1. Boston Patent Law Association
Joseph Rolla – Deputy Commissioner for Patent Examination Policy

2. Application Filings and Examiner Production
First, I’ll go into our application filing history and production numbers.
This will show you how much work we have coming in the door versus how much work goes out the door.

3. UPR Applications Filed
FY 05 plan 375,080 (5.5% above FY 04)
FY 05 actual 384,228 (8.1% above FY04)
2.6% over plan
This shows you that, in FY 05, we received more than 383,000 applications. The actual filings outpaced our FY 05 model by 1.5%.

4. Production FY 04 FY 05 Target FY 05 UPR1 FAOM2 288,315 297,614 297,287
UPR Disposals3
287,188
295,456
279,345
UPR Production Units4
287,752
296,535
288,316
PCT Production Units5
16,882
22,916
15,147
In all of FY 2005, we did 297,000 first actions.
Note that we did 15,000 PCT production units. Keep in mind that every time an examiner completes a PCT, it represents a U.S. application that was not done.
If you’ll compare the 383,000 received applications with the 297,000 first actions we completed, you’ll see that we added 84,000 applications to our backlog last year alone. We started the year with 500,000 applications in our backlog and finished the year with close to 600,000. This year, our models shows that we will add another 100,000 applications to our backlog next year.
With this type of continued growth, we will soon be looking at 1 million applications in our backlog. Ask yourself whether our current patent system can survive and remain relevant with this level of backlog. With this kind of backlog, it would take anywhere from 7-8 years to get a first-action on a filed application.
1 “UPR” = Utility, Plant, and Reissue Applications.
2 “FAOM” = First Action on the Merits – first action count by an examiner after the filing of an application (does not include restrictions or other miscellaneous actions).
3 “Disposal” = An examiner allowance, abandonment, or disposals following a board decision.
4 “Production Unit” = First action count plus disposal count divided by 2.
5 “PCT” = Patent Cooperation Treaty. PCT applications are processed differently and tracked separately from US National stage applications. For FY 05, 15,147 PU’s is 35,389 processed applications.

5. PENDENCY . . . vs the Backlog
I just told you that, every year, we are adding cases to our backlog. The next slides will show you the effect this backlog is having on our pendency.

6. Patent Pendency (as of 1/1/2006)
Technology Center
Average 1st Action Pendency (months)1
Average Total Pendency (months)2
Biotechnology and Organic Chemistry
23.3
33.5
Chemical and Materials Engineering
20.6
29.8
Computer Architecture Software and Information Security
33.1
44.8
2600 – Communications
31.2
43.9
Semiconductor, Electrical, Optical Systems
15.0
25.0
Transportation, Construction, Electronic Commerce
19.8
27.5
Mechanical Engineering, Manufacturing and Products
18.6
26.6
UPR Total (as of 10/1/2005)
21.8
30.6
Average pendency represents a backwards look from the applications that were completed in the last quarter of FY 05. So, for example, in 2100, the applications completed in the last quarter of 05 represent applications that were filed 32.7 months earlier.
Note that 2100 and 2600 have the highest average first action pendency. This are also the areas of highest growth and the fastest-moving technology areas that can least afford this kind of delay. By the time an examiner works on an application in these areas, the technology is no longer current. Also, there is the risk for our applicants that the technology may have already peaked and become obsolete before we even look at their applications. This represents a very real concern to our inventors in these areas.
1 “Average 1st action pendency” is the average age from filing to first action for a newly filed application, completed during October-December 2005.
2 “Average total pendency” is the average age from filing to issue or abandonment of a newly filed application, completed during October-December 2005.

7. First Action Pendency by Art Areas
High Pendency Art Areas
Pendency1 (months)
Low Pendency Art Areas
1640 – Immunology, Receptor/ Ligands, Cytokines, Recombinant Hormones, and Molecular Biology
27.7
1620 – Heterocyclic Compounds and Uses
16.9
1743 – Analytic Chemistry & Wave Energy
30.8
1752 – Radiation Imagery
12.1
2123 – Simulation and Modeling, Emulation of Computer Components
39.7
2125 – Manufacturing Control Systems and Chemical/ Mechanical/Electrical Control
20.0
2617 – Interactive Video Distribution
50.4
2651 – Dynamic Information Storage & Retrieval
16.1
2836 – Control Circuits
24.3
2833 – Electrical Connectors
8.8
3628 – Finance & Banking, Accounting
52.1
3612 – Land Vehicles
12.0
3731 – Surgery: Cutting, Clamping, Suturing
30.9
3723 – Tools & Metal Working
10.9
This shows you the first action pendency in both high and low pendency areas. Looking again at our high-tech technology centers of 2100 and 2600, the pendency is 4 years and growing.
If you look in the right hand column, you’ll see that the best pendency to first action you can expect from these two technology centers is 2 years, and that is in the relatively low-tech and low-growth areas of manufacturing control systems and general electrical communications.
It is in the high pendency areas that we are targeting our hiring efforts.
1 “Average 1st action pendency” is the average age from filing to first action for a newly filed application, completed during October-December 2005.

