve its patent processing capability, over the
past 2 decades, USPTO has undertaken various efforts to automate its
patent process. In addition, as part of an aggressive 5-year modernization
effort outlined in its strategic plan, the agency has articulated its
approach to creating a more productive and responsive patent organization
through accelerating its use of automation and enhancing the quality of
its patent examination workforce. At the request of the Committee, our
testimony today summarizes the work presented in two reports that we
issued in June 2005-one addressing the agency's progress, and problems
faced, in developing and using electronic information and systems to
achieve its

1Patent and Trademark Office Authorization Act of 2002, Pub. L. No.
107-273, S: 13104, 116 Stat. 1899, 1900, required USPTO to develop a
5-year strategic plan for meeting these three requirements. USPTO also
prepared the Strategic Plan to fulfill the requirements of the Government
Performance and Results Act.

automated patent processing capability2 and the other addressing its steps
to attract and retain a workforce of qualified patent examiners, three
longstanding human capital challenges that could undermine recent efforts,
and the overall status in implementing its strategic plan.3

In summary, we found the following:

USPTO is pursuing a long-standing strategy to implement a paperless,
electronic patent process, with the goal of replacing the manual
processing of applications with an electronic process for researching
patent information and viewing and manipulating application text
throughout all processing phases. While the agency has achieved important
electronic capabilities through information systems that it has
implemented, such as electronic filing and patent application
classification and search, collectively these functions have not provided
the fully integrated electronic patent processing capability articulated
in its automation plans. Two of the primary systems that the agency is
relying on to enhance its capabilities-its electronic filing system and a
document imaging system that it acquired from the European Patent
Office-have not yielded processing improvements that the agency considers
essential to operate successfully in an electronic environment.
Contributing to this situation are ineffective planning and management of
its patent automation projects-due in large measure to enterprise-level,
systemic weaknesses in its information technology investment management
processes.4 Although the agency had begun instituting certain essential
investment management mechanisms, it had not yet finalized its capital
planning and investment control process and had not established the
necessary linkages between the process and its enterprise architecture to
ensure that projects will comply with the architecture.5 As a result, the

2GAO, Intellectual Property: Key Processes for Managing Patent Automation
Strategy Need Strengthening, GAO-05-336 (Washington, D.C.: June 17, 2005).

3GAO, Intellectual Property: USPTO Has Made Progress in Hiring Examiners,
but Challenges to Retention Remain, GAO-05-720 (Washington, D.C.: June 17,
2005).

4A key requirement of the Clinger-Cohen Act of 1996 (40 U.S.C.S:11312) is
that agencies have capital planning and investment control processes. Such
processes aid management by providing a means to obtain necessary
information about the progress of an investment in terms of cost,
capability of the system to meet specified requirements, timeliness, and
quality.

5An enterprise architecture serves as a blueprint for systematically and
completely defining an organization's current operational and technology
environment and as a roadmap toward the desired state.

agency had not rigorously assessed its patent systems' compliance with the
enterprise architecture and it lacked reliable experience-based data to
consistently demonstrate the costs and benefits of its systems.

In addition, to help attract and retain a qualified patent examination
workforce, USPTO has taken steps such as enhancing its recruiting efforts
and using many of the human capital benefits available under federal
personnel regulations. However, it is too soon to determine the long-term
success of the agency's recruiting efforts because they have been in place
only a short time and have not been consistently sustained because of
budgetary constraints. Long-term uncertainty about USPTO's hiring and
retention success is also due to the unknown impact of the economy. In the
past, when the economy was doing well, the agency had more difficulty
recruiting and retaining the staff it needed. Further, USPTO faces three
long-standing challenges that could undermine its efforts to retain a
qualified workforce: (1) the lack of an effective strategy to communicate
and collaborate with examiners, (2) outdated assumptions in the
application processing quotas it uses to reward examiners, and (3) the
lack of required ongoing technical training for examiners. According to
patent examiners, the lack of communication and a collaborative work
environment has resulted in low morale and an atmosphere of distrust that
is exacerbated by the contentious relationship between management and
union officials.

Overall, USPTO has made more progress in implementing its strategic plan
initiatives to increase the agency's capability than it has in
implementing the initiatives to decrease patent pendency6 and improve
electronic processing. The agency has fully or partially implemented all
23 capability initiatives that focus on improving the skills of employees,
enhancing quality assurance, and altering the patent system through
changes in existing laws or regulations. In contrast, the agency has
partially or fully implemented only 8 of the 15 initiatives aimed at
reducing patent pendency and improving electronic processing. A lack of
funding was cited as the primary reason for not implementing these
initiatives. With the passage of legislation in December 2004 to increase
fees available to USPTO for the next 2 years, the agency is reevaluating
the feasibility of implementing some of these initiatives.

6The time between filing for and being granted a patent historically has
been referred to as "patent pendency."

Background

In our reports, we made recommendations aimed at improving the agency's
management of its patent automation strategy and related information
technology investments and at enhancing communication and collaboration
between management and patent examiners, and between management and union
officials. USPTO generally agreed with the findings, conclusions, and
recommendations in both reports, although it only partially agreed with
several material aspects of our assessment of its patent automation
strategy, including our recommendation that it reassess its approach to
automating its patent process.

