Patent Answers

enior managers at the Patent and Trademark Office and union officials representing patent examiners agree on one thing: They don't get along. Though the agency is serving as a model for others on measuring performance, PTO remains a bastion of labor-management tension and disdain. "We are unable to agree on anything," complains Ronald Stern, president of the Patent Office Professionals Association. "Management plays all sorts of games. They try to hide as much information as they possibly can to get tactical advantage. We don't have any confidence in them."

Bruce Lehman, commissioner of patents and trademarks until the end of 1998, confirms the standoff. "We've never had a very good relationship here between commissioners and unions," Lehman says, adding that he doesn't see any way to improve the situation "unless there's a change in the leadership of the union."

The poor relations between labor and management have consequences beyond minor disagreements over telecommuting arrangements and transit subsidies. The patent examiners' union is taking on management over a plan to move into a new office building--one of the largest federal real estate ventures planned for the next decade. The union also is trying to thwart an effort to turn the Patent and Trademark Office into a government corporation and is opposing efforts to make the patent examining procedure paperless.

PTO's labor-management impasse mars the reputation of an agency where many things are going right.

Unlike agencies with a regulatory or policy mission, PTO operates much like a business. The agency issues patents and trademarks to paying customers, receiving all of its revenues from their patent and trademark fees.

PTO was slated to be the first agency to become a performance-based organization, a management model developed by Vice President Al Gore's reinventing government team in 1996. As such an organization, PTO would be freed from government personnel and procurement regulations and could reward executives for strong performance with hefty bonuses. Legislation to make the PTO a performance-based organization, in the form of a government corporation, has stalled for the last three years, in part as a result of patent union opposition.

Backlogs and Battles

PTO's front-line supervisors are caught in the crossfire of labor-management battles. They strain to motivate employees to excel in an atmosphere of extreme distrust. Jackie Stone, a supervisory patent examiner, finds herself defending management policies to her 10 employees every time the union newsletter comes out. "The patent office is faced with a lot of changes," Stone says. "If you have a weak relationship with the union, it's difficult to make the changes that need to be made."

Three unions represent PTO employees: one for patent examiners, one for trademark attorneys and another for administrative and clerical workers. While Stone and other patent examiner supervisors must cope with poor relations, administrative and trademark managers find themselves in a much happier situation. The trademark attorneys and clerical workers, both represented by chapters of the National Treasury Employees Union, have approved PTO's pending move to a new building and sanctioned PTO's performance-based organization plans.

Howard Friedman, a trademark attorney and president of NTEU Chapter 245, says partnership has been a useful tool in obtaining agreements from management that benefit trademark employees. He notes that the trademark side of PTO sometimes takes a back seat to the larger patent business. "There is sometimes a tendency for us to get lost in the shuffle," Friedman says. He says morale is low among trademark attorneys because an increasing backlog of trademark applications has the attorneys working harder than ever. GS-13s have a strict production schedule of 1.2 cases an hour.

In fiscal 1997, PTO received 224,355 trademark applications and issued 112,509 trademark registrations. From 1992 to 1997, applications increased 12 percent a year. PTO also received 237,045 patent applications in 1997. Such applications have increased at a rate of 5 percent a year over the past decade. The office issued 112,646 patents in 1997.

The increasing number of patent and trademark applications has led to a corresponding backlog of work for examiners. Processing times have lengthened to 16 months for patents and 16.9 months for trademarks. PTO employees feel swamped by the backlogs. That's part of the reason only 41 percent of employees on the patent side and just 42 percent of trademark employees said they were satisfied with their jobs in a 1996 PTO survey.

To reduce backlogs and improve conditions for current employees, PTO is in the midst of a major hiring effort, including bringing on 2,000 more patent examiners--a doubling of the patent examiner corps. About 100 trademark examining attorneys were hired in 1998, bringing the attorney ranks to 286. Another 90 will be hired in 1999.

Not only are workloads growing, but the agency also has had trouble holding onto employees. Over the past three years, 14 percent of PTO employees have left voluntarily before retirement. Patent manager Stone says a number of examiners leave after three to five years with the agency. Once they've gained valuable training and experience at PTO, examiners often are lured to the private sector by better salaries.

Employees say dwindling opportunities for professional development make PTO less attractive as an employer. While the PTO University, an agency effort to help workers earn college credits, is lauded as a model for both private- and public-sector employers, employees say the agency tends to offer a lot of training to new employees, but not PTO veterans. For example, PTO used to help with law school tuition but suspended the practice in 1998, leaving many employees scrambling to pay for their classes.

