Kappos sketches out plans for patent office

Funding the PTO
SAN JOSE, Calif. — David J. Kappos, nominated by President Barack Obama to head the U.S. Patent and Trademark Office, pledged to "refashion the patent examination process" and improve funding for the patent office in his confirmation hearing before the Senate Judiciary Committee Wednesday. The promise drew praise from a leading engineering group.

Kappos said he will help develop a "sustainable long-term funding model" for the patent office which faces a record backlog of 740,000 applications. He said he would work to end the diversion of patent application fees to other government agencies, and suggested he may raise fees. In addition, he said he would "completely remake" incentives given to patent examiners.

The patent office suspended overtime, imposed a hiring freeze and shaved $140 million from its budget because of a downturn in applications and fees due to the recession, according to a Wall Street Journal report confirmed by a patent office spokeswoman. Congress passed legislation awaiting President Obama's signature that would allow the agency to borrow up to $70 million from trademark collections to fund patent operations.

"The PTO faces many challenges," said Kappos in his opening statement. "The most immediate are those resulting from the current economic downturn, the need for a stable and sustainable funding model, the need to address pendency concerns while maintaining patent quality, and the need to attract and retain skilled personnel at a time of fiscal constraint," he said.

"Secretary [of Commerce Gary] Locke asked me personally to make it my number one priority to refashion the patent examination process to meet these challenges," he added.

"It sounds like what we were asking six months ago, so we are very happy to hear it," said Keith Grzelak, chairman of the IEEE-USA Intellectual Property Policy Committee. "PTO funding is about ready to create an absolute crisis and that will hurt our members," he added.

The IEEE-USA released a statement in January calling for the federal government to clear up the backlog of patent applications and the shortfall of funding at the patent office as the starting point of patent reform. Grzelak was part of an IEEE-USA contingent that met with the Obama transition team early this year and had an hour-long conference call with Kappos in the spring.

"He said all the right things," said Grzelak who watched the confirmation hearings online. "This is an engineering management issue, it sounds to me like he wants to address it, and I think that's great," he added, referring the changes in incentives for examiners.

In his testimony, Kappos suggested ending fee diversion would pave the way for increasing patent application fees, something the head of the patent office could do under a draft patent reform bill now in Congress. He also suggested the agency needs the flexibility to spend fees gathered in one fiscal year on systems that may be needed in another year.

"Application fees are down in an era where there is this tremendous backlog [of applications]," Kappos said. "We need to refashion the fee system to assess fees against the work being done," he added.

"Fees could go up without dramatically impacting the overall cost of getting a patent," said Mike Mclean, vice president of professional services for Semiconductor Insights (Ottawa), a sister division of EE Times. "I think most technology companies would be OK with reasonable increases if the fees weren't being diverted," he said.

Some expressed skepticism about how the electronics industry would respond to fee increases. "I think some people are willing to pay more--though not all will be--but they will want to get something in return for their fees, most likely faster examination," said Mark Lemley a Stanford law professor and partner at Durie Tangri LLP.