Intellectual Property: Enhancements Needed in Computing and Reporting
Patent Examination Statistics (Letter Report, 07/15/96, GAO/RCED-96-190).

Pursuant to a congressional request, GAO reviewed the Patent and
Trademark Office's (PTO) operations, focusing on: (1) patent pendency;
(2) PTO allocation of resources among its patent and trademark
processes, dissemination of information, and executive direction and
administration; and (3) a comparison of PTO workload and examination
processes with those of other industrialized nations.

GAO found that: (1) PTO computation and reporting of patent pendency is
inadequate; (2) PTO does not provide separate statistics on patents
issued, abandoned applications, or applications still in process in its
pendency calculations; (3) PTO does not report variations in pendency
among individual applications or measure pendency from the original
filing date in accordance with patent law; (4) PTO does not determine
how much of pendency is due to the patent examination process or
applicant delays; (5) applicant delays may constitute as much as 36
percent of the average pendency period; (6) PTO has consistently
committed most of its resources to its patent process, which in fiscal
year (FY) 1995 constituted three-quarters of its funds and staff; (7)
funding and staffing for the trademark process, executive direction and
administration, and information dissemination also increased from FY
1986 through FY 1995; (8) during the same period, the PTO patent
workload increased significantly while average pendency decreased by
about 2.9 months; (9) it is difficult to compare the PTO patent
examination process and pendency with those of Japan and Europe, which
are the other two primary patent-granting entities; (10) Japan and
Europe require an additional request for examination before starting the
examination process, which may delay examination for months or years
after an applicant's initial filing; and (11) Japan and Europe include
applications in-process in their pendency computations.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-96-190
     TITLE:  Intellectual Property: Enhancements Needed in Computing and 
             Reporting Patent Examination Statistics
      DATE:  07/15/96
   SUBJECT:  Patents
             Information processing operations
             Statutory limitation
             Patent law
             Statistical methods
             Statistical data
             Productivity
             Human resources utilization
             Financial management
             Foreign patents
IDENTIFIER:  Europe
             Japan
             
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Cover
================================================================ COVER


Report to the Chairman, Committee on the Judiciary, U.S.  Senate

July 1996

INTELLECTUAL PROPERTY -
ENHANCEMENTS NEEDED IN COMPUTING
AND REPORTING PATENT EXAMINATION
STATISTICS

GAO/RCED-96-190

Intellectual Property

(307741)


Abbreviations
=============================================================== ABBREV

  FTE - full-time equivalent
  GAO - General Accounting Office
  PALM - Patent Application Location and Monitoring (system)
  PTO - Patent and Trademark Office

Letter
=============================================================== LETTER


B-272127

July 15, 1996

The Honorable Orrin G.  Hatch
Chairman, Committee on the Judiciary
United States Senate

Dear Mr.  Chairman: 

On February 26, 1996, you asked us to provide you with information on
issues related to the operations of the Department of Commerce's
Patent and Trademark Office (PTO).  Specifically, you asked that we
(1) analyze patent pendency--the amount of time that PTO spends in
examining an application to determine whether an invention should
receive a patent; (2) compare PTO's resources committed to the patent
process, the trademark process, the dissemination of information, and
executive direction and administration; and (3) compare PTO's
workload and examination processes with those of other industrialized
countries. 

Public Law 103-465, enacted December 8, 1994, changed the term for
most patents granted by the United States from 17 years from the date
of issuance to 20 years from the date of the earliest filing of an
application.  This change, which applies to new applications filed
after June 7, 1995, raised concerns about patent pendency.  Because
an invention generally is not considered marketable until a patent is
issued, the time frame for issuance reduces the effective term of the
patent left to the inventor under the new law.  These new concerns
regarding patent pendency have in turn raised questions regarding how
PTO commits resources to the patent examination process as well as
how patent examinations in the United States compare with those in
other countries. 

The information on patent pendency in this report builds on analyses
that we recently provided for Representative Dana Rohrabacher in a
May 22, 1996, report.\1 Our work on PTO's resources and foreign
patent offices relies on information obtained from PTO, budget
submissions, and comparative statistics published jointly by PTO and
the patent offices in Japan and Europe.  More details on our scope
and methodology are included in appendix I. 


--------------------
\1 Patent Examination Statistics (GAO/RCED-96-152R, May 22, 1996). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The importance of patent pendency has increased over the past year
because of new legislation affecting the term of most patents.  For
several reasons, the old methods of calculating and reporting
pendency will not provide inventors and decisionmakers with the
information that they now need to determine the new law's effect on
the patent term and to evaluate PTO's performance.  First, PTO's
computation does not provide separate pendency statistics for patents
issued, applications abandoned, and applications still under
examination.  Second, PTO reports pendency as one aggregate rate,
which does not reveal the wide variations in pendency among
individual applications because of factors such as the type of
invention under examination.  Third, PTO measures pendency from the
filing date of the most recent application, whereas the patent term
under the new law will be measured from the filing date of the
original application.  Fourth, PTO's computation does not show how
much of the pendency was the result of PTO's examination and how much
was the result of applicant delays. 

PTO has consistently committed most of its resources to the patent
process.  In fiscal year 1995, about three-fourths of PTO's
funding--all of which now is generated by fees--and staff were
devoted to the patent process.  The increases in resources allocated
to the patent process from fiscal year 1986 through fiscal 1995 do
not appear to have come at the expense of PTO's other activities,
because funding and staffing for the trademark process, the agency's
executive direction and administration, and information dissemination
also increased in most years over this period. 

The patent examination processes and methods for computing pendency
in PTO and its counterpart offices in Japan and Europe differ
markedly.  One reason is that PTO considers the examination process
to have begun when the application is filed, while in Japan and
Europe the examination may begin months or even years later.  Also,
Japan and Europe consider applications in-process when computing
pendency, while PTO considers only those applications that resulted
in a patent or were abandoned.  Because of these and other
differences--as well as the absence of comparative
statistics--meaningful process and performance comparisons are
impossible. 


   BACKGROUND
------------------------------------------------------------ Letter :2

A patent is a grant given by a government to an inventor of the right
to exclude others for a limited time from making, using, or selling
his or her invention.  In the United States, the sole granting
authority for patents is PTO.  While other countries throughout the
world have patent offices of their own, the two largest counterparts
to PTO are the patent offices in Japan and Europe. 

Within PTO, the patent application examination process consists of
several progressive phases.  An applicant files a patent application
with PTO, where it is subjected to reviews for accuracy and
completeness during a preexamination phase.  Following
preexamination, the application is assigned, or "docketed," to an
examiner within an examination group that has expertise in a specific
field, such as computer systems or biotechnology. 

At this point, the examiner begins the process of determining whether
the invention is a new and useful process or product that should
receive a patent.  Usually early in the process, the examiner makes a
preliminary decision, or "first action," which may then be followed
by a series of contacts with the applicant to resolve questions
and/or obtain additional information.  Possibly after a number of
actions by the examiner, PTO will decide whether to issue a patent. 
If PTO decides to issue a patent, termed an "allowance," then the
agency informs the applicant and, upon the payment of the necessary
fees, issues a patent.  The application may be abandoned during any
of these stages. 

PTO defines pendency as the period from the date when an application
is filed until the date when a patent is issued or the application is
abandoned.\2 PTO computes average pendency as the total number of
months of examination for all patents issued or applications
abandoned over a particular period, divided by the total number of
applications for that period. 

