Apple Inc. v. Samsung Electronics Co. Ltd. et al

Filing 167

Declaration of NICHOLAS P. GODICI IN SUPPORT OF SAMSUNG'S OPPOSITION TO APPLE'S MOTION FOR PRELIMINARY INJUNCTION filed bySamsung Electronics America, Inc., Samsung Electronics Co. Ltd., Samsung Telecommunications America, LLC. (Attachments: #1 Exhibit 1, #2 Exhibit 2, #3 Exhibit 3, #4 Exhibit 4-1, #5 Exhibit 4-2, #6 Exhibit 5, #7 Exhibit 6, #8 Exhibit 7, #9 Exhibit 8-1, #10 Exhibit 8-2, #11 Exhibit 8-3, #12 Exhibit 8-4, #13 Exhibit 8-5, #14 Exhibit 8-6, #15 Exhibit 8-7, #16 Exhibit 9, #17 Exhibit 10, #18 Exhibit 11, #19 Exhibit 12-1, #20 Exhibit 12-2, #21 Exhibit 12-3, #22 Exhibit 12-4, #23 Exhibit 13, #24 Exhibit 14)(Maroulis, Victoria) (Filed on 8/22/2011) Modified on 8/29/2011 cannot link entry-opposition has not been efiled (dhm, COURT STAFF).

Exhibit 6

A Report of the
NATIONAL ACADEMY OF
PUBLIC ADMINISTRATION
for the United States Congress and the
United States Patent and Trademark Office

August 2005

U.S. PATENT AND TRADEMARK
OFFICE: TRANSFORMING TO
MEET THE CHALLENGES OF THE
21ST CENTURY

Panel
Thomas H.Stanton, Chair*
Marilu Goodyear*
Bernard Ross*
Daniel L. Skoler*
Charles Van Horn
* Academy Fellow

Officers of the Academy
Valerie A. Lemmie, Chair of the Board
G. Edward DeSeve, Vice Chair
C. Morgan Kinghorn, President
Jonathan D. Breul, Secretary
Howard M. Messner, Treasurer

Project Staff
J. William Gadsby, Vice President, Academy Studies
Terry F. Buss, Responsible Staff Officer
Elaine L. Orr, Project Director
Dan Maceda, Project Advisor
Laurie J. May, Senior Project Advisor
Harry G. Meyers, Project Advisor
Christine A. Mooney, Research Associate
Sherrie Russ, Project Analyst
Kenneth Ryder, Senior Analyst
Martha S. Ditmeyer, Senior Program Associate

The views expressed in this report are those of the Panel. They do not necessarily reflect the
views of the Academy as an institution.
National Academy of Public Administration
1100 New York Avenue, N.W.
Suite 1090 East
Washington, DC 20005
www.napawash.org

First published August 2005
Printed in the United States of America
ISBN 1-57744-117-6
Academy Project Number: 2041-000

ii

FOREWORD

The U.S. Patent and Trademark Office (USPTO) is a fee-supported, performance-based
organization within the U.S. Department of Commerce that is at the center of the U.S.
intellectual property system. Its patent process affects innovation in the nation as well as the
domestic and global economies. Over the past decade, an increase in the volume of patent
applications and technological advancement have created additional challenges for the agency,
resulting in added time to process patent applications and concerns about the quality of issued
patents.
To help ensure that USPTO is on a path to effectively achieve modernization and meet its
challenges, the House Appropriations Subcommittee on Science, State, Commerce, and Justice
asked the Academy to review the agency’s structure and business processes and to provide
insights on whether and how agency efforts have helped to increase patent quality and decrease
patent pendency. Congress also requested that the Academy examine the extent to which
USPTO has a suitable employee allocation and skill mix. The Panel’s recommendations will
enable USPTO to better meet the needs of the nation and the individual inventor. It is essential
that USPTO have a governance structure that gives it the flexibility to make sound decisions
based on revenue and expenditure projections.
I want to thank Thomas Stanton, who chaired the Panel overseeing this study, for his leadership,
and the other Panel members who contributed substantially to the project. I also commend the
project staff for their research and thoughtful analysis in support of the Panel’s findings and
recommendations. Finally, I would like to express my appreciation to Congress, the Department
of Commerce, USPTO, its stakeholders, and its Trilateral partners in Europe and Japan for
sharing their insights with the Academy.
We hope that the Panel’s findings and
recommendations have practical application and help USPTO meet the challenges that lie ahead.

C. Morgan Kinghorn
President

iii

iv

TABLE OF CONTENTS

FOREWORD................................................................................................................................ iii
ACRONYMS .............................................................................................................................. xiii
EXECUTIVE SUMMARY ...................................................................................................... xvii

CHAPTER 1: BACKGROUND ................................................................................................. 1
USPTO Mission, Strategic Plan, and Organization Structure .................................................. 1
Organization Structure ........................................................................................................ 3
Budget, Human Resources and Culture .................................................................................... 4
Strong Organizational Culture ............................................................................................ 8
Input From Stakeholders........................................................................................................... 9
Patent System and Work Process............................................................................................ 11
Changes in Patent Workload Over Time ................................................................................ 12
Information Technology to Support Patent Operations .......................................................... 13
Inspector General Examines Management Systems ............................................................... 14
Impact of the Changing External Environment ...................................................................... 15
Impact of Federal Court Structure .................................................................................... 16
Changes in What Could be Patented................................................................................. 17
Themes in External Studies of the Patent System .................................................................. 18
Federal Trade Commission Examines Competition and Innovation ................................ 20
National Academy of Sciences Recommends Reforms.................................................... 22
Continuing Visibility for NAS and FTC Reports ............................................................. 22
Scholarly and Media Articles............................................................................................ 23
Legislative Issues .................................................................................................................... 24
Bills Proposed in 2005 ...................................................................................................... 25

v

Work With Other Nations and International Organizations ................................................... 27
Scope and Methodology ......................................................................................................... 29
Road Map to the Report.......................................................................................................... 31
Pendency and Resources................................................................................................... 31
Quality............................................................................................................................... 31
Workforce ......................................................................................................................... 31
Human Capital System ..................................................................................................... 31
Management Issues........................................................................................................... 32
Structure of the Organization............................................................................................ 32
Other Patent Offices.......................................................................................................... 32
Summary Conclusions ...................................................................................................... 32

