Statement of Michael K. Kirk, Executive Director
American Intellectual Property Law Association
Before the Subcommittee on Transportation and Infrastructure
Committee on Environment and Public Works
United States Senate
on U.S. Patent and Trademark Office Consolidation
September 23, 1998

Mr. Chairman: I appreciate the opportunity to present the views of the American Intellectual Property Law Association (AIPLA) on the efforts of the United States Patent and Trademark Office (USPTO) to procure consolidated space for its operations.

The AIPLA is a national bar association whose nearly 10,000 members are primarily lawyers in private and corporate practice, in government service, and in the academic community. The AIPLA represents a wide and diverse spectrum of individuals, companies and institutions involved directly or indirectly in the practice of patent and trademark law, as well as other fields of law affecting intellectual property. AIPLA members interact with patent examiners, trademark examiners, and their clerical support staff on a daily basis. They know from these contacts that many of the USPTO employees are forced to work in cramped quarters with inadequate furnishings and equipment. Many examiners, now forced to share rooms, are denied the privacy they need to efficiently search and examine patent and trademark applications and to consult with applicants regarding prosecution issues.

The USPTO is currently housed in seventeen buildings located in the Crystal City complex in Arlington, Virginia. These buildings range in age from the late 1960s, when the USPTO first moved to Crystal City, to the mid 1980s. Few of these buildings were constructed for modern electronic communication networks that will facilitate the electronic search systems that examiners will increasingly use. In addition, the buildings, far from being contiguous, stretch out through a nearly one-mile-long corridor in Crystal City, creating considerable lost productivity as the employees traverse between and among the various buildings. To alleviate the problems which the USPTO employees and their customers must endure because of these cramped and outdated facilities, AIPLA believes that the Office should acquire adequate space. At the same time, since we, the users of the patent and trademark systems, will pay through our fees for the cost of the facilities leased by the USPTO, we believe the acquisition of space by the Office should be evaluated against appropriate criteria. To that end, we developed the following guidelines:

--any facility should be competitively procured, taking price and quality into consideration

--any facility should be convenient to MetroRail to provide convenient access by employees and users

--any facility should be "automation-ready" to house modern electronic communications networks

--any facility should provide private offices for examiners, but reflect the private enterprise trend toward downsizing and standardizing office size

--any facility should provide employees reasonable amenities, comparable to those in the private sector, including sufficient parking, health facilities, day care, and reasonably-priced eating facilities

--any facility should be sufficiently compact and interconnected to promote efficiency of operations

--any facility should, with the approval of Congress, have such "above-standard" items as are customary in businesses (e.g., uninterrupted power supplies for computer systems).

To alleviate its cramped conditions, the USPTO and the General Services Administration (GSA) began working on alternative approaches to meet the USPTO's long-range requirements in 1989. After considerable study and negotiation, the Of lice of Management and Budget authorized GSA in 1995 to send a prospectus to the House and Senate requesting permission to acquire a competitively-procured, twenty-year operating lease for the USPTO's space needs. The prospectus was approved by the Senate Committee on Environment and Public Works on October 24, 1995 and by the House Committee on Transportation and Infrastructure on November 16, 1995.

AIPLA believes that the Solicitation For Offers (SFO), published by GSA on behalf of the USPTO following the approval by Congress of the prospectus, generally comports with the guidelines adopted by AIPLA. Accordingly, we believe that the solicitation should proceed under the watchful eyes of Congress and the user community.

We are aware of a campaign over the last fifteen months to convince Congress that the SFO is too extravagant. At his request, I met with a Mr. Edward Newberry of Patton Boggs, L.L.P. in July, 1997. Mr. Newberry had indicated in a telephone conversation that the USPTO was seeking a grandiose and elaborate headquarters facility and that the USPTO could satisfy its space needs in a much more modest facility. I understood that Mr. Newberry represented one of the then four bidders on the SFO, the Charles E. Smith Company, which is also the principal landlord for the USPTO in its current space in Crystal City. Nonetheless, in light of the allegations made, I concluded that it was important to learn more and to investigate the merits of Mr. Newberry's claims. I asked Mr. Newberry to put his concerns in writing, which he did. The material was then made available to the USPTO with the request that they respond to the allegations. We invited representatives from the House and Senate Judiciary Committees, the Intellectual Property Owners Association, the American Bar Association, and the International Trademark Association to join us in an effort to separate fact from fiction.

