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Sometime after the U.S. Congress approves the 2004 federal budget, Capitol Hill will likely get around to addressing the dire situation confronting the U.S. Patent and Trademark Office. The PTO is one of the more neglected federal departments in Washington, D.C. Other government agencies steal from its coffers, patent examiner turnover is high, and the office is notorious for the slow and cumbersome way it does business. At the same time, patent and trademark applications are at record highs. Documentation for the world’s next life-saving medical device or revolutionary business idea could sit on a shelf for years before someone looks at it. No one is more familiar with these troubles than James Rogan, U.S. undersecretary of Commerce for intellectual property and director of the PTO. But he has made a habit of translating misfortune into opportunity. In 1994 Rogan, a former prosecutor and state court judge, won a special election to fill the term of a California state assemblyman who resigned after pleading guilty to bribery. Two years later Rogan ran for Congress and was offered a spot on the House Judiciary Committee when a vacancy opened after Sonny Bono’s death. And after losing the most expensive House race in U.S. political history in 2000, Rogan became director of the PTO, appointed by President George W. Bush. Now Rogan is in the hot seat once again. Under an administration that views more government spending with skepticism, he is lobbying for an extra $163 million for the agency’s $1.4 billion budget. That money would go toward hiring 4,000 new examiners over the next five years, increasing raises for the office’s other staffers, and outsourcing some of the department’s major functions. The PTO’s 21st Century Strategic Plan has made it out of Capitol Hill’s subcommittees and will soon be voted on by both houses. Rogan, 45, met with staff reporter Eriq Gardner to discuss his controversial efforts. Corporate Counsel: What have you personally brought to the table as director of the U.S. Patent and Trademark Office? James Rogan: I had no real background in patents and trademarks beyond my oversight experience as a member of Congress [from 1997 to 2001], but I have a substantial legislative background in intellectual property. So I have found it’s been a good fit. I have also found that having no background in the bureaucratic aspect of it gave me the freedom to think � I hate to use the phrase “outside the box,” � but really to think outside the box when it came time to contemplate restructuring the office in a way that would pass muster in Congress, and allow us to do our mission more efficiently and from a higher qualitative perspective. CC: You have said that the PTO is in “crisis.” Can you explain why? JR: The average pendency [the time a patent application is pending] is over two years. For some of the more critical technology, the more complex technology, it’s easily three, four, and five years. Left unchecked, average pendency will be up in the four- and five-year range by the end of the decade � with critical technologies being off the charts. The backlog is no longer 70,000 [applications], as it was 20 years ago. The backlog is [now] about half a million. By 2008, under the status quo, it’s expected to be at a million. On top of that, the applications that we get today are far more complex, far more technical than anything the U.S. PTO has experienced. That’s not what the patent system was intended to be; it was not intended to be a drag on innovation and technology, it was supposed to be a great boon for it. And when we have the kind of numbers that we’re facing now, we move away from that. And that’s why I use the term crisis. CC: It’s a bit unusual for an agency head to be Chicken Little, isn’t it? JR: I think it’s a very rare thing, from my experience in Washington, to have heads of agencies walking around saying an agency is in crisis. The temptation, of course, is to tell our secretaries and the president and members of Congress that everything is great, we’re doing well, and give us more money. So I don’t know that it’s unique that I’ve been walking around sounding the alarm, but it’s not a common thing that one finds in this town. CC: So is the heart of your 21st Century Strategic Plan about being overburdened and underfunded and needing to deal with the backlog? Or something else? JR: I see it in very simple terms. Too often bureaucracy develops an attitude where the underlying theme is, “You have to come to us to get what you need. We’ll do it on our time frame. We don’t really care about the exigencies of your life and your markets and your needs. Take a number, get in the back of the line.” To the maximum extent that I can move us away from that and inject flexibility and market forces into the PTO, that’s what I’m trying to do with the 21st Century Strategic Plan. CC: To attack the backlog, you plan to hire more patent examiners and raise application fees. Why focus on the volume of patents, when you could solve the pendency problem in other ways, such as by narrowing the types of patents your agency approves? JR: We have tried to make the focus on [the quality of the patents we approve]. If you go back and look at the [Strategic Plan], almost every single one of those initiatives is focused on the quality side, not on the pendency side. In fact, I’ve told Congress that I fully expect pendency to go up a little bit…. A win for us is when pendency creeps up, as it will, and we freeze it and kick it back down to about where we are today. It’s a lot better to have a two-year average pendency than a five-year average pendency. CC: The Intellectual Property Owners Association estimates that for a small entity undergoing an excessively long patent application review, that company or person will pay $5,250 in filing fees when it used to cost about $375. Don’t you think this will deter small inventors and small companies from applying for patents? JR: I think the fee average is about a 10 percent to 15 percent increase…. It’s still the best deal in town. Let me tell you where those inflated numbers come from. Right now, we do the search [the research on prior patents issued], and we do the examination [the judgment of an invention's worthiness to be patented]. We have a big discount for small inventors, and we will still have a big discount for small inventors. But if the search is outsourced…they are not going to have [that portion of the fee] underwritten [by us] anymore. But it isn’t going to be $5,000. I don’t know where they are getting these $5,000 search figures. CC: But there’s no denying that small entities will feel a bigger impact than larger ones, right? JR: Just the opposite. If you are a small inventor with one or two claim applications, and you’re sitting next to a genomic patent filer that has a thousand claims, there is [now] not much of a difference in the fee that you are going to pay versus the fee that megaapplicant is going to pay. It’s the small inventor that is subsidizing the large inventor. The very simple basic premise that we’re trying to inject into the fee structure is right out of Econ 101, Adam Smith’s textbook. The less work you make us do, the less we’re going to charge you. The more work you make us do, the more we’re going to charge you. CC: Some say the fee hike is unnecessary. The American Intellectual Property Association has estimated that about $650 million of filing fees collected in the last five years has been redirected from the PTO to other agencies within the U.S. government. What do you think of this “diversion”? JR: There are a lot of ways to characterize it. If I wanted to approach the job from a theoretical perspective, I could probably write haiku poetry on what I think of diversion. But I have to run an agency, and I have to try to protect the agency. The practical reality is this: During my time in Congress and before that, Congress continued to divert money and Congress used � as the reason for diverting money � their dissatisfaction with the way the PTO vision was being presented to them. CC: So how we can be sure that the new, higher filing fees aren’t going to fund a congressman’s pet project outside the PTO? JR: Last year the administration did something that I don’t think anybody expected. [U.S. Commerce secretary] Don Evans said the president wants to end diversion. That isn’t just sending a signal that we’re trying to move in the right direction. That is setting a course for a sea change in policy… I’m optimistic that submitting a real strategic plan that has meaningful change, that shows a real blueprint to improve the future of the PTO, is probably the best antidote to the diversion hits that the office has taken. CC: Part of the new plan includes outsourcing some of the search work for comparing pending patents with those already granted. Have you figured out how that is going to happen yet? JR: No. That’s something that is all open to discussion and negotiation. If we feel that there are private search companies… that use all the rigorous standards that we impose, that meet an international style of search report standard set by the World Intellectual Property Organization, that would give us the same type of quality search that we would get on our own, then we would consider certifying them. And if we did certify a company, we would monitor it very closely, and if at any time we felt that their ability to provide that type of search failed, we would yank their certification. CC: If most patent applications are filed today as defensive measures � to beat the competition � people will file as many applications as they can. Maybe there doesn’t need to be a new plan. Maybe if the agency said no more often, you would still have the same number of patents, but you’d have less work. JR: A couple of things: Number one, we say no quite a bit. Number two, the issue you are raising is not a problem with the patent office, it’s a problem with the tort system. The fact that you’re filing an application defensively as opposed to filing because you just got a great idea, and you want to get a patent � there’s isn’t a “no” box for you to check on the application to tell us that. That’s really not our business. Jim Toupin, our general counsel, says we call balls a strike, and that’s what we do. We don’t get into the psychology of why you are filing. That’s not our bailiwick. There are abuses in the exercise of the patent. There are horrible abuses in the exercise of litigation and threat of litigation. We don’t have any control over that. That’s an issue of importance and for another portfolio. We are a technology-neutral agency. CC: We’re entering a confusing period… the computer software industry, the whole genomics arena, some of these patents are quite novel, and no one knows how broad or narrow they should be. Should the PTO examine this? JR: The problem with trying to answer your question is that almost everything I’ve heard on this is someone’s war story. It’s not hard study and evidence. And the law review articles I’ve looked at, they tend to be slanted depending on whether somebody is identified, if you will, as pro-patent or antipatent…. I mean, if the agency makes a mistake [in granting or not granting a patent], and we do make mistakes, that can have profound economic consequences for people who acted in good faith based on the issuance of a patent. I take that very seriously. I know it can destroy companies, it can destroy jobs, it can destroy family fortunes. And so that’s why, when we came up with a strategic plan, we started making sure that wherever we could tighten up on the quality and make things as error-free as we can humanly do, that was going to be our primary focus, even if it meant letting pendency go up, and even if it meant listening to people scream about it. CC: What does an IP in-house company lawyer need to know about your plan? JR: He needs to know it’s good and to get on board. Our goal is to make it as easy as possible � and to remove as many impediments as possible and to make it as cost-beneficial as possible � for filers. A lot of patent counsel may not like that. A lot of patent counsel have told me privately, when it gets this easy, we won’t be able to charge as much. That’s too bad. I’m not in the business of trying to make sure the patent counsel will get additional billable hours. I’m a lawyer, I appreciate billable hours. My job is to get this agency running as efficiently as possible for the benefit of inventors and applicants. I think most patent counsel appreciate that. CC: I have to ask: Do you hold any patents yourself? JR: No. CC: Ever think about applying? JR: Actually, yes. I’m thinking about it right now. I have developed, after great experimentation, the perfect health shake, which I made for myself this morning. CC: Going to apply? JR: No, because I don’t want somebody to steal my idea. But all kidding aside, that’s not on my agenda. But if I were to file one, I suspect it would get granted fairly quickly.

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