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ATTACHMENT C

RANGE OF HOURS PER DISPOSAL EXPECTANCY FOR GRADE GS-12 BY GROUP

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U.S. DEPARTMENT OF COMMERCE,

PATENT OFFICE,

Washington, D.C., October 1, 1973. Hon. PHILIP A, HART, 0.8. Scnate, Washington, D.C.

DEAR SENATOR HART : During the hearing on September 12, 1973, before the Subcommittee on Patents, Trademarks and Copyrights of the Senate Judiciary Committee, you asked the Department of Commerce witnesses how the pendency time for patent applications is calculated and how the reduction in pendency time over the last few years has been achieved. Your questions related to statistics the Patent Office provided in Appendix A of our letter to you dated August 31, 1973.

In reviewing Appendix A, we have discovered an error on page 9 in the number of patents issued for fiscal year 1968. We are enclosing a substitute copy of page 9 that we would like to have appear in the printed record. Even with this correction, however, the information in Appendix A alone does not provide an answer to your questions. Accordingly, we are submitting additional data in the table attached to the present letter which will explain the reduction in pendency.

Pendency of a patent application is defined as the time period occurring between the day an application is filed in the Patent Office and the day the same application is issued as a patent. The Patent Office calculates the average pendency time by averaging the pendencies of a representative sample of patents issued on a given date.

The Patent Office expects to be able to reduce the average pendency of a patent application to 18 months by the end of fiscal year 1976 in order to provide more timely patent protection for the inventor and earlier disclosure of patent technology to the public. As shown in column 2 of the attachment, average pendency decreased from 37 months at the end of fiscal year 1964 to 24 months at the end of fiscal year 1973.

Column 3 of the attached table shows the output of the patent examining operations over the period 1964 to 1973 measured in terms of "disposals””. Total disposals represent the sum of applications allowed and applications abandoned each year. By comparing column 3 of the table with the number of applications filed, shown in column 4, it can be seen that the Patent Office has disposed of more applications than it received in every year since 1967.

Despite the fact that the number of examiners in the Patent Office has remained essentially unchanged since 1968 (see Appendix A and column 6 of the attached table), an important factor contributing to the recent reduction in pendency has been increased funding for the examining staff. This was particularly true during fiscal year 1973. Because of difficulties in recruiting additional examiners, the Patent Office during 1973 used funds equivalent to 122.5 examiner man years for paid overtime for the existing staff of over 1,100 examiners. Accordingly, when the overtime is taken into account, a significant

increase in the effective examining staff has occurred (see column 10 of attached table). Another factor contributing to the increased number of disposals has been a significantly lower rate of turnover in the examining staff since 1970. (See column 13.) The more experienced staff has been able to dispose of a greater workload.

In addition to the effective increase of the examining staff and the retention of more experienced examiners, a number of procedural changes instituted :since about 1964 have contributed to the reduction in pendency. These changes have saved pendency time not by reducing the time devoted to examibation but rather by shortening various delays inherent in the examining process. One major change was shortening of the period permitted for an applicant to respond to an office action from six months to three months in nearly all cases. Another change concerned the order in which pending applications were taken up for examination. Examiners were directed to give priority to applications with the oldest filing dates.

A further change required that the examiner's second action on an applic. tion be made the final action when this could be done without depriving the applicant of a fair opportunity to present his case. Still another change encouraged examiners to hold interviews with applicants or their attorneys, thereby eliminating some of the time required for back-and-forth written correspondence.

As a result of these revisions, a large inventory of amended applications on hand was reduced, thereby having an immediate effect in cutting the average pendency time. Moreover, these changes have resulted in shortening the time for prosecution following the first action. Interviews have frequently led to a better and earlier understanding of the issues involved in a particular application, and hence an earlier conclusion of prosecution.

Another change contributing to shorter pendency, made by the Congress, was amendment of section 151 of the Patent Cobe in 1965 to shorten the period for paying patent issue fees from 6 months to 3 months. (The Administration's patent bill that was forwarded to the Congress on September 27, 1973, would provide for further shortening of this time period.)

