INTRODUCTION

Who We Are

The United States Patent and Trademark Office (USPTO) is the Federal agency responsible for granting U.S. patents and registering trademarks. In doing this, the USPTO fulfills the mandate of Article I, Section 8, Clause 8, of the Constitution, that the Executive branch  "promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."  The USPTO registers trademarks based on the Commerce Clause of the Constitution (Article 1, Section 8, Clause 3).

The USPTO advises the President of the United States, the Secretary of Commerce, and U.S. Government agencies on intellectual property (IP) policy, protection and enforcement; and promotes stronger and more effective IP protection around the world.  The USPTO furthers effective IP protection for U.S. innovators and entrepreneurs worldwide by working with other agencies to secure strong IP provisions in free trade and other international agreements.  It also provides training, education and capacity building programs designed to foster respect for IP and encourage the development of strong IP enforcement regimes by U.S. trading partners.

• The USPTO is headquartered in Alexandria, Virginia.

• The USPTO's Internet address is http://www.uspto.gov.

• The USPTO has over 8,000 employees — including engineers, scientists, attorneys, analysts, computer specialists — all dedicated to protecting U.S. IP rights.

U. S. Patent and Trademark Office
Organization Chart

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OVERVIEW

Fiscal Year 2006:  OUR RECORD-BREAKING YEAR

The year 2006 was a banner year for the USPTO.  We continued to improve enforcement of IP rights in our nation and around the world.  We led several initiatives to make our own country’s system of IP protection even better.  And we educated thousands of individuals, businesses, and other governments on the importance of protecting IP.

Fiscal year 2006 was a record-breaking year for the USPTO, in terms of quality, production, electronic filing, teleworking, electronic processing, and hiring.  As the chart below illustrates, the USPTO met 90 percent of the performance goals established pursuant to the Government Performance and Results Act of 1993 (GPRA), providing its best record to date for achieving important measures of performance and results.

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LEADING WITH PATENTS

Our Patent organization broke virtually every record in 2006 – by improving quality, efficiency, e-filing, hiring, training, and hoteling.  Improvements in quality were particularly noteworthy.  USPTO received a historic high-water mark of 445,613 utility, plant, reissue and design (UPRD) patent applications filed, while achieving the highest patent allowance compliance rate in 20 years – 96.5 percent.  As part of our new strategic plan, we will continue to work with all interested parties to find new ways to improve and measure quality even more effectively.

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A challenge that remains is that the volume of patent applications continues to outpace our capacity to examine them.  We have a pending application backlog of historic proportions.  Patent pendency – the amount of time an application is waiting before a patent is issued or abandoned – now averages more than 31 months.  To turn the corner and reduce the backlog of patent applications and the amount of wait-time for a patent examination, the USPTO is exploring necessary changes to the patent system.

Hire, train, retain, and hotel

The USPTO hired a record 1,218 patent examiners in 2006, exceeding our hiring goal by more than 200 people.  We plan to hire 1,210 new examiners in 2007, representing another monumental increase.  To assimilate this number of new hires, we introduced a new way of training:  we implemented a university approach to training new examiners by teaching them in a classroom setting for eight months, rather than using our traditional one-on-one training model.  This allowed us to deliver intensive training to the newly hired examiners, leaving more experienced examiners and supervisors to focus on quality examination.  We also implemented recruitment bonuses to hire and retain the talented engineers and scientists we need to examine our increasingly complex applications.  A pioneer group of 500 examiners joined our hoteling program, and we provided them with the electronic access and equipment they need to do their jobs from remote locations.  This freed space to add new examiners more quickly and cost-effectively.  A benefit for those hoteling has been the reduction of time spent commuting.  We plan to add 500 more examiners to the hoteling program in 2007, and we are piloting a work-at-home program for our technical support staff.

Implementing Electronic Filing System-Web

Patents implemented the Electronic Filing System-Web (or EFS-Web), a user-friendly, Internet-based patent application and document submission solution.  This system has dramatically increased the electronic filing of patent applications from 1.5 percent per month to 33 percent per month at the end of fiscal year 2006.  We believe this easy to use system will continue to encourage applicants to file electronically.

Optimizing the patent process

In 2006, the USPTO proposed rules changes regarding the examination of patent application claims, continuations, and information disclosure statements.  Our executive team traveled the nation presenting the proposed rules to interested groups, such as stakeholders, applicants, and independent inventors, asking for feedback and alternative solutions.  Our purpose is to identify a way to produce a more focused, higher-quality, and efficient examination and to ensure that patent examiners receive the most relevant information as early in the examination process as possible.

We also implemented a new accelerated patent examination procedure, which gives participating applicants a final decision on their application within 12 months from filing. This is in return for their providing an appropriate search of the prior art and an improved explanation of their claims and prior art found.

As part of this strategic plan, we will continue to work with all interested parties to ensure that we maintain and improve the world's best patent processes and procedures.

LEADING WITH TRADEMARKS

In 2006, the Trademark organization also broke records in quality while increasing production.  With more than 354,000 application classes filed, we had a final compliance rate of 96.4 percent.  In fact, the Trademark organization exceeded all of its Agency performance targets for the first time since the GPRA mandated establishing performance goals.  These performance goals include first and final action quality, production, application pendency, and efficiency.

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We reduced first action pendency by 1.5 months, and increased by 25 percent our number of "disposals" (instances when trademarks are either registered, or the applicant abandons the application).  We made significant progress on improving internal operations by streamlining our process to further improve disposal pendency and quality.  We documented workflows, adopted standardized practices, and retrained employees to enhance trademark consistency and quality.

Enhancing trademark e-filing

Ninety-four percent of trademark applications were filed electronically in 2006, compared with 88 percent in the previous year.  We continued to enhance electronic filing by expanding the number and type of transactions offered on-line and by offering reduced fees to any applicant who files a complete application using our newer system, the Trademark Electronic Application System-Plus (TEAS-Plus).

Improving customer service and communications

The Trademark organization provided more options to enhance the quality of application data in trademark systems and search results. We also expanded the hours of the Trademark call center, and added call center positions to improve service for all our customers.

Expanding successful Trademark work-at-home program

The Trademark organization's work-at-home program for examining attorneys received the "Telework Program with Maximum Impact on Government Award" from the Telework Exchange. The Trademark work-at-home program is considered a "best practice" because of its success in addressing budgetary, space, retention, recruitment, and job satisfaction issues. During 2006, we expanded this program to include 85 percent of all eligible employees.

LEADING WITH INTERNATIONAL RELATIONS AND ENFORCEMENT

In 2006, the USPTO communicated the importance of protecting and respecting IP, both domestically and internationally.

Working with other U.S. Government agencies

As part of the Bush Administration's Strategy Targeting Organized Piracy (STOP!) initiative, the USPTO worked with other U.S. Government agencies to fight piracy and counterfeiting around the world. We collaborated on IP training, norm-setting, and enforcement efforts with our colleagues in the Departments of Commerce, Justice, and State; the Department of Homeland Security's Customs and Border Protection; the Copyright Office; and the Office of the United States Trade Representative (USTR). Together, we enhanced the domestic and international IP environment for American businesses.

Working with individuals and businesses

As part of STOP!, the USPTO continued a communications campaign to educate small businesses about protecting their IP in the United States and abroad. As shown in the chart below, we offered small-business conferences throughout the country. Other USPTO conferences focused exclusively on the IP challenges of doing business in China. All conferences had strong attendance, and more than 90 percent of attendees rated them "Excellent" or "Good."

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The USPTO also continued to staff the STOP! hotline, 1-866-999-HALT, which lets callers receive information on IP rights and enforcement from our attorneys with regional expertise. In 2006, the hotline received 1,460 phone calls from people across America with a range of IP questions – a 52 percent increase over 2005. The STOP! gateway Web site, www.stopfakes.gov, was expanded to provide more specialized information, including USPTO-designed "IP toolkits" which help businesses protect their rights in other countries.

Working with other governments

To strengthen global IP protection, the USPTO represented the United States in discussions and negotiations at the World Intellectual Property Organization (WIPO) throughout the year. Most notably, the USPTO led a delegation to the WIPO Diplomatic Conference, which culminated in the adoption of the Singapore Treaty on the Law of Trademarks. The new treaty will help trademark applicants around the world receive better and faster responses.

The USPTO promoted IP protection in China. Through the Joint Commission on Commerce and Trade (JCCT) and its Intellectual Property Rights (IPR) Working Group, the USPTO and USTR negotiated another set of commitments from the Chinese Government to reduce counterfeiting and piracy. The USPTO conducted Global Intellectual Property Academies (GIPA) and IP Rights programs for foreign government officials and private sector representatives around the world. Additionally, we placed IP experts in Brazil, China, Egypt, India, Thailand and Geneva (WIPO/World Trade Organization (WTO)) to advocate improved IP protection for American businesses and to coordinate training to help stop piracy and counterfeiting abroad.

Foreign Postings of Intellectual Property Experts

Our Challenges/Our Response

As represented by the model below, our strategic planning process encompasses end-to-end examination of all components of our core responsibilities.

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Innovation – both in the United States and throughout the world – is growing at a record pace. The United States is the fastest growing major industrialized economy in the world, with a Gross Domestic Product (GDP) value of about $12 trillion in 2005. GDP grew 3.2 percent in 2005, which is above average relative to annual rates since 2000. Research and development (R&D) expenditures are estimated to have increased by 4.7 percent in 2004, when adjusted for inflation. Since August 2003, more than 6.8 million jobs have been created – more jobs than in all the other major industrialized countries combined. Between October 2005 and October 2006, the U.S. economy grew 2.9 percent – faster than any other major industrialized country. And, as of October 2006, U. S. productivity has grown at an annual rate of 3 percent since the first quarter of 2001.

This makes the United States an attractive market for both domestic and foreign competitors. Our stable economy, our commitments to the rule of law, our business values – and our strong IP system – combine to create the most favorable trade environment in the world. American innovators have consistently broken U.S. patent filing records – filing 218,472 patent applications in 2005 or 56 percent more than the number filed in 1995. Trademark applications filed by U.S. residents have followed a more circuitous trajectory in recent years, but the general trend from 1995 through 2005 is positive, with filings consistently growing every year after 2002 by an average rate of 8.1 percent.

The United States is not the only country experiencing dramatic economic growth and prosperity. A trend that we anticipate will grow – possibly at historic rates – is the large percentage of foreign applicants who file patent and trademark applications in the United States. A recent study conducted by WIPO noted that the United States, through the USPTO, receives more foreign patent applications than does any other patent office in the world, for example, 182,866 patent utility applications in 2005 or 107 percent more than in 1995.

For the past decade, patent application filings have consistently risen, sometimes at rates of 10 percent over the previous year. In fact, this strategic plan anticipates that patent application filings will continue to rise at the rate of 8 percent per year, through 2012. This growth is not a surprise, nor is it new. The various proposals the USPTO has put forward in the past and most recently with draft proposed rules changes, have stemmed from a recognition of the need to handle growth. They have focused on encouraging more complete applications and urging "finality" to the patent process, with the objective of promoting certainty in a timely manner.

The chart below illustrates our planning assumptions with respect to projected patent and trademark applications.

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It is an unchallenged reality that the rate at which patent applications are being filed has increased beyond the rate at which the USPTO is presently able to examine them, resulting in an increasing backlog. It is possible that this backlog (cases that have not been examined) could approach one million by 2010 – unless something is done.

It is fair to say that USPTO's more recent patent pendency proposals have met with mixed, even negative, response.  Many commentators recommend that the USPTO simply continue to hire patent examiners at record rates to ensure timely examination.  Hiring is certainly an aspect of the ultimate answer to reducing pendency.  Between 2005 and 2012 we will have hired over 9,000 new examiners.  A key question throughout the life of this strategic plan will continue to be, "How do we handle record growth in patent applications, consistent with our guiding principles of quality, timeliness, accuracy, and transparency?"  We respectfully submit that hiring, while important, will not be the only answer to this critical question.  As shown in the chart below, hiring will reduce the rate of increase in pendency time, but will not be sufficient to drive pendency time downward during the six years of this strategic plan.

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Public confidence in the quality of our patent grants and trademark registrations is also a critical issue.  Confidence is earned, and we do not take it for granted.  We believe the essential components of quality are accuracy and consistency.  We must ensure that allowed applications meet both statutory and regulatory standards, thus providing the certainty that enhances competition in the marketplace.  We must not allow the need for timeliness to impact the requirement for quality.

We will continue to manage quality through the successful implementation of a comprehensive and integrated quality system throughout the examination processes.