As reported by PTO, average pendency varied over the period from
fiscal year 1981 through fiscal 1995, peaking at 25.5 months in
fiscal year 1983 and reaching a low point of 18.2 months at the end
of fiscal year 1991.  Since fiscal year 1991, pendency has averaged
at least 19 months in each fiscal year. 

For our May 22, 1996, report, we developed statistics for patents
issued or applications abandoned during fiscal year 1994 as well as
patents still in-process as of October 1, 1994.  We selected fiscal
year 1994 because it was the last full fiscal year prior to the
change in the patent term law and the last full fiscal year for which
complete data were available.  In addition, October 1, 1994, was
chosen because it provided us with the most recent data available for
comparison with data from fiscal year 1994 without including any of
the same applications. 

As a baseline for our analyses, we first computed the overall average
pendency for patents issued and applications abandoned during fiscal
year 1994.  In this regard, we computed an overall average pendency
rate of 20.2 months for fiscal year 1994 instead of the 19 months
reported by PTO.  This variation appears to result from a combination
of three factors.  First, PTO computed pendency on a quarterly basis,
and the 19-month rate reported is the pendency rate for the fourth
quarter of fiscal year 1994.  Second, unlike PTO, we included design
patents.\3 Third, PTO's automated database continued to be updated
between the time when PTO made its computation and when we made ours. 
PTO officials agreed that these factors accounted for the difference
in the computations of pendency for fiscal year 1994.  While the
difference is slight, we nevertheless believe our computation to be
more accurate and complete and used our computed rate of 20.2 months
for subsequent analyses and comparisons. 


--------------------
\2 As used by PTO, an "abandoned" application is any application that
does not result in an issued patent and is eventually taken out of
the examination process by the applicant or by PTO. 

\3 Under P.L.  103-465, the term of a design (configuration, shape,
or surface ornamentation) patent--14 years from the date of
issuance--remains unchanged.  Utility (process, machine, manufacture,
or composition of matter) and plant (asexually propagated) patents
had a term of 17 years from the date of issuance under the old law
and 20 years from the date of the earliest filing under the new law. 
Reissued patents (replacement of defective patents) are for the
unexpired part of the term of the original patent. 


   CURRENT PATENT PENDENCY
   STATISTICS DO NOT PROVIDE
   INFORMATION NEEDED BY THOSE
   OUTSIDE PTO
------------------------------------------------------------ Letter :3

The overall average pendency rate computed and reported by PTO does
not provide inventors and decisionmakers such as the Congress and the
administration with the information they now need to determine the
effect of pendency on the patent term and to evaluate PTO's
performance.  This is because (1) PTO's pendency computation method
considers both issued patents and abandoned applications but does not
consider applications still in-process; (2) pendency can vary widely
for individual applications, depending on the type of invention and
factors such as whether the application is subject to a secrecy
order;\4 (3) pendency is higher when the filing date used is that of
the original, rather than the most recent, application for the
particular invention; and (4) the applicants themselves are partly
responsible for the time taken to examine applications. 


--------------------
\4 Patent applications for inventions that could affect national
security interests can be placed under a secrecy order by PTO if the
applicable federal agency determines that such protection is
necessary. 


      PTO'S CALCULATION OF
      PENDENCY CONSIDERS ABANDONED
      APPLICATIONS BUT NOT
      APPLICATIONS IN-PROCESS
---------------------------------------------------------- Letter :3.1

Pendency is an important factor in any consideration of the patent
examination process because it provides (1) the inventor with an
estimate of how long PTO is likely to take to issue a patent, (2) PTO
with information on how it is managing its workload, and (3)
decisionmakers such as the Congress and the administration with a
method to measure results.  However, we believe that the overall
average pendency reported by PTO does not provide inventors and
decisionmakers with the information they need because it does not
show separate computations for patents issued, applications
abandoned, and applications still in-process. 

Pendency has taken on a new importance to inventors over the past
year because, in most cases, the time taken to examine a patent will
in effect reduce that portion of the 20-year term in which the
invention can be commercialized.  The important measurement is
pendency for issued patents because it reflects the examination time
for the successful applications that have completed the examination
process.  As shown in table II.1 in appendix II, the pendency for the
113,684 patents issued during fiscal year 1994 was 21.3 months, which
is 1.1 months higher than the overall pendency for both issued
patents and abandoned applications. 

Pendency for abandoned applications is also important.  While such
applications may have limited importance to the inventor, they are
important to PTO because they represent a substantial portion of
PTO's overall workload.  As shown in table II.1, 73,949 applications
were abandoned during fiscal year 1994; their average pendency was
18.3 months.  Thus, PTO spends a considerable amount of time
examining or awaiting responses on applications that will not result
in the issuance of a patent. 

Pendency as reported by PTO also excludes applications that have been
filed but not yet issued or abandoned.  At any one time, the number
of applications in-process is greater than the number of patents
issued or applications abandoned during the previous fiscal year.  As
of October 1, 1994, 294,565 applications were still in some phase of
examination; their average age was 16 months.  Of these, 14.8 percent
were more than 2 years old, 5.2 percent were more than 3 years old,
and 2.7 percent were more than 4 years old. 

In responding to the results of our analyses, PTO performed its own
analysis of work in-process as of October 1, 1994.  PTO officials
said that their findings were consistent with ours but that their
analysis went further in explaining some of the reasons for the older
applications.  While we did not verify their statistics, the PTO
officials said that of those applications that were more than 2 years
old, 55 percent had experienced delays because of factors--such as
those created by secrecy orders and applicant appeals--beyond PTO's
control.  Of those applications more than 4 years old, 82 percent
were said to have experienced delays beyond PTO's control. 


      PENDENCY VARIES BY TYPE OF
      INVENTION AND OTHER FACTORS
---------------------------------------------------------- Letter :3.2

Patent applications cover a broad range of inventions.  To determine
whether pendency varies by the type of invention being examined and
other factors, we compared pendency in fiscal year 1994 for
individual examination groups, applications subject to secrecy
orders, and foreign applications.  We found that (1) pendency can
vary significantly among the examination groups, (2) applications
subject to secrecy orders have high pendency themselves but little
effect on overall pendency because of their limited number, and (3)
pendency for applications from foreign residents is only slightly
higher than for all applications. 


         EXAMINATION GROUPS
-------------------------------------------------------- Letter :3.2.1

One of the functions of preexamining an application is to determine
the examination group within PTO to which the application should be
assigned.  Each examination group specializes in a broad type of
application and is divided into "art units" that have greater degrees
of specialization.  We found that the type of invention being
examined can have a significant effect on pendency.  As shown in
table II.2, overall average pendency during fiscal year 1994 was
highest--at 27.6 months--in the Computer Systems group and lowest--at
16.9 months--in the Solar, Heat, Power, and Fluid Engineering Devices
group.  As shown in tables II.3 and II.4, these same two examination
groups also had the highest and lowest pendency rates for issued
patents (29 months for the former compared with 17.8 months for the
latter) and abandoned applications (26 months for the former compared
with 14.1 months for the latter). 