"Training's pretty good when you start here," says Friedman. "But where the office misses the mark is additional training once you've been here. There's such a great push to get applications out the door that there has been a corresponding impact on the amount of training provided."

One goal of the PTO's push to become a performance-based organization is freedom from many federal personnel laws. PTO officials believe becoming a performance-based organization would help combat retention problems.

"It's harder to retain people than to recruit them. We train people how to be patent agents here, and then law firms hire them away from us," says Lehman. "If we could adjust the pay scale more, we would actually save money, because we would keep our skilled people and cut down on recruiting costs."

In a January 1998 report, the National Academy of Public Administration recommended that human resources reform move slowly. "PTO is not ready for major change, primarily due to a perception that trust is low in the organization," the academy's report said. "PTO should pursue a strategy of incremental vs. radical change."

Ready for Results

The academy's study praised PTO's performance management system, saying that employees' performance plans clearly explain what is expected and are clearly linked to the agency's goals. Patent examiners, for example, must meet or exceed their quotas for reviewing patent applications to receive high marks on their evaluations. Supervisors, in turn, must answer to their managers on goals for their work units.

Since PTO has been evaluating employees using this system for years, the agency was well prepared for the 1993 Government Performance and Results Act, which calls on federal agencies to measure the results of their work. Measurement is easier for PTO than for many agencies, since PTO's effectiveness at issuing timely patents and trademarks is easier to gauge than, say, the Health Care Financing Administration's impact on the health of senior citizens.

PTO wants to cut patent processing time by four months, to an average of 12 months, by 2003. PTO also hopes to knock trademark processing down 4.9 months, to an average of 13 months, by 2003. PTO's corporate plan describes the funding and staff levels necessary to achieve those goals. PTO is one of the few agencies tying its budgetary needs directly to expected results.

While PTO is working on reducing processing time, the agency's customers are reminding PTO not to forget the quality of patent and trademark reviews. "Numbers should be brought down to a more manageable level, but only if a higher standard of quality control can also be put in place," former International Trademark Association President David L. Stimson cautioned at a 1998 congressional hearing. "Misspellings, typographical errors, and erroneous dates on filing receipts, prosecution papers and even registration certificates are routine."

One measure of quality is customer satisfaction, for which PTO gets low marks. A 1998 survey showed that only half of patent customers are pleased with the service PTO provides, while 63 percent of trademark customers are happy with PTO. Those numbers are basically unchanged from a 1996 survey.

The quality of information PTO gives customers left many feeling unsatisfied. PTO leaders acknowledge customer service needs to improve, but they say they're well ahead of other agencies. PTO's effort to measure customer service began in 1994. Its annual reports clearly lay out goals and baseline performance data, helping customers provide constructive feedback. Trademark and inventors' associations applaud PTO for inviting them to offer suggestions on how to improve service. The General Accounting Office also gave the office's measures high marks in reviews of agency strategic plans.

The Results Act is old hat for PTO, officials say. "We've always been on production goals here," says Terron Sims, director of trademark services at PTO. "What GPRA did for us was give us an extra motivator. Now we have the Vice President and his boys wanting to use what we do as a benchmark."

Fees Fix Finances

PTO also serves as a model for financial management. The office has received unqualified opinions on its annual financial statements since 1993, while many other agencies are still struggling to pass an audit. Stone sees sound finances as one of PTO's greatest strengths. "There's a great deal of consciousness, partly because we're funded by user fees," Stone says. "We're trying to make sure our customers are getting a good product for what they're paying."

In fact, a portion of the money PTO brings in is siphoned off to other federal programs every year. In fiscal 1999, for example, the Treasury will consume $116 million of the fees PTO collects. This arrangement doesn't sit well with patent and trademark customers, who say the money they spend on applications should be used to improve service at the office. But PTO has little to say on the matter, since both the Clinton administration and Congress are content with the current setup.

Meanwhile, a new activity-based costing (ABC) system is helping PTO figure out how much it costs to process applications. PTO managers assign costs to their units' activities based on the direct and indirect resources the units consume. The method helps managers identify ways they can cut costs. "If I have a GS-15 doing administrative tasks that a less expensive contractor could do, then I better look at peeling away some of the GS-15's administrative duties to make better use of the money I'm spending," Stone explains.

PTO also plans to use ABC to figure out whether its fees actually cover the costs of its services. Congress sets most of PTO's fees, and the ABC data will help lawmakers make better fee decisions. For non-statutory services like patent CD-ROMs, PTO will use the data to adjust fees.

"We're going to be using ABC more in 1999," Sims says. "Ultimately, it's going to impact whether we need to increase the cost of processing an application. We might not be charging enough money."

Real Estate Woes

Breaking down costs brought PTO a heap of public embarrassment in 1998 over its planned move into a new headquarters in Northern Virginia. Since a wary Congress did not want to pay the up-front costs of purchasing a building, PTO is planning on entering into a 20-year, $1.3 billion lease for a new facility. The move will cost $300 million and consolidate in one building PTO employees now spread among 18 facilities. Some of those buildings are inaccessible to the disabled, some lack sprinkler systems and some cannot handle the electricity requirements of the increasingly automated agency.

On Sept. 15, 1998, ABC's "World News Tonight" showcased the PTO move. Anchor Peter Jennings introduced the segment as "another federal project that may be on its way to being out of control." Reporter James Walker highlighted a consultant's cost projection report that listed a shower curtain in a fitness facility locker room at $250. "Government contractors sell them for $8.04," Walker said. The reporter said the only place he could find a $250 shower curtain was at an upscale store in New York. Walker concluded by questioning the decision to lease the PTO facility: "After the 20 years are up and the lease runs out, what do taxpayers get for their $1.6 billion? Nothing."

Walker failed to mention a number of facts that favor the move. Studies by Commerce Department Inspector General Johnnie E. Frazier, Washington consultant Jefferson Solutions, and Bethesda, Md., consultant Deva & Associates approved PTO's planning process for the new building, though the IG said PTO could improve its space planning. The independent verifiers also agreed that moving would save PTO up to $72 million over the life of the lease.

The reason the government will end up with "nothing" at the end of the lease is that direct federal construction, purchase or lease-purchase arrangements for a new building would have required up-front funding, says Robert Peck, head of the General Services Administration's Public Buildings Service. Congress would not allow such funding. In addition, PTO's facilities needs will likely change over the coming 20 years.

As for the shower curtain, the cost projection was a worst-case scenario that agency officials say does not reflect what they actually intend to spend on any individual curtain. Though the project will go forward, the shower-curtain flap demonstrated the dangers of capital planning in the public eye.

Tech Training Trouble

While the Commerce IG found PTO did a good job justifying its building plans, he has been less enthusiastic about PTO's management of information technology. "PTO's heavy investments in automation and business process reengineering have not led to significant productivity improvements," Frazier said in a 1998 report. "The concept of electronic processing has been on the drawing board for more than 15 years, has been repeatedly postponed, and is now not scheduled to be fully deployed until the year 2003." Frazier complained that PTO's automation efforts have failed to reduce patent and trademark processing times.

Employees also are critical of the agency's IT management. Melanie Tung, an examiner and union member, says PTO has provided many automated tools to help examiners, but no training on how to use those tools. Without training, Tung says many of the icons on her computer screen are meaningless. "I basically have a $7,000 word processor on my desk," Tung says.

Trademark manager Sims says PTO is on an IT management learning curve as it moves toward electronic processing of applications in the next five years. "When you introduce new technology, you must first learn how to use it," Sims says. "When you're putting in a new system, you need to slow down in order to get it right."

Lehman also defends IT management at PTO. "Unlike other government agencies, we have not had any major investment that's been thrown in the wastebasket. There are a lot of government agencies that have," he points out. "When we've only had a couple months' increase in processing backlogs over the last five years while we've had a 50 percent increase in our workload, we're doing something that's making us more productive. These inspectors general don't know a thing about our work. They're not technologists. They're not patent lawyers. I think PTO is one of the most successful government agencies in automation."

Policy vs. Business

PTO has charted a course for the future that includes electronic processing, a much larger workforce, better customer service, and freedom from restrictive government regulations. PTO juggles its constitutional responsibilities for protecting intellectual property and its growing business imperatives as a service organization. The performance-based organization legislation pending before Congress would split the two functions, leaving policy responsibilities in the Commerce Department while spinning off the business side of PTO as an independent government corporation. For PTO leaders, that split is essential.

"The top challenge that faces this organization is like [that facing] any government agency," says Lehman. "That is, trying to run an organization that should be a performance-based organization in the context of a statutory framework and a larger government organizational framework that is not performance-based, that tends to measure what you do by very arbitrary and abstract benchmarks, not really whether or not your customers are satisfied and you're really getting the job done."