8. Inventory by Art Examples
High Inventory Art Areas
Months of Inventory*
Low Inventory Art Areas
1614, 1615, and 1617 – Drugs, Bio-affecting and Body Treatment
38-51
1620 – Organic Chemistry 15
1753 – Radiation Imagery 34
1734 – Adhesive Bonding and Coating Apparatus 10
2127 – Computer Task Management 46
2125 – Manufacturing Control Systems and Chemical/ Mechanical/Electrical Control
2611 – Interactive Video Distribution
114
2651, 2653 – Information Storage and Retrieval 12
2836 – Control Circuits 22
2831 – Electrical Conductors 8
3620 – Business Methods
22-136
3651 – Conveying
3731 and 3737 – Medical Instruments, Diagnostic Equipment
38-47
3742 – Thermal and Combustion Technology
The previous slides were related to pendency, which is a look backwards from the work we did.
This slide represents the current inventory in technology areas – representing applications in the backlog that have not been worked on yet.
These numbers are calculated by looking at how many applications are pending in an art unit and dividing by the personnel fire power in that unit. These numbers represent how long it will take to get a first action on an application filed today. Look at interactive video distribution for example. If you file an application today, it will not get a first action for 88 months!
These numbers represent the worst-case scenario – if we don’t hire any more examiners over current staff and don’t make any examination efficiency gains through other means.
*The number of months it would take to reach a first action on the merits (e.g., an action addressing patentability issues) on a new application filed in July 2005 at today’s production rate. Today’s production rate means that there are no changes in production due to hiring, attrition, changes to examination processing or examination efficiencies, and that applications are taken up in the order of filing in the given art unit/area. Of course, USPTO is taking aggressive steps to ensure changes that will significantly lower the inventory rates in high-inventory art areas.

9. TC Application Inventory
1600
1700
2100
2600
2800
3600
3700
Total*
Design
New Applications1 9/30/2004
55,402
63,923
71,778
97,380
77,651
56,738
65,005
508,878
18,451
New Applications1 9/30/2005
62,644
72,697
76,529
115,585
94,425
70,354
83,225
586,580
24,534
Overall Pending Applications2 9/30/2004
95,006
105,447
102,440
138,822
137,458
101,097
108,039
809,323
27,599
Overall Pending Applications2 9/30/2005
107,647
120,767
117,728
167,721
159,687
117,045
130,168
932,300
38,104
This shows you the inventory, or backlog, in the different technology centers. As I mentioned earlier, we added more than 80,000 applications to our inventory this year.
Look where the areas of biggest inventory are – again the biggest inventories are in the electrical areas – 2100, 2600, and 2800.
Cases in active prosecution, listed here as pending applications, increased by more than 125,000 last year alone.
1 “New Application inventory” is the number of new applications designated or assigned to a technology center awaiting a first action.
2 “Overall Pending Application inventory” is the total number of applications designated or assigned to a technology center in an active status. Includes new applications; rejected awaiting response; amended; under appeal or interference; suspended; reexams and allowed applications awaiting grant publication.
*Total inventory includes applications not assigned to a particular TC, awaiting processing either pre- or post-examination.

10. (Shared Responsibility)
Patent Quality
(Shared Responsibility)
Share with you the results of our increased quality efforts in place during the second half of FY 05
We put new quality initiatives in place so as to insure we are outputting a better quality product – both intermediate Office actions and final granted patents
As I go through these, understand that we believe that quality is the responsibility of both the Office and the practitioners.
The factory example – products come in the front door and leave the back door. We can make changes internally to insure that the product leaving the back door is the best possible quality possible, but there is a limit to what we can do without your help. We can only achieve maximum overall quality improvements if, in addition to our internal process enhancements, the quality of the products coming in the front door are also improved.