At the meeting with USPTO of finials, we discovered that, when the allegations contained in Mr. Newberry's letter were placed in perspective with factual information which was omitted, the allegations were not only unpersuasive, but frequently misleading. For example, it was stated that the USPTO plans to spend $88 million to outfit and furnish the interior of their new facilities and that, if the USPTO were to accept a standard, high-quality building typical of government agencies, some $48 million would be saved. What the correspondence neglected to mention however was that the SFO requests an unfinished shell, and that the $88 million would be used to complete the building according to the USPTO's operational needs. More importantly, no mention was made of the fact that this $88 million must be paid by the successful bidder who could charge the government no more than the Congressionally-imposed limit of(in FY 1998 dollars) $25.41 per rentable square foot. The cost of Crystal City space utilized by the USPTO today averages $26 per rentable square foot, and recent space provided to accommodate the expansion of the trademark examining operation costs approximately $27 per square foot. Thus, the successful bidder for the consolidated USPTO space must charge less than the current average per square foot rent paid by the USPTO and provide the $88 million for build-out.

The USPTO has indicated that the standard in their build-out for individual office sizes for examiners will be 120 square feet - 20% smaller than the room sizes in the current facility and consistent with the guidelines adopted by AIPLA. On this point, it is not surprising that one of the USPTO's three unions opposes the consolidation plan. Even though each examiner will have a private office and even though 120 square feet will provide ample room for examiners to conduct their search and examination responsibilities, particularly in the electronic environment in which examiners currently work, this union has opted to argue for retaining their current larger rooms and forcing the users to pay the additional lease costs. It is telling, in our opinion, that the other two of the three unions have approved the SFO in light of the operational efficiencies it will bring about.

Earlier this year, the National Taxpayers Union (NTU) and Citizens Against Government Waste entered the fray, referring to the USPTO space consolidation as a "Taxpayer Ripoff." The same litany of alleged problems that Mr. Newberry had previously raised were set forth, such as, "high-priced programmable lighting systems" and the curious statement that many users oppose the new building because it could lead to massive increases in patent fees. First, it should be noted that programmable lighting systems are commonly used in modern buildings today because of their savings in energy costs. Secondly, I have not run across any users of the USPTO who fear that paying less for space will lead to massive increases in patent fees.

More recently, the NTU has argued that the USPTO will spend $1.3 billion to lease - not own - this facility and that the environmental clean up costs could be as high as $194 million. Again, if the USPTO stays in its present, decentralized, aging facilities, it will spend at least $1.3 billion in lease charges over the next twenty years and actually more than it will pay under the SFO. While it is true that the USPTO will not own the building at the end of this period, there is no practical option under which that could be the case. Both the Of lice of Management and Budget, which controls the USPTO's requests for funds, and the Congressional Appropriations Committees, which approves those requests, have agreed that a competitive lease of the type the USPTO is seeking is the only viable option available to the USPTO. There is no reserve of user fees nor any available taxpayer funds to actually construct such a building. In this regard, we note that, in a colloquy between you, Mr. Chairman, and Senator Gregg during the Senate debate on the Fiscal Year 1998 Supplemental Appropriations Bill, Senator Gregg agreed that no funds would be available in the foreseeable future to purchase or construct a facility to house the USPTO. With respect to the alleged environmental clean-up costs, the SFO places the burden of environmental clean-up, if any, solely on the successful bidder_not the USPTO. The Federal government recently built a Federal courthouse on a portion of one of the two sites where a bidder is proposing to construct USPTO facilities, and the Department of Defense has been housed on a portion of the other site for over 25 years.

