Building a Better Patent System Together - PTO Day Conference

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

IPO Education Foundation's 24th PTO Day Conference

Washington, D.C., March 25, 2014

Remarks as Prepared for Delivery

Thank you for the kind introduction, Herb. It's wonderful to be here today, among old friends and colleagues. IPO is a great organization of hardworking, talented people. The work you do-facilitating cutting-edge innovation by your member companies-fuels economic growth and job creation, and in that mission we share a common goal. I had the privileged of serving a brief stint on IPO's board of directors. It was a pleasure to work together with Herb Wamsley, his team, and an impressive group of in-house corporate counsel, the latter of whom had very busy day jobs, yet who were still willing to make the time to serve on the IPO board to work on intellectual property issues important to us all.

I was always impressed by the wide variety of corporations represented on the board and across IPO's membership. But nobody is born a corporate counsel. Every one of us brought a unique background that shaped who we are and how we approach those inside counsel positions - and I'm no exception. I was born and raised in the Silicon Valley, the product of an immigrant family, and a beneficiary of economic prosperity created by our innovation economy. It's a fundamentally American story.

My father was an engineer. We spent many of our weekends and evenings tinkering, working together to build things, like a Heathkit amateur handheld radio and later the television set that was eventually to sit in our family room and used for years to come. All the dads on the street where I grew in the Silicon Valley, were engineers, innovators in the truest sense of the word. They worked for tech companies, small and large, often founded by a single person or small team who created an invention, patented it, and used that patent to help obtain venture capital funding and bring the invention to the marketplace. Some of the companies succeeded. Some did not. But for those that did, they created good jobs and, in some cases, new products and services that changed the world and our way of life.

Seeing that process up close and personal growing up-the virtuous cycle of invention and intellectual property protection and innovation-and how that allowed individuals and communities to together build products, services and companies with the potential to change the world-made a lasting impression on me. I wanted to contribute, and enable others to contribute, to innovation. It's why I studied electrical engineering and computer science at M.I.T., and later intellectual property law at Stanford, with the goal of representing innovative companies. While working at M.I.T.'s Artificial Intelligence Laboratory and Hewlett-Packard's Research Labs as a computer programmer, I witnessed innovation at its creation. It was an exciting experience I'll never forget, and one that still informs my work to this day. Later, as an attorney, I worked as the head of patents and patent strategy for a then-small company that grew into a Fortune 500 corporation in the span of eight short years. Along the way, my team and I built the company's patent portfolio from a few handful of patents to over 10,500, using many of the services offered by the USPTO.

Through my experiences as an in-house corporate counsel and, before that, a law firm partner in a Silicon Valley law firm representing a wide range of innovators from an individual inventor to a Fortune 500 technology company, I came to understand and practice many areas of intellectual property law and almost every aspect of patent law-including prosecuting patents, asserting patents, defending against patent infringement, and licensing, buying and selling patents. I understand and appreciate, from a business perspective, the important value and uses of intellectual property for innovators and for the growth of our businesses and economy.

More recently, during my service on the USPTO's Patent Public Advisory Committee and a year as the agency's first Silicon Valley satellite office director, I saw and experienced firsthand the impressive talent of the USPTO team, and that a diverse group of stakeholders (from solo inventors to large and small companies in a wide range of technology areas) can work together with government to accomplish common good. Consider, for a moment, the good news story about the selection of our new Silicon Valley satellite office space in San Jose.

I was head of the Silicon Valley office and tasked with finding a permanent location for the satellite office at a time of sequestration and much political gridlock in Washington. In this environment, the city of San Jose and the state of California-with the enthusiastic support of the local innovation community and the California congressional delegation-stepped up to the plate and helped the USPTO by offering space for our permanent office in San Jose City Hall. When businesses, innovators, and members of Congress join with city and state governments to look to a federal agency and say, "We want you in our community, and we're willing to provide you the space to work," you know you're doing something right-that you are contributing something of value to the community.

And so we are, in the Silicon Valley and across the country. We're building a better patent system together-all of us-because we want to encourage and empower the innovation that fuels our nation's continued economic prosperity. Every one of us in the business of intellectual property shares a common conviction that our patent system is too important to treat lightly or hastily. We have to find that balance, or sweet spot, where our patent laws and processes provide the strong protection innovators need, without the kind of red tape, delays, or frivolous litigation that stifles innovation. Achieving that balance isn't the task of any one person, agency, or group of stakeholders. It requires all stakeholders to work together-not only the USPTO, but also the judiciary, Congress, inventors, business leaders, patent applicants and owners, patent plaintiffs and defendants and patent licensors and licensees.

