The Benefits of IP in the Biotech and Pharmaceutical Industries

Deputy Under Secretary of Commerce for IP and USPTO Deputy Director Michelle K. Lee

BIO International Convention

San Diego, California

June 25, 2014

Remarks as Prepared for Delivery

Thank you for the kind introduction, Hans, and for inviting me to speak here today. As a native Californian I'm particularly pleased the convention is being held in San Diego this year. As some of you may know I was born and raised a bit north of here in the Silicon Valley, and spent the majority of my career there as an engineer and IP attorney. That included two terms on the USPTO's Patent Public Advisory Committee, followed by a year as Director of the agency's new Silicon Valley office. In fact I'll be returning tomorrow to Stanford Law School, my alma mater, to give an address outlining the case for building a better patent system.

After that, I'll be heading to Denver for another important milestone in our agency's history: the opening of our second permanent satellite office. Along with our existing permanent office in Detroit and our temporary offices in Dallas and the Silicon Valley, these offices are an integral part of the USPTO's mission to foster American innovation and competitiveness, and they help us better engage our stakeholders in a collaborative effort to continually improve the services we offer to you.

During my two terms on PPAC, I was able to hear, understand, and build bridges with a wide range of stakeholders, including those from the bio/pharma and high-tech industries, a food technology company, as well as patent asserters, patent defendants, and solo inventors. That kind of engagement has proven critical in my current position as Deputy Director. But the USPTO has a long history of working with and promoting your industry. For example, one of our oldest industry partnerships is the Biotechnology/Chemical/Pharmaceutical Partnership, which dates back to 1996. We also sponsor a Medical Device Technology Partnership. Biotech and pharma are major areas of patenting for the USPTO. For example, in the "Molecular Biology and Microbiology" classification, we've granted more than 31,000 patents since 2009, and about 30,000 in the "Drug, Bio-Affecting and Body Treating Compositions" classification. That's a lot! There's also been a significant increase in recent years in patents granted for medical devices, a sign of tremendous innovation in that field. In 2012 we granted more than 16,000 patents in that category, a 157 percent increase in five years. All of which indicates that an inspiring, can-do spirit is alive and well today in biotech fields such as medicine and medical technology.

Dedicated research repeatedly unearths new, cost-effective ways to address cancer, cardiovascular disease, and a variety of other health crises and challenges. Biotech companies are true innovators. Many are harnessing data using wearable technologies, and using the power of software and the Internet to more efficiently synthesize and share the information gathered. For example, I read in an article last week that a portable artificial pancreas has been built with a modified iPhone that can successfully regulate blood sugar levels in trial with people who have Type 1 diabetes. According to the article, the device consists of an iPhone 4S with an attached glucose monitoring device, two pumps, and reservoirs for insulin and glucagon. A sensor implanted under the skin on one side of the patient's abdomen measures the glucose in the fluid between the cells, which corresponds closely to blood glucose levels. The sensor delivers the reading to the Smartphone, and the phone's software calculates a dose of insulin and glucagon every five minutes. The medicine is then pumped through thin tubes to two tiny infusion points embedded just under the skin on the other side of the patient's abdomen.

It's work like this being done in your field that is so tremendously exciting and holds such promise for improving the lives of all. Similarly, in the life sciences, every new innovation has the potential to improve or to save lives. It is humbling and awe-inspiring to reflect on that, to imagine the profound impact one idea-patented and marketed-can have on the world, and on our way of life.

I'm sure many of you are familiar with the work of Richard DiMarchi. Dr. DiMarchi is a distinguished professor of Chemistry at Indiana University, where he serves as the Linda and Jack Gill Chair in Biomolecular Sciences. He has received international recognition for the discovery of peptide-based polypharmacy directed at the treatment of diabetes and obesity. His most important commercial contributions were the molecular design of the first rDNA-derived peptide analog approved as a medicine, Humalog insulin, and the executive development of Forteo, a peptide-based therapy for osteoporosis. Dr. DiMarchi is one of many innovators in the bio industry who is improving the lives of millions of people, now and well into the future.