USPTO helps promote industrial and technological progress in the United
States and strengthen the national economy by administering the laws
relating to patents and trademarks. A critical part of its mission is
examining patent applications and issuing patents. A patent is a property
right granted by the U.S. government to an inventor who secures, generally
for 20 years from the date of initial application in the United States,
his or her exclusive right to make, use, offer for sale, or sell the
invention in exchange for disclosing it.7 The number of patent filings to
USPTO continues to grow and, by 2009, the agency is projecting receipt of
over 450,000 patent applications annually.

Patent processing essentially involves three phases: pre-examination,
examination, and post-examination. The process begins when an applicant
files a patent application and pays a filing fee. During the
pre-examination phase, patent office staff document receipt of the
application and process the application fee, scan and convert the paper
documents to electronic format, and conduct an initial review of the
application and classify it by subject matter. During the subsequent
examination phase, the application is assigned to a patent examiner with
expertise in the subject area8 who searches existing U.S. and foreign
patents, journals, and other literature and, as necessary, contacts the
applicant to resolve questions and obtain additional information to
determine whether the proposed invention can

7According to 35 U.S.C. S:154(a)(1), a patentee may also exclude others
from importing the patented invention into the United States.

8USPTO has eight technology centers that define its subject areas as
follows: Biotechnology and Organic Chemistry; Chemical and Materials
Engineering; Computer Architecture, Software, and Information Security;
Communications; Semiconductors, Electrical and Optical Systems and
Components; Designs for Articles of Manufacture; Transportation,
Construction, Electronic Commerce, Agriculture, National Security and
License and Review; Mechanical Engineering, Manufacturing, and Products.

be patented.9 Examiners document their determinations on the applications
in formal correspondence, referred to as office actions. Applicants may
abandon their applications at any time during this process. If the
examiner determines that a patent is warranted, a supervisor reviews and
approves it and the applicant is informed of the outcome. The application
then enters the post-examination phase and, upon payment of an "issue
fee," a patent is granted and published.10 Historically, the time from the
date that a patent application is filed to the date that the patent is
either granted or the application is abandoned has been called "patent
pendency."

Because of long-standing concerns about the increasing volume and
complexity of patent applications, USPTO has been undertaking projects to
automate its patent process for about the past two decades. In 1983, the
agency began one of its most substantial projects-the Automated Patent
System (APS)-with the intent of automating all aspects of the patent
process. APS was to be deployed in 1990 and, when completed, consist of
five integrated subsystems that would (1) fully automate incoming patent
applications; (2) allow examiners to electronically search the text of
granted U.S. patents and access selected abstracts of foreign patents; (3)
scan and allow examiners to retrieve, display, and print images of U.S.
patents; (4) help examiners classify patents; and (5) support on-demand
printing of copies of patents.

In reporting on APS more than 10 years following its inception, we noted
that USPTO had deployed and was operating and maintaining certain parts of
the system, supporting text search, limited document imaging, orderentry
and patent printing, and classification activities.11 However, our report
raised concerns about the agency's ability to adequately plan and manage
this major project, pointing out that its processes for exercising
effective management control over APS were weak. Ultimately, USPTO never
fully developed and deployed APS to achieve the integrated, end-toend
patent processing system that it envisioned. The agency reported

9A proposed invention is patentable if it is a new or useful process,
machine, manufacture, or composition of matter, or any new and useful
improvement thereof.

10To keep the patent active, the patentee must pay maintenance fees at 3.5
years, 7.5 years, and 11.5 years.

11GAO, Patent and Trademark Office: Key Processes for Managing Automated
Patent System Development Are Weak, GAO/AIMD-93-15 (Washington, D.C.:
Sept. 30, 1993).

spending approximately $1 billion on this initiative from 1983 through
2002.12

In addition, in 1998, the agency implemented an Internet-based electronic
filing system at a reported cost of $10 million, enabling applicants to
submit their applications online. Further, through 2002, the agency
continued to enhance its capabilities that enabled examiners to search
patent images and text, and upgraded its patent application classification
and tracking systems.13

To help the agency address the challenges of reviewing an increased volume
of more complex patent applications and of reducing the length of time it
takes to process them, Congress passed a law requiring USPTO to improve
patent quality, implement electronic government, and reduce pendency.14 In
response to the law, in June 2002, the agency embarked on an aggressive
5-year modernization plan outlined in its 21st Century Strategic Plan,
which was updated to include stakeholder input and rereleased in February
2003. The strategic plan outlines 38 initiatives related to the patent
organization that focus on three crosscutting strategic themes:
capability, productivity, and agility. The capability theme focuses on
efforts to enhance patent quality through workforce and process
improvements; the productivity theme focuses on efforts to decrease the
pendency of patent applications; and the agility theme focuses on
initiatives to electronically process patent applications. To fully fund
the initiatives in its strategic plan, the agency requested authority from
Congress to increase the user fees it collects from applicants and to
spend all of these fees on patent processing.15 Legislation enacted in
December

12The reported cost included system enhancements and maintenance through
the end of the project's life cycle in 2002.

13The initial deployment of USPTO's patent tracking system occurred in
1980. This system provides workflow tracking, status reporting, and
examiner production information.

14Patent and Trademark Office Authorization Act of 2002, Pub. L. No.
107-273, S: 13104, 116 Stat. 1899, 1900.