In a government of the people, by the people, for the people, we all have a vital role to play in improving our patent system and finding that balance. Since our nation's Constitution was first drafted, debated, and eventually adopted-granting to innovators that "exclusive right" to writings and discoveries enshrined in Article I, Section 8-generations of Americans have been hard at work building, inventing, and innovating for the benefit of all. That hard work has necessarily included efforts to ensure that our patent laws and system keep up with the pace of American innovation-no small task for a country that put a man on the moon, created the Internet, and pioneered such revolutionary technologies as lasers, smartphones, and artificial hearts.

Two and a half years ago, in a rare moment of bi-partisanship and common purpose, the most recent of those efforts came to fruition when Congress passed, and President Obama signed into law, the Leahy-Smith America Invents Act. Then, over the next eighteen months, IPO and other stakeholders worked together with the USPTO as we successfully implemented the provisions of the historic act. Since then, we have come a long way in ensuring that our patent laws and infrastructure are suited to the needs of a global innovation leader. David Kappos outlined that progress during his luncheon speech at your IPO Day in December 2012. Today, we have post-grant patent review proceedings that offer faster and less expensive alternatives to litigation in federal courts, a first-inventor-to-file regime, fee setting authority, satellite offices in all four continental time zones, and much more. But of course, the reforms to our patent system didn't stop there, because even a high-performance engine still needs some fine-tuning to stay running at top pace.

In June of last year, President Obama announced five executive actions and seven legislative recommendations to build upon the strong foundation of the AIA reforms. You've likely followed our updates on those executive actions, four of which are led by the USPTO. Those include:

  • exploring greater transparency of patent ownership information;
  • providing new, targeted training for patent examiners to scrutinize certain types of patent claims (functional claims) that may be overly broad and to increase patent clarity;
  • offering new educational resources for Main Street businesses and others to help them respond to claims of infringement; and
  • expanding our already extensive public outreach efforts and empirical research.

With help and input from our stakeholder community, we've made great progress on these executive actions. You can see a summary of those accomplishments on each of the executive actions and new ones on the USPTO website. And just last month at the White House, the White House, Department of Commerce, and the USPTO jointly announced three new executive actions designed to further advance this next round of innovative improvements to our patent system.

With our first new executive action, the USPTO will make it easier for companies, experts, and the general public to provide more relevant prior art to the USPTO so its examiners may use it in evaluating patent applications to help issue the best quality patents possible.

Specifically, we are:

  • refining our existing third-party submission program,
  • exploring other ways for the public to submit prior art, and
  • updating our guidance and training for examiners to more effectively use crowd-sourced prior art.

To this end, coming up on April 10th at the USPTO, we are hosting a roundtable with the innovation community to gain insights on how our agency can better leverage crowdsourcing techniques to find prior art so our examiners can make the most informed judgments possible about patentability. We're also recruiting right now for a Presidential Innovation Fellow to help increase the volume and relevance of information provided to the USPTO and the public by identifying effective new approaches to tap into the relevant innovation communities. If you know of a good candidate for that position, be sure to encourage them to apply before the deadline on April 7th! You can find more information on our website by looking at my March 13th blog announcing the opening. You can also see from that blog post that more than a dozen corporations and associations have already expressed a willingness to help advance our shared goal of increasing examiners' access to the best prior art possible.

I want to thank Herb and all of the IPO leadership for your support in our efforts to implement these new executive actions. The administration is grateful to you and those others who are already answering this call to help us build a better patent system together. And we hope all of you here today will also consider following IPO's lead in answering this call to work together on this important endeavor.

The second new executive action is aimed at expanding our Patent Examiner Technical Training Program, which ensures experts in industry and academia can provide relevant technical training and experience to patent examiners. The USPTO has long recognized the importance of ensuring that patent examiners are fully versed in the latest advances in their technological fields, including those that involve overlapping fields such as software and biotechnology. Under this program your technical experts could come to the USPTO, or eventually a local satellite office, to give perhaps an hour long presentation on his/her topic of expertise.

Most likely, this is a presentation that your expert has given before to colleagues or at conferences. Yet, the willingness to provide this same presentation to our examiners (which could be webcast nationwide to all examiners who examine in that technology area) is tremendously helpful and can be done so at relatively little cost and effort to those good enough to volunteer, especially as our satellite offices get up and running. With the public's help-with the help of you and your companies-the USPTO can ensure more and regular training across all technological disciplines through this examiner training program to the benefit of all.

