Mark T. Banner
Section Chair 2002-03

In the October Chair’s Bulletin, I reported that several IP organizations, including the IPL Section of the ABA, had criticized many features of the PTO proposal for a wholesale revision of patent and trademark user fees and for numerous operational changes in the Office. Today I want to bring you up to date on further activities of the Section on the PTO funding/reorganization front, including a letter that I recently sent to OMB Director Mitch Daniels.

Substantial increases in patent user fees were proposed in the reorganization plan that PTO Director James Rogan unveiled in June. In our testimony at the hearing by the House IP Subcommittee on the Rogan plan, the Section indicated that we did not oppose restructuring fees, including restructuring resulting in higher fees necessary to reduce pendency and assure quality, so long as each fee imposed is necessary to reimburse the PTO for the cost of providing the service in question. However, we indicated that we found the proposal for fee restructuring fundamentally flawed, in that fees would be set so as to raise substantially more than the amount the PTO indicates that it needs to effectively operate the Office. The purpose in collecting more than the Office spends is, of course, to perpetuate the 10 year practice of diverting PTO user fee collections to fund other programs unrelated to PTO functions. Under the PTO fee proposal, $162 million would be diverted in the first year, with similar amounts siphoned off in the years to follow as diversion is statutorily provided for in the permanent PTO fee structure. Consistent with our belief that fees should be based on the cost of providing the service in question, we also objected to setting fees artificially high for behavior modification purposes, as the PTO admitted doing. For example, under the PTO fee bill, each independent claim in excess of three in a patent application would be subject to rapidly escalating fees ranging from $150 to $1000.

We also criticized a number of operational changes proposed in Director Rogan’s 21st Century Strategic Plan for the Office, which was to be implemented in conjunction with the new fee structure. We objected to a proposal to split the current single fee for patent application and examination into two separate fees in order to permit applicants to defer examination for up to 18 months. Another operational change that we could not support was the proposal to split patent search and examination functions, and to allow applicants to provide their own searches by use of private search entities.

IP law associations and kindred groups are not always successful in our lobbying efforts, but we were in our efforts opposing undesirable features in the Rogan Plan. In fact, our success was such that we found ourselves in a situation similar to that of the dog that, after perpetually chasing after passing cars, finally caught one, and had to decide what to do with it. The PTO user community, having effectively killed the PTO fee bill and stalled progress on the Strategic Plan that was closely tied to the fee changes, was looked to for proposals of its own for the future funding and functioning of the Office. As I mentioned in the October Chair’s Bulletin, House IP Subcommittee Chairman Howard Coble wrote to Director Rogan in late August, noting the opposition of the user community to several elements of his Plan, and cautioning him to move ahead in the short run with only those components of the Plan that enjoy broad support in the user community.

In fact, there are many features of the Rogan Strategic Plan that the Section and the broader PTO user community support, and it is in the interest of the user community that the Plan and corresponding fee restructuring, revised to correct deficiencies and provide funding to reduce pendency and assure quality, move ahead. Congress had made it abundantly clear that it does not buy the argument that all user fee revenue rightly belongs to the Office. It has instead indicated that the Office’s access to that revenue— and by implication the future course of diversion of fee revenue--will be conditioned on the Office developing an effective multi-year strategic plan to address problems of pendency, quality, and conversion to electronic processing. The interest in the user community in the success of the Rogan Strategic Plan was underscored by the action of the Senate Appropriations Committee on funding for the PTO in the current year. The Committee recommended that this year’s funding be frozen at last year’s level. At the same time, however, the Committee stated that the Rogan Strategic Plan was moving the Office in the right direction, and that the appropriators would consider providing additional funding during the course of the year if a fee bill to support the Plan is enacted.

Recognizing that its fee bill was effectively dead for the 107th Congress and implementation of its Strategic Plan therefore hobbled, the PTO then encouraged the user community to develop and submit to Congress an alternative proposal, in the hope that a bill could be enacted before the end of the 107th Congress, in time for a January 1 effective date for a new fee schedule, and, it is to be hoped, additional appropriations for the Office. At the same time, the Office signaled a willingness to abandon or modify many of the features of the Plan/fee bill that concern the user community.

The Section then began intensive efforts with other major PTO user groups—the American Intellectual Property Law Association, the Intellectual Property Owners, the International Trademark Association, and the Biotechnology Industry Association—to develop a consensus fee bill to propose to Congress. I was pleased that our Immediate Past Chair, Charles Baker, agreed to take the lead for us in these talks, thereby continuing the excellent work that he began as Chair.