The differences by invention type are even more visible when
comparisons are made among the nearly 200 individual art units. 
Again using the data from fiscal year 1994, for example, we found
that the 550 patents issued or applications abandoned in Art Unit
2307--Data Base and File Management Systems--had an average pendency
of 34.2 months compared with an average pendency of 15.6 months for
the 1,426 patents issued or applications abandoned in Art Unit
2404--Special Receptacles or Packages, Shoes and Shoe Making. 
Comparisons at this level are more difficult, according to PTO
officials, because of the frequent shifts that PTO makes in the scope
of inventions covered by individual art units and because the number
of applications can vary so widely among the units.  Nevertheless,
PTO officials agree that pendency varies widely among the art units. 


         SECRECY ORDERS
-------------------------------------------------------- Letter :3.2.2

Patent applications subject to secrecy orders are assigned to a
separate examination group.  PTO will not issue a patent or permit an
abandonment on an application while it is subject to a secrecy order;
thus, such applications technically remain under examination until
the secrecy order is lifted.  As shown in table II.5, applications
subject to secrecy orders have a higher pendency but have little
effect on overall pendency because they are relatively few in number. 

Only 464 patents issued or applications abandoned during fiscal year
1994 had at one time been subject to secrecy orders.  Pendency for
these was higher than the norm, averaging 62.9 months in total, 67.5
months for issued patents, and 51.6 months for abandoned
applications.  However, such applications raised overall pendency for
fiscal year 1994 by only 0.1 month.  As of October 1, 1994, PTO had
3,653 applications still in-process that were or at one time had been
subject to secrecy orders.  The pendency for these applications
ranged from 2.2 to 189.3 months and averaged 86.2 months. 


         FOREIGN APPLICATIONS
-------------------------------------------------------- Letter :3.2.3

PTO considers a patent application to have originated in a foreign
country if the first applicant named in the application is a foreign
resident.  As shown in table II.6, we compared the average pendency
for foreign applicants with pendency for all patents issued or
applications abandoned during fiscal year 1994. 

Overall, the average pendency for foreign applications--which
accounted for 36.8 percent of all patents issued or applications
abandoned--was 20.9 months, compared with 20.2 months for all
applications.  Foreign patents that were issued had a pendency of
21.9 months, compared with 21.3 months for all patents issued. 
Foreign applications that were abandoned had a pendency of 19.2
months, compared with 18.3 months for all applications abandoned. 


      PENDENCY WOULD HAVE BEEN
      GREATER IF ORIGINAL FILING
      DATE HAD BEEN USED
---------------------------------------------------------- Letter :3.3

According to PTO officials, a patent application may spawn other
applications during the examination period.  This can be done through
a "division," whereby the application is split after PTO determines
that it contains more than one invention, or through a
"continuation," whereby the applicant has chosen to continue
prosecution of the same invention described and claimed in the
original application.  The new, or current, application is referred
to by PTO as the "child," and the earlier application is referred to
as the "parent." Several generations of applications are possible
from one invention. 

PTO officials also told us that in calculating pendency, PTO uses the
date when each new application is filed.  This practice is consistent
with PTO's primary use of the pendency statistics as internal
workload measurement tools.  Also, the filing date for measuring
pendency was of less importance under the old law, since a patent
term did not begin until the patent was issued. 

Under the new law, the patent will be effective when issued, but the
term for most patents will be measured from the earliest filing date
relating to the particular invention.  This change will affect only
those utility and plant applications filed after June 7, 1995. 
However, to determine what pendency would have been if the
application filing date for the parent had been used, we recalculated
overall pendency for both the patents issued and applications
abandoned during fiscal year 1994 and applications in-process as of
October 1, 1994.  As shown in table II.7, 49,686,\5 or 26.5 percent,
of the patents issued or applications abandoned during fiscal year
1994 had a parent application.  Using the application date of the
parent instead of the current application date, we found that average
pendency would have been 28 months instead of 20.2 months overall, 28
months instead of 21.3 months for issued patents, and 28.1 months
instead of 18.3 months for abandoned applications. 

As of October 1, 1994, 87,437, or 29.7 percent, of the applications
still in-process had parent applications.  Using the filing date for
the parent rather than the filing date for the current application
would raise the average pendency for all applications still
in-process from 16 months to 25 months. 

If only those patents and applications that had a parent were
considered, the difference in pendency is even more pronounced.  As
also shown in table II.7, the 49,686 patents issued and applications
abandoned during fiscal year 1994 that were the children of earlier
applications had an average pendency of 17.9 months if the current
application filing date were used and 47.7 months if the application
filing date for the parent were used.  If the parent application
filing date were used instead of the current application filing date,
the average pendency would have been 46.9 months instead of 19.4
months for issued patents and 48.5 months instead of 16.1 months for
abandoned applications.  Likewise, those applications still under
examination as of October 1, 1994, would have had an average pendency
of 45 months rather than 14.6 months. 


--------------------
\5 This includes design patents. 


      APPLICANTS THEMSELVES
      CONTRIBUTE TO PENDENCY
---------------------------------------------------------- Letter :3.4

In many cases, PTO cannot complete the examination until the
applicant has taken some further action.  For example, (1) the
applicant may have filed an incomplete application that must be
corrected before it can be assigned to an examination group, (2) the
applicant may need to answer questions raised by the examiner or
provide PTO with additional information, or (3) PTO may have to wait
for the payment of a fee before it can proceed with the examination
process. 

We could not determine precisely how much pendency is attributable
overall to the applicant, since PTO's automated system does not
retain information on each contact with the applicant.  However, we
did calculate the elapsed time between certain applicants' responses
to official actions by PTO, using data that PTO maintains on such
responses and includes in its own automated reports. 

During PTO's examination, the examiner makes a preliminary decision
on the merits of the application as filed.  At such time, the
examiner may ask the applicant to respond to questions or provide the
examiner with information.  This process may occur a number of times. 
For patents issued or applications abandoned during fiscal year 1994,
we compared the dates between PTO's actions and the applicants'
responses for the first three such responses recorded on the subject
applications. 

Of the 187,633 patents issued and applications abandoned during
fiscal year 1994, the applicants had provided examiners with
responses at least once for 125,949 applications, at least twice for
36,887 applications, and at least thrice for 7,955 applications.  As
shown in table II.8, the need for applicants' responses added to the
time that applications were pending.  The filers' response time added
3.6 months to the overall average pendency, 3.7 months to the average
pendency for issued patents, and 3.4 months to the average pendency
for abandoned applications.  Thus, the average pendency without these
response times would have been 16.6 months instead of 20.2 months
overall, 17.6 months instead of 21.3 months for issued patents, and
14.9 months instead of 18.3 months for abandoned applications. 

PTO officials said that the portion of pendency attributable to the
applicant actually is much higher than the average response times
that we computed because the applicant can create delays at other
times throughout the examination process.  Subsequent to our
analyses, PTO performed its own analysis of the fiscal year 1994
database and identified an additional average of 3.8 months due to
applicant delays.  While we did not verify the accuracy of PTO's
computations, we note that adding the additional 3.8 months from
PTO's analysis to the 3.6 months that we computed for applicants'
responses alone would result in about 7.4 months, or 36.6 percent, of
the 20.2-month average pendency for fiscal year 1994 being
attributable to the applicants themselves. 


