1. THE STATE OF THE PATENT SYSTEM BACKGROUND FOR RULE PROPOSALS Los Angeles Intellectual Property Law Association “Washington and the West” Conference January 25, 2006

2. 2 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 FAOMs in FY05 FAOMs in FY05

3. 3 1600170021002600280036003700Total*Design New Applications 1 9/30/2004 55,40263,92371,77897,38077,65156,73865,005508,87818,451 New Applications 1 9/30/2005 62,64472,69776,529115,58594,42570,35483,225586,58024,534 TC Application Inventory 1 “ New Application inventory” is the number of new applications designated or assigned to a technology center awaiting a first action. *Total inventory includes applications not assigned to a particular TC, awaiting processing either pre- or post-examination.

4. 4 Patent Pendency (as of 1/1/2006) Patent Pendency (as of 1/1/2006) Technology Center Average 1 st Action Pendency (months) 1 Average Total Pendency (months) 2 1600 - Biotechnology and Organic Chemistry23.3 33.5 1700 - Chemical and Materials Engineering 20.6 29.8 2100 - Computer Architecture Software and Information Security 33.1 44.8 2600 – Communications31.243.9 2800 - Semiconductor, Electrical, Optical Systems15.025.0 3600 - Transportation, Construction, Electronic Commerce19.8 27.5 3700 - Mechanical Engineering, Manufacturing and Products18.626.6 UPR Total (as of 10/1/2005) 21.830.6 1 “Average 1 st 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.

5. 5 First Action Pendency by Art Areas High Pendency Art Areas Pendency 1 (months) Low Pendency Art Areas Pendency 1 (months) 1640 – Immunology, Receptor/ Ligands, Cytokines, Recombinant Hormones, and Molecular Biology 27.7 1620 – Heterocyclic Compounds and Uses 16.9 1743 – Analytic Chemistry & Wave Energy 30.81752 – Radiation Imagery12.1 2123 – Simulation and Modeling, Emulation of Computer Components 39.7 2125 – Manufacturing Control Systems and Chemical/ Mechanical/Electrical Control 20.0 2617 – Interactive Video Distribution50.4 2651 – Dynamic Information Storage & Retrieval 16.1 2836 – Control Circuits24.32833 – Electrical Connectors8.8 3628 – Finance & Banking, Accounting52.13612 – Land Vehicles12.0 3731 – Surgery: Cutting, Clamping, Suturing 30.93723 – Tools & Metal Working10.9 1 “Average 1 st action pendency” is the average age from filing to first action for a newly filed application, completed during October-December 2005.

6. 6 Inventory by Art Examples High Inventory Art Areas Months of Inventory* Low Inventory Art Areas Months of Inventory* 1614, 1615, and 1617 – Drugs, Bio-affecting and Body Treatment 38-511620 – Organic Chemistry15 1753 – Radiation Imagery34 1734 – Adhesive Bonding and Coating Apparatus 10 2127 – Computer Task Management46 2125 – Manufacturing Control Systems and Chemical/ Mechanical/Electrical Control 10 2611 – Interactive Video Distribution114 2651, 2653 – Information Storage and Retrieval 12 2836 – Control Circuits222831 – Electrical Conductors8 3620 – Business Methods22-1363651 – Conveying12 3731 and 3737 – Medical Instruments, Diagnostic Equipment 38-47 3742 – Thermal and Combustion Technology 8 * 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.

7. 7 Quality of Products – FY 05 Fiscal Year 2005 FY 041600170021002600280036003700 Desig n FY 05 FY 05 Target Patent In-Process Examination Compliance Rate 1* 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 Rate 2* 5.32%4.88%6.46%3.56%2.25%4.43%4.94%6.43%1.6%4.55%4.0% *Compliance and error rates as measured by OPQA. 1 Compliance 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). 2 Patent 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.

8. 8 Technology Centers Rework* Statistics * Rework first actions are those actions that are in a Continuing (CONs and CIPs), RCE, CPA or 129(a) applications (excludes Divisionals).

9. 9 Continuation Filing Rates As of 10/24/2005

10. 10 Continuation Filing Percentage As of 10/24/2005

11. 11 APPEAL PENDENCY FY01 – FY05 Inventory Time to Decision

12. 12 Appeal Conference Initiatives  Pre-Brief Appeal Conference Pilot Program  1296 Off. Gaz. Pat. Office 67 (July 12, 2005)  The USPTO is extending the program until further notice.  Appeal Conferee Specialists Pilot Program

13. 13 Average Number of Claims at Filing

14. 14 Rule Makings on Representative Claims and Continuing Applications  Objectives:  Better focused examination – help us get it right the first time  Create greater finality in examination:  To help the Office turn to new inventions and create public certainty on patent protection

15. HistoricWithout Strategic Plan1,000 Hires & Low AttritsPlus Claims & Continuation RulesPlus Patentability Report