The five user groups were quickly in agreement on core principles that should be reflected in any PTO user fee revision. Such a fee structure should support the key principles in the Rogan Strategic Plan, which are to “(1) improve patent and trademark quality, (2) aggressively implement e-Government to handle the workload associated with the 21st Century economy, and (3) reduce patent and trademark pendency.” The new bill should fund these objectives, but only these objectives. The groups are unanimous that the fee structure should provide no revenue that will be diverted to other programs. Unanimity also exists on the principle that fees should be set to allow the Office to recoup the cost of providing the service in question, and that fees should not be designed for punitive or behavior modification purposes.

During the course of these user group discussions, the Section team met with the PTO leadership in a meeting that was arranged before the joint talks began. At this meeting, the PTO noted that the Office of Management and Budget is in the later stages of preparing the budget proposal to be presented to Congress for funding the PTO in Fiscal Year 2004, which begins October 1, 2003. The Office expressed the view that the OMB, like the Congress, has the impression that there is little or no support for the Strategic Plan or for PTO fee revision in the user community, and that an expression of support from the user community could be beneficial in obtaining a recommendation for adequate funding from the OMB. The Section took this suggestion back to the group discussions, which were then expanded to include consideration of communicating views to the OMB.

At a final meeting of the five user groups on these issues on October 19, a decision was reached to not submit a proposed fee bill to Congress in the short time remaining in the 107th Congress. The issue of user fee diversion was a central consideration in this decision. All organizations strongly oppose diversion, but had differing views on the value and effectiveness of including in the bill various proposals that would call upon Congress to statutorily end diversion as a condition to fee changes. However, there was consensus that such a provision would be controversial, that such a controversial provision could not be enacted under the extraordinary circumstances that such a bill would be considered, and that its inclusion would likely sink the whole bill.

The five organizations did agree on joint views to be communicated to OMB in the hopes of obtaining more realistic funding for the PTO in the next fiscal cycle. ABA rules regarding joint communications did not permit us to join the other four organizations in a joint letter to OMB, but I sent a separate letter to OMB Director Mitchell Daniels, Jr. on October 25. In the letter, I communicated our participation in the joint efforts and our agreement with the views expressed in the joint letter. I also elaborated on particular points that I felt we needed to underscore.

At the outset, I stated that our opposition to some aspects of the PTO fee bill and Strategic Plan does not mean that we do not support PTO reorganization and fee structuring. I indicated that we recognize that increased funding is necessary to increase patent and trademark quality and to reduce pendency, and that we would support increased fees to the extent needed for these objectives. At the same time, I emphasized our strong continuing opposition to user fee diversion, and that we support a revised fee structure only to the extent all revenue is made available to run the Office. I also indicated particular components of the Strategic Plan with which the Section agrees or disagrees.

It is my hope that, in working with other major IP organizations to identify components of PTO reform that deserve support and those should be abandoned, and in expressing Section views in this regard to key policy makers, the Section is serving as a positive and valuable force in shaping and maintaining IP policies on which we all depend.

A copy of my October 25 letter to OMB Director Daniels, and a copy of the October 24 joint letter from the other four organizations which is referred to in it, is posted on the Section website under “Advocacy.” (www.abanet.org/intelprop)

 

Madrid Protocol Update:

A New International Trademark Filing System

By Clark W. Lackert*
and Seana H. Smith**

I. Madrid Protocol Background

The Madrid Protocol (an international trademark application filing treaty) was initially conceived in 1989 and formally came into being in 1996. The ABA has been a strong supporter of the Protocol throughout its history and, in fact, the Section of Intellectual Property Law submitted its recommendation that the ABA favor of U.S. adherence to the Protocol while the treaty was under debate in Washington. The ABA House of Delegates agreed and approved the Section’s resolution in August, 2001, thus making support of the pending Madrid Protocol official ABA policy. On November 2, 2002 President Bush signed into law the Madrid Protocol Implementation Act, which was included in the Department of Justice Reauthorization Act. The U.S. Patent and Trademark Office (PTO) will have a year to prepare for the implementation of the Protocol in the U.S. The year will provide time to establish rules and ready PTO staff for the expected influx of Madrid Protocol filings. How will the eventual implementation of this treaty affect the day to day trademark work of American practitioners?

II. Madrid Protocol Member Countries

There are currently 56 countries which are members of the Madrid Protocol, namely, Antigua, Armenia, Australia, Austria, Belarus, Belgium, Bhutan, Bulgaria, China, Cuba, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Kenya, North Korea, Latvia, Lesotho, Liechtenstein, Lithuania, Luxembourg, Macedonia, Moldova, Monaco, Mongolia, Morocco, Mozambique, Netherlands, Norway, Poland, Portugal, Romania, Russia, Sierra Leone, Singapore, Slovakia, Slovenia, Spain, Swaziland, Sweden, Switzerland, Turkey, Turkmenistan, Ukraine, United Kingdom, Yugoslavia and Zambia. Thus, major U.S. trading partners such as Germany, Japan and the United Kingdom are members (Canada is expected to join soon).

III. Madrid Protocol Procedure

The Madrid Protocol provides a means for simultaneously seeking protection for a trademark in multiple jurisdictions. The result of a Madrid Protocol application is known as an International Registration, or IR. However, this term is actually a misnomer as the result is neither international nor a registration. It is really nothing more than a series of simultaneous, national applications and actually is more properly called a “Multinational Application”. An International Registration application under the Madrid Protocol can be filed by any national or legal entity having a real and effective industrial or commercial establishment in a jurisdiction belonging to the Protocol. However, a member of the Madrid Protocol can apply for coverage only in other countries which are also members of the Protocol. Likewise, members to the Madrid Agreement (the 1892 filing treaty to which the new treaty is a “protocol”) can only apply for coverage in other Madrid Agreement countries. Members of both treaties are free to apply for coverage within the membership of both treaties.

An applicant who meets the above-noted standard for standing to file as a “citizen” of a Madrid Protocol member country has two possible scenarios for applying for IR coverage. The first is to base the IR application on an existing registration in their home country. The applicant would merely need to file for extension of IR coverage in their home country Trade Mark Office based on this national registration. The second would be for the applicant to file new application in home country and ask for the extension of IR protection at the same time. This extension of coverage must be for the same mark; for the same goods and services; for the same classes; with the same owner as the home or base application. The applicant can file through WIPO (World Intellectual Property Organization, Geneva, Switzerland—see www.wipo.int) in English or French. At the time of filing the applicant simply designates other Madrid Protocol countries in which they want coverage. The requests for International Registration coverage are then sent to WIPO by the home Trademark Office and the separate designee counties are informed by WIPO of the request. The result is that it is no more or less difficult to obtain coverage for a mark in a particular country in terms of examination procedure under the Protocol (i.e., the IR is examined in each country under national regulations). It is just less difficult to request IR coverage in practical terms. The national Trademark Offices of the designate countries have between 12 and 18 months to examine the potential mark and inform the applicant of registrability issues. The standard time period under the Protocol is 12 months but this can be extended to 18 months via special order. If an applicant does not hear from a designee Trademark Office by the end of the relevant time period for that jurisdiction, the applicant can infer that the mark is protected under an International Registration (barring unusual circumstances or oppositions, which can draw out this waiting period). The IR has the same rights of protection in a particular designee jurisdiction as a national registration would have. The International Registration retains the initial filing date of the home or base application and receives an IR number to be used in all IR designee countries. Finally, the International Registration protection lasts ten years.

Initially, the International Registration is dependent on the home application on which it was based. This dependency period lasts for five years. During this time, if the home application is cancelled or with drawn, the IR will be cancelled or withdrawn as well. Under the Madrid Agreement, this process is known as “central attack” which means that successfully attacking or opposing a base application essentially destroys all of the International Registrations based thereupon. Under the Protocol, however, this somewhat harsh rule is modified into a procedure known as “transformation”. Under transformation, if the home or base application is successfully “attacked”, the applicant can choose to have any dependent International Registrations based on same “transformed” into separate, national applications in the designee countries. These applications are then treated as normal national applications and may be subject to additional national fees but they are not summarily cancelled as they would have been without the transformation option. After the first five years, the International Registrations are independent of the base application or registration.

IV. Madrid Protocol Advantages

There are many advantages to using the Madrid Protocol. One of the most appealing is the simple filing procedure. The applicant needs to file one application at its home trademark office. This entails only one set of documents, in one language, with one fee, in one currency which will ultimately result in protection in several jurisdictions. Moreover, the filing fees are significantly reduced from what they would be for country by country filings. The expedited examination feature (18 months maximum) will lead to greatly reduced waiting periods for the processing of applications. Without the Protocol, many countries take in excess of several years to process a trademark application. Once the International Registration issues, the most obvious cost advantages become apparent. As noted, there is only International Registration number used in all designee countries. Thus, if the applicant needs to record a change of name or address or amend the specification of goods and services covered, it can accomplish this by one filing and one fee. The IR also requires only one renewal, leading to savings on attorneys fees as well as filing fees.

V. Conclusion

It is important to note that the experience of private practitioners in those countries that have recently joined the Protocol has been positive. Their work has not decreased but has merely changed in character. While they may be doing fewer applications for worldwide filing campaigns, they are finding an increase in searching and clearance work, in oppositions, in assignments and in licensing and franchising work. When it is easy and relatively inexpensive to file for coverage, applicants tend to expand their portfolios and opt for coverage in more countries, all of which need to be examined, published for opposition and prosecuted. From a corporate practitioners perspective, the Protocol can be “one-stop-shopping” for a global filing and maintenance program. Overall, the Madrid Protocol is a supplemental filing system that is intended to centralize and simplify the trademark application process, and has proven to be a useful tool for trademark owners and practitioners worldwide.