   PTO ALLOCATES MOST RESOURCES TO
   THE PATENT PROCESS
------------------------------------------------------------ Letter :4

PTO's resources are committed to four broad functions--examining
patent applications, examining trademark applications,\6
disseminating information,\7 and providing overall direction and
administration for the agency.  In fiscal year 1995, PTO committed
about three-fourths of its funding and staff to the patent process. 

PTO's annual obligations\8 have increased steadily in recent years. 
In the 10-year period from fiscal year 1986 through fiscal 1995,
PTO's annual obligations increased from about $212 million to $589
million, an average annual increase of nearly 20 percent.  Table
III.1 in appendix III subdivides these obligations by amounts
allocated to the patent process, the trademark process, executive
direction and administration, and information dissemination. 

While the patent process consistently accounted for the majority of
the obligations, spending for the other three functions also
increased over the 10-year period.  The patent process accounted for
56.6 to 75.4 percent of the obligations in individual years, while
the range was 5.4 to 8.5 percent for the trademark process, 6.4 to
20.2 percent for executive direction and administration, and 9.9 to
18.5 percent for information dissemination. 

To illustrate another measure of the commitment of resources to the
patent process, we compared staffing levels in the four functions. 
Table III.2 compares the full-time equivalent (FTE) staff assigned to
the patent process, the trademark process, executive direction and
administration, and information dissemination over the same 10-year
period.  As with obligations, the majority of PTO staff was committed
to the patent process; the percentage ranged from 58 to 75.1 percent
of total staffing in individual years.  During these same years, the
trademark process accounted for 6.8 to 9.7 percent of total staff,
executive direction and administration for 7.1 to 15.4 percent, and
information dissemination for 8.0 to 22.4 percent. 

According to PTO officials, precise comparisons among the functions
for different years is difficult, because of changes PTO has made in
how it allocates obligations and staff among major functions.  In
fiscal year 1990, for example, PTO began including all obligations
for facilities under executive direction and administration;
previously, the obligations had been allocated among the four
functions.  Conversely, in fiscal year 1991, PTO began allocating
obligations for automation among the four functions; previously,
these obligations had been assigned to executive direction and
administration.  In fiscal years 1992, 1994, and 1995, PTO underwent
significant reorganizations and transfers of both obligations and FTE
staff among functions. 

To compare resource commitments in the patent process with changes in
patent pendency, we compared statistics on four patent workload
indicators--the number of applications, number of patents issued,
number of patents pending prior to PTO's decision to issue a patent
(termed an "allowance"), and average pendency in months for the same
10-year period as above.  As shown in table III.3, PTO's workload
increased significantly from fiscal year 1986 through fiscal 1995;
applications increased in each year, and patents pending prior to
allowance increased in 8 of the 10 years.  The largest increases in
each of these categories were during fiscal year 1995 and, according
to PTO officials, resulted from the flood of applications filed
immediately prior to the new patent term for applications filed after
June 7, 1995. 

The number of patents issued annually generally increased over the
10-year period, even though there was a wide variation in individual
years.  A lesser fluctuation occurred in the reported pendency rate,
which varied from 18.2 to 22 months over the period.  Overall, PTO's
published reports indicate that the agency reduced pendency by 2.9
months from fiscal year 1986 through fiscal 1995. 


--------------------
\6 As it does under the patent process, PTO examines trademark
applications seeking federal registration and protection for words,
symbols, or devices used in commerce. 

\7 This includes application services, customer services, publication
and dissemination, and data and document retrieval. 

\8 Since fiscal year 1991, PTO has been essentially funded by fees
generated by the sales of its products and services, according to PTO
officials. 


   PATENT EXAMINATION PROCESSES
   DIFFER BETWEEN PTO, JAPAN, AND
   EUROPE
------------------------------------------------------------ Letter :5

The three primary granting authorities for patents in the world are
PTO, the Japanese Patent Office, and the European Patent Office
formed by the Contracting States of the European Patent Convention. 
The only statistics on foreign patent offices that we have obtained
are those included in the Trilateral Statistical Report,\9 which is
an annual compilation of unverified statistics made available by PTO,
the Japanese Patent Office, the European Patent Office, and the World
Intellectual Property Organization in Geneva, Switzerland.  As shown
in the most recent report and in table IV.1 in appendix IV, the
patent offices in the United States, Japan, and Europe had granted
3.1 million, or 80.5 percent, of the 3.9 million patents in force
around the world at the end of calendar year 1993. 

PTO, the Japanese Patent Office, and the European Patent Office have
similar objectives in examining patent applications.  Each of the
three offices will examine a filed patent application on the basis of
inventive novelty and industrial applicability.  Figure IV.1 compares
patent examination processes in each of the three offices. 

While PTO, Europe, and Japan have similar procedures for examining
and granting patents, there are important differences as shown below: 

  -- PTO's examination process is unified--the filing of an
     application is considered to be a request for substantive
     examination as well as a request for a search for inventive
     novelty.  Thus, examination commences on the date when the
     patent is filed and continues until the patent is issued or the
     application is abandoned. 

  -- The examination process in the Japanese Patent Office is also
     unified.  An examination consists of both a search for novelty
     and a substantive examination for industrial applicability. 
     Unlike PTO, however, an application in the Japanese Patent
     Office is not considered a request for examination.  Rather, the
     applicant must make a separate request for examination, which
     may come at any time up to 7 years after the application is
     filed.  If a request for examination is not made within the
     7-year period, the application is considered withdrawn. 

  -- In the European Patent Office, examination is a two-phase
     process.  A filing with the European Patent Office is taken to
     imply a request for a search to determine whether the invention
     is new compared with the state of the art.  If an applicant then
     desires a substantive examination for industrial applicability,
     the applicant must file a separate request not more than 6
     months after the publication of the search.  If a request for
     examination is not made within the 6-month period, the
     application is considered withdrawn. 

Table IV.2 shows 1992-94 examination pendency statistics reported by
PTO, the Japanese Patent Office, and the European Patent Office. 
While these statistics appear to indicate that pendency is lower in
PTO than in either the Japanese or European offices, actual
comparisons cannot be made because of differences in both examination
procedures and pendency calculations. 

The differences in the procedures followed by the three patent
offices create differences in what is being measured in the pendency
statistics.  The Japanese Patent Office, for example, had 2.13
million applications in 1994 awaiting a request for examination. 
This was more than five times the 397,322 applications actually under
examination.  During the same year, the European Patent Office had
44,300 applications undergoing searches and 12,600 applications
awaiting a request for examination in addition to the 126,700
applications actually undergoing examination.  Under PTO's
procedures, all of the applications filed in the other two offices
would have been considered under examination. 

The three offices also differ in the way they compute pendency. 
Under PTO's procedure, pendency is the average number of months from
the filing of the application to either the issuance of a patent or
the abandonment of the application and does not include applications
still under examination.  In both the Japanese Patent Office and the
European Patent Office, examination pendency is determined by
dividing the number of pending applications in examination at the end
of the reporting year by the number of disposals (decision to grant,
withdraw, refuse, abandon, or convert) during the reporting year and
multiplying by 12.  These different computation methods would yield
fundamentally different results between the patent offices in the
United States, Japan, and Europe.  Consequently, caution should be
exercised in comparing workloads and pendency between these offices. 