Finally, NTU has stated that the costs for moving the USPTO could be as high as $130 million. In a review mandated by PL105-174, Deva and Associates, PC, concluded that for the USPTO to stay in its present quarters, total costs over the 20-year life of the lease would be $72 million greater than if it proceeds with the competitive procurement, after factoring in all the costs for moving, furniture, etc. The Deva study was reviewed by the USPTO, GSA, the Commerce Department Inspector General, the Commerce-Justice branch of the Office of Management and Budget, and, for the Office of the Secretary of Commerce, Jefferson Solutions, LLC, and their subcontractor, BTG, Inc. It is particularly worth noting that Jefferson Solutions and BTG found that the consolidation of USPTO space through a competitive lease would improve workflow efficiencies, improve the environment for employee retention, and most importantly, reduce lease costs. In short, they recommended proceeding with the current procurement without delays that would impact the schedule and costs.

The most recent attack criticizes the USPTO's space consolidation effort on the basis of estimates of the cost of furniture which were contained in the Deva report. The appendix to the Deva report contained an extensive listing of the estimated cost of the furniture which would be needed for the new USPTO facility. Those preparing this estimate chose to err on the high side to ensure that their estimate of the total cost of the move and furniture purchase would not understate the actual cost. Unfortunately, the report lists such easily-criticizable items as $250 shower curtains and $4,000 desks. While we understand that these estimates were intended to be worst-case scenarios and do not reflect the anticipated savings which would be realized through competitive volume discounts, nonetheless, we would agree that a number of these estimates are much too high even for worst-case scenarios.

It must be kept in mind, however, that even with these unfortunately high and questionable estimates, the Deva report still projects an overall savings of $72 million if the procurement proceeds - a projection which no one has challenged. Moreover, recognizing that the furniture purchases associated with the move will be subject to intense Congressional oversight, it is certain that the actual furniture costs will be much less than the worst-case estimates in the Deva report. This Committee, the Appropriations Committee and the Judiciary Committee will have ample opportunity to ensure that, when the USPTO requests approval to purchase the furniture, the expenditures will be prudent and responsible. Delaying the procurement for yet another study will only serve to delay and diminish the benefits which the users of the USPTO will receive. On the other hand, proceeding with the procurement and applying a sharp pencil to the purchase of furniture in the future will serve to significantly enhance these benefits.

Finally, we note that the recent amendment offered by Senator McCain to the Departments of Commerce, Justice, and State, the Judiciary and related Agencies Appropriations Act, S. 2260, would have denied any funds for the planning or lease of a new facility until 90 days after the submission to Congress of yet another study on the results of a cost-benefit analysis of relocating the USPTO to a new facility. The study would have required an analysis of the cost associated with leasing in comparison with the cost of any lease-purchase, federal construction, or other alternative for new space for the USPTO and to consider any appropriate location or facility not limited by geographic region. In addition to the fact noted earlier that lease-to-purchase or construction are not available options, relocating the USPTO outside of a 10-mile radius from its current location could have serious adverse consequences for the USPTO. If the Office were to be moved to a distant location, many of its current employees would not be able to stay with the Office. In addition, the USPTO would be required to pay the relocation costs for those of its 5,000 employees who chose to continue working for the USPTO. Clearly, the operational and financial consequences of such a move would reduce if not exceed the $72 million savings identified in the Deva report.

One of the four final bidders on the SFO has already withdrawn. Additional significant delays of the type that would be experienced as a result of requiring additional studies would cause additional bidders to withdraw from the process. In the end, the USPTO would be forced to stay with its current landlord_in a sole-source situation_where there would be little, if any, incentive to restrain lease costs to the USPTO.

AIPLA strongly urges this Subcommittee, Mr. Chairman, to take all steps possible to allow this procurement to proceed as expeditiously as possible to its conclusion without further delay. In addition, I have been authorized by the Intellectual Property Owners Association and the Intellectual Property Law Section of the American Bar Association to express their agreement that the procurement should continue to conclusion without further delay for additional studies.