Intellectual Property and Medical Entrepreneurship

Under Secretary of Commerce for IP & Director of the USPTO David Kappos

June 9, 2011

Medical Device Manufacturers Association

"Intellectual Property and Medical Entrepreneurship"

Draft remarks as prepared for delivery

Good afternoon everybody and thank you for that kind introduction. I'd like to thank Sheri Devinney, Joe Kiani and the Medical Device Manufacturers Association for inviting me to participate in this year's annual meetings, especially because of what all of you, represent for our country.

At a time where government struggles to balance its checkbook, your dedicated research is unearthing new, cost-effective ways to tackle cancer and cardiovascular disease; at a time where countries are grappling with generational challenges, your determination is harnessing data and the Internet to more efficiently share information about pandemic disease across borders; and at a time where families around the country are faced with daunting financial decisions, like choosing between a mortgage payment and antibiotics, your partnerships are distributing medicines in ways that make it a little easier for Americans to find and access affordable, life-saving drugs.

Without a doubt, we meet at a crossroads in our country's economic evolution. But while the 21st century continues to invent new challenges, their solutions lie in the innovative drive represented in this room. The growth-potential and vitality of the United States has been, and continues to be, deeply rooted in American innovation. This country was founded by pioneers who developed new ways to cope with an unfamiliar environment, who cured disease and connected a country, who led the world into the age of flight and who now transcend borders through information technology.

Universities, start-ups and small, high-growth enterprises have often played a crucial role in the development of new products in the biotech and medical device industry. Because of your adaptability, ability to identify market niches and huge innovative potential, your firms form a vital component of the health care industry worldwide.

So not only does your unrelenting research inspire medical advances, transform the welfare of a community and afford us second chances in an all too fragile life-but it also attracts critical resources and capital needed to spur additional research & development, creating a host of new markets and new job opportunities.

Time and time again, the story of American growth is written by the daring drive of entrepreneurs who are willing to roll the dice on a great idea. It's the story of CyberHeart Inc in California which is leveraging the power of robotic radiology to design non-invasive heart treatments. And it's the story of K2M Innovations, right here in Virginia, which is using patented spine technologies to treat deformity and degenerative trauma.

The entrepreneurial drive on display throughout our country is not only about making sure an ailing parent gets to see their grandchild graduate, or lending a patient a renewed sense of hope. In unleashing human creativity and genius to address our most human of problems, innovation is also being leveraged to drive our economy forward. Many early-stage ventures such as those gathered here today create two out of every three new jobs in our country. Your efforts, similar to the story of this country itself, represent the willingness to take a risk on a new cause, a new idea or a new invention. And that is the path by which the next chapter of American growth will be written.

That's why, in order to optimize the ability of entrepreneurs to thrive, the United States Patent and Trademark Office is working in concert with the Department of Commerce and the Obama Administration, to reduce barriers to medical device business development, and accelerate success. First and foremost, the capacity for growth of any inventor or entrepreneur or new enterprise rests in their ability to raise capital, spur additional research & development, and ultimately bring their ideas to the marketplace. Recognizing that need, the Administration is taking concrete actions to improve the environment for high-growth innovation through the Startup America initiative.

By building partnerships with the private sector, the Department of Commerce and the Small Business Administration match up to $2 billion for private funds that invest in early-stage R&D, invest in businesses in underserved communities, and invest in small entities that face difficult challenges in accessing capital. These nation wide partnerships not only help break down barriers that independent entrepreneurs may face in seeking funding, they also encourage and incentivize direct partnerships between venture capital firms and small companies.

Outside of federal matching grants, we also want to put the opportunity to connect with funders directly in your court. So in this year we are working to host several "DC-to-VC" summits that will gather federal leadership, entrepreneurs in the health care space, and early-stage investors, to leverage targeted engagements in addressing emerging business opportunities while also working to improve our country's health through better, more efficient care delivery.