11. Quality of Products – FY 05
Fiscal Year 2005
FY 04
1600
1700
2100
2600
2800
3600
3700
Design
FY 05
FY 05 Target
Patent
In-Process Examination Compliance Rate1*
82.0%
81.7%
82.9%
88.1%
84.7%
90.9%
84.4%
86.6%
94.3%
86.2%
84.0%
Patent Allowance Error Rate2*
5.32%
4.88%
6.46%
3.56%
2.25%
4.43%
4.94%
6.43%
1.6%
4.55%
4.0%
Point out overall quality improvements from FY 04 to FY 05.
At mid-year, the allowance error rate was 5.2% and a massive effort was put in to drive it down in the second half of the year. During the second half of the year, the error rate was reduced to 4%. This is the first time we had met our quality goal in four years. This quality improvement came at a price, however.
Second pair of eyes reviews were conducted of all allowances in the Corps. We decided to put as much resources into this as we could to see how low we could drive the error rate. More than 27,000 hours were put into this initiative. As we look back on the results, we are evaluating the costs and benefits of this approach as well as alternative methods to improve quality in the upcoming year.
You can see our challenge – not only do we need to do more applications, but we also are focusing on doing them better.
*Compliance and error rates as measured by OPQA.
1Compliance is the percent of office actions reviewed and found to be free of any in-process examination deficiency (an error that has significant adverse impact on patent prosecution).
2Patent allowance error rate is the percent of allowed applications reviewed having at least one claim which is considered unpatentable on a basis for which a court would hold a patent invalid. “Allowance” occurs before a patent is issued, so these errors are caught before any patent is actually granted.

12. Re-Work
Next I want to discuss re-work which represents applications we work on that have already received a full examination earlier.
In effect, like with PCTs, these applications represent time examiners spend doing something other than working on a new application.

13. Technology Centers Rework* Statistics
This slide shows you the re-work stats by technology center. These numbers represent the number of continuations, CIPs, RCEs and CPAs completed by a technology center. Divisional applications are not included as true divisionals which claim a different invention than the parent do not represent “re-work”.
Note that the percentage of re-work done in each TC has increased since Overall, 28.3% of the applications done by examiners last year were re-work. Each one of these applications that were done represent a brand new case that was NOT done. Without this re-work, 100,000 additional new cases would have been completed last year. We would not have added the 80,000 applications to our backlog.
Look at 1600’s numbers % of applications completed in that Technology Center were re-work. There are primary examiners in this technology center who do only 1 or 2 new cases in an entire quarter. This is not an efficient system.
We need to move to a system where applications are filed, prosecuted and disposed of quickly. If the examiner and the applicant reach an impasse, the case moves through the appeals process for quick disposition.
There’s no place else in the world where you can try your case over and over and over until you get the result you want. JPO and EPO don’t allow this kind of continuation practice.
* Rework first actions are those actions that are in a Continuing (CONs and CIPs), RCE, CPA or 129(a) applications (excludes Divisionals).

14. Hiring and
Retention
In order to issue more patents and complete more production units than we did in FY 05, we are placing a lot of emphasis into hiring and retaining large numbers of new examiners. This is particularly true in those areas with the greatest backlog and pendency issues.

15. Hires and Attritions 1600 1700 2100 2600 2800 3600 3700 Corps Design
FY 04 Hires 75 35
115
116 31 26 45
443 15
FY 04 Attritions 30 58 82 43 39
336 4
FY 05 BOY Examiner Staff
417
440
563
658
742
422
439
3681 72
FY 05 Hiring (10/1/05)
101
225
169
184 91
131
959 19
FY 05 Attrits (10/1/05) 42 93 92 54 55 50
425 10
FY 05 Hiring Goal
100
200
150
160 90
125
860 20
New Hires as a Percent of Examiner Staffing in the TC
24%
13%
40%
26%
25%
22%
30%
Last year, we hired 978 new utility and design examiners
This number shows that examiners under one year represent 26% of our examining staff. Imagine the resources needed to hire, train, retain, and make productive 25% of your staff in a single year. How many of your firms would be able to match that kind of growth?
In the next two years, we plan on hiring 2000 more examiners. That represents another 45% growth in our workforce.
If you look at the blue line, you’ll see that the majority of our hires were targeted in our electrical and biotechnology areas – our areas of highest growth.
2100, the technology center dealing with computer-related inventions, has 40% of its current staff under one year. This is also an area that is very low in senior examiners that can assist with the mentoring and training of the new examiners. You can see how this is stretching our resources and impeding our ability to absorb this level of new hires.

16. Stats and Stuff

17. Total Continuation Filing Rates
FY 03 filings
FY 04 filings
FY 05 expected filings
For CPAs and RCEs, 81% of the total filed are first continuations – 19% are second or subsequent.
For straight continuations, 79% of them are first CONs, 21% are second or subsequent.
*Straight Continuations 37 CFR §1.53 (b)(1) – No Divisionals or CIPs – as of 10/23/05

18. Distribution of Independent Claims at Filing
Here is an interesting slide which shows the number of independent claims in applications at filing.
What this shows is that 70% of you live with filing 3 or fewer independent claims.
93% of you live with filing 6 or less.
The number of applicants who file 11 or more are relatively few. However, some of these applicants abuse the system by filing extraordinarily high numbers of independent claims which place a severe burden on the examination process.
However, this chart shows that this behavior is not typical of the way the majority of you conduct your prosecution.