An administrative improvement within the Patent Office during the last year that has contributed to shorter pendency is elimination of a backlog in the Reference Order Section, a clerical support unit that supplies copies of patents cited by examiners to be mailed to the applicant. Formerly delays of 3 to 4 months existed in this operation, and currently delays have been reduced to a maximum of 1 month.

We hope the foregoing information provides a satisfactory answer to your question. Please do not hesitate to call upon us if you desire additional infor. mation. Sincerely,

RENE D. TEGTMEYER,

Acting Commissioner of Patents. Enclosures.

NUMBER OF PATENTS ISSUED BY GROUP

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70,129 12,170

Corps.

70,036

70,481

67, 651

· Group 360 abolished in March 1970.

Mr. Nash. My particular question at the moment is whether or not if the examiner on his first action grants or rejects an application, does he get more weight for disposing of something the first time around in your formula than if he were to look at an application a second or third time after receiving the additional information from the applicant?

Mr. TEGTMEYER. You can make various analyses of the goals program. We do not feel there is any tendency in the goals programs, as it has been established, to lead examiners to issue patents on the first action any more than any other action, quite independently of the goals program. We have encouraged examiners to isolate the issues in patent applications as early as possible. We encourage them to cover all the matter on a first office action. We have a program by which examiners can, by telephone interview, contact the attorney to determine whether or not some amendments to the claims could be made which would make them allowable and which would permit a first action allowance. In the technical sense, it is really not a first action allowance if you look at the various steps that are taken before the allowance is made.

Mr. Nash. You mean via a telephone conversation an examiner can be satisfied to issue a patent application?

Mr. TEGTMEYER. The examination can only be satisfied by examining the application filed.

Mr. NASH. Let me rephrase the question I am trying to get an answer to. I know I have not studied the formula. Ï never knew it existed.

In that formula, with regard to the manner in which it is weighted, without the reason for it, just the fact, is it weighed in such a way that more credit is accorded the examiner if he disposes of an application, be it granting it or rejecting it, the first time around rather than after a second or a third office action?

Mr. TEGTMEYER. Every application receives both a first action and, at some point, a disposal. Therefore, an application issued on the first action receives no more credit than one that is issued on any other action. Accordingly, the formula cannot be definition—the definition you have given at least-give any more weight and credit to an examiner because he issues it on a first office action.

Mr. Nash. A first office action gets no more weight accorded than a second or third office action?

Is that right?

Mr. TEGTMEYER. In respect to any particular application, there is always a first office action. There is always a disposal. Therefore, an application that is issued on the first office action, as opposed to one issued on the second office action, gives the examiner no more credit than the one issued on the second action.

Mr. Nash. Where is the break point? Third action?

Mr. TEGTMEYER. There is no break point. In each case the examiner gets the same amount of credit over the whole period of examining any particular application, no matter on what action the allowance for disposal is achieved.

Mr. Nash. I am not sure if I fully understand what you have been telling me. I will certainly read the information supplied for the record. Maybe we may decide to seek further clarification.

My last points relates to the matters of deferred examination. I have read and heard the administration's views for opposing it. It seems to me—and I would like your reaction to this—that assuming that we do just as badly as the Dutch do, as you have explained it, and we only eliminate 35 percent of the applications that are filed, my arithmetic tells me that that will eliminate 40,000 applications from having to be reviewed by United States patent examiners.

Do you consider that insignificant?

Mr. TEGTMEYER. First of all, in our direct testimony, we point out another distinction between the Dutch experience and our own. That is the fact that 85 percent of the applications filed in the Netherlands are of foreign origin. The situation in the United States is quite different, and the tendency among applicants that come from foreign countries to a country with deferred examination would be to request examination in fewer cases than would the domestics of that country. Particularly that would be the situation in this country. Mr. Nash. I appreciate that.