CHAPTER 2: PATENT PENDENCY AND THE POTENTIAL TO REDUCE IT............ 33
Steps in the Patent Prosecution Process.................................................................................. 33
Pendency and Workload ......................................................................................................... 35
Variations in Pendency and Workload among TCs.......................................................... 36
Increased Complexity in Patent Applications................................................................... 39
Fee Availability and Its Impact on Staffing Levels and Pendency......................................... 40
Simulating the Impact of Fee Availability on Achieving Pendency Targets.................... 41
Consistent Hiring is the Key to Reducing Pendency and Maintaining
Desirable Pendency..................................................................................................... 45
Fee Availability in the Context of Federal Budgeting ...................................................... 47
Conclusions and Recommendations: Impact of Fee Availability on Staffing
Levels and Production................................................................................................. 48
Pendency and Non-Resource Issues ....................................................................................... 49
Reclassification ................................................................................................................. 49
Continuations .................................................................................................................... 50
Conclusions and Recommendations: Pendency and Non-resource Issues ...................... 52
Outsourcing the Search ........................................................................................................... 53
Search and Examination in JPO and EPO ........................................................................ 54
USPTO’s Outsourcing Pilot.............................................................................................. 56
Views of USPTO, Stakeholders, JPO ............................................................................... 57
Conclusions and Recommendations: Outsourcing the Search......................................... 58

vi

CHAPTER 3: INITIATIVES TO IMPROVE PATENT QUALITY ................................... 61
Statutory Criteria for Issuing Patents...................................................................................... 61
Concerns About Patent Quality .............................................................................................. 62
USPTO’S Quality Data........................................................................................................... 63
21ST Century Strategic Plan Patent Quality Initiatives.......................................................... 65
Conclusions and Recommendations on Strategic Plan Quality Initiatives....................... 69
Reviews of primary examiners work/recertifying primary examiners ............................. 70
Second-pair-of-eyes review .............................................................................................. 70
Evaluate search quality as part of the reviews .................................................................. 70
Survey practitioners on specific applications ................................................................... 70
Enhance the reviewable record ......................................................................................... 71
Certification of searching authorities/outsourcing............................................................ 71
USPTO Proposes A New Post-Grant Review Process ........................................................... 71
Conclusions and Recommendations: Post-Grant Review................................................ 75

CHAPTER 4: FINDING AND RETAINING THE BEST WORKFORCE.......................... 79
Staffing Growth Eroded by Attrition ...................................................................................... 79
Reasons for Entry-Level Attrition .................................................................................... 82
USPTO Actions to Improve Hiring and Reduce Attrition................................................ 82
What Other Organizations Do to Recruit and Retain Top Quality People ....................... 86
Comparisons to EPO and JPO .......................................................................................... 87
Conclusions: Staff Growth Eroded by Attrition .............................................................. 88
Recommendations: Staff Growth Eroded by Attrition .................................................... 89
Developing and Managing the Workforce.............................................................................. 90
Staff Development ............................................................................................................ 90
Executive Talent ............................................................................................................... 93
Challenges in the Supervisory Ranks ............................................................................... 94
Conclusions: Developing and Managing the Workforce................................................. 96
Recommendations: Developing and Managing the Workforce....................................... 97
USPTO Awards System.......................................................................................................... 98

vii

Basic Incentive Structure for Patent Examiners ............................................................... 99
Awards .............................................................................................................................. 99
Need for Change—Consultants, Task Forces, and IG Reports ...................................... 100
Outside Critics ................................................................................................................ 101
Employee Perspective..................................................................................................... 102
Management Perspective ................................................................................................ 103
Rewarding Quality .......................................................................................................... 104
Rewarding Production and Pendency Reduction............................................................ 104
Group Awards................................................................................................................. 105
Conclusions: USPTO Awards System............................................................................ 106
Recommendations: USPTO Awards System................................................................. 107
USPTO Employee Relations................................................................................................. 107
Employee Performance................................................................................................... 108
Employee Conduct.......................................................................................................... 111
Conclusions: USPTO Employee Relations..................................................................... 111
Recommendations: USPTO Employee Relations........................................................... 112

CHAPTER 5: The HUMAN CAPITAL PROGRAM .......................................................... 115
Flexibilities ........................................................................................................................... 115
Key Practices in Using Flexibilities................................................................................ 115
Most Effective Flexibilities............................................................................................. 116
Human Capital Assessments and Plans .......................................................................... 117
Status of Recommendations in the Strategic Workforce Restructuring Plan ................. 118
OPM Flexibilities............................................................................................................ 119
Areas Where USPTO Has Used These or Other Flexibilities ........................................ 121
USPTO Labor-Management Relationship............................................................................ 122
Collective Bargaining ..................................................................................................... 123
POPA Leadership, Structure, and Focus......................................................................... 124
Conclusions: Managing Today's Human Capital Program............................................ 125
Recommendations: Managing Today’s Human Capital Program ................................. 126
A Human Capital System for Tomorrow.............................................................................. 128
Background on the Federal Civil Service System .......................................................... 128
More Flexible Systems within Title 5............................................................................. 130
Labor-Management Relations Provisions in DOD and DHS Personnel Systems .......... 133
Conclusions and Recommendations: A Human Capital System for Tomorrow ........... 135

viii

CHAPTER 6: VARIED LEVELS OF MANAGEMENT SUCCESS ................................. 139
Goals and Results.................................................................................................................. 140
Conclusions and Recommendations: Goals and Results ................................................ 141
Organizational Culture.......................................................................................................... 141
Conclusions and Recommendations: Organizational Culture ........................................ 144
Technology Systems and Mission Needs ............................................................................. 146
Organizational Agility .......................................................................................................... 148
New Workspace Designed to Meet Multiple Needs............................................................. 149
Need for Strategic Internal Assessment Capability .............................................................. 150
Conclusions and Recommendations: Strategic Internal Assessment Capability........... 151
Coordinating Management Activities ................................................................................... 152
Potential to Integrate Management ................................................................................. 153
Conclusions and Recommendations: Coordinating Management Activities.................. 154
Stakeholder Communication................................................................................................. 155

CHAPTER 7: THE GOVERNANCE STRUCTURE........................................................... 157
USPTO’S Current Organizational Structure......................................................................... 157
The Other PBO ............................................................................................................... 159
Corporate Structure in the Federal Government................................................................... 160
Prior Efforts to Establish USPTO as a Corporation.............................................................. 161
Key Legislative Issues in Establishing USPTO as a Government Corporation ................... 162
Governance and Management......................................................................................... 163
Conclusions and Recommendations: Governance Structure ............................................... 164
Recommendations: Governance Structure........................................................................... 166

ix

CHAPTER 8: WORKING IN AN INTERNATIONAL ENVIRONMENT....................... 169
Trilateral Cooperation as the Working Mechanism.............................................................. 169
What the Offices Can Resolve Among Themselves............................................................. 170
Trilateral Web Site.......................................................................................................... 170
Trilateral Patent Network................................................................................................ 170
Shared Search Information ............................................................................................. 171
Potential to Accelerate Work Sharing................................................................................... 174
Classification Harmonization.......................................................................................... 176
Examiner Exchange ........................................................................................................ 178
Conclusions: Potential to Accelerate Work Sharing...................................................... 179
Recommendations: Potential to Accelerate Work sharing ............................................ 180
Harmonization Issues Requiring Legislative Intervention ................................................... 180
Conclusions: Harmonization Issues Requiring Legislative Intervention........................ 181
Recommendations: Harmonization................................................................................ 182