Another difference in the computations is the filing date used for
individual applications.  As discussed earlier, an application
submitted to PTO ultimately may spawn one or more "child"
applications.  In determining pendency, each of these applications is
considered separately; the filing date of the child is considered
rather than that of the parent application.  PTO officials told us
that while the Japanese Patent Office and the European Patent Office
have provisions for divisions, they do not have continuation
applications as does PTO. 


--------------------
\9 Most of the statistics in this report are for utility patents
only. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Given the current law, which starts the term of most patents when the
original application for an invention is filed, patent pendency is
likely to become a more important concern to those outside PTO in the
future.  In this regard, pendency statistics would be more useful to
inventors and decisionmakers if pendency were differentiated in terms
of issued patents, abandoned applications, and applications
in-process.  Statistics on patents by examination group would also be
more useful to inventors in particular fields.  Computing pendency
statistics from the original as well as the most recent application
filing dates would be consistent with the change in the law and would
provide for a better estimate of how much of the patent term is
likely to be devoted to examination.  In addition, modifying the
automated system to allow accumulation and reporting of pendency time
attributable to the filer would enhance PTO's future efforts to
reduce or manage pendency. 

PTO's funding and staffing have increased in recent years, and PTO
has consistently committed the majority of these resources to the
patent process.  In fiscal year 1995, the patent process accounted
for about three-fourths of both funding and staffing. 

Finally, despite similarities, there are fundamental differences in
the procedures for examining patent applications in the United
States, Japan, and Europe.  Also, there appear to be differences in
the methods for computing and reporting pendency.  For these reasons,
caution should be exercised in comparing workloads and pendency
between these offices. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

To improve the information on patent pendency for use by applicants,
PTO, and decisionmakers, we recommend that the Secretary of Commerce
direct the Assistant Secretary of Commerce and Commissioner of
Patents and Trademarks to compute and report patent pendency
statistics that will separately identify issued patents, abandoned
applications, and applications still under examination.  These
statistics should (1) be further divided by examination group, (2)
allow for comparisons of pendency using both the original and most
recent application filing dates, and (3) separate the examination
time attributable to both PTO and the applicant. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

We transmitted a draft of this report to the Department of Commerce
for its review and comment.  Generally, the Department agreed that
more meaningful pendency statistics are needed but did not agree that
the current methods for measuring and reporting pendency should be
used as a baseline. 

In commenting on our recommendations, the Department believed that
more was needed than just an expansion of the pendency statistics now
in use.  It said that by fiscal year 2003, PTO's goal is to complete
the examination of each new patent application within 12
months--discounting waiting time caused by the applicant.  Therefore,
the Department believes that PTO's reported statistics will need to
reflect the average examination time per invention and the percentage
of patent applications that have attained the 12-month goal.  The
Department said that until these new procedures can be implemented,
PTO will continue to report pendency as it had in the past. 

We agree with PTO's identified need to track and report pendency when
its new examination policy is put into effect.  However, because this
new policy (1) may not be in effect for several years and (2) is
dependent on a redesign of PTO's monitoring and tracking systems, PTO
needs to begin reporting pendency statistics in the interim as we
recommended.  Also, our recommendations should be considered in
planning and implementing any new pendency reporting system. 

The Department also provided us with some clarifying information on
its views concerning the effect of pendency on the patent term,
pendency reporting by art units, and use of the original application
filing date to compute pendency.  The full text of the Department's
written comments and our evaluation appear in appendix V. 


---------------------------------------------------------- Letter :8.1

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 3 days after the date of this
letter.  At that time, we will send copies to the appropriate House
and Senate committees, interested Members of Congress; the Secretary
of Commerce; the Assistant Secretary of Commerce and Commissioner of
Patents and Trademarks; the Director, Office of Management and
Budget; and other interested parties.  We will make copies available
to others upon request. 

This report was prepared under the direction of Allen Li, Associate
Director of Energy, Resources, and Science Issues, who may be reached
at (202) 512-3600 if you or your staff have questions.  Major
contributors to this report are listed in appendix VI. 

Sincerely yours,

Victor S.  Rezendes
Director, Energy, Resources,
 and Science Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

On February 26, 1996, the Chairman, Senate Committee on the
Judiciary, requested that we provide him with information on a number
of intellectual property issues affecting the Patent and Trademark
Office (PTO) and the Copyright Office.  In discussions with the
Committee's staff, we agreed to provide the Chairman with a report
covering only those issues affecting PTO.  These issues include an
analysis of patent pendency; a comparative summary of recent resource
allocations within PTO, particularly in regard to the patent process;
and a comparison of patent examination processes and pendency between
PTO and the patent offices in Japan and Europe.  The information
requested on the Copyright Office was included in our testimony
before the Joint Committee on the Library of Congress on May 7, 1996. 
We provided the Committee with a copy of our testimony, entitled
Library of Congress:  Opportunities to Improve General and Financial
Management (GAO/T-GGD/AIMD-96-115) and related documents. 

To provide the Chairman with the information on patent pendency, we
built on the information we recently included in a report to
Representative Dana Rohrabacher entitled Patent Examination
Statistics (GAO/RCED-96-152R, May 22, 1996).  In our analysis, we
relied on data reported through PTO's automated Patent Application
Location and Monitoring (PALM) system to develop statistics on patent
pendency.  This system contains background information on each patent
application, as well as a "prosecution history" that shows the date
when key actions were taken on each application during examination. 
To determine pendency, we first analyzed the periodic reports that
PTO produces from the PALM system.  While these reports were useful
in learning how the examination process works and what data were
available from the automated system, they did not allow us to compare
pendency over a full fiscal year for the individual categories of
issued patents, abandoned applications, and applications still
in-process. 

For this reason, we performed our own analysis of the automated data. 
We asked PTO to provide us with certain background information and
prosecution histories from the PALM system for (1) all patents issued
and applications abandoned during fiscal year 1994 and (2) all
applications that had been filed but neither issued nor abandoned as
of October 1, 1994.  We chose fiscal year 1994 because it was the
last fiscal year for which complete data were available at the time
of our request in October 1995 and because it was the last full year
under the old patent term law.  We chose October 1, 1994, because it
would give us a "snapshot" of pendency at one particular point and
because it was the first day after the end of fiscal year 1994. 
While the data for our two analyses would be in close proximity,
there would be no overlapping files from the automated system. 

We designed our own automated program for analyzing PTO's data.  In
this regard, we obtained the file layouts for one of PTO's own
automated reports (PALM 3515) and held discussions with PTO officials
familiar with the PALM system to ensure that we were using the same
data fields to extract information by examination phases, examination
groups, types of applications, secrecy orders, foreign applications,
et cetera.  We then extracted data and computed the number of
applications, the average pendency, and the pendency range for the
various subsets of information shown in the tables in appendix II of
this report. 

Our analyses of pendency are based on PTO's own data.  We did not
independently verify or validate the PALM system or the data we
extracted from the system.  We did, however, discuss with officials
in PTO's Search and Information Resources Administration office the
layout of the PALM system, the manner by which information is added
to the system, and our plans for extracting, collating, and analyzing
the data we obtained from the system.  We also discussed the results
of our analysis of pendency with officials in PTO's Assistant
Commissioner for Patents office, Comptroller office, and Office of
the Chief Information Officer.  Where possible, we compared aggregate
data with data produced by PTO in other reports and discussed with
PTO officials the potential reasons for any discrepancies. 