The health care sector is particularly research intensive and requires regular investments at different stages in company development in order for enterprises to grow. And a majority of the small and medium sized companies here that drive innovation in life-saving therapies and techniques need accelerated means to acquire funds and get their businesses off the ground. Not only is their bottom-line at stake, but so too are lives and the welfare communities.

Now in the IP domain we also realize that the medical device and indeed the health care innovation sector are highly dependent on effective patent protection. That's why the USPTO is working to create a more efficient and cost-effective patent system. Aiming to re-engineer the process of securing IP rights, we are currently building bipartisan support in Congress to pass the America Invents Act that will allow small and independent inventors to move their ideas to the market place faster and enable you to do your jobs more easily-while also reducing the need for cost-prohibitive litigation, which all too often ties up ideas in the courts-stifling innovation and choking job creation.

By processing patents in a shorter amount of time, medical device entrepreneurs will be able to use those intellectual property rights as vehicles to leverage even more funding. Through this legislation, the PTO is also empowered to retain the fees and resources necessary to ensure high quality patent examinations. Not only does this enhance the quality of reviews without adding a dime to the deficit, but it allows the USPTO to actually use our funds to do the job you're paying us to do in the first place! All of the programs PTO is implementing to strengthen our examining corps, chip away at the backlog and increase our internal efficiency require resources. So passing this bill not only improves the PTO's ability to do our job across the board, but it also makes your jobs as practitioners more effective and easier, all the while giving way to a new generation of American opportunity.

Now sustaining that robust IP system is especially important to all of you because the dynamics of the medical device industry are rapidly evolving. Historically, device development was grounded in the mechanical sciences. But as this industry continues to leverage the cutting-edge potential of digital technologies, it is becoming increasingly more cross-disciplinary. Great new products have one foot in neuroscience, another in software, and yet another in nanotech. These kinetic realities demand intelligent engagement and a smarter infrastructure to keep up. By passing patent reform, we're infusing additional resources into the Patent Office, equipping our patent examiners with the appropriate tools needed to evaluate these new technological heights, and ultimately ensuring that tomorrow's innovation economy does not take root in yesterday's infrastructure.

And let me be clear: passing this bill is not about politics; it's about ensuring that we are doing everything we can to create a more efficient IP system, lift your businesses, spur growth in America and out-innovate our economic competitors. MDMA member companies boast some of the most impressive high-growth employment statistics in the nation. And the public-private research partnerships many of your organizations embark on generate a high share of cutting edge research compared to the rest of the world, highlighting that many technologists are increasingly working at the seams of unchartered industries, sciences and markets-where disciplines are overlapping in ways not seen in the past.

If this country is going to effectively unleash and harness the might of these evolving fields, the scientific pioneers charting their murky terrain need all the support and guidance they can get. That's why, beyond funding and a strengthened intellectual property system, close collaborations and peer-to-peer partnerships are essential for new businesses to communicate best practices to ascertain tricks of the trade. In this regard, groups in the Valley like YCombinator and The Founder Institute offer forums to test new ideas and tap into a network of professional support.

And that's the sort of collaborative work the Obama Administration is also working to tap into. Through the Startup America program, we're expanding entrepreneurship education by establishing additional peer-to-peer mentor programs that grow networks of support between large companies, investors, small high-growth businesses and startups. This gives innovators the chance to further fertilize their ideas and identify nodes of collaboration, expanding the innovation potential within their markets.

While the efforts I've mentioned are aimed at making the business environment ripe to grow products and services, the USPTO also recognizes that much of research and development involves a simple race against the clock. For medical device ventures committed to helping the sick, offering a new lease on life requires making treatments available as fast as possible. To help you and your patients, USPTO is launching a new three-track acceleration program that allows applicants to determine the pace at which their ideas are reviewed for patentability. If an enterprise is in urgent need of IP protection, they can accelerate the speed of review simply by remitting a fee. And for ideas that can benefit from a bit more incubation time, applicants can opt for a slowed-down track.