CHAPTER 9: CONCLUDING PANEL OBSERVATIONS................................................ 183

TABLES AND FIGURES

Table 1-1. Annual New Obligations, FYs 2000-2006 .................................................................. 5
Figure 1-1. USPTO Organization Chart ....................................................................................... 5
Table 1-2. Patent Staffing Budget Authority and FTE, FYs 2003-2006 ..................................... 6
Table 1-3. USPTO Spending and Budget Requests: Patent Operations , FY 2004-06 ................ 7
Table 1-4. The Patent Prosecution Process ................................................................................. 11
Figure 1-2. Calendar Year Trends in Patent Applications, Allowances, and First
Actions on the Merits ............................................................................................................. 12
Table 1-5. Principal Recommendations of Panels and Institutions Studying
the Patent System ................................................................................................................... 21
Figure 1-3. Applications in USPTO, JPO, and EPO, 1995-2004 and Requests for
Examination in JPO, 1995-2004 ............................................................................................ 28
Table 2-1. Status of Utility, Plant, and Reissue (UPR) Applications by Technology Center .... 37
Table 2-2. FY 2005 Pendency as of April 1, 2005 ...................................................................... 38
Figure 2-1. Historical and Simulated Impacts of Additional Staffing Resources
on First Action Pendency ....................................................................................................... 43
Figure 2-2. Historical and Simulated Impacts of Additional Staffing Resources

x

Table 2-3.
Table 2-4.
Table 3-1.
Table 3-2.
Table 3-3.
Table 3-4.
Figure 4-1.
Figure 4-2.
Table 4-1.
Figure 4-3.
Figure 7-1.
Table 8-1.

on Examiner Work Years ........................................................................................ 44
Model’s Estimates of Hires Needed to Achieve First Action Pendency,
Actual Hiring, and Attrition .................................................................................... 46
Examiner Productivity by Grade and TC, Examiner Hours per Production Unit ... 46
USPTO’s Quality Data ........................................................................................... 64
Patent-related Quality Initiatives in The 21st Century Strategic Plan .................... 66
Knowledge, Skills, and Abilities-Related Initiatives in
The 21st Century Strategic Plan ............................................................................. 69
Comparison of Different Proposals for a Post-Grant Review Process ................... 73
Years of Service for Utility/Design Examiners, Onboard as of 4/30/05 ................ 80
USPTO Patent Attrition Rates,: FY 2000-04 .......................................................... 81
Recruitment Bonuses for Patent Examiners, FY 1998-2003 .................................. 84
Growth in USPTO Workforce and Employee Relations Actions,
FYs 2000-2005 ...................................................................................................... 109
U. S. Patent and Trademark Corporation .............................................................. 168
EPO and JPO Exchanges ...................................................................................... 178

APPENDICES

APPENDIX A: Panel and Staff ................................................................................................. 187
APPENDIX B: Individuals Interviewed or Contacted .............................................................. 189
APPENDIX C: Selected Bibliography ...................................................................................... 195
APPENDIX D: Simulating Additional Resources..................................................................... 207
APPENDIX E: USPTO User Fees Relative to Other Federal Regulatory User Fees ............... 215
APPENDIX F: Data on Examiner Attrition............................................................................... 225
APPENDIX G: Federal Agency Tailored Recruitment Programs............................................. 231
APPENDIX H: Japan Patent Office and European Patent Office Work Processes and
Background Information....................................................................................................... 233
APPENDIX I: Information on Utilization of Satellite Facilities ............................................... 253
APPENDIX J: EPA's Human Capital Innovation Fund Program.............................................. 255
APPENDIX K: Legal Structure of a Proposed U.S. Patent and Trademark Corporation ......... 257
APPENDIX L: Patent Cooperation Treaty ................................................................................ 259
APPENDIX M: Harmonization Issues Requiring Legislative Intervention .............................. 261
APPENDIX N: List of Recommendations ................................................................................ 267

xi

xii

LIST OF ACRONYMS
ABA
ACEPO
AFGE
AIPA
AIPLA
AIPN
AIPPI
BEA
BEST
BPAI
CAFC
CAO
CEO
CBI
CBO
CCC
CFO
CHCO
CIO
CIPA
CLE
COBRA
COO
CSRS
CY
DAC
DG
DHS
DOD
DOE
DOJ
DOL
DOT
EAST
EESR
EIP
EPA
EPC
EPI
EPO
ESOP
FACA
FAOM
FCC

American Bar Association
Administrative Council of the European Patent Organization
American Federation of Government Employees
American Inventors Protection Act
American Intellectual Property Law Association
Advanced Intellectual Property Network
International Association for the Protection of Intellectual Property
Budget Enforcement Act
Bringing Examination and Search Together
Board of Patent Appeals and Interferences
Court of Appeals for the Federal Circuit
Chief Administrative Officer
Chief Executive Officer
Critical Behavior Interview
Congressional Budget Office
Commodity Credit Corporation
Chief Financial Officer
Chief Human Capital Officer
Chief Information Officer
Chartered Institute of Patent Agents
Continuing Legal Education
Consolidated Omnibus Budget Reconciliation Act
Chief Operating Officer
Civil Service Retirement System
Calendar Year
Deputy Associate Commissioner
Directorate General
U.S. Department of Homeland Security
U.S. Department of Defense
U.S. Department of Energy
U.S. Department of Justice
U.S. Department of Labor
U.S. Department of Transportation
Examiner Assisted Search Tool
Extended European Search Report
Environmental Intern Program
Environmental Protection Agency
European Patent Convention
European Patent Institute
European Patent Office
Employee Stock Ownership Plans
Federal Advisory Communications Act
First Action on the Merits
Federal Communications Commission

xiii

FCRA
FDIC
FERC
FERS
FFB
FFRDC
FLRA
FPI
FTC
FTE
FY
GAO
GOCO
GCCA
GNMA
GS
GSA
GSE
HHS
HRM
IFW
IFP
IPI
IG
IPC
IPCC
IPO
ISR
IT
IP
IPO
JIPA
JPAA
JPO
KSA
LES
LDRC
LIE
MBA
MOU
MPEP
NAPP
NAS
NASA
NATO
NOA