In limited cases, the application files that we obtained from the
automated system did not include usable information in particular
fields.  In those cases, we deleted the particular application from
the computation we were making using such data fields.  Thus, the
tables in appendix II may show different numbers of applications for
different subsets of data within the same table. 

For the information on PTO's resource allocations, we obtained
information from PTO's budget submissions and related documents for
fiscal years 1986 through 1995.  We supplemented these with
discussions with PTO officials.  We did not independently verify the
statistics. 

For the information comparing PTO with its counterpart patent offices
in Japan and Europe, we used the Trilateral Statistical Reports
published as a joint effort by the three agencies for calendar years
1993 and 1994.  We supplemented these with discussions with PTO
officials and attorneys specializing in international patent issues. 
We did not independently verify the information obtained. 

We conducted our review from February 1996 through June 1996 in
accordance with generally accepted government auditing standards. 


STATISTICS ON PATENT PENDENCY
========================================================== Appendix II



                               Table II.1
                
                 Patent Pendency for Patents Issued or
                  Applications Abandoned During Fiscal
                Year 1994 and Applications In-Process as
                           of October 1, 1994

                                         Number of    Average pendency
Applications                          applications           in months
------------------------------  ------------------  ------------------
Fiscal year 1994
Issued                                     113,684                21.3
Abandoned                                   73,949                18.3
======================================================================
Total                                      187,633                20.2
In-process, Oct. 1, 1994                   294,565                16.0
----------------------------------------------------------------------
Source:  Patent Application Location and Monitoring system, PTO;
GAO's computations. 



                                    Table II.2
                     
                     Patent Pendency by Examination Group for
                     Patents Issued or Applications Abandoned
                             During Fiscal Year 1994



Gro                          Number of
up   Description          applications       Average           Low          High
---  -------------------  ------------  ------------  ------------  ------------
110  General,                   13,477          19.7           0.1         151.8
 0    metallurgical,
      inorganic,
      petroleum and
      electrical
      chemistry and
      engineering
120  Organic chemistry           9,253          18.8           0.8         177.2
 0    drug, etc.
130  Specialized                 8,239          19.3           0.6         128.6
 0    chemical
      industries, etc.
150  High polymer               15,550          20.2           0.1         101.8
 0    chemistry,
      plastics, coating,
      photography, etc.
180  Biotechnology              13,094          21.5           0.1         164.0
 0
210  Industrial                 10,374          20.5           0.1         152.8
 0    electronics,
      physics, etc.
220  Special laws                4,220          24.7           0.8         185.8
 0    administration
230  Computer systems,           9,181          27.6           1.9         134.0
 0    etc.
240  Packages, cleaning,        10,507          17.2           0.2         103.9
 0    textiles, and
      geometrical
      instruments
250  Electronic/optical         14,493          20.6           0.1         140.1
 0    systems, etc.
260  Communications,            13,371          22.7           0.1         308.5
 0    measuring, testing
      and lamp/
      discharge group
290  Special designs            17,036          23.0           1.1         126.2
 0
310  Handling and                8,501          17.8           2.1         103.9
 0    transporting media
320  Material shaping,           8,646          17.0           0.9         115.7
 0    tools, etc.
330  Medical technology,        12,056          18.2           0.1         137.7
 0    sporting goods,
      etc.
340  Solar, heat, power          8,424          16.9           1.9          97.2
 0    and fluid
      engineering
      devices
350  Construction,               9,764          18.4           1.5         128.2
 0    petroleum and
      mining engineering
     Not determined              1,447           N/A           N/A           N/A
Tot                            187,633          20.2           0.1         308.5
 al
--------------------------------------------------------------------------------
Source:  Patent Application Location and Monitoring system, PTO;
GAO's computations. 



                                    Table II.3
                     
                     Patent Pendency by Examination Group for
                      Patents Issued During Fiscal Year 1994



Gro                          Number of
up   Description          applications       Average           Low          High
---  -------------------  ------------  ------------  ------------  ------------
110  General,                    8,346          20.7           5.1         151.8
 0    metallurgical,
      inorganic,
      petroleum and
      electrical
      chemistry and
      engineering
120  Organic chemistry           5,234          20.0           4.9         145.3
 0    drug, etc.
130  Specialized                 4,698          20.3           5.0         128.6
 0    chemical
      industries, etc.
150  High polymer                8,360          21.4           4.5         101.8
 0    chemistry,
      plastics, coating,
      photography, etc.
180  Biotechnology               4,209          25.0           5.0         164.0
 0
210  Industrial                  7,093          21.4           4.8         152.8
 0    electronics,
      physics, etc.
220  Special laws                2,964          25.8           5.3         185.8
 0    administration
230  Computer systems,           4,960          29.0           4.9          95.7
 0    etc.
240  Packages, cleaning,         6,364          18.9           5.3         103.9
 0    textiles, and
      geometrical
      instruments
250  Electronic/optical          9,819          21.4           5.1         139.1
 0    systems, etc.
260  Communications,             7,932          24.4           6.0         308.5
 0    measuring, testing
      and lamp/
      discharge group
290  Special designs            11,142          23.2           5.2         126.2
 0
310  Handling and                5,940          19.0           5.6          95.5
 0    transporting media
320  Material shaping,           6,106          18.0           5.6         115.7
 0    tools, etc.
330  Medical technology,         7,273          19.9           5.4         112.9
 0    sporting goods,
      etc.
340  Solar, heat, power          6,447          17.8           4.8          93.0
 0    and fluid
      engineering
      devices
350  Construction,               6,792          19.6           5.0          93.7
 0    petroleum and
      mining engineering
     Not determined                  5           N/A           N/A           N/A
Tot                            113,684          21.3           4.5         308.5
 al
--------------------------------------------------------------------------------
Source:  Patent Application Location and Monitoring system, PTO;
GAO's computations. 



                                    Table II.4
                     
                     Patent Pendency by Examination Group for
                       Applications Abandoned During Fiscal
                                    Year 1994



Gro                          Number of
up   Description          applications       Average           Low          High
---  -------------------  ------------  ------------  ------------  ------------
110  General,                    5,131          18.2           0.1         128.3
 0    metallurgical,
      inorganic,
      petroleum and
      electrical
      chemistry and
      engineering
120  Organic chemistry           4,019          17.2           0.8         177.2
 0    drug, etc.
130  Specialized                 3,541          18.0           0.6          86.0
 0    chemical
      industries, etc.
150  High polymer                7,190          18.8           0.1          96.1
 0    chemistry,
      plastics, coating,
      photography, etc.
180  Biotechnology               8,885          19.9           0.1         159.5
 0
210  Industrial                  3,281          18.6           0.1         112.2
 0    electronics,
      physics, etc.
220  Special laws                1,256          22.3           0.8         183.3
 0    administration
230  Computer systems,           4,221          26.0           1.9         134.0
 0    etc.
240  Packages, cleaning,         4,143          14.7           0.2          91.8
 0    textiles, and
      geometrical
      instruments
250  Electronic/optical          4,674          18.9           0.1         140.1
 0    systems, etc.
260  Communications,             5,439          20.2           0.1          99.2
 0    measuring, testing
      and lamp/
      discharge group
290  Special designs             5,894          22.5           1.1         100.1
 0
310  Handling and                2,561          15.1           2.1         103.9
 0    transporting media
320  Material shaping,           2,540          14.6           0.9         111.2
 0    tools, etc.
330  Medical technology,         4,783          15.6           0.1         137.7
 0    sporting goods,
      etc.
340  Solar, heat, power          1,977          14.1           1.9          97.2
 0    and fluid
      engineering
      devices
350  Construction,               2,972          15.4           1.5         128.2
 0    petroleum and
      mining engineering
     Not determined              1,442           N/A           N/A           N/A
Tot                             73,949          18.3           0.1         183.3
 al
--------------------------------------------------------------------------------
Source:  Patent Application Location and Monitoring system, PTO;
GAO's computations. 



