The United States Patent and Trademark Office (USPTO) has a new leader at the helm. On August 13, 2009, David Kappos was sworn in as the new director of the U.S. Patent and Trademark Office (“USPTO”). Director Kappos was nominated by President Obama to replace John Doll, who had been the Acting Director since the resignation of Jon Dudas in January 2009.

Director Kappos graduated from the University of California at Davis in 1983 with an electrical and computer engineering degree, and began his career at IBM as a development engineer. He received his law degree from the University of California at Berkley in 1990, whereupon he joined IBM’s legal department. Director Kappos remained at IBM until his swearing in ceremony. During his tenure at IBM, Director Kappos held several important in-house counsel positions, through which he influenced IBM’s intellectual property policies, and managed IBM’s worldwide patent portfolio. For the past 16 years, IBM has led all U.S. companies in patent filings. Last year, IBM received 4,186 U.S. patents, becoming the first company ever to earn more than 4,000 U.S. patents in a single year. Many practitioners believe that Director Kappos will use his over 20 years of experience as an engineer and a patent attorney to fix — or at least minimize — the daunting issues currently facing the USPTO.

Director Kappos has taken the helm of the USPTO at a time when the organization faces considerable challenges on several fronts. For example, the USPTO has been financially pressured by the worldwide economic recession. The impact of the economic recession on the USPTO has been especially hard because it is funded solely by fees collected from its patent and trademark application, prosecution, maintenance and renewal processes. A recent large drop in the number of patent application filings has resulted in a significant decrease in fee collections. In response to the shortfall, the USPTO recently suspended overtime pay, initiated a hiring freeze, and reduced its $1.9 billion annual budget by approximately $140 million. Legislation was also recently passed that permits the patent side of USPTO operations to use a surplus from the trademark side of operations.

It is reported that some of the biggest problems facing the USPTO include a backlog of more than 770,000 patent applications, increasingly long waits for patent reviews, outdated information technology systems, new questions regarding patentable subject matter in light of In re Bilski, and a possible court battle (the presently-stayed Tafas v. Doll) over proposed new practice rules for patent applications. The U.S. Secretary of Commerce, Gary Locke, is quoted on the USPTO website as saying:

We are grateful to the Senate for its swift confirmation of David Kappos to lead the U.S. Patent and Trademark Office. “It’s no secret that the agency currently faces significant and persistent challenges, but David is the right person to meet them and carry out my top priority for the USPTO — dramatically reducing the unacceptably long time it takes to process patent applications.

One of Director Kappos’ plans for addressing budget issues includes ensuring that a larger portion of the USPTO’s revenues are allocated for USPTO use. Since 1990, a portion of USPTO fees have been diverted to other federal programs. Director Kappos has expressed the desire to revise such “fee diversion” so that a greater portion of the fees paid to the USPTO will go towards subsidizing the USPTO, rather than other areas of the federal government.

Reducing the massive backlog of pending patent applications is also high on Director Kappos’ agenda. Despite the reduction in patent application fees collected as a result of the economic recession, the current average time from filing to first action for a patent application is 30 months. This is a significant increase as compared to a decade ago, when the average pendency period until first action was 24 months.

In his remarks at his swearing-in ceremony, Director Kappos addressed the issue of examiner efficiency, and promised to overhaul the “count” system that is currently used to evaluate examiner productivity. Under the count system, an examiner earns a first “count” upon issuance of a first office action. The examiner then receives another “count” when the application is disposed of (e.g., allowed, abandoned, or response to appeal). However, under the current “count system,” the examiner receives no credit for preparing a second non-final office action, a final office action, or an advisory action. Director Kappos has acknowledged that the current count system needs reworking, and has even remarked that the count system promotes “dysfunctional behavior” among the Examining Corps.

Director Kappos is encouraging examiners to adopt a teamwork-oriented mindset when dealing with patent applicants. In a recent e-mail to the Examining Corps, Director Kappos emphasized that examiners should work with patent applicants to expeditiously identify patentable subject matter. Addressing speculation that examiners are encouraged to reject applications in order to maintain patent quality, Director Kappos cautioned examiners against equating lower allowance rates with higher patent quality:

Let’s be clear: patent quality does not equal rejection. In some cases this requires us to reject all the claims when no patentable subject matter has been presented...In other cases this means granting broad claims when they present allowable subject matter. In all cases it means engaging with the applicant to get to the real issues efficiently – what we all know as compact prosecution.

Given his history at IBM, it is not surprising that Director Kappos is a proponent of using information technology to improve the efficiency of the patent examination process. For example, Director Kappos has touted the benefits of using software to help analyze whether a patent application meets certain formalities. For example, software may be used to determine whether recited claim terms are used in the specification. Such software could be used by applicants and examiners to ensure that a patent application conforms to certain statutory requirements. Further, such software could reduce the number of objections and rejections, or at least the time expended to address such objections and rejections, thereby enabling examiners to spend more time addressing substantive issues.

Assisting Director Kappos in the transition will be Nicholas Godici. Mr. Godici is returning to the USPTO as a temporary special advisor hired under the direction of Secretary Gary Locke to “use his decades of experience to help us strengthen the management of the USPTO and identify the areas most in need of attention by the new director.” Mr. Godici’s previous career of over 33 years at the USPTO started when he became a patent examiner and worked his way up through the ranks to eventually become the Commissioner for Patents from 2000-2005 and Acting Director of the PTO in 2001. In his previous stint at the USPTO, Mr. Godici focused on organizational management and leadership. Some in the Patent Bar have reported that the real problems regarding management at the USPTO started after Godici left in 2005. It is possible that the temporary agreement with Mr. Godici to retain his services for up to 180 days may be turned into a long-term agreement to help repair problems at the USPTO.

The leadership of these two highly capable people at the USPTO has created quite a buzz in the Patent Bar and, for better or for worse, has also created high expectations. A good sign arrived for all consumers of the patent system, including companies engaged in research and development and those licensed to practice before the USPTO, when both parties in Tafas v. Doll filed a “Joint Consent Motion for a Stay of En Banc Proceedings” to delay briefing and oral arguments in order to wait and see what new Director Kappos will elect to do with the proposed USPTO rules at issue in the case. Tafas v. Doll is the appeal of the highly opposed USPTO rules proposed in August 2007 that in part limit the number of claims that may be filed in the absence of an onerous examination support document and limit the number of continuing applications permitted in a patent family. If Director Kappos retracts the proposed rules before the stay expires, the case will become moot. Given that both parties to the suit requested the stay of proceedings, this is seen as a likely possibility. If that occurs, it provides an opportunity for new and different rule changes to be proposed that foster efficiency while meeting the collective needs of the USPTO, the inventing community, and the Patent Bar rather than favoring one at the expense of the others. Another interesting sign is the anecdotal information from some practitioners that, beginning around the summer of 2009, Patent Examiners have been calling Patent Attorneys at a higher rate than in previous years to recommend Examiner Amendments to the claims in patent applications. These communications tend to expedite the allowance/disposal of applications, and are possibly a first step to reducing the USPTO’s substantial patent application backlog.

Director Kappos has inherited many challenges from his predecessors but seems willing to address these challenges using fresh perspectives. While addressing these challenges will take time, the USPTO’s examining corps and the patent bar will appreciate Director Kappos’ following sentiments (from his swearing-in ceremony): “The list [of challenges facing the USPTO] goes on and on... I’m here to address the whole list.” We look forward to hearing more of Director Kappos’ ideas and plans, such as during his keynote speech at the Intellectual Property Owner’s Association Annual Meeting in Chicago in mid-September.