Federal Credit Reform Act
Federal Deposit Insurance Corporation
Federal Energy Regulatory Commission
Federal Employees Retirement System
Federal Financing Bank
Federally Funded Research and Development Center
Federal Labor Relations Authority
Federal Prison Industries
Federal Trade Commission
Full-Time Equivalent
Fiscal Year
Government Accountability Office
Government-Owned Contractor Operated
Government Corporation Control Act
Government National Mortgage Association
General Schedule
General Services Administration
Government-Sponsored Enterprises
U.S. Department of Health and Human Services
Human Resources Management
Image File Wrapper
Increased Flexitime Program
International Patent Institute
Inspector General
International Patent Classification
Industrial Property Cooperation Center
Intellectual Property Owners
International Search Report
Information Technology
Intellectual Property
Intellectual Property Owners
Japanese Intellectual Property Association
Japanese Patent Attorneys’ Association
Japan Patent Office
Knowledge, Skills, Abilities
Licensing Executives Society
Legal Document Review Clerk
Legal Instrument Examiner
Master of Business Administration
Memoranda of Understanding
Manual of Patent Examination Policy
National Association of Patent Practitioners
National Academy of Sciences
National Aeronautics and Space Administration
North Atlantic Treaty Organization
Notice of Allowance

xiv

NRC
NSF
NTEU
OBRA
OCC
OCP
OFHEO
OGC
OHR
OIG
OIPE
OMB
OPFM
OPM
OPQA
PAIR
PAP
PBGC
PBO
PCT
PE
PGO
PLT
POPA
P-PAC
PPM
PTDL
PTO
PTOEA
RCE
RFP
SCP
SFA
SEC
SES
SL
SME
SPE
SSA
TC
TLO
T-PAC
TWS
ULP
UPR
USC

Nuclear Regulatory Commission
National Science Foundation
National Treasury Employees Union
Omnibus Budget Reconciliation Act
Office of the Comptroller of the Currency
Office of Corporate Planning
Office of Federal Housing Enterprise Oversight
Office of General Counsel
Office of Human Resources
Office of Inspector General
Office of Initial Patent Examination
Office of Management and Budget
Office of Patent Financial Management
Office of Personnel Management
Office of Patent Quality and Assurance
Patent Application Information Retrieval
Performance Appraisal Plan
Pension Benefit Guaranty Corporation
Performance-based Organization
Patent Cooperation Treaty
Patent Examiner
Post Grant Opposition
Patent Law Treaty
Patent Office Professional Association
Patent Public Advisory Committee
Patent Production Model
Patent and Trademark Depository Libraries
Patent and Trademark Office
Patent and Trademark Office Efficiency Act
Request for Continuing Examination
Request for Proposal
Standing Committee on the Law of Patents
Student Financial Assistance
Securities and Exchange Commission
Senior Executive Service
Senior Level
Small and Medium Sized Enterprises
Supervisory Patent Examiner
Social Security Administration
Technology Center
Technology Licensed Organization
Trademark Public Advisory Committee
Trilateral Web Site
Unfair Labor Practice
Utility, Plant, Reissue (Patents)
U.S. Code

xv

USPC
USPS
USPTC
USPTO
USRA
VPN
WEST
WIPO

U.S. Patent Classification
U.S. Postal Service
U.S. Patent and Trademark Corporation
U.S. Patent and Trademark Office
U.S. Railway Association
Virtual Private Network
Web-based Examiner Search Tool
World Intellectual Property Organization

xvi

EXECUTIVE SUMMARY

The U.S. Patent and Trademark Office (USPTO) is a complex "knowledge worker" agency and
the fulcrum of the U.S. intellectual property system. Its mission—grounded in the U.S.
Constitution—is to ensure that the intellectual property system contributes to a strong domestic
and global economy, encourages investment in innovation, and fosters an entrepreneurial spirit.
Under the close scrutiny of its stakeholders, academia, its counterparts around the world,
Congress, and the courts, USPTO must accommodate a burgeoning interest in securing property
rights and changing legal interpretations of patent law. It must also deal with substantial
external volatility—particularly the U.S. economy and funding levels. With all of these
variables and pressure points, USPTO attempts to balance the tradeoffs between enhancing
quality and maximizing production and does so within the context of the federal workplace and
its myriad requirements.
With a $1.7 billion proposed fiscal year (FY) 2006 budget, derived from fees for services
provided, USPTO needs the flexibility to operate with the incentives and acumen of a private
business—with full accountability to Congress and its users. In 1999, to provide USPTO with
added management flexibilities to achieve its mission, Congress designated it as one of only
two federal “performance-based organizations.”
This designation provided additional
flexibilities in budgeting, human resources, procurement, and other administrative areas, but not
those needed for making long-term business decisions. In 2003, USPTO issued a modified 21st
Century Strategic Plan, which described its vision to create a quality-focused, productive,
responsive organization supporting a market-driven intellectual property system. It seeks to
transform itself over the next five years guided by three strategic themes—(1) agility, (2)
capability, and (3) productivity, with quality embedded in each theme.
To help ensure that USPTO is making progress in implementing its strategic plan and is on the
right path to transformation, the Chairman of the House Appropriations Subcommittee on
Science, State, Commerce, and Justice asked the National Academy of Public Administration
(Academy) to examine USPTO’s organization structure and its work processes. The Academy
Panel has reviewed and assessed organizational and human capital structures, the timeliness and
quality challenges USPTO faces in processing patent applications, and whether it has the
appropriate skills needed within its staff.

CORPORATE STRUCTURE AND CULTURE
As a performance-based organization, USPTO has more flexibility than a traditional federal
agency, but it still does not have the flexibility to make long-term business decisions, the
borrowing authority to help meet multi-year capital needs, or access to all of its user fee
revenues. While organizational form does not guarantee efficient operations, one that does not
permit a business-type agency to apply its resources to meet changes in market demand (for
USPTO, the changing volume of patent applications) can create inefficiencies and
disincentives.