                                    Table II.5
                     
                     Patent Pendency for Applications at One
                     Time Subject to Secrecy Orders--Patents
                     Issued and Applications Abandoned During
                      Fiscal Year 1994 and Applications In-
                          Process as of October 1, 1994



App
lic                  Average                   Average                   Average
ati              pendency in               pendency in               pendency in
ons     Number        months      Number        months      Number        months
---  ---------  ------------  ----------  ------------  ----------  ------------
Fis
 cal
 ye
 ar
 19
 94
Iss        330          67.5     113,354          21.2     113,684          21.3
 ued
Aba        134          51.6      78,815          18.3      73,949          18.3
 nd
 on
 ed
================================================================================
Tot        464          62.9     187,169          20.1     187,633          20.2
 al
In-      3,653          86.2     290,912          15.1     294,565          16.0
 pr
 oc
 es
 s,
 Oc
 t.
 1,
 19
 94
 \a
--------------------------------------------------------------------------------
Source:  Patent Application Location and Monitoring system, PTO;
GAO's computations. 



                                    Table II.6
                     
                       Patent Pendency for Foreign Patents
                     Issued and Applications Abandoned During
                                 Fiscal Year 1994



App
lic                  Average                   Average                   Average
ati              pendency in               pendency in               pendency in
ons     Number        months      Number        months      Number        months
---  ---------  ------------  ----------  ------------  ----------  ------------
Fis
 cal
 ye
 ar
 19
 94
Iss     42,774          21.9      70,910          21.0     113,684          21.3
 ued
Aba     26,188          19.2      47,761          17.8      73,949          18.3
 nd
 on
 ed
================================================================================
Tot     68,962          20.9     118,671          19.7     187,633          20.2
 al
--------------------------------------------------------------------------------
Source:  Patent Application Location and Monitoring system, PTO;
GAO's computations. 



                               Table II.7
                
                Comparison of Pendency Using Current and
                 Original Application Filing Dates for
                Patents Issued or Applications Abandoned
                During Fiscal Year 1994 and Applications
                    In-Process as of October 1, 1994


                                            Number
                                                of   Current  Original
                                          applicat    filing    filing
Applications                                  ions      date    date\a
----------------------------------------  --------  --------  --------
Fiscal year 1994 applications
Issued                                     113,684      21.3      28.0
Abandoned                                   73,949      18.3      28.1
======================================================================
Total                                      187,633      20.2      28.0
In-process, Oct. 1, 1994                   294,565      16.0      25.0

Fiscal year 1994 applications that had
 parent applications
Issued                                      27,526      19.4      46.9
Abandoned                                   22,160      16.1      48.5
======================================================================
Total                                       49,686      17.9      47.7
In-process, Oct. 1, 1994                    87,437      14.6      45.0
----------------------------------------------------------------------
\a Original parent application filing date if application had a
parent; current application filing date if there was no parent. 

Source:  Patent Application Location and Monitoring system, PTO;
GAO's computations. 



                               Table II.8
                
                    Patent Pendency Attributable to
                 Applicants' Response Time for Patents
                Issued or Applications Abandoned During
                            Fiscal Year 1994


                           Applicants'
Applications                 responses           Other           Total
----------------------  --------------  --------------  --------------
Fiscal year 1994
Issued                             3.7            17.6            21.3
Abandoned                          3.4            14.9            18.3
======================================================================
Total                              3.6            16.6            20.2
----------------------------------------------------------------------
Source:  Patent Application Location and Monitoring system, PTO;
GAO's computations. 


STATISTICS ON PTO'S RESOURCE
ALLOCATIONS
========================================================= Appendix III



                                   Table III.1
                     
                       PTO's Obligations by Major Activity,
                               Fiscal Years 1986-95

                              (Dollars in millions)


Fisca
l              Percen          Percen          Percen          Percen      Total
year   Amount       t  Amount       t  Amount       t  Amount       t     amount
-----  ------  ------  ------  ------  ------  ------  ------  ------  ---------
1986   $132.0    62.3   $12.5     5.9  $ 28.2    13.3   $39.2    18.5    $ 211.9
1987    154.5    63.3    13.1     5.4    34.4    14.1    42.1    17.3      244.1
1988    177.3    64.2    16.8     6.1    37.1    13.4    44.9    16.3      276.1
1989    189.6    61.7    22.9     7.5    42.2    13.7    52.5    17.1      307.2
1990    185.4    56.6    23.8     7.3  66.0\a    20.2    52.3    16.0      327.5
1991    208.5    58.2    30.5     8.5  72.2\b    20.2    46.9    13.1      358.1
1992\   249.9    59.2    31.9     7.6    76.1    18.0    64.5    15.3      422.4
 c
1993    284.9    60.5    32.6     6.9    78.9    16.8    74.6    15.8      471.0
1994\   340.0    64.0    35.7     6.7    91.1    17.2    64.1    12.1      530.9
 c
1995\   444.4    75.4    48.9     8.3    37.8     6.4    58.1     9.9      589.2
 c
--------------------------------------------------------------------------------
\a Beginning in fiscal year 1990, PTO included obligations for
facilities under executive direction and administration, according to
PTO officials.  In prior years, PTO allocated these obligations among
the four functional areas. 

\b Beginning in fiscal year 1991, PTO allocated obligations for
automation among the four functional areas, according to PTO
officials.  In prior years, PTO included these obligations under
executive direction and administration. 

\c According to PTO officials, major reorganizations and transfers of
funds among functions took place in fiscal years 1992, 1994, and
1995. 

Source:  PTO. 



                                   Table III.2
                     
                       PTO's Full-Time Equivalent Staff by
                       Major Activity, Fiscal Years 1986-95


Fiscal           Percen          Percen          Percen          Percen   Total
year       FTEs       t    FTEs       t    FTEs       t    FTEs       t   FTEs
-------  ------  ------  ------  ------  ------  ------  ------  ------  -------
1986      1,980    62.3     241     7.6     488    15.4     471    14.8   3,180
1987      2,045    62.8     222     6.8     496    15.2     493    15.1   3,256
1988      2,161    63.7     258     7.6     483    14.2     489    14.4   3,391
1989      2,410    64.8     303     8.2     481    12.9     525    14.1   3,719
1990      2,592    63.9     344     8.5     551    13.6     572    14.1   4,059
1991      2,849    64.8     410     9.3     571    13.0     564    12.8   4,394
1992\a    2,663    58.0     429     9.4     476    10.4   1,021    22.3   4,589
1993      2,872    58.7     439     9.0     482     9.9   1,097    22.4   4,890
1994\a    3,244    65.2     457     9.2     510    10.3     766    15.4   4,977
1995\a   \3,761    75.1     486     9.7     358     7.1     402     8.0   5,007
--------------------------------------------------------------------------------
Legend

FTE = full-time equivalent

\a According to PTO officials, major reorganizations and transfers of
FTE staff among functions took place in fiscal years 1992, 1994, and
1995. 