This program puts tools in the hands of the innovation community to tier priorities and help manage the patent backlog. Even though recent Congressional budget decisions have prevented us from rolling out the first phase-the Track One program-as early as we'd like, we're putting all the structural and procedural resources in place to make this avenue available to the public as soon as budgets permit. Regardless of its start date, however, the nature of the program reflects recognition on the part of the PTO that we live in an age where technological change can occur in the blink of an eye.

So, the mandate is to create a smart, agile and nuanced Patent and Trademark architecture that can adapt to evolving business needs and leverage modern tools to address them. That's why we're also working to develop a better information technology system for the PTO to make everyone's lives easier. From automated petition systems we rolled out this spring, to a community wiki to give office staff, practitioners and applicants alike a chance to share, update and pull down information to better inform their efforts, we are working unrelentingly to strive for a 21st century system that can work smarter, better, faster and stronger for all stakeholders to benefit from-and for current stresses on the IP system to be relieved.

In truth, what all these efforts strive to do, is keep up with a new reality. IP isn't just important, it's become all important. It isn't just a big thing. it's the only thing that enables innovations to benefit from the fruits of their labor. So we simply must get it right to remain competitive. But another part of remaining competitive in this economy is recognizing that innovation is not measured simply by the number of patent applications filed or patents granted. Rather, growth is measured by smarter investments and trade associated with the IP.

A smart growth economy, isn't rooted in an infrastructure that just blindly pushes along IP for the sake of IP, but rather one that adeptly incubates good ideas, offers high quality reviews, and swiftly brings the best products to the marketplace. This smart innovation, and the infrastructure that makes it happen, writes the next chapter of American growth.

That's why the USPTO is also proud to play a role in accelerating socially conscious technologies. Under our Green Technology Pilot Program, patent applications involving reduced greenhouse gas emissions, energy conservation and environmental quality are accelerated in their review. And at no cost to the inventor. By advancing a commitment to building a more sustainable energy future, the US Patent and Trademark Office is able to spur innovation and promote green collar jobs that provide our world with alternatives to harmful energy practices. This program has been another pretty clear success, with over 3,000 petitions submitted and over 2,000 granted, and hundreds of patents issued in months not years.

And two weeks back we also launched the Global Intellectual Property Education Training Program Database. By allowing U.S. government agencies to post in one place information about the intellectual property rights (IPR) training programs they conduct around the world, we transparently demonstrate the premium we place on issues of protection and enforcement-showing that the US is not just the world's chief global competitor, but also its chief global citizen.

Ladies and gentleman, America's economic growth and international competitiveness depends on our capacity to innovate. And your cutting edge technologies not only impact our safety and quality of life-they also drive down health care costs for generations to come. Boosts in R&D investment, public-private partnerships, and cause based technologies are all essential to ensuring that new businesses flourish. And the Commerce Department and USPTO are committed to helping create 21st century business opportunities in our country. As the government invests in the building blocks of innovation through new infrastructure and new research, we can establish an environment ripe for private sector investment and competitive markets, if we smartly invest in the innovation that will win America's future.

And one thing is apparent from today's conversation. America is not lacking for groundbreaking ideas, nor are we short on entrepreneurs willing to take risks. What we need is to improve our ability at connecting our country's great creators and thinkers, our doers and our makers. Many medical device businesses are stewards, shuttling ideas from labs to the marketplace, but despite the unrelenting efforts of our universities, commercialization of federally funded technologies developed at your labs and at universities is not as efficient as it needs to be.

That's why forums such as this are so essential. They allow us to better understand how to balance the IP equation, distribute technologies and capture funding-all while addressing specific barriers to growth that you face daily. So if there's anything you take away from my remarks today, please recognize that the goal of these efforts is not just to tout innovation for innovation's sake. Instead, by cultivating technologies, by respecting them and protecting them, we can give ideas the vehicles they need to spread across continents and help heal societies. All parts of the US innovation value chain must remain vibrant. And if amplified by good government policy, the current re-aligning trends can support one another to preserve American excellence in out-building, out-innovating and out-hustling our economic competitors.

Thank you for listening.