While we're on the topic of our satellite offices, I'd like to highlight how the USPTO is using these offices to provide better services to you. In addition to increasing the USPTO's ability to hire the most talented IP professionals across the country to handle your matters (and I mean both examiners and Patent Trial and Appeal Board judges), the satellite offices play an extremely important and indispensable role in the ability of our agency to provide outreach and education to all of our stakeholders, and not simply those fortunate enough to be located near the D.C. area or who have budget to travel to the D.C. area.

In addition these offices will eventually be able to offer the opportunity to participate in Patent Trial and Appeals Board proceedings and examiner interviews locally (either with a live person and/or with a person or persons available via a secure video-link). We also envision our satellite offices as a place where examiners can provide "best practice" training to the local IP bar to improve the quality of applications submitted. We believe this more convenient access to many of our services will make a big difference particularly to smaller companies and individual inventors, but also to larger companies. In short, the potential of the satellite offices to help the USPTO achieve its mission is a subject about which I'm extremely passionate and familiar, after my experience as the first Silicon Valley office director. I will work hard as Deputy Director to ensure that we harness their potential to the fullest, and welcome your input on how we can best utilize these offices for the benefit of you and your clients.

Let's turn back to the third (and final) new executive action. Due to the complexity and legal nature of IP rights, under-resourced independent inventors, start-ups, and small businesses sometimes struggle with filing and prosecuting patent applications. The USPTO will help by providing dedicated resources to pro se applicants who lack legal representation. We will work with our partners through a full-time pro bono coordinator that we will hire to expand the existing pro bono program to all 50 states. We will be looking for volunteers from the IP bar to support this program, and we hope you will consider contributing. As you all know, assistance from the USPTO or from a patent attorney can be critical in preparing the necessary documents to help ensure that, if an invention is patentable, a quality patent is issued as expeditiously as possible. The dual public/private structure of these assistance programs is another excellent example of that cooperation I mentioned in the beginning of my remarks, and a recognition that building a better patent system together isn't just about stakeholder engagement; it's about stakeholder empowerment, and we can work together to achieve this goal.

These executive actions are examples administrative steps being taken by the USPTO in collaboration with our stakeholders to strengthen our patent system. But, as many of you know, the USPTO is also working with our stakeholders, as well as members of Congress and our colleagues within the administration, to help advance some legislative reforms designed ensure a strong and balanced patent system that encourages innovation and not litigation.

Our active engagement with the House and Senate on their patent reform efforts is focused on three areas-increasing transparency, helping Main Street technology users, and streamlining patent litigation costs. On the topic of transparency, the USPTO has proposed new rules in this area. The House and Senate bills also have included provisions that would increase requirements to update this type of information. We are seeking public input on our proposed rules, and we've extended the written comment period to April 25th. We also are hosting a second public hearing on the proposed rules tomorrow in San Francisco. This hearing will be webcast live on the USPTO website.

Let me just make clear that these proposed rules are exactly as the name says, proposed. As with all of our proposed rules, we welcome and solicit your input. What we do will be guided by your input. So, please help us do our job better by letting us know your thoughts. Next, when I say helping Main Street technology users, I'm referring to so-called "customer stays." We're focused on ensuring that downstream users of technology are protected from potentially abusive litigation. Lastly, on the subject of streamlining patent litigation costs, we would like to see some improvements and incentives to reduce the costs in what is already a very expensive process.

The key in all of these areas is striking the right balance, one that protects the rights of intellectual property owners while ensuring innovators are investing, as President Obama said in his State of the Union remarks, in innovation, not litigation. We are committed to working with Congress and our stakeholders on these important issues to create a stronger and more balanced patent system for our country now and in the long run. We owe the American people no less.

In another area where the USPTO and our stakeholder community have opportunities to share information and work together is on our Patent Trial and Appeals Board proceedings. I am pleased to announce that our Patent Trial and Appeal Board, which currently stands at 181 judges across four continental time zones, is about to embark on a nationwide stakeholder outreach. Specifically, we are planning to host a series of roundtables across the country focused on the AIA trial proceedings-inter partes review and covered business method review. The roundtables will begin on April 15th and run until May 8th. We will visit eight major cities-Alexandria, New York City, Chicago, Detroit, Silicon Valley, Seattle, Dallas, and Denver. These roundtables will provide an opportunity for stakeholders and USPTO administrative patent judges to discuss the new AIA trials, lessons learned, and never before released statistics. Likewise, they will offer ample opportunities for stakeholders to share input about their experiences with the trials. Because our Board's work with the new trials is providing another option to district court litigation for patent owners and alleged infringers to resolve disputes about patent rights earlier and more efficiently than in the past, we want to ensure that all of you understand the operation of our trials and that we collect input about them from you.

