Modernizing a 21st Century Patent Office

Under Secretary of Commerce & Director of the USPTO David Kappos

April 14, 2011

Joint Venture: Silicon Valley Leadership Breakfast @ Applied Materials Inc.

"Modernizing a 21st Century Patent Office"

Draft remarks as prepared for delivery


Good morning everybody and thank you for inviting me to participate in today's conversation, in the heart of the Silicon Valley. It's always exciting to be back home in California, but it's especially fascinating to be able to visit the Applied Materials campus in Santa Clara.

Through your pioneering research, Applied has found cost-effective ways to commercialize non-manufacturing technology for a wide variety of use. From coating solar cells, to speeding up the production of semiconductor chips, you have found ways to scale your technologies to tackle everything from medical diagnostic technologies to data storage solutions to unearthing sustainable energy solutions.

And this is particularly important because the growing ability for a single company to pivot in their business practices and provide a vast array of commercial solutions, across industries, is not just unique to Applied Materials, but it's increasingly becoming the norm among the high-skilled workforces seen around this town.

Now, it's no doubt that Silicon Valley boasts some of the most important high-tech employment trends in the nation. But the dense concentration of highly skilled tech workers in the Bay Area is giving way to this rising trend of cross-disciplinary collaboration, where technologists from one field are working with technologists in another, and increasingly, they find themselves working at the seams of unchartered industries, sciences and markets-where disciplines are overlapping