Last month I had the honor of inducting Dr. DiMarchi into the National Inventors Hall of Fame, a program we maintain in partnership with the non-profit Invent Now. There are two criteria for induction into the Hall of Fame: You must have an innovation that truly changed people's lives for the better, and you must have a U.S. patent for that innovation. In Dr. DiMarchi's case, the particular patent associated with his induction was for Insulin LisPro, which we know better by its trademarked name, Humalog. I should note that Dr. DiMarchi is not resting on his laurels. He's still engaged in research, and recently said that one of his unachieved goals is to focus on a disease like Alzheimer's, reduce it to a molecular target, and then design a drug that will work in human clinical studies. Let me quote him: "The likelihood of failure is at least 100 times greater than the likelihood of success. At this point in time, there is far too much luck and trial and error that surrounds drug discovery." I think he downplays the role of insight and creative thinking demonstrated by innovators like him, but he makes a good point that we at the USPTO understand well. When you do find that one-in-a-hundred success-that drug that truly works-it's critical that you have the patent protection necessary to get that drug to market and recoup your investment on the 99 attempts that didn't succeed.

Next I'd like to turn to some important updates and statistics from the USPTO. I'm talking about our continued focus on further reducing our unexamined patent application backlog while shortening pendency. We continue to see a rise in patent applications. In the last fiscal year, for example, we saw a 6.2 percent increase in applications over the previous year. Despite that increase, in fiscal year 2013 we successfully reduced the backlog of unexamined patent applications by more than 23,000-a four percent decrease-thanks to our expanded corps of patent examiners and a number of internal improvements to our IT systems and processes.

One challenge we've faced in the last year is implementing a joint patent classification system with the European Patent Office called the Cooperative Patent Classification system, or CPC, that enables patent examiners and patent system users worldwide to conduct more efficient prior-art searches. The CPC incorporates the best classification practices from both the USPTO and the EPO. The database jointly led and maintained by the USPTO and EPO contains more than 100 million documents, providing a more comprehensive search of prior art and increased opportunities for work-sharing among offices. We expect that CPC will eventually be used by more than 45 patent offices worldwide.But the process of implementing the system requires approximately 20 hours of formal training per examiner, as well as approximately 120 hours of on-the-job training. Transitioning about 8,000 examiners is no small feat, and it has had a temporary impact on our examination output. The good news is that we'll be fully transitioned to CPC by January 2015, and the renewed focus of training examiners on examination, as well as our continued focus on examiner hiring, will go a long way to again lowering our backlog and pendency.

Also helping is the opening of our permanent satellite offices, including Detroit in 2012, Denver next week, and Dallas and Silicon Valley in 2015. In these regions we're recruiting new examiners with strong backgrounds in science and law. These are individuals who welcome the opportunity to work for an agency named the Best Place to Work in the Federal Government® by the Partnership for Public Service, without having to relocate to Alexandria, Virginia. To be honest, that ability to work from my native region was part of what first lured me to the USPTO as the first Director of the Silicon Valley office.

So as our agency continues to focus on patent examination, our Patent Trial and Appeal Board, or PTAB, has been hard at work with the new post-grant review processes brought about by passage of the America Invents Act. To meet demand, and our commitment under the AIA to reach a conclusion in each case within one year from institution, we have focused significantly on hiring as well. Since enactment of the AIA in September 2011, the PTAB has more than doubled in size to a total of 204 Administrative Patent Judges, all of exceptional caliber. And these new judges are not only working at the Alexandria headquarters but at all of the satellite office locations. Our goal is to have at least 20 in each office working to help reduce the inventory of trial and appeal cases.

The number of administrative trials is on the rise, resulting from an increased number of inter partes review and covered business method review petitions under the America Invents Act. As of last week, the Board had received petitions for a cumulative total of 1,351 inter partes reviews, 185 covered business method patent reviews, and six derivation proceedings since inception of the AIA trial proceedings in September 2012. Petitions received to date (and we are only mid-way through the year) this fiscal year represent a nearly 150 percent increase in petition filings over the total number of petition filings in all of last fiscal year. Of these petitions, 501 are inter partes reviews that have already been instituted. While the percentage of IPR petitions from the bio/pharma industries is relatively low at present, some of those in your industry have recently recognized the benefits of these PTAB proceedings and we may see more.