You've also seen us engaged in a wide variety of outreach as we work to build a better patent system together. In late 2012, the USPTO created the Software Partnership, with the goal of bringing stakeholders together through a series of roundtable discussions to share ideas, feedback, experiences and insights on software related patents. The Software Partnership held multiple events at our Alexandria headquarters, in Silicon Valley, and in New York City.

  • The topic of the first two Software Partnership Roundtables addressed, among other topics, functional claiming.
  • The topic of the second roundtable, the potential use of glossaries to enhance claim clarity.
  • The topic of the third roundtable, prior art sources and search techniques.
  • And, the topic of our upcoming fourth roundtable on April 10th at our offices in Alexandria, crowdsourced prior art and preissuance submissions.

Each of these roundtables has been very well-attended, and the topics for discussion at these roundtables were provided by the public. But the Software Partnership is not our only partnership with our stakeholders. We have a business method partnership, a biotechnology and chemical pharmaceutical customer partnership, an additive manufacturing partnership, and a medical device partnership. All of these partnerships provide on-going ways for our stakeholders and USPTO team come together to share ideas on ways to improve programs and the services provided by the USPTO for given technology areas. When you engage with us, in our partnerships, at roundtables, and by submitting comments, you are helping us build a better patent system together.

Moving to a broader plane, as Commerce Secretary Pritzker states in her ambitious "Open for Business" agenda, innovation is the key driver of U.S. competitiveness, wage and job growth, and long term economic growth. If we want our nation to continue to lead and thrive in the 21st century global economy, we have to ensure that all Americans have the tools and knowledge they need to be a part of that economy. From STEM education initiatives, to our partnership with the National Inventors Hall of Fame, to pro bono assistance programs and a variety of other initiatives in between, the USPTO is helping in that worthwhile effort. And we will continue to do so.

And so, starting to sum things up, let me tell you this: the USPTO is in a very good place right now. Our funding looks good, and our nationwide workforce is the best it's ever been. On the funding front, in January of this year, Congress passed a $1 trillion Omnibus Appropriations Bill. This legislation means that the federal government, including the USPTO, will not be subject to sequestration in 2014 as we were this past year. Rather, the Omnibus Appropriations Bill provides the USPTO with our requested $3.024 billion in spending authority for fiscal year 2014, which is the amount we estimate that we will collect in fees during the year. Put another way, if we collect all the fees we predicted we would collect, and we spend all that we budgeted for, all the fees that you pay us will be used to provide services to you and support our shared innovation ecosystem.

The bill also enables the USPTO to place any funds that we collect above our $3.024 billion appropriations amount into our fee reserve fund. This fund was established under the Leahy-Smith America Invents Act to end fee diversion. With the fiscal year 2015 budget we just submitted to Congress, we'll continue on our path of reducing patent application pendency and aligning the backlog of unexamined applications with increased manpower by FY 2018. The new budget supports our ability to hire more patent and trademark examiners. It also allows us to make substantial capital improvement investments in critical IT modernization projects to provide our examiners with the tools they need to do their jobs more efficiently and effectively.

Turning to the topic of our workforce, the outlook could not be better. A little over a week ago, we celebrated our agency's #1 ranking by the Partnership for Public Service as the Best Place to Work in the Federal Government, out of more than 300 agency subcomponents. I am delighted to share the good news that we have seen a rapid and dramatic rise in those rankings, from 172nd place in 2007 to #1 today. For this accomplishment, I give all the credit to the hard work, talent and dedication of all of USPTO's employees and the commitment of my predecessors to improving our agency and its operations. As for our stakeholders, I firmly believe that a satisfied and engaged workforce leads to better service and quality for the users of our services. While the #1 ranking is a tremendous accomplishment, no one at the USPTO-least of all myself-believes this is a time to rest on our laurels. Our work has never been more important, and we have a lot of important work to accomplish over the next few years, but we are operating from a good starting position.

I hope this gives you a sense of the numerous and tremendous efforts we have underway at the agency. I want to thank you for your time and attention today, and for everything you do-in a number of ways, large and small-to help, strengthen this great patent system of ours together. Thank you.