Source:  PTO. 



                                   Table III.3
                     
                     Comparison of PTO's Patent Applications,
                      Issuances, and Pendency, Fiscal Years
                                     1986-95


                       Annual          Annual          Annual
                       change          change          change             Annual
                       (perce          (perce          (perce             change
Fiscal year    Number     nt)  Number     nt)  Number     nt)  Months  (percent)
-------------  ------  ------  ------  ------  ------  ------  ------  ---------
1986           131,40     4.4  76,993     2.3  207,77    -3.6    22.0       -5.2
                    3                               4
1987           137,17     4.4  88,793    15.3  209,91     1.0    20.8       -5.5
                    3                               1
1988           148,18     8.0  83,584    -5.9  215,28     2.6    19.9       -4.3
                    3                               0
1989           163,30    10.2  102,71    22.9  222,75     3.5    18.4       -7.5
                    6               2               5
1990           174,71     7.0  96,727    -5.8  244,96    10.0    18.3       -0.5
                    1                               4
1991           178,08     1.9  101,86     5.3  254,50     3.9    18.2       -0.6
                    3               0               7
1992           185,44     4.1  109,72     7.7  269,59     5.9    19.1        5.0
                    6               8               6
1993           188,09     1.4  107,33    -2.2  244,64    -9.3    19.5        2.1
                    9               2               6
1994\          201,55     7.2  113,26     5.5  261,24     6.8  19.0\\       -2.6
                    4             8\a               9               a
1995           236,67    17.4  114,24     0.9  298,52    14.3    19.1        0.5
                    9               1               2
--------------------------------------------------------------------------------
\a Amount reported by PTO.  GAO's computations for fiscal year 1994
differ because (1) GAO used data for the entire fiscal year to
compute pendency, while PTO used data from the final quarter of the
fiscal year; (2) GAO included design patents in computing pendency,
while PTO did not; and (3) GAO used more recent data from the
automated system than did PTO. 

Source:  PTO. 


STATISTICS ON COMPARISON OF PTO
WITH PATENT OFFICES IN JAPAN AND
EUROPE
========================================================== Appendix IV



                               Table IV.1
                
                 Patents in Effect Worldwide at the End
                         of Calendar Year 1993


Granting authority                              Number         Percent
--------------------------------------  --------------  --------------
PTO                                          1,131,239            29.1
Japanese Patent Office                         631,063            16.2
Contracting States of the European           1,369,545            35.2
 Patent Convention
Others                                         759,071            19.5
Total                                        3,890,918           100.0
----------------------------------------------------------------------
Source:  Trilateral Statistical Report, PTO (1994). 

   Figure IV.1:  Major Phases in
   the Patent Examination and
   Granting Processes of the
   European Patent Office, the
   Japanese Patent Office, and PTO

   (See figure in printed
   edition.)

Source:  Trilateral Statistical Report, PTO (1994). 



                               Table IV.2
                
                 Examination Pendency Reported by PTO,
                  the Japanese Patent Office, and the
                  European Patent Office for Calendar
                             Years 1992-94


Patent office                         1992          1993          1994
----------------------------  ------------  ------------  ------------
PTO                                   19.3          19.6          19.6
Japanese Patent Office                28.0          28.0          25.0
European Patent Office                31.3          24.8          23.9
----------------------------------------------------------------------
\a Because of different computation methods used by the three
offices, comparisons of pendency between the offices are not
possible.  Also, because the data in Trilateral Statistical Reports
are shown by calendar year, the pendency statistics for PTO in this
table cannot be compared with the fiscal year pendency statistics
shown in other tables in appendixes II and III. 

Source:  Trilateral Statistical Report, European Patent Office and
PTO (1993 and 1994). 




(See figure in printed edition.)Appendix V
COMMENTS FROM THE DEPARTMENT OF
COMMERCE
========================================================== Appendix IV



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on the Department of Commerce's
letter dated June 21, 1996. 


   GAO'S COMMENTS
-------------------------------------------------------- Appendix IV:1

1.  The intent of our statement was not to contrast the average
patent term after the change in the law but rather to show the effect
that pendency would have on the term.  Since the patent term on
utility and plant patents will begin when the original application is
filed, any pendency will reduce the 20-year term.  Prior to the
change in the law, pendency did not affect the term, which ran for 17
years from the date when the patent was issued. 

2.  We agree that the effective term of the patent for most inventors
will be greater under the new law if PTO issues the patent in less
than 3 years from the original filing date.  However, as shown in
table II.7, well over one-fourth of the patents and applications in
our analysis had a parent application, and the pendency on these
averaged at least 45 months when measured from the parent filing
date. 

3.  Our report recognizes that developing meaningful pendency
statistics at the art unit level is difficult because of the frequent
shifts that PTO makes in the scope of work within individual units as
well as the wide variation in workload among the units.  For this
reason, we are not recommending that PTO report pendency by art unit. 
Instead, we are recommending that statistics be reported at the
broader examination group level. 

4.  We did not evaluate PTO's plans to begin measuring pendency by
cycle time per invention because these plans were still in a
developmental phase at the time of our work.  We agree that PTO needs
to be able to measure and report the time that the agency itself
spends in examining an application.  However, as discussed in our
report, the amount of time attributable to applicant delays is
significant.  Thus, as we recommended, PTO needs to compute and
report pendency time attributable to both PTO and the applicant,
regardless of the pendency measurement system used. 

5.  We agree that abandonments are not totally within the control of
PTO and that reporting average pendency is important.  However, as we
recommended, PTO also needs to show separate statistics for issued
patents and abandoned applications because (1) statistics on issued
patents are an important indicator of pendency for the inventor
wanting to know how long the examination of a successful application
is likely to take and (2) decisionmakers in the Congress and
administration need to be able to measure the resources being devoted
to unsuccessful applications. 

6.  We agree with PTO's tentative plans to conduct an aging analysis
of applications in-process at the end of the year in terms of their
pendency from the date of filing.  This is consistent with our
recommendation and with our finding that the pendency statistics now
reported do not address a significant portion of the examination
workload.  As shown in table II.1, the number of applications still
under examination can be greater than the number of applications that
resulted in a patent or were abandoned during the course of the year. 

7.  We agree with the Department's statement that the old methods of
calculating and reporting pendency no longer provide PTO managers and
inventors with the information they need to determine the effect of
pendency on the patent term or to evaluate PTO's performance in one
of its primary core businesses.  Consequently, we do not disagree
with PTO's tentative plans to move to a cycle-time method for
measuring and reporting pendency.  However, PTO does not plan to
implement the new procedures fully until fiscal year 2003.  Also,
implementation is dependent on a redesign of PTO's application
monitoring and tracking systems.  Therefore, in the interim, PTO
needs to implement our recommendations, using the monitoring and
tracking system now in place.  Also, we believe that in concept,
these recommendations should be incorporated into any new pendency-
reporting system. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION

Kenneth A.  Davis
Frankie Fulton
John P.  Hunt, Jr.
Mitchell Karpman
Gary M.  Malavenda
Robin Nazzaro
Paul Rhodes
Julie Schneiberg
Mindi Weisenbloom


*** End of document. ***