You may recall your response to Senator Hart's letter setting forth the United States' experience with foreign applications. My arithmetic indicates that in 1963, foreign applications accounted for about 17 percent of U.S. patents issued. In 1972 they accounted for 30 percent. By sheer numbers, foreign applicants have increased their number of U.S. patents granted over 300 percent since 1963, and the patents issued to U.S. applicants have gone up only 40 percent.

Now, I do not know whether that curve will continue or not.

If Europe is becoming as industrialized as we think, and Japan is as industrialized as we think, I think in a 10-year period we are going to have quite a different situation with regard to foreign patents.

If that were true, would that change your views on the need for the deferred examination system?

Mr. TEGTMEYER. There were other considerations referred to as far as deferred examination. That is the cost of printing, the cost of handling the applications, and the like. I would hope that we would never reach the situation where 85 percent of our patent applications come from abroad. It would be a rather sad tale if that were the case. We feel that a strong patent system will help insure the fact that that will not occur.

We agree with your statistics. I think it is reflective probably of the fact that since World War II there has been a resurgence in European countries. They are coming into their own. It is reflective of the fact also that international trade has increased, and there is naturally additional filings between countries, more so than there was in the past.

Mr. Nash. Thank you.
No further questions, Mr. Chairman.
Senator HART. Mr. Brennan?
Mr. BRENNAN. No further questions.
Senator Hart. Gentlemen, thank you very much.

[The following letter was ordered printed at this point in the record).

GENERAL COUNSEL OF THE DEPARTMENT OF COMMERCE,

Washington, D.C., October 12, 1973. Senator PHILIP A, HART, U.S. Senate, Washington, D.C.

DEAR SENATOR HART: I am writing in reply to your letter of September 12, 1973, requesting certain information for the record of your hearings on revision of the patent laws.

For fiscal year 1973, the Patent Office collected $26,119,000 in fees. Expenditures for the same year amounted to $64,536,000. The fee recovery rate, therefore, was approximately 40 percent.

The number of patent applications filed during fiscal year 1973 was 101,395. This number includes applications for plant and reissue patents, but does not inelude design patent applications. The total filing fees paid during the same period for these applications was 9,431,753. The average filing fee, therefore, was approximately $93.

During fiscal year 1973, 69,328 patents were issued; including plant patents and reissue patents but not design patents. The total issue fees paid for these patents was 9,496,493, and the average fee paid was approximately $137.

Our initial, rough estimates are that the Administration's patent revision bill will increase expenses about $5 million annually, and that the average filing and issuance fee under the Administration's bill will total between $450 and $500. We would expect to divide this total in the same proportion as exists today between filing and issue fees. I would emphasize that our cost estimates must be considered as no more than a rough approximation, due to many unpredictable factors. For example, we have estimated that approximately 10 percent of issuing patents will be involved in opposition proceedings. This estimate may or may not be realistic, but only actual experience could provide a more precise figure.

I trust this letter provides the information you desire. I would be pleased to furnish further information or answer any questions you may have. Sincerely,

(S) KARL E. BAKKE,

General Counsel. Mr. BRENNAN. The Department of Justice.

Senator Hart. Let me welcome a friend, a very prestigious professor of law at the University of Michigan.

Professor, if you will identify your associates. Mr. KAUPER. For the record I will also identify myself, Senator. My name is Thomas E. Kauper, Assistant Attorney General of the Antitrust Division, United States Department of Justice.

I am accompanied on my left by Richard Sayler, special assistant to me; on my right Mr. Richard Stern, who is the chief of our Patent Section.

STATEMENT OF THOMAS E. KAUPER, ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. DEPARTMENT OF JUSTICE; ACCOMPANIED BY: RICHARD SAYLER, SPECIAL ASSISTANT, RICHARD STERN, CHIEF, PATENT SECTION

Mr. KAUPER. My prepared statement does not lend itself too well to summary.

I appreciate the opportunity to appear before you today to discuss the important subject of general reform and revision of the patent laws, title 35, United States Code. S. 1321, the Patent Reform Act of

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