19. Distribution of Total Claims at Filing
This shows you the distribution of the total number of claims are being filed.
Note that 59% of you live with filing 20 or fewer claims.
21% of you live with filing a total number of claims fewer than 10.
However, a small number of applicants place a severe burden on our system by filing a huge number of claims. In FY2004, 7% of the applications filed presented 23% of the total number of claims to be examined.

20. Total Claims at Filing and Issue
This graph represents a summary of the previous slides.
14 years ago, the average number of claims submitted at filing was 14. Now, the average number of claims has increased to 24.
While this does not sound like much, 10 additional claims over 400,000 applications represents an additional 4 million claims being examined by examiners today.

21. Distribution of the Number of References Cited in Applications
This last slide shows a distribution of the numbers of references cited in applications.
85% of you live with fewer than 20 references.
We have some applicants, however, who abuse the system by filing boxes of references.
In one example in biotechnology, more than 700 references were submitted with a single application. Of this 700, some of them pre-dated the relevant technology altogether, and others were for a completely irrelevant and mutually exclusive technology.
Why were 700 references placed before the examiner?
How can we expect a thorough and efficient examination with this many references?
This chart shows that the majority of you do not practice this way. However, those that do place a severe burden on the examination process.

22. Pendency Projections

23. Without strategic plan Without funding
Historic
Without Strategic Plan
Without strategic plan
Without funding
Hiring at attrit level only
This shows filings with 6% growth rate. However, in ’05, we had an 8.5% growth in filing.
This models with an attrition level of 8%. However, in ’05, we had a 10.3% attrition level.
Uses lower OT levels (90 hours instead of 100 per examiner)
Adjusted for complexity creep – 2% + ½ + ½ etc.

24. this has things within our control
Historic
Without Strategic Plan
1,000 Hires & Low Attrits
this has things within our control
Hiring 1000 examiners per year (SEED to train 50% of hires this year – other 50% traditional SPE time-intensive 1-on-1 method)
Decreased attrition rate – ’06 10%, 9, 8, 7, 7, 7 (retention team, contractor)
new hires – 19% leave in 1st year, 8% in their 2nd year, 7% in the 3rd year
OPM assessment tool being developed to hire better
PCT outsourcing
Also shows filings at 6% growth
Also shows decreased OT usage
Also adjusted for complexity creep

25. Claim limitations – overall 5% efficiency gain – representative claims
Historic
Without Strategic Plan
1,000 Hires & Low Attrits
Plus Claims & Continuation Limits
The blue lines our risky proposal to get an efficiency gain from the Corps. This has never been done before. We can ask for these efficiency gains by making examination more focused.
Claim limitations – overall 5% efficiency gain – representative claims
½ ’06, full ’07
Limit continuations – 5% reduction in filings
Same as last graph:
1000 hires per year
Decreased attrition
Outsourcing savings
Filing growth 6%
Decreased OT
Adjusted for complexity creep

26. Plus patentability report
Historic
Without Strategic Plan
1,000 Hires & Low Attrits
Plus Claims & Continuation Limits
Plus Patentability Report
Plus patentability report
Based on: 15% efficiency gain beginning in ’07
10% drop in inventory
10% reduction in filings
This is a total of 20% efficiency gain – must be negotiated with POPA
Patentability reports to include: where search was conducted using search grids
Same as last graphs:
1000 hires per year
Decreased attrition
Outsourcing savings
Filing growth 6%
Decreased OT
Adjusted for complexity creep

27. Dashed lines show filings at a growth rate higher than the 6% modeled in the solid lines
05/06 – 8%
07 – 15.6%
08/09 – 8.7%
10 – 12.3%
11 – 11.2%

28. You Can’t Hire Your Way Out of This One
Production
You Can’t Hire Your Way Out of This One

29. ’05 filings – approx 381,000
’06 filings – approx 409,000 presuming 7% growth rate
’07 filings – approx 450,000 presuming 7% growth rate
’08 filings - approx 482,000 presuming 7% growth rate
’09 filings – approx 515,000 presuming 7% growth rate
’10 filings – approx 550,000 presuming 7% growth rate

30. Markush Practice

31. A cell adhesion protein of formula (1),
A-(B)-(C)-(D)n-E
or a pharmaceutically acceptable derivative thereof , wherein . . .

32. Accelerated Examination Would You Like Your Patent
In 12 Months ?!?

33. Accelerated Examination
Features of the proposed revision:
Move to the head of the line
Final Disposition within 12 months
Program for expedited Issuance of Patents
e-file application and all follow on papers
Single Invention
Limited Number of Claims
Patentability Report
Possible Interview before 1st Action
Shortened Statutory Period
Enforcement of special status in the Corps

34. Contact Information
Joseph Rolla
Deputy Commissioner for Patent Examination Policy
Phone: