MR. TOEDT;:  First off, thank you very much for accommodating
the viscidities of travel.  I found out a little while ago
that the real reason for my trip, which was a federal circuit
oral argument this morning, was canceled.  So I'm glad this
was able to go forward.  I appreciate your working it in.
COMMISSIONER LEHMAN;:  I should say, this is the advantage of
a fully user fee funded agency.
COMMISSIONER LEHMAN;:  You've got to be there when your
customers are there.  The court is not a full user fee.
MR. TOEDT;:  As Mr. Commissioner indicated my name is D.C.
Toedt.  As requested in the Federal Register notice of this
hearing, let me summarize briefly for the record my
I'm a shareholder and chair of the Patent Prosecution Practice
Committee at Arnold, White and Durkee, practicing in the
firm's Houston office.  Much of my firm's practice and my own
work relates to the computer industry and to computer
software.  My remarks today, however, represent my own views
and not necessarily those of my firm nor of any of its clients
or its other attorneys.  My remarks are directed strictly to
procedural questions and not to the substantive issues that
have come up in these hearings.
For the convenience of the panel, the written version of my
remarks includes something of an executive summary beginning
on page 2.
Mr. Secretary, you mentioned just now, and in San Jose two
weeks ago, your focus on the customers of the PTO, and we're
all aware of the Clinton Administration's commitment to
reinventing government.  It sounds as though you're familiar
with the concept of reengineering.
The PTO has made considerable progress lately in improving the
quality of examinations, but the challenge faced by the Office
is broader than that.  The Office should be concerned with
doing the right things in today's high technology world, and
not just doing things right as that might have been defined
years or decades or even centuries ago.
One of the first steps, of course, is figuring out who the
customers are and what is it they want.  In the broadest
terms, the PTO's customers are the people who participate in
patent enforcement, by which I mean, not just litigants --
judges, juries, attorneys -- but companies doing license
negotiations, design work, deciding whether they can compete
with a patent owner, or whether they stay out because they
respect the patent rights.
I'd like to address three points today concerning what the PTO
can do for those customers.  Some of my suggestions frankly
even to me seem a little bit off the beaten track.  Some might
work.  Some might need fine-tuning.  Some might be wildly
impractical upon further thought or maybe in actual practice.
First, the Office should experiment within the existing
statutory framework through notice and comment rulemaking,
with borrowing some approaches from the Securities and
Exchange Commission.  In some notable respects the PTO's work
is very similar to that of the SEC.  A company or an
individual does similar things when it applies for a patent
and when it issues securities.  In each case, it's going to
the public and asking, broadly speaking, to give it an asset
for use in its business.  In effect, it's saying to the
public, let's make a deal.
The price the public levies is information in the offering
document, whether that's a patent application or a securities
prospectus.  Both the PTO and the SEC are charged with
ensuring that when a company goes to the public seeking such
an asset, the public gets what it pays for.
The U.S. securities markets are considered to be the best in
the world, so maybe there's some lessons to be had there.  And
it's interesting because the PTO and the SEC take considerably
different approaches to their work and to their respective
uses of administrative resources.
The SEC does not use a one size fits all philosophy.  If your
proposed securities offering is a limited one, a low end
offering with limited potential impact on the public, you can
use short form disclosures, streamlined SEC approval
If you're willing to settle for a low end asset, restrictions
on the dollar amount of the offering, the amount of
solicitation you could do and so forth, you can use a
qualification proceeding under Regulation A as recently
amended specifically for small business owners, instead of a
full blown public offering registration, or you could even be
exempt from registration entirely.
Every venture capitalist and every small business pretty much
knows it can make a lot more sense for a company to go for
such a low end securities offering first, and hold off on a
full blown public offering until it clearly makes sense.
The other difference is that the SEC tries a different way of
getting the most bang for its buck.  It prescribes fairly
detailed requirements in advance for a disclosure content and
format of an organization, and in some instances certification
by outside professional CPAs, for example.
The SEC is very selective about how it uses its investigation
and examination resources.  It doesn't do merit review of
securities offerings at all unless a problem comes up and they
have to deal with enforcement proceedings.  They save their
resources for when they can do the most good for the public.
The SEC's examination of offering documents is usually
confined to determining that the documents comply with the
extensive formal requirements.  If you're in this kind of
business, you need to disclose this, this, and this, in such
and such order.
Staff can get pretty picky about whether you've complied.  But
even so, securities offerings are approved with what we patent
lawyers would regard as blinding speed.
The Commissioner might have authority under the existing
statute to create analogous low end patents for people who
want them, like small businesses, for example, that can be
obtained quickly and inexpensively without a full blown
examination proceeding.
By regulation the Commissioner might require applicants to
file applications that conform to specified content and format
standards, depending on the argument they're in.  And an
applicant that wanted to could file a written election to
waive certain statutory rights associated with a patent, and
reduce the impact of the patent on the public.
The Commissioner could then cause a limited examination to
happen.  The statute says only that the Commissioner shall
cause an examination to be made -- and then issue the patent
The applicant's written election might include, for example,
voluntary acceptance of limitations on statutory rights and
remedies, maybe an obligation to prove patentability in any
infringement litigation, maybe just a few claims, maybe an
independent prior art search.
If the application and the written election documents appear
to be in order, issue the patent.  Treat the written election
as a continuation application.  Suspend action on the
continuation for some period of time.  And if it turns out to
be worth it to the patent owner in the long run, the patent
owner can ask for a full blown examination to go to a
conventional, what would now be a 20-year patent, subject to
broadening of reissue limitations and intervening right
I think many small businesses and large companies would love
to have such an option available.  One of my colleagues that
deals mostly in biotech areas said that she thought many of
her clients would be delighted to be able to get some
protection up front, and wait until it becomes more clearly
advantageous to go through a full blown proceeding.