xvii

The Panel believes that USPTO’s structure has created such inefficiencies. The demand for
patents is closely tied to the U.S. economy and its fluctuations. A corporate structure would
enable USPTO to respond more quickly and effectively to workload, yet remain accountable to
Congress, the President, and stakeholders.
Accordingly, the Panel recommends that Congress create the U.S. Patent
and Trademark Corporation (USPTC) as a wholly owned government
corporation under the policy direction of the Secretary of Commerce, with
the appropriate authority to borrow, set fees (within parameters Congress
would set), and issue its own regulations.
Past Academy reports have tended to recommend a Chief Executive Officer but not a governing
board for government corporations. There are no stockholders for a board to represent. Also,
some government corporations have not been well-served by large boards. Therefore, the
Academy Panel believes an Advisory Board or Advisory Committee would better serve USPTO
rather than a formal governing board of directors and believes such an advisory body could
provide guidance in terms of stakeholder interests.
A key feature of USPTO’s culture is that its work is far more geared to measurable production
than most federal agencies with a highly educated workforce, and the patent workforce is also
highly unionized. The consequence is that nearly all aspects of work process and workforce
management are negotiated. Given that management and its largest union have been at impasse
for decades, proposed reforms may not be accepted with alacrity even if they make sense,
because they require negotiation. This is not a healthy organizational culture.
The Panel recommends that USPTO develop strategies to make theirs a
more positive, collaborative organizational culture.
These efforts should start with an assessment of the current culture, probably by an external
group, and should involve employees and managers. Top management should continually
reinforce that USPTO is a good employer; its employees receive excellent benefits and enjoy a
very flexible work schedules, and work in state-of-the-art facilities.
It is essential that an organization’s culture support its mission, and a culture cannot be changed
overnight. Cultural change has costs, such as time away from production for focus groups or
training, consultant fees, purchasing materials and allowing staff time to read them, or
producing a video on how the organization plans to institute change. The Panel believes the
long-term benefits will far outweigh the costs.

HUMAN CAPITAL MANAGEMENT SYSTEM
With only 45 percent of the workforce having five years or more of service, USPTO lacks
adequate numbers of seasoned examiners to meet its mission challenges. The current human
capital system will become an increasing liability to USPTO as even larger portions of the

xviii

federal workforce (the Departments of Homeland Security and Defense) implement their new
personnel systems and demonstrate the benefits of human capital agility in the federal
framework. Those agencies with more constraints will likely be less competitive in the
recruitment marketplace.
The Panel believes that the General Schedule pay system impedes USPTO’s ability to attract
and retain employees. With a personnel system tailored to its needs, USPTO could adopt a pay
scale or performance-based pay system that could improve recruitment and reduce attrition,
thus keeping more experienced employees rather than training them for several years before
they leave to oin law firms or other entities as patent attorneys or agents. A performance-based
pay system could also expedite the collective bargaining process.
The new DHS personnel system, with a labor-market based pay structure and performancebased pay increases, is in place. While unions have raised issues about the framework for the
labor-management relationship, the independent Homeland Security Labor Relations Board
provides a valuable vehicle for the quick resolution of all bargaining matters and disputes and
ensures continued focus on agency mission. Aspects of this system could be a model for a
tailored USPTO personnel system. The Panel believes that if, and only if, USPTO receives
congressional authority to develop a more flexible personnel system, it should not be reluctant
to pay rates that are substantially above General Schedule levels. It would be far more efficient,
for the agency and patent applicants, to retain patent examiners rather than to lose half the
number hired within a short period of time, as is the case in most fiscal years.
The Panel therefore recommends that USPTO work with Congress and OPM
to develop an impasse resolution system that permits prompt renegotiation of
work processes and pay rates.

TIMELINESS AND WORK PROCESSES
High performing organizations constantly struggle with using their limited resources efficiently
while at the same time ensuring the delivery of high quality work. USPTO’s strategic plan
acknowledges the importance of issuing high-quality patents in a timely manner. It is a
substantial challenge particularly due to funding volatility and the backlog of patent
applications.
Pendency is the key measure that USPTO uses to assess the timeliness of processing patent
applications. First-action pendency is defined as the time (measured in months) from when an
applicant files an application and USPTO makes a preliminary decision about whether to issue
a patent. Although first-action pendency averages 20.2 months (up from 7.6 months in FY
1993 and 13.6 months in FY 2000), examiners spend only about 20 hours on average reviewing
a patent application. First-action pendency includes time an examiner is not reviewing an
application—primarily time in the queue. Pendency varies by the subject area of the
application. For example, in FY 2004, it was 31.4 months for the communications area, and
15.2 months for the mechanical engineering, manufacturing, and products area.

xix

In part, conditions beyond USPTO’s control—the volatility of the U.S. economy, the
concomitant but sometime unexpected increase in applications, and the consequences of not
having access to all patent application fees—have created today’s massive backlog of patent
applications (more than 830,000, up from 244,646 in 1993). Between FYs 1992-2004, USPTO
did not have access to $741 million of the fees it collected, the preponderance of which ($573
million) came from patent fees. This $741 million represents between 6 and 7 percent of the
total funding available to USPTO during this period. The inherent nature of the appropriations
process prevents some fees from reaching USPTO in unanticipated high-volume years because
USPTO’s budget is set months prior to the start of the fiscal year.
Simulations using USPTO’s patent resource model, which the Academy Panel independently
evaluated before using, show that if USPTO had been given access to these fees and applied all
or most of them to patent staffing, it would have had the ability to consistently hire staff and
FAOM pendency could have remained at an average of 11.4 to 12.6 months. USPTO’s FY
2005 appropriation permits access to most of the patent fees collected, as does the President’s
FY 2006 budget request.
The Panel believes this recent action to allow fuller access to patent fees is a
step in the right direction. To provide more funding certainty, the Panel
recommends that Congress take steps to ensure that all fees USPTO collects
during future fiscal years are available for its use without fiscal year
limitation.
To help USPTO achieve efficiencies in patent processing and possibly reduce pendency,
USPTO initiated, at the direction of Congress, a pilot program to test outsourcing the “search”
function of the patent prosecution process. The search function involves reviewing patent or
non-patent literature for historical references to inventions that are similar to those in a patent
application. USPTO estimates that about 20 percent of the total patent prosecution time would
be saved if another entity conducted the search. The Panel recognizes that pendency cannot be
quickly reduced by hiring new patent examiners. However, it has reservations about
outsourcing, in part because the European Patent Office (EPO) previously had the search and
examination functions done by different staff members and now has combined these functional
responsibilities to achieve greater efficiency. The Japan Patent Office (JPO) began, in the mid1980s, to outsource some searches because statutes did not permit them to hire more staff. JPO
examiners work directly with searchers, most of whom are in a quasi-governmental entity, and
the only searches outsourced are those that can be done in patent literature.
Questions remain about whether private search firms will be attracted to this type of work given
the conflict-of-interest requirements or whether they can perform work at the same level of
quality as USPTO staff. A thorough evaluation of the pilot program will be critical because the
results will have an impact on USPTO’s future business vision, which calls for leveraging
search results from others—foreign patent offices, the patent applicant, and private contractors.
Congress has required such an evaluation.

xx

The Panel recommends, as part of the evaluation of the pilot, that USPTO
examine the potential to outsource the search function to a federally funded
research and development center that would work exclusively for USPTO.
Such centers—which have more flexible hiring authorities—can secure the skills the agency
needs, do not have a proprietary interest in the work, and have little incentive to breach the
principles of confidentiality.
Eliminating unnecessary rework offers another opportunity to increase efficiency in patent
processing. In 2004, 25 percent of examiners' work could be described as rework. Patent law
allows a form of rework known as "continuations," which allow an applicant to request another
review of the same invention that was included in a prior application—even if USPTO rejected
the patent. Continuations provide an applicant a substantial benefit, because this second review
skips the queue and receives the same priority for processing as the original application. This
means other applicants wait longer for USPTO to review their applications. There are valid
uses for continuations, but there are also indications that some applicants use them to “game the
system.” There are varied proposals to limit the use of continuations, either through
congressional action or USPTO rule-making.
The Panel recommends that:
USPTO use every means possible to work with stakeholders to provide
Congress with the necessary information to assist it in identifying the
appropriate number of continuations that should be allowed.
Congress amend patent law by establishing a specific maximum number of
continuations that will be allowed for any patent application.
Finally, worksharing (relying on aspects of the examination process that foreign patent offices
have completed) also has potential to increase efficiencies in processing patent applications and
reducing workload. Currently, USPTO, EPO, and JPO (the Trilateral Offices) annually receive
almost 200,000 applications in common (more than half USPTO's annual volume of new
filings). To achieve the goal of worksharing, the Trilateral Offices need to better understand
each other’s work methods, and each country needs to amend certain provisions of its patent
law to accommodate worksharing. The need for greater collaboration is under discussion and,
to some extent, is the driving force behind current patent law reform efforts. A 2004 National
Academy of Sciences (NAS) report concluded that the United States, Europe, and Japan should
further harmonize patent examination procedures and standards to reduce redundancy in the
search and examination functions and eventually achieve mutual recognition of results.
The Panel strongly supports harmonization and recommends that USPTO
work closely with Congress to provide it with the necessary information to
amend patent laws to achieve harmonization.

xxi

QUALITY
Patent quality is important because USPTO's decision on a patent application has economic
spillover effects to other businesses and, more broadly, to competition and innovation. Thus, it
is important for USPTO to conduct quality reviews during application processing and "get it
right the first time" to prevent issuance of inappropriate patents, with their attendant litigation
costs and adverse technological impacts. For the last 25 years, USPTO has assessed quality by
determining whether the claims in a patent clearly meet the statutory criteria. To make this
assessment, USPTO reviews between two to three percent of approved applications. The error
rate from FYs 2000-2004 varied from a high 6.6 to a low of 4.2 percent. Although the error
rate has remained fairly stable, several studies, congressional hearings, and scholarly articles
report perceptions that patent quality has declined, particularly in areas of technology in which
patents have only recently been granted, such as computer software and business methods.
However, these concerns have not been quantified.
To respond to concerns that patent quality has declined, USPTO implemented several initiatives
to ensure appropriate patentability determinations and improve the knowledge, skills, and
abilities of examiners. The Panel believes many of these are consistent with sound
management practices and acknowledges that additional quality reviews affect timeliness of
application processing.
The Panel recommends that USPTO monitor the results of these reviews to
(1) ensure that their implementation does not result in denying or seriously
delaying patents to deserving inventors, and (2) identify the appropriate
number of reviews needed to sustain quality without adversely affecting
pendency.
In addition to raising concerns about quality, others—the Federal Trade Commission, NAS, and
scholarly articles—recommended various regulatory or legislative reforms to improve quality.
USPTO’s strategic plan includes one such reform—developing a new post-grant review
process—which would reduce the volume of litigation by providing a new administrative
opportunity to rule on patent validity. Though many stakeholders agree on the need for a new
process, they differ on certain design elements. The Panel reviewed four major proposals for
establishing a post-grant review process, including proposed legislation.
The Panel agrees with the provisions of the four proposals for post-grant
review that provide for (1) administrative patent judges conducting the
process and (2) an appeals option to the Court of Appeals of the Federal
Circuit.
The Panel recommends the following with regard to the other elements of a
post-grant review process:
•

The grounds for a challenge be limited to patentability and not
enforceability.

xxii

•

Discovery be limited to cross examination on matters relevant to the
grounds for review.

•

Estoppel from further litigation be limited to those issues raised and
resolved in the proceeding.

•

The patent owner be permitted a single narrowing of any claims,
with the addition of dependent claims on good cause shown.

If a post-grant review system is adopted, the Panel recommends that
USPTO compile data on the costs and benefits of post-grant review and
inter partes reexamination, including the impact on patent quality. These
data should help inform Congress about whether both systems should be
maintained.

WORKFORCE AVAILABILITY AND SKILLS
USPTO places highly skilled knowledge workers—its patent examiners—in a production
environment and measures their performance primarily in quantitative terms. Those who can
work in this environment can receive substantial bonus pay, but the production system may be a
contributing factor to high attrition rates.
In 10 out of 13 years, from FY 1992-2004, for every ten patent examiners hired, five left; many
within the first three years. Because examiners become fully productive only after several
years of USPTO work experience, it is essential to retain staff. USPTO does not systematically
use exit interviews to determine why examiners leave, but senior USPTO staff attribute high
attrition to:
•

Pay in relation to the Washington, DC cost of living

•

The lack of a real-world understanding about the job on the part of recent graduates

•

The difference between the often-isolating and repetitive desk work of USPTO patent
examination duties and those of research or bench science, for which many USPTO
employees have trained

•

The up-front career plans of many new employees, who use this USPTO experience as a
stepping stone to law school, or, if already a lawyer, to a more lucrative private practice
or employment opportunity in intellectual property

The Panel believes that USPTO is on the right track with:
•

Bringing in new human resources management leadership so that USPTO can apply
additional and improved techniques in recruiting and retaining staff

xxiii

•

Developing videos and better recruitment literature to more clearly explain the work to
potential recruits and requiring personal interviews for all applicants to assess their
overall competence and communication skills

•

Using information gleaned from quality reviews of patent examiner work to help
individual examiners improve their work

However, USPTO needs to do more, and the Panel recommends that it:
•

Systematically determine why patent examiners are likely to leave within
their first three years with the office and determine if it can make
accommodations to retain them

•

Develop competitive recruitment programs (a “patent scholars program”)
to raise USPTO visibility on campuses and attract more of the best
graduates

•

Use more of the hiring flexibilities now permitted under its status as a
performance-based organization and general federal personnel regulations

While USPTO cannot hire its way out of its pendency problems in the short term, unchecked
attrition of recent hires is at historical levels and will likely exacerbate the pendency problem
and reduce the quality and consistency of patent determinations. An organization that so
significantly affects innovation in the U.S. and around the globe needs to have and use the
flexibility to deal with these challenges to optimize its performance. The Panel offers several
recommendations to help USPTO deal with the problems of staff erosion, improve morale, and
enhance the retention of experienced and technology-savvy examiners upon whom the system
relies.

xxiv

APPENDIX D

With an additional $503 million devoted to examiner staffing, USPTO would have had:
•
•
•

FA of 12.6 months
Issuance pendency of 22.6 months
416,203 more patent application disposals

To achieve these levels of pendency and patent application disposals, USPTO would have used
5,059 more work years between FY 1992-2004 and had 3,811 examiner staff on board at the end
of FY 2004 instead of 3,681.

