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In a wide-ranging discussion with reporters about his first year as director of the U.S. Patent and Trademark Office, David Kappos discussed the application backlog, controversial parts of the agency’s three-track patent processing proposal and agency funding. Kappos, who was confirmed by the U.S. Senate for his post on Aug. 7, 2009, said the agency is chipping away at the huge application backlog. The total is down from “737,000 and change in July to [about] 728,000 at end of August … We’re pressing very hard to try to get that backlog under 700,000. We think we’re in the hunt and can get that done,” Kappos said. He also spoke about the three-tier processing proposal, which would allow applicants to pay for faster processing, opt to delay processing for up to 30 months or choose regular processing. The patent community has criticized an agency provision that would delay PTO review of applications first filed at a foreign agency until the foreign agency completes its review. Kappos acknowledged that the foreign filing part of the proposal, and the track that would allow applicants to delay processing, have attracted “a lot of negative reactions.” He said the PTO is reworking that part of the plan and the delayed processing track in advance of issuing a final rule. The PTO is aiming to finalize the plan by the end of October, Kappos said. “I hope we’re being good listeners at the PTO,” Kappos said. “We’re trying to be very responsive situations where the IP community says that’s not a good idea. We’re reworking the proposal based on comments.” The Intellectual Property Owners Association (IPO), for example, is against allowing applicants the option to delay processing of their applications, said executive director Herb Wamsley. “There’s a strong public interest in having all patents granted or denied reasonably promptly in order to create certainty about the status of legal rights,” Wamsley said. As far as funding goes, Kappos said the agency’s fiscal year 2011 budget request is $2.322 billion. The number includes $2.098 billion in fee collections and a proposed interim fee increase that would raise $224 million. The agency estimates that those numbers would enable it to hire 1,000 patent examiners each year during fiscal year 2011 and fiscal year 2012. “If we were to get a lot of funding we’d be able to accelerate information technology improvements and accelerate hiring and other initiatives,” Kappos said. The PTO achieved a funding victory on Aug. 10, when President Barack Obama signed a law giving the agency the authority to spend an additional $129 million its 2010 fees. The agency’s fiscal year 2010 budget was $1.887 billion before the supplemental appropriation. Kappos also addressed the agency’s efforts to cut requests for continued examination (RCEs), which applicants can seek after a patent examiner’s final rejection of an initial patent. Kappos acknowledged that RCEs spiked 29.1% in fiscal year 2008, 23.1% in fiscal year 2009 and 9% in the current fiscal year through the end of August. According to the PTO’s Web site, there were 114,183 RCE applications filed in the current fiscal year through July 12, compared with 138,459 filings for all of fiscal year 2009. “It’s another one of those hard problems,” Kappos said. He credited the PTO’s overhaul of the patent examiner evaluation system last October as helping reduce the rate of growth for RCEs. The revamped system gives examiners more total time to process applications, more time for examining applications filed for the first time and fewer credits for working on RCEs and other types continuing patent applications. “I think all those changes which we made with the [examiner] count system, are upstream changes and RCE filing rates are downstream consequences,” Kappos said. “It’s taking a period of months. I hope it will start heading downward.” The problem with the examiner count system changes is that they still give examiners some credit for working on RCEs, so there’s still incentive to issue a final rejection so the applicant will file an RCE, said Harold Wegner, a patent partner in the Washington office of Foley & Lardner. “They compromised with the [patent examiners'] union instead of getting rid of it,” he said. “As long as there’s substantial RCEs and continuing application flow per year, there will never be a significant reduction in the backlog.” Changing the production standards for examiners was a major accomplishment, but more must be done, said IPO’s Wamsley. “The percentage of applications that are RCEs is still at a very high level,” Wamsley said. “Kappos had an important accomplishment in getting some modification made but the job is not complete.” Restoring the intellectual property community’s confidence in the agency through his leadership and the team he’s brought in is probably Kappos’ No. 1 achievement, said Q. Todd Dickinson, executive director of the American Intellectual Property Law Association (AIPLA). Last November, for example, the PTO hired IPO’s former director of government relations Dana Colarulli for its Office of Governmental Affairs. Any qualms observers may have had about Kappos’ toughness and political skills were laid to rest when the PTO got the additional $129 million, Dickinson said. Kappos personally went to the Office of Management and Budget and Capitol Hill to press for the funding, Dickinson said. “He figured out how the lever of political power works and he got it done,” Dickinson said. “He had an agency in crisis and there was money being diverted [from its fee collections to other programs] that is rightfully theirs. In Washington, accomplishing something like that, that’s the proof that you know what you’re doing.” Looking ahead, Kappos needs to get patent reform accomplished and put a permanent end to fee diversion, Dickinson said. A March amendment to the Patent Reform Act of 2009, S.515, sponsored by Sen. Patrick Leahy (D-Vt.) includes a provision that would allow the PTO to set fees. AIPLA supports the amendment, but wants PTO fee-setting linked to a permanent end to diversion of collected fees to other agencies. IPO opposes giving the PTO fee-setting authority. “The next thing we’d like to see done is to get patent reform through Congress and to permanently secure funding for the office,” Dickinson said. IPO’s Wamsley said the PTO is re-energized under Kappos and is experimenting with ways to cut the backlog, but it’s “still at a near record high level.” The PTO has tested various pilot programs since last summer and expanded its commitment to two since May. In May, the agency expanded two pilot programs rolled out last year to cut the backlog. One opened the so-called application exchange program, which allows inventors to get fast-track treatment of one application if they abandon another pending one, to all applicants. The November pilot was open to inventors from small organizations. Also in May, the agency also expanded its December pilot to fast-track green-technology patent applications. In a third May innovation, the PTO eliminated the fee for “patent prosecution highway” petitions. The PTO has signed numerous so-called highway agreements with foreign patent agencies since 2006. The agreements allows applicants who obtain a ruling on at least one claim in a patent application submitted to one participating agency to request that other participating agencies fast-track examination of the patent.

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