The Office should try that out on an experimental basis.  My
written remarks go into a fair amount of more detail about
that possibility.
Now, a friend of mine who is in-house at a large company's
patent department commented that this sounds uncomfortably
like the Japanese system, where an applicant can wait years to
request examination and businesses might have to wait that
long to know whether a patent got ever issued.
I see a critical difference.  In Japan, as I understand it,
the applicant's incentive to request examination at the end of
the -- I think it's a seven-year period -- is to go from zero
protection to full protection.  Here the differential is much
smaller.  The low end patent owner has some protection
already.  So there's much less upside and much less incentive
to try and go for a full blown examination at the end of
whatever the waiting period is.
My second suggestion is that we get rid of file ping-pong in
examination proceedings.  As an attorney, I never know when an
Office action is going to hit my in box.  It could be years
after filing.  The examiner never knows when I'm going to
respond, if at all.  He never knows when I'm going to pick up
the phone and call and ask for an interview, he or she.
I sometimes wonder whether, as a result, some attorneys and
examiners unconsciously focus more on getting the file off of
their desk and onto someone else's desk, than on getting a
client's project finished.
Moreover, sometimes it can seem like it's difficult to get
meaningful attention from an SPE.  The SPEs are busy.  They
are very busy.  They might have a dozen or more assistants to
supervise.  And every now and then you get the feeling that
you're like in a situation where you're buying a car.
You talk to the salesman, and the salesman says, yeah, I think
we can do that.  But the salesman has to go off to talk to the
sales manager in the back room.  Sometimes you make the deal,
and sometimes the salesman comes back and says, sorry, we
can't do that.
It's not like that in appeals to the board.  It's not like
that in interferences.  And more particularly, it's not like
that in trial work.  If the judge wants it to, the scheduling
order means what it says.  If you're on the Eastern District
in the rocket docket, in Judge Sam Kent's court in Galveston,
you will get your pretrial work done, you will go to trial on
schedule.  You get in, you get it done.  Everybody gets very
focused because that's their one shot.
Let's try doing some patent examinations that way.  Let an
assistant examiner function like a junior prosecutor in a DA's
office.  He can try cases under the tutelage of a more
experienced attorney, but he's trying the cases.  Let a
primary examiner be the "judge."  Have discovery cutoffs for
exchanging prior art.  Do whatever claim amendments are
desired, whatever evidence of patentability against
patentability is desired.  Propose filings and conclusions
just like examiners do now, just like attorneys do now.  And
let the primary make the decision, a first and final action.
If the action is adverse, take it up on appeal.  Tape record
the hearing maybe.  It could be just a low key interview.  It
doesn't' need to be a complete adversarial proceeding. 
Transcribe it to get a written decision.  It could be a lot
like a board of appeal, a lot like an interference.
It would make life easier for attorneys, I think.  Many
examiners would probably enjoy doing administrative trials
instead of having work shoved into their in-box.  I think the
quality of the examination would go up, and the throughput
volume might even go up.
Now, my in-house friend said he thought a lot of old-time
patent lawyers would be very nervous about this, that a lot of
them like the leisurely practice, where you've got three to
six months to handle an Office action that comes in.
That is a valid concern, but it is certainly not the driving
Mr. Secretary, many practitioners are delighted that the
Office is working so hard on the examination process.  You
have a wonderful opportunity to help improve the role of the
PTO in promoting the progress of science and the useful arts.
Thank you very much for the chance to participate.
COMMISSIONER LEHMAN;:  Thank you very much.  I might want to
just ask you a question, if you would bear with me for just a
First, I would like to say for the record that your testimony
was extremely polished and very well delivered.  And I know
what the reason for that was.  You were a student of my
colleague Larry Goffney when he taught you at the University
of Texas.
So it's a good illustration of, you know, if this is what we
get from the student, just think what we will get from the
The procedure you were talking about offers sort of a range of
options.  In a sense, some of the other countries already have
this.  In Europe some countries have sort of petty patent
systems.  The Germans have it.  And that's one of the kinds of
things that you're talking about, right?
MR. TOEDT;:  Correct.
COMMISSIONER LEHMAN;:  The advantage of that specifically for
what we're talking about today would be that at least this
would enable us to focus the examination resources on the
really critical issues and the really critical technology.
It would also have the advantage, then, I assume for the -- if
you want to use the term petty patents, whatever you want to
use -- it would have the advantage of getting that information
out there, at least, in the public domain so that people would
know that it was there, would be aware that it was lurking out
Presumably they would then be able to prepare, should that --
if they disagreed with the patent claims and the patent
applicant decided to go for the full-blown patent, they would
be well-positioned then to come in to make certain that the
Patent Office had the relevant prior art and so on.
Does that sort of describe the advantages of the system that
you just outlined?
MR. TOEDT;:  Those are among them, yes, sir.
COMMISSIONER LEHMAN;:  Those are among the advantages.  That
was the answer to that.
COMMISSIONER GOFFNEY;:  Great presentation.  Thank you very
(Discussion off the record.)
COMMISSIONER LEHMAN;:  Next I'd like to call Joseph Hofstader. 
Joseph Hofstader is basically sitting in for his father,
Christian Hofstader.
MR. HOFSTADER;:  My brother.
COMMISSIONER LEHMAN;:  Oh, your brother.  I didn't think there
was anybody your father's age in the League for Programming
Freedom.  So I was really surprised at that when I was told it
was your father.  But it's your brother.  And he is here to
represent the League for Programming Freedom.
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