STAFF HIRING LEVELS AND PRODUCTIVITY
Table D-1 shows how a consistent flow of additional funds would have affected hiring in each of
the three simulations, and then shows the actual number of hires and attritions. The most
noticeable difference is that hiring patterns fluctuate substantially in the actual hiring column.
Table D-1
Simulations’ Estimates of Hires Needed to
Achieve First Action Pendency, Actual Hiring, and Attrition
1st
simulation’s 2nd simulation’s
estimate of hires estimate of hires
($680 million)
($573 million)
1989
283
283
1990
503
503
1991
350
350
1992
350
350
1993
400
400
1994
400
400
1995
400
400
1996
400
400
1997
400
400
1998
500
400
1999
500
400
2000
500
470
2001
500
500
2002
500
500
2003
500
500
2004
500
500
Total
6,986
6,756
Source: USPTO’s Patent Production Model
Fiscal
year

3rd simulation’s
estimate of hires
($503 million)
283
503
350
350
400
400
400
400
400
400
400
400
400
400
500
500
6,486

Actual
hires

Actual
attrition

283
503
227
227
210
216
283
380
204
728
799
375
414
769
308
443
6,369

219
247
210
166
131
161
162
190
239
259
375
437
263
250
241
336
3,886

Table D-2 shows patent examiner productivity by grade and TC, expressed as hours per
production unit. A production unit is defined as a first action plus a subsequent disposal (not
necessarily for the same application) divided by two. Since a period of months separates first and
final actions on a single application, the actions in this measure do not refer to the same
application.

212

APPENDIX D

The Cost of the First Simulation’s Hiring Approach
The Academy staff asked USPTO to provide an estimate of the costs of increased staffing each
model year. To do this, Patent’s Office of Financial Management incorporated the 2005 pay
schedule into the model and applied it to each year's staffing by grade. Thus, all of the
simulation estimates are expressed in 2005 dollars. Academy staff converted this estimate into a
series of estimates each year expressed in then-current dollars for that year.
To make these conversions, Academy staff obtained the annual federal pay raise adjustments,
including locality pay adjustments from the Office of Personnel Management web site.
Academy staff converted these pay raise adjustments to an annual index with FY 2005 = 1.0000
and multiplied this by the values calculated by the model.
The increased cost depends both on increased staff, as shown in Figure 1, and the annual federal
pay raises. The total increase amounted to $680 million (which included costs of space for new
hires, training, equipment, and overhead).
With the first simulation, USPTO would have had to use some of the $168 million that was not
available to Trademarks to have attained the FY 1996 pendency levels in 2004. Since this could
not have occurred, the second simulation uses the actual amount of funds that was unavailable to
patent operations.

SECOND SIMULATION: ACCESS TO $573 MILLION ADDITIONAL FEES
All of the assumptions for the second simulation were the same as for the first, but the total funds
stipulated as available for staffing were limited to a number close to the $573 million that Patents
did not receive between FY 1992-2004. Assuming USPTO had these additional funds during
this time period, FY 2004 FA pendency would have averaged 11.4 months (compared to the
actual 20.2), and total pendency would have averaged 21.2 months (compared to actual 27.6).
This information is also reflected on Figure D-1.
To achieve these pendency levels, USPTO would have needed 5,954 additional work years
between FY 1992-2004 (see Figure D-2), and would have had on board 4,081 staff in FY 2004
instead of 3,681. USPTO would have prosecuted an additional 478,079 applications between FY
1992-2004.

THIRD SIMULATION: ACCESS TO $503 MILLION IN ADDITIONAL FEES
During any 12-year period, it is unlikely that an organization would use all additional resources
on staffing; some would go to information systems, customer service, quality enhancements, etc.
Thus, the Panel looked at the impact of some number less than the full $573 million and chose
$503 million. Using a number only $70 million less than $573 million assumes that most added
resources would have gone to staffing so as to keep pendency within a reasonable timeframe

211

APPENDIX D

The additional $680 million would also have meant that total pendency would never have
exceeded the FY 1996 level of 20.8 months. In FY 2004, total pendency would have declined to
18.2 months compared to the actual 27.6 months.
To have maintained the FY 1996 pendency levels, USPTO would have needed 7,237 work years
above historical levels over the period FY 1989-2004. With the additional work years, USPTO
could have prosecuted 562,676 additional applications. Figure D-2 shows that, beginning in
1991, additional staff are added in steady increments. Using this hiring approach, at the end of
FY 2004, USPTO would have had 4,308 patent staff instead of 3,681 staff. With the FY 2005
appropriation, USPTO will reach approximately the same level of staffing, but has no chance of
reaching the equivalent pendency levels. Additional staff added in FY 2005 are primarily
intended to prevent the problem from getting worse.
Figure D-2
Historical and Simulated Impacts of Additional Staffing Resources
on Examiner Work Years
4,500

4,000

3,500

Work Years

3,000

2,500

2,000

1,500

1,000

500

0
1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Fiscal Year

Actual

+ $503 Million

Source: USPTO’s PPM

210

+ $573 Million

+ $680 Million

2003

2004

APPENDIX D

Analysis of the First Simulation
The first simulation showed that USPTO would have needed about $680 million of its
unavailable fees to ensure that FA and total pendency would never have exceeded the FY 1996
levels. Figure D-1 shows how these additional staff reduce FA pendency to 8.5 months
beginning in FY 1996. Subsequently, historical pendency generally increases, (with the
exception of FY 2000), while the pendency associated with increased hiring in the model begins
a steady decline. By FY 2004, actual FA pendency was 20.2 months, while FA pendency using
the simulation’s hiring approach is only 7.8 months--61.4% percent below the historical level.
Figure D-1 shows historical FA pendency rates and pendency rates calculated by the three
simulations using the model.
Figure D-1
Historical and Simulated Impacts of Additional Staffing Resources
on FA Pendency
25.0

Months

20.0

15.0

10.0

5.0

0.0
1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Fiscal Year

Actual

+ $503 Million

Source: USPTO’s PPM

209

+ $573 Million

+ $680 Million

2002

2003

2004

APPENDIX D

This appendix presents the results of the three simulations on pendency in terms of months to
achieve the first action (FA), months to final pendency, and additional applications processed as
of 2004. It also examines patent staff productivity based on years of experience with USPTO.