15USPTO is authorized to collect fees from the public for specific
activities related to processing applications. The spending of those fees
is subject to provisions in annual appropriations acts at the discretion
of the Congress.

  USPTO Continues to Pursue a Fully Automated Patent Process, but Has Not
  Effectively Managed its Strategy for Achieving This Capability

2004 increased the fees available to USPTO; 16 however, the increases are
only effective for fiscal years 2005 and 2006.

As was its intent with APS, USPTO has continued to pursue a paperless,
end-to-end, automated patent process. In 2001, the agency initiated its
Tools for Electronic Application Management (TEAM) automation project,
aiming to deliver an end-to-end capability to process patent applications
electronically by fiscal year 2006. Under the TEAM concept, the agency had
planned to integrate its existing electronic filing system and the
classification and search capabilities from the earlier APS project with
new document management and workflow capabilities, and with imageand
text-based processing17 of patent applications to achieve a sophisticated
means of handling documents and tracking patent applications throughout
the examination process. By implementing imageand text-based capabilities,
the agency had anticipated that patent examiners would be able to view and
process applications online, as well as manipulate and annotate text
within a patent application, thus eliminating manual functions and
improving processing accuracy, reliability, and productivity, as well as
the quality of the patents that are granted.

With the issuance of its 21st Century Strategic Plan, however, USPTO
altered its approach to accomplishing patent automation. The strategic
plan, among other things, identified the agency's high-level information
technology goals for fully automating the patent process as part of the
5year modernization effort. It incorporated automation concepts from the
TEAM project, but announced an accelerated goal of delivering an
operational system to electronically process patent applications by
October 1, 2004, earlier than had been scheduled under TEAM.

16Consolidated Appropriations Act, 2005, S: 801, Pub. L. No. 108-447, 118
Stat. 2809, 2924 (Dec. 8, 2004).

17Image-based processing uses a graphic representation of documents
produced by scanning paper documents or by converting electronic documents
into images. To transform image content into text, optical character
recognition (OCR) software is used to derive text from the image. OCR can
convert image documents to hidden text, which is searchable. In text-based
processing, the words and sentences in the document are retained as text
and can be stored, processed, and retrieved by a document management
system. Unlike image-based processing, text-based processing allows the
text to be searched and extracted.

In carrying out its patent automation plans, USPTO has delivered a number
of important processing capabilities through the various information
systems that it has implemented. For example, an automated search
capability, available since 1986, has eliminated the need for patent
examiners to manually search for prior art in paper files, and the
classification and fee accounting capabilities have facilitated assigning
applications to the correct subject areas and managing collections of
applicable fees. In addition, the electronic filing system that has
existed since 1998 has enabled applicants to file their applications with
the agency via the Internet. Using the Internet, patent applicants also
can review the status of their applications online and the public can
electronically access and search existing published patents. Further, an
imaging system implemented in August 2004, called the Image File Wrapper,
has given USPTO the capability to scan patent applications and related
documents, which can then be stored in a database and retrieved and
reviewed online. The agency's progress in implementing its automated
patent functions is illustrated in figure 1.

Figure 1: USPTO's Patent Automation Progress

Nonetheless, even with the progress that has been made, collectively,
these automated functions have not provided the fully integrated,
electronic patent processing capability articulated in the agency's
automation plans. Two of the key systems that it is relying on to further
enhance its capabilities-the electronic filing system and the Image File
Wrapper-have not yielded the processing improvements that the agency has
deemed essential to successfully operate in a fully integrated, electronic
environment.

Specifically, in implementing its electronic filing system, USPTO had
projected significant increases in processing efficiencies and quality by
providing patent applicants the capability to file online, thus
alleviating the need for them to send paper applications to the agency or
for patent office staff to manually key application data into the various
processing systems. However, even after enhancements in 2002 and 2004, the
system did not produce the level of usage among patent filers that the
agency had anticipated. For example, although USPTO's preliminary
justification for acquiring the electronic filing system had projected an
estimated usage rate of 30 percent in fiscal year 2004, patent officials
reported that, as of April 2005, fewer than 2 percent of all patent
applications were being submitted to the agency via this system. As a
result, anticipated processing efficiencies and quality improvements
through eliminating the manual rekeying of application data have not been
realized.

In September 2004, USPTO convened a forum of senior officials representing
the largest U.S. corporate and patent law firm filers to identify causes
of patent applicants' dissatisfaction with the electronic filing system
and determine how to increase the number of patents being filed
electronically. According to the report resulting from this forum, the
majority of participants viewed the system as cumbersome, timeconsuming,
costly, inherently risky, and lacking a business case to justify its
usage. Among the barriers to system usage that the participants
specifically identified were (1) users' lack of a perceived benefit from
filing applications electronically, (2) liability concerns associated with
filers' unsuccessful use of the system or unsuccessful transmission of
patent applications to USPTO, and (3) significant disruptions to filers'
normal office/corporate processes and workflow caused by factors such as
difficulty in using the automated tools and the inability to download
necessary software through firewalls.

Several concerns raised during the forum mirrored those that USPTO had
earlier identified in a 1997 analysis of a prototype for electronic
filing. However, at the time of our review, the agency had not completed
plans to show how it would address the concerns regarding use of the
electronic filing system.

The agency's Image File Wrapper also had not resulted in critical patent
processing improvements. The system includes image technology for storage
and maintenance of records associated with patent applications and
provides the capability to scan each page of a submitted paper application
and convert the pages into electronic images. Patent examiners in a
majority of the focus groups that we conducted

commented that the system had provided them with the ability to easily
access patent applications and related information. In addition, patent
officials stated that the system had enabled multiple users to
simultaneously access patent applications.

Nonetheless, patent officials acknowledged that the system had experienced
performance and usability problems. Specifically, in speaking about the
system's performance, the officials and agency documentation stated that,
after its implementation, the Image File Wrapper had been unavailable for
extended periods of time or had experienced slow response times, resulting
in decreased productivity. To lessen the impact of this problem, patent
officials said they had developed a backup tool to store images of an
examiner's most recent applications, which can be accessed when the Image
File Wrapper is not available. Further, in commenting on this matter, the
USPTO director stated that the system's performance had begun to show
improvement.

Regarding the usability of the system, patent officials and focus group
results indicated that the Image File Wrapper did not fully meet
processing needs. For example, the officials stated that, as an
image-based system, the Image File Wrapper did not fully enable patent
examiners to electronically search, manipulate, or track and log changes
to application text, which were key processing features emphasized in the
agency's automation plans. The examiners also commented that a limited
capability to convert images to text, which was intended to assist them in
copying and reusing information contained in patent files, was
error-prone, contributing to their need to download and print the
applications for review. Further, because the office's legacy systems were
not integrated with the Image File Wrapper, examiners were required to
manually print correspondence from these systems, which then had to be
scanned into the Image File Wrapper in order to be included as part of an
applicant's electronic file.

Patent and Office of Chief Information Officer (OCIO) officials largely
attributed the system's performance and usability problems to the agency's
use of software that it acquired from the European Patent Office. The
officials explained that, to meet the accelerated date for delivering an
operational system as outlined in its strategic plan, the agency had
decided in 2002 to acquire and use a document-imaging system owned by the
European Patent Office, called ePhoenix, rather than develop the

integrated patent processing system that had been described in its
automation plans.18 According to the officials, the director, at that
time, had considered ePhoenix to be the most appropriate solution for
further implementing USPTO's electronic patent processing capabilities
given (1) pressures from Congress and from customers and stakeholders to
implement an electronic patent processing system more quickly than
originally planned and (2) the agency's impending move to its new facility
in Alexandria, Virginia, which did not include provisions for transferring
and storing paper patent applications.19

However, they indicated that the original design of the ePhoenix system
had not been compatible with USPTO's technical platform for electronic
patent processing. Specifically, they stated that the European Patent
Office had designed the system to support only the printing of files for
subsequent manual reviews, rather than for electronic review and
processing. In addition, they stated that the system had not been designed
for integration with other legacy systems or to incorporate additional
capabilities, such as text processing, with the existing imaging
capability. Further, an official of the European Patent Office noted that
ePhoenix had supported their office's much smaller volume of patent
applications.20 Thus, with USPTO's patent application workload being
approximately twice as large as that of its European counterpart, the
agency placed greater stress on the system than it was originally designed
to accommodate. OCIO officials told us that, although they had tested
certain aspects of the system's capability, many of the problems
encountered in using the system were not revealed until after the system
was deployed and operational.

Patent and OCIO officials acknowledged that the agency had purchased
ePhoenix although senior officials were aware that the original design of
the system had not been compatible with USPTO's technological platform

18In November 2002, patent officials entered into an agreement with the
European Patent Office, in which that office agreed to provide USPTO with
a license to use its patent processing software and to provide technical
assistance in customizing the software to meet USPTO's needs. USPTO
completed its implementation of the system in August 2004, at a reported
total cost of approximately $14 million.

19In December 2003, USPTO began relocating its headquarters from Arlington
(Crystal City), Virginia, to Alexandria, Virginia, with the intent of
consolidating all of its major operations in a central facility. The
agency completed this move in July 2005.

20Over the past 2 years, the European Patent Office reported processing
about 160,000 to 170,000 patents per year using ePhoenix.

for electronic patent processing. They stated that, despite knowing about
the problems and risks associated with using the software, the agency had
nonetheless proceeded with this initiative because senior officials,
including the former USPTO director, had stressed their preference for
using ePhoenix in order to expedite the implementation of a system. Patent
and OCIO officials acknowledged that management judgment, rather than a
rigorous analysis of costs, benefits, and alternatives, had driven the
agency's decision to use this system.

To a significant extent, USPTO's difficulty in realizing intended
improvements through its electronic filing system and Image File Wrapper
can be attributed to the fact that the agency took an ad hoc approach to
planning and managing its implementation of these systems, driven in part
by its accelerated schedule for implementing an automated patent
processing capability. The Clinger-Cohen Act of 1996,21 as well as
information technology best practices and our prior reviews, emphasize the
need for agencies to undertake information technology projects based on
well-established business cases that articulate agreed-upon business and
technical requirements; effectively analyze project alternatives, costs,
and benefits; include measures for tracking projects through their life
cycle against cost, schedule, benefit, and performance targets; and
ultimately, provide the basis for credible and informed decision making
and project management. Yet, patent officials did not rely on established
business cases to guide their implementation of these key automation
initiatives.

The absence of sound project planning and management for these initiatives
has left the agency without critical capabilities, such as text
processing, and consequently, has impeded its successful transition to an
integrated and paperless patent processing environment. The Under
Secretary of Commerce for Intellectual Property, who serves as the
director of USPTO, stated at the conclusion of our review that he
recognized and intended to implement measures to address the weaknesses in
the agency's planning and management of its automated patent systems.

2140 U.SC. S:11312.

USPTO Lacks Essential Information Technology Investment Management
Processes to Support Its Patent Automation

USPTO's ineffective planning for and management of its patent automation
projects, in large measure, can be attributed to enterpriselevel, systemic
weaknesses in the agency's information technology investment management
processes. A key requirement of the Clinger-Cohen Act is that agencies
have established processes, such as capital planning and investment
control, to help ensure that information technology projects are
implemented at acceptable costs and within reasonable and expected time
frames, and contribute to tangible, observable improvements in mission
performance. Such processes guide the selection, management, and
evaluation of information technology investments by aiding management in
considering whether to undertake a particular investment in information
systems and providing a means to obtain necessary information regarding
the progress of an investment in terms of cost, capability of the system
to meet specified requirements, timeliness, and quality.

Further, our Enterprise Architecture Framework22 emphasizes that
information technology projects should show evidence of compliance with
the organization's enterprise architecture, which serves as a blueprint
for systematically and completely defining an organization's current
(baseline) operational and technology environment and as a roadmap toward
the desired (target) state. Effective implementation of an enterprise
architecture can facilitate an agency by informing, guiding, and
constraining the decisions being made for the agency, and subsequently
decrease the risk of buying and building systems that are duplicative,
incompatible, and unnecessarily costly to maintain and interface.

At the time of our study, USPTO had begun instituting certain essential
information technology investment management mechanisms, such as a
framework for its enterprise architecture and components of a capital
planning and investment control process. However, it had not yet
established the necessary linkages between its enterprise architecture and
its capital planning and investment control process to ensure that its
automation projects would comply with the architecture or fully instituted
enforcement mechanisms for investment management. For example, USPTO
drafted a capital planning and investment control guide in June 2004 and
issued an agency administrative order on its integrated

22For more information, see GAO, Information Technology: A Framework for
Assessing and Improving Enterprise Architecture Management (Version 1.1),
GAO-03-584G (Washington, D.C.: April 2003).

investment decision practices in February 2005. However, according to
senior officials, many of the processes and procedures in the guide had
not been completed and fully implemented and it was unclear how the agency
administrative order was being applied to investments.

In addition, while the agency had completed the framework for its
enterprise architecture, it had not aligned its business processes and
information technology in accordance with the architecture. According to
OCIO officials, the architecture review board responsible for enforcing
compliance with the architecture was not yet in place; thus, current
architecture reviews were of an advisory nature and were not required for
system implementation. Our analysis of architecture review documents that
system officials provided for the electronic filing system and the Image
File Wrapper confirmed that the agency had not rigorously assessed either
of these systems' compliance with the enterprise architecture. Adding to
these conditions, a study commissioned by the agency in 2004 found that
its Office of Chief Information Officer was not organized to help the
agency accomplish the goals in its automation strategy and that its
investment management processes did not ensure appropriate reviews of
automation initiatives.

USPTO has an explicit responsibility to ensure that the automation
initiatives that it is counting on to enhance its overall patent process
are consistent with the agency's priorities and needs and are supported by
the necessary planning and management to successfully accomplish this. At
the conclusion of our review, the agency's director and its chief
information officer acknowledged the need to strengthen the agency's
investment management processes and practices and to effectively apply
them to USPTO's patent automation initiatives.

Since 2000, USPTO has also taken steps intended to help attract and retain
a qualified patent examination workforce. The agency has enhanced its
recruiting efforts and has used many human capital flexibilities to
attract and retain qualified patent examiners. However, during the past 5
years, its recruiting efforts and use of benefits have not been
consistently sustained, and officials and examiners at all levels in the
agency told us that the economy has more of an impact on their ability to
attract and retain examiners than any actions taken by the agency.
Consequently, how USPTO's actions will affect its long-term ability to
maintain a highly qualified workforce is unclear. While the agency has
been able to meet its hiring goals, attrition has recently increased.

  USPTO Has Taken Steps to Help Attract and Retain a Qualified Patent Examiner
  Workforce, but Long-Term Success Is Uncertain

USPTO's recent recruiting efforts have incorporated several measures that
we and others identified as necessary to attract a qualified workforce.23
First, in 2003, to help select qualified applicants, the agency identified
the knowledge, skills, and abilities that examiners need to effectively
fulfill their responsibilities. Second, in 2004, its permanent recruiting
team, composed of senior and line managers,24 participated in various
recruiting events, such as job fairs, conferences sponsored by
professional societies, and visits to the 10 schools that the agency
targeted based on the diversity of their student population and the
strength of their engineering and science programs.25 Finally, for 2005,
USPTO developed a formal recruiting plan that, among other things,
identified hiring goals for each technology center and described the
agency's efforts to establish ongoing partnerships with the 10 target
schools. In addition, the agency trained its recruiters in effective
interviewing techniques to help them better describe the production system
and incorporated references to the production-oriented work environment in
its recruitment literature.

USPTO has also used many of the human capital benefits available under
federal personnel regulations to attract and retain qualified patent
examiners. Among other benefits, it has offered

o  recruitment bonuses ranging from $600 to over $10,000;

o  	a special pay rate for patent examiners that is 10 percent above
federal salaries for comparable jobs;

o  non-competitive promotion to the full performance level; and

o  	flexible working schedules, including the ability to schedule hours
off during midday.

23See GAO, Human Capital: A Self-Assessment Checklist for Agency Leaders,
GAO/OCG-00-14G, version 1 (Washington, D.C.: September 2000); and Office
of Personnel Management, Human Capital Assessment Accountability
Framework, (Washington, D.C., Sept. 20, 2000).

24USPTO's permanent recruiting team was established in 2002. However, the
agency suspended recruiting efforts in 2002 and 2003 in the face of
budgetary uncertainty.

25The 10 target schools selected were Florida International University,
North Carolina Agricultural and Technical State University, North Carolina
State University, University of Florida, University of Maryland,
University of Pennsylvania, University of Puerto Rico-Mayaguez, University
of Virginia, University of Wisconsin-Madison, and Virginia Polytechnic and
State University.

According to many of the supervisors and examiners who participated in our
focus groups, these benefits were a key reason they were attracted to the
agency and are a reason they continue to stay. The benefits that examiners
most frequently cited as important were the flexible working schedules and
competitive salaries.

However, it is too soon to determine the long-term effect of the agency's
efforts, in part because neither its recruiting efforts nor the human
capital benefits have been consistently sustained due to budgetary
constraints. For example, in 2002 the agency suspended reimbursements to
examiners for law school tuition because of funding limitations, although
it resumed the reimbursements in 2004 when funding became available.
Examiners in our focus groups expressed dissatisfaction with the
inconsistent availability of these benefits, in some cases saying that the
suspension of benefits, such as law school tuition reimbursement, provided
them an incentive to leave the agency. More recently, in March 2005, USPTO
proposed to eliminate or modify other benefits, such as the ability of
examiners to earn credit hours and to set their own work schedules.

Another, and possibly the most important, factor adding to the uncertainty
of USPTO's recruiting efforts is the unknown potential impact of the
economy, which, according to agency officials and examiners, has a greater
effect on recruitment and retention than any actions the agency may take.
Both agency officials and examiners told us that when the economy picks
up, more examiners tend to leave the agency and fewer qualified candidates
are attracted to it. On the other hand, when there is a downturn in the
economy, the agency's ability to attract and retain qualified examiners
increases because of perceived job security and competitive pay. When
discussing their reasons for joining USPTO, many examiners in our focus
groups cited job security and the lack of other employment opportunities,
making comments such as, "I had been laid off from my prior job, and this
was the only job offer I got at the time." This relationship between the
economy and USPTO's hiring and retention success is part of the reason why
the agency has met its hiring goals for the last several years. However,
the agency has recently experienced a rise in attrition rates. In
particular, a high level of attrition among younger, less experienced
examiners could affect its efforts to maintain a highly qualified patent
examination workforce. Attrition of examiners with 3 years or less
experience is a significant loss for the agency because considerable time
and dollar resources are invested to help new examiners become proficient
during their first few years.

  USPTO Faces Long-Standing Human Capital Challenges that Could Undermine Its
  Recruiting and Retention Efforts

While USPTO has undertaken a number of important and necessary actions to
attract and retain qualified patent examiners, it continues to face three
long-standing human capital challenges which, if not addressed, could also
undermine its recent efforts. First, although organizations with effective
human capital models have strategies to communicate with employees and
involve them in decision making, the lack of good communication and
collaboration has been a long-standing problem at USPTO. We found that the
agency does not have a formal communication strategy and does not actively
seek input from examiners on key management decisions. Most of the
emphasis is on enhanced communication among managers but not between
managers and other levels of the organization, such as patent examiners.
Patent examiners and supervisory patent examiners in our focus groups
frequently stated that communication with agency management was poor and
that managers provided them with inadequate or no information, creating an
atmosphere of distrust of management. The examiners also said that
management was out of touch with them and their concerns and that
communication with the managers tended to be one way and hierarchical,
with little opportunity for feedback. Management officials told us that
informal feedback can always be provided by anyone in the organization-for
example, through an e-mail to anyone in management.

The lack of communication between management and examiners is exacerbated
by the contentious working relationship between management and union
officials and by the complexity of the rules about what level of
communication can occur between managers and examiners without involving
the union.26 Some managers alluded to this contentious relationship as one
of the reasons why they had limited communication with patent examiners,
who are represented by the union even if they decide not to join it.
Specifically, they believed they could not solicit the input of employees
directly without engaging the union. Another official, however, told us
that nothing prevents the agency from having "town hall" type meetings to
discuss potential changes in policies and procedures, as long as the
agency does not promise examiners a benefit that impacts their working
conditions. Union officials agreed that USPTO can invite comments from
examiners on a plan or proposal; however, if the proposal concerns a
negotiating issue, the agency must consult the examiners'

26Patent examiners are represented by, but not required to join, the
Patent Office Professional Association (POPA), an independent union of
professional employees formed in 1964.

union, which is their exclusive representative with regard to working
conditions.

Second, human capital models suggest that agencies should periodically
assess their monetary awards systems to ensure that they help attract and
retain qualified staff. However, patent examiners' awards are based
largely on the number of applications they process, and the assumptions on
which application processing quotas are based have not been updated since
1976. Patent examiners and management have differing opinions on whether
these assumptions need to be updated. Examiners in our focus groups told
us that, in the last several decades, the tasks associated with and the
complexity of processing applications have greatly increased while the
time allowed has not. As a result, many of the examiners and supervisory
patent examiners in our focus groups and respondents to previous agency
surveys reported that examiners do not have enough time to conduct
highquality reviews of patent applications. The examiners noted that these
inadequate time frames create a stressful work environment and are cited
in the agency's exit surveys as a primary reason that examiners leave the
agency. In contrast, USPTO managers had a different perspective on the
production model and its impact on examiners. They stated that the time
estimates used in establishing production quotas do not need to be
adjusted because the efficiencies gained through actions such as the
greater use of technology have offset the time needed to address the
greater complexity of the applications and the increase in the number of
claims. Moreover, they said that for an individual examiner, reviews of
applications that take more time than the estimated average are generally
offset by other reviews that take less time.

Finally, counter to current workforce models, USPTO does not require
ongoing technical education for patent examiners, which could negatively
affect the quality of its patent examination workforce. Instead, the
agency requires newly hired examiners to take extensive training only
during their first year of employment; all subsequent required training is
focused on developing legal expertise. Almost all patent examiners are
required to take a range of ongoing training in legal matters, including
patent law. In contrast, patent examiners are not required to undertake
any ongoing training to maintain expertise in their area of technology,
even though the agency acknowledges that such training is important,
especially for electrical and electronic engineers. In 2001 the agency
stated, "Engineers who fail to keep up with the rapid changes in
technology, regardless of degree, risk technological obsolescence."
However, agency officials told us that examiners automatically maintain
currency with their technical fields by just doing their job. Patent
examiners and supervisory patent

  USPTO Has Made Greater Progress on Strategic Plan Initiatives that Enhance the
  Agency's Capability Rather than Productivity and Agility

examiners disagreed, stating that the literature they review in
applications is outdated, particularly in rapidly evolving technologies.
The agency does offer some voluntary in-house training, such as technology
fairs and industry days at which scientists and others are invited to
present lectures to patent examiners that will help keep them current on
the technical aspects of their work. In addition, the agency offers
voluntary external training and, for a small number of examiners, pays
conference or workshop registration fees. Agency officials could provide
no data on the extent to which examiners have taken advantage of such
training opportunities.

In carrying out its strategic plan to become a more productive and
responsive organization, our work found that USPTO has made greater
progress in implementing its initiatives to make the patent organization
more capable by improving the quality of examiners' skills and work
processes than it has in implementing its productivity and agility
initiatives aimed at decreasing the length of time to process a patent
application and improving electronic processing. Specifically, of the
activities planned for completion by December 2004, the agency has fully
or partially implemented all 23 of the initiatives related to its
capability theme to improve the skills of employees, enhance quality
assurance, and alter the patent process through legislative and rule
changes. In contrast, it has partially implemented only 1 of the 4
initiatives related to the productivity theme to restructure fees and
expand examination options for patent applicants and has fully or
partially implemented 7 of the 11 initiatives related to the agility theme
to increase electronic processing of patent applications and to reduce
examiners' responsibilities for literature searches. Table 1 provides our
assessment of each of the strategic plan initiatives.

Table 1: Status of Strategic Plan Initiatives to Improve Workforce Skills

Increase the pool of qualified management candidates by adding awards
to total compensation  o 

Explore alternate organizational structures for the workplace  o

Develop interim pre-employment measures to assess English language skills 
o

Recertify the skills of examiners with authority to issue patents (primary
examiners) through examinations and expanded work product reviews  o 

Certify that examiners possess the requisite knowledge, skills, and
abilities prior to promotion to a position with authority to negotiate on
behalf of USPTO  o 

     Improve the selection and training of supervisory patent examiners  o

Use examinations and other means to ensure that new patent examiners
possess the requisite skills prior to promotion  o 

      Implement a pre-employment test to assess English language skills  o

                   Create an Enterprise Training Division  o

Expand current quality assurance program to include works in progress
(in-process reviews)  o 

Establish "second pair of eyes" reviews in each technology center  o

Survey customer regarding transactions with USPTO on specific applications
to supplement comprehensive customer surveys  o

           Evaluate the quality of examiners' literature searches  o

Enhance the reviewable record for each patent application with additional
information from the applicant and examiner  o 

Delete the requirement for physical surrender of the original patent
papers  o

Certify the legal knowledge of patent attorneys and agents who wish to
practice before USPTO and periodically recertify the skills of practicing
attorneys and agents  o

           Evaluate whether to adopt a unity of invention standard  o

                   Simplify adjustments to the patent term  o

Permit individuals who have been assigned patent rights to sign an oath
declaring that the inventor is the original and first inventor  o 

Permit individuals who have been assigned patent rights to broaden the
claims in an application  o 

Correct an inconsistency regarding unintentionally delayed submission of
certain claims  o 