Another challenge vital to the long-term success of the Office's mission is obtaining the resources and flexibilities needed to provide a stable and reliable foundation in a changing world. As a performance-based organization whose operations are not funded out of general taxpayer revenues, Congress granted the agency substantial autonomy in its management and administrative functions. Nevertheless, the USPTO faces challenges beyond its immediate control in achieving the business-like operations that such an organizational structure contemplates.

Although user fees provide the source of USPTO's funding, the present model has several implications that impede long-term capital planning and can affect cash flow. Specifically,

• The agency lacks the authority to set most of its user fees, including patent and trademark application fees. This leads to an inability to respond to changes in processing costs or the cost of operations.
• There continues to be uncertainty about whether USPTO funding based on estimated annual revenues will be appropriated. This uncertainty makes it difficult for the USPTO to plan for the future and to target funding for long-term initiatives.
• Operating under annual appropriation of funds makes it difficult to ensure adequate investment and contingency planning to meet market demands for our services. Given that we are not guaranteed the ability to retain and use unspent annual revenues in future years, we do not have the ability to adjust annual operating costs to meet processing costs required by a sudden fluctuation in application filings.

In summary, despite successes and accomplishments, the USPTO still faces ongoing challenges related to complex patent laws and rules, growth in filings, increasing complexity and volume of patent applications, continuing focus on the quality of examination, the transition to operating in a fully electronic environment, the impact of counterfeiting and piracy on American business interests in the United States and throughout the world, and securing appropriate resource levels and operational flexibilities. This strategic plan proposes consideration of more substantial changes for patents, trademarks and management that will better position the USPTO and its users for future growth and complexity.

In support of the Department of Commerce goal to "Promote U.S. innovation and industrial competitiveness by IP..." we identified objectives, initiatives, and performance measures that will enhance the degree of excellence or quality in every aspect of our patent and trademark processes – from the information we receive from applicants to the support we provide our own employees. In preparing this strategic plan, our goals, objectives and initiatives were built upon four guiding principles.

Quality means accurate and consistent results in examination. It presumes improved inputs, better-focused examination, improved review processes, and consistent examination results.

Timeliness means processing, including review of applications, is completed without delay. It presumes that applicable laws, regulations, and policies work synergistically to eliminate frictions or uncertainties that lead to delays.

Cost-Effectiveness implies efficiency, accountability, and a focus on results. It requires leadership and commitment to ensure that activities and processes result in value. This means using resources in the most effective manner to deliver quality, timely USPTO services. It also means being responsible stewards of the public trust.

Transparency demands impartiality, fairness, accessibility, availability, and a public-service mentality. This includes our continuing commitment to opening the USPTO to the public by providing electronic filing, patent and trademark file contents, and as much training and research material as possible via our web site. It requires discipline on the part of the public to use public means to influence change in USPTO practices and activities.

Planning Assumptions/Critical Needs

This plan is predicated on the following assumptions and needs:

• Patent application filings will increase by eight percent a year through 2012.
• Trademark application filings will increase by six to eight percent each year through 2012.
• The fee structure and changes to practice that were temporarily put in place for fiscal years 2005-2007 will be made permanent, and the USPTO will be appropriated its full estimated revenues.
• Full implementation of some initiatives will be dependent upon completion of pilot projects and successful evaluation results (e.g., demonstrated cost-effectiveness and efficiency).
• Many initiatives cannot be developed or implemented without the input and active involvement of interested parties; for example, Congress, the Administration, special interest groups, IP officials from other countries, users of our systems, and our employees.

As noted above, throughout the life of this strategic plan, we will strive to find meaningful answers to the following questions:

• How can we process increasing, historically large numbers of patents – consistent with our guiding principles of quality, timeliness, cost-effectiveness and transparency?
• Can we – as members of the public have suggested – simply hire a lot of patent examiners (and supporting employees) – to handle the increase?
• What alternatives – including packages of alternatives – exist to handle increases in patent applications?

We believe that partnership with stakeholders is crucial to defining, in a collaborative manner, solutions that will benefit the entire IP system. We also believe that such partnerships can offer keys to global IP solutions, as today's American inventor, entrepreneur, and businesses have global issues to consider. As an example, in fiscal year 2006, the USPTO cooperated with a private sector-led group that chose to focus on so-called "peer review" as a possible means of improving the quality of patent application packages received by the USPTO. Private sector-initiated and-led efforts may provide the USPTO with important data and feedback that will help us, as stewards of the public trust, improve patent, trademark and other IP systems for the benefit of all.