FIRST SIMULATION RESULTS: ACCESS TO SUFFICIENT ADDITIONAL FEES
TO REACH FY 1996 PENDENCY LEVELS
The assumptions for the first simulation were:
•

USPTO would have had no limitations on total fees available for additional staffing.

•

USPTO would have had no fiscal year limitations on its use of funds.

•

USPTO would have hired staff to reduce FA and total pendency to the maximum
extent possible consistent with a sustainable work force (no layoffs, fully employed
and factoring in actual attrition).

•

USPTO would have made full allowance for all associated hiring costs (space,
equipment, training, supervision, overhead, etc.).

Using these assumptions, the Panel requested the historical information and simulations for:
•

FA and total pendency rates

•

level, and average grade of the work force

•

salary and benefit costs of examiner hires and

•

total costs

The methodology was relatively straightforward. The number of hires was the only variable that
changed in the model. The number of hires was increased each year. The model accounted for
actual attrition, promotions, and productivity. Hiring was adjusted in a series of approximations
to produce a pattern of staffing that kept pendency at its FY 1996 level or better.
Because the Panel was aware that worker productivity and pendency vary by technology,
sometimes substantially, the Panel requested the historical data and simulations for each TC.
Patent officials said they could not provide data by TCs before 1998 because the TCs did not
exist. They indicated they could not compile the pre-1998 data to correspond to the subject areas
of the current TCs. Academy staff obtained productivity information by TC from another
source, and these data are presented later in this appendix (Table D-1).

208

APPENDIX D

SIMULATIONS USING THE PATENT PRODUCTION MODEL

The Office of Patent Financial Management, with is under the Commissioner for Patents, uses its
Patent Production Model (hereafter referred to as the model), which it developed during the
1980s, to link staffing, productivity, workload and production, and forecast expected pendency.
Despite its age and primitive format, an Academy staff review determined that the model is a
solid analytic effort. It is USPTO’s primary vehicle for making staffing and program impact
projections.
Per the Panel’s guidance and the Academy staff’s request, USPTO used the model to simulate
the impact on pendency if USPTO had access to all or a portion of the funds that USPTO
collected from FYs 1991–2004. The amount that Congress did not make available to USPTO
during this period had been estimated at $742 million. Because Congress can choose to provide
some of the initially unavailable funds to USPTO, ultimately the collected fees that were
unavailable to USPTO were $741 million.1
Additional analysis showed that, of the $741 million, $573 million comprised unavailable patent
fees and $168 million unavailable trademark fees. To determine the impact on staffing and
pendency, the Panel requested that USPTO simulate the programmatic impact if additional funds
had been available for staffing.2 The Panel had USPTO do three simulations. For each, the
Panel wanted to know the impact on pendency if additional resources been available for
examiner staffing, and what level of staffing would have been needed to achieve given levels of
pendency. The three simulations were:
•
•
•

What amount of spending would have enabled USPTO to maintain 1996 levels of patent
pendency?
What difference would an amount close to $573 million (the funds Patents did not
receive) have made?
What difference would a lesser amount of spending ($503 million) have made?

The first two simulations assume that any additional funding would be efficiently used to expand
patent examiner staffing to meet annual workloads. Moreover, the additional funding would
have been provided throughout the period rather than in one or two large lumps. This allowed
the model to avoid or minimize the development of any workload backlogs. The third simulation
assumed that USPTO might have chosen not to use the entire $573 million on examiner staffing.3
1

Essentially, Congress made a certain dollar amount of fees unavailable for USPTO use each year and then, in
differing amounts over the years, allowed the agency to use some, but not all prior year money for patent and
trademark functions. This made tracking the fee diversions somewhat challenging. The agency used three criteria
to determine the allocation of these carryover funds: (1) requested funding level for each of the program
components; (2) estimate of fees for each program for the current year; and (3) if allowed by Congress, amount of
carryover money available.
2
For this simulation, the number of hires was the only variable that changed to reach or exceed a specific pendency
goal. The model accounted for all attrition, promotions, and productivity. Hiring was not increased beyond the level
that could be funded from the fees.
3
The $503 million chosen for the third simulation was an arbitrary number ($70 million less than total unavailable
patent fees), used to demonstrate a simulation with an amount less than the $573 total patent fees unavailable.

207

APPENDIX D

While on average, it takes about 20 hours to examine a patent application, productivity varies by
TC. Part of variation may stem from differences in application complexity. Typically, the most
senior examiners are at least three times as productive as the most junior, according to USPTO
standards.
Table D-2
Examiner Hours per Production Unit by Grade and TC*
Grade

1600

1700

2100

2600

2800

3600

3700

Corps

15
14

15.7
16.9

12.1
15.0

21.1
22.1

19.7
19.0

11.8
14.6

11.8
14.4

11.2
13.5

13.0
14.5

13
12
11
9
7
5

20.4
25.2
37.5
38.2
66.5
N/A

17.8
21.0
23.9
26.6
52.6
N/A

25.7
29.1
33.1
41.0
59.6
71.0

24.2
28.6
30.2
37.1
51.8
61.8

17.5
20.4
23.0
27.0
36.5
76.1

18.0
23.1
22.3
25.2
50.5
128.5

16.3
19.6
21.4
24.6
41.7
48.0

18.9
21.9
26.3
33.4
52.7
64.7

Source: USPTO, Special Examining Production Report, PALM3180-PR3, 10/06/2004
* USPTO hires very few staff at the GS-5 or GS-7 levels, so production unit hours for these grade levels
represent a small number of PEs.
Note:
1600
1700
2100
2600
2800
3600
3700

Biotechnology and Organic Chemistry
Chemical and Materials Engineering
Computer Architecture, Software & Information Security
Communications
Semiconductor, Electrical, Optical Systems & Components
Transportation, Construction, Agriculture & Electronic Commerce
Mechanical Engineering, Manufacturing, Products & Design

The wide variability in examiner productivity and the uniformly low productivity of junior
examiners suggest that volatility in staffing is likely to result in high costs and low production in
comparison to a steadily growing work force. In 2004, a GS-15/1 examiner was paid 3.6 times
as much as a GS-5/1 entry level examiner, not including overtime and bonuses, but was 5 times
as productive. A GS-12 made 2.2 times as much and was 2.8 times more productive. In general,
it pays to retain workers, if only from a narrow productivity perspective. This argument is
strengthened when one considers the costs of recruitment, hiring, and training, and the fact that
attrition is highest in the entry level grades.

213