Eliminate certain exemptions from the requirement to publish most patent
applications within 18 months of when they were first filed  o 

Amend current legislation regarding certain limitations on an inventor's
right to obtain a patent  o 

Restructure fees and provide for refunds  o

Offer patent applicants a choice of up to 5 examination options based in
part on the ability to rely on searches conducted by others  o 

      Offer patent applicants the option of an accelerated examination  o

      Revise postgrant review procedures to allow greater public input  o

Establish an information security program  o

Transition to electronic patent processing  o

Transition to electronic processing for postgrant reviews  o

Ensure availability of critical data in the event of a catastrophic
systems failure  o

Promote international harmonization and pursue goals to strengthen
international intellectual property rights of U.S. inventors  o 

Pursue international agreements to share patent search results  o

Accelerate Patent Cooperation Treaty reforms  o

             Rely on other sources to classify patent documents  o

Rely on other sources to support domestic and international literature
searches  o 

Rely on other sources to transition to a new global patent classification
system  o

       Develop stringent conflict of interest clauses for search firms  o

Source: GAO analysis of USPTO data.

Agency officials primarily cited the need for additional funding as the
main reason that some initiatives have not been implemented. With passage
of the legislation in December 2004 to restructure and increase the fees
available to USPTO, the agency is reevaluating the feasibility of many
initiatives that it had deferred or suspended.

In summary, through its attempts to implement an integrated, paperless
patent process over the past two decades, USPTO has delivered a number of
important automated capabilities. Nonetheless, after spending over a
billion dollars on its efforts, the agency is still not yet effectively
positioned to process patent applications in a fully automated
environment. Moreover, when and how it will actually achieve this
capability is uncertain. Largely as a result of ineffective planning and
management of its automated capabilities, system performance and usability
problems have limited the effectiveness of key systems that the agency has
implemented to support critical patent processes. Although

USPTO's director and its chief information officer have recognized the
need to improve the agency's planning and management of its automation
initiatives, weaknesses in key information technology management processes
needed to guide the agency's investments in patent automation, such as
incomplete capital planning and investment controls, could preclude their
ability to successfully accomplish this. Thus, the agency risks further
implementing information technology that does not support its needs and
that threatens its overall goal of achieving a fully electronic capability
to process its growing patent application workload.

Further, to improve its ability to attract and retain the highly educated
and qualified patent examiners it needs, USPTO has taken steps recognized
by experts as characteristic of highly effective organizations. However,
without an effective communication strategy and a collaborative culture
that includes all layers of the organization, the agency's efforts could
be undermined. The absence of effective communication and collaboration
has created distrust and a significant divide between management and
examiners on important issues such as the appropriateness of the
production model and the need for technical training. Unless the agency
begins to develop an open, transparent, and collaborative work
environment, its efforts to hire and retain examiners may be adversely
affected in the long run. Overall, while USPTO has progressed in
implementing strategic plan initiatives aimed at improving its
organizational capability, the agency attributes its limited
implementation of other initiatives intended to reduce pendency and
improve electronic patent application processing primarily to the need for
additional funding.

Given the weaknesses in USPTO's information technology investment
management processes, we recommended that the agency, before proceeding
with any new patent automation initiatives, (1) reassess and, where
necessary, revise its approach for implementing and achieving effective
use of information systems supporting a fully automated patent process;
(2) establish disciplined processes for planning and managing the
development of patent systems based on well-established business cases;
and (3) fully institute and enforce information technology investment
management processes and practices to ensure that its automation
initiatives support the agency's mission and are aligned with its
enterprise architecture. Further, in light of its need for a more
transparent and collaborative work environment, we recommended that the
agency develop formal strategies to (1) improve communication between
management and patent examiners and between management and union officials
and (2) foster greater collaboration among all levels of the

organization to resolve key issues, such as the assumptions underlying the
quota system and the need for required technical training.

USPTO generally agreed with our findings, conclusions, and recommendations
regarding its patent automation initiatives and acknowledged the need for
improvements in its management processes by, for example, developing
architectural linkages to the planning process and implementing a capital
planning and investment control guide. Nonetheless, the agency stated that
it only partially agreed with several material aspects of our assessment,
including our recommendation that it reassess its approach to automating
its patent process. Further, the agency generally agreed with our
findings, conclusions, and recommendations regarding its workforce
collaboration and suggested that it would develop a communication plan and
labor management strategy, and educate and inform employees about progress
on initiatives, successes, and lessons learned. In addition, USPTO
indicated that it would develop a more formalized technical program for
patent examiners to ensure that their skills are fresh and ready to
address state-of-the-art technology.

  Contacts and Acknowledgments

(360612)

Mr. Chairman, this concludes our statement. We would be pleased to respond
to any questions that you or other Members of the Committee may have at
this time.

For further information, please contact Anu K. Mittal at (202) 512-3841or
Linda D. Koontz at (202) 512-6240. They can also be reached by e-mail at
[email protected] and [email protected], respectively. Other individuals
making significant contributions to this testimony were Valerie C. Melvin,
Assistant Director; Cheryl Williams, Assistant Director; Mary J. Dorsey,
Vijay D'Souza, Nancy Glover, Vondalee R. Hunt, and Alison D. O'Neill.

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