Turning now to a discussion of the White House Executive Action and legislative patent reform, it's important to remember that the United States patent system has supported some of the world's greatest innovations. Our patent system is the engine that powers our 21st century economy. But even the most high-performance engine occasionally needs some fine-tuning. On February 20 of this year, at a White House event, I outlined the hard work the USPTO has done to implement four executive actions from 2013 focused on issuing the highest quality patents possible; adding ever-more transparency to our patent system; and leveling the playing field for all players, big and small. During the same White House event we also announced three new executive actions the USPTO is undertaking. They include:

  • encouraging crowdsourcing to better identify prior art;
  • providing even more robust technical training for patent examiners; and
  • expanding pro bono and pro se assistance across the country.

I strongly encourage you to visit to learn more. You'll find on our home page a link to a page with updates on all of our executive actions and our progress to date.

We have also played a leading role in engaging with the House and Senate on their legislative efforts to improve our patent system. In early December, the House passed the Innovation Act with strong bipartisan support. More recently, we have engaged with the Senate and convened many meetings of stakeholders from a wide range of industries (including some of you in this room) to discuss the issues in the legislation. As many of you know, the Senate bill has been put aside. As Chairman Leahy recently noted, it isn't easy to craft legislation that effectively addresses the problem of abusive patent litigation while simultaneously protecting the interests of IP owners and inventors. And it is critically important that we achieve both. In the meantime we continue to move forward on our executive actions to further improve patent quality, clarity, and transparency, and identify other ways we can facilitate a well-functioning patent system that supports innovation. These efforts complement the commitments we've already made in our new strategic plan to building a better patent system.

Now while we have led the process of improving our patent system, sometimes our agency must respond to outside direction. USPTO leadership was active in the crafting of the America Invents Act, for example, but when it came time to implement the law, our discretion to act was bound by what the statutes directed. The same is true when it comes to decisions by the Supreme Court of the United States. Recently, the Court has reminded us of the role the judicial exceptions doctrine plays when determining subject matter eligibility under 35 USC 101. The Myriad and Mayo cases, each of which concerns the eligibility of naturally occurring things-Myriad for natural products and Mayo for laws of nature-has made it necessary for us to give our examiners guidance that allows them to conduct complete and thorough examinations.

The subject matter eligibility guidance we issued March 4 of this year is the result of eight months of careful deliberation. On May 9we held a forum on subject matter eligibility at our headquarters that was well-attended and featured a number of interested parties as speakers. We have also solicited written comments, and are pleased to have already received a lot of input in our dedicated mailbox. Later today in this program, we'll share some of the public feedback we've received. While we are always open to feedback, we're encouraging comments by July 31 on any aspect of the guidance. We recently extended this comment period from June 30 after hearing from stakeholders that more time was desired. We're looking forward to receiving your comments, and are eager to hear the public's thoughts about potential alternative approaches to implementing the Supreme Court case law and claim examples for future examiner training. Once we've had time to carefully consider all of the comments, we will update our examiner guidance material.

All of this is part of our agency's larger commitment to open government and transparency, and more specifically to facilitate a productive public discussion that ensures our work on behalf of the American people is the best it can be-and that includes our patent examiner guidance. In that same spirit, we made sure that some of our senior leadership, including our Deputy Commissioner for Patent Examination Policy Drew Hirshfeld, would be here today to further engage with you on subject matter eligibility or any other topic of interest to you. You'll hear from Drew and a member of his team-June Cohan from the Office of Patent Legal Administration-very shortly. And we want to hear from you because we recognize the critical role all of you play in innovation and our economy.

My team and I look forward to continuing to work with you to advance our shared goal of promoting an efficient and balanced IP system in the United States that promotes the creation of the world's most innovative discoveries. Thank you again for having me here today, and I'm going to turn it over now to Drew and June to provide more detail on the Myriad/Mayo guidelines and how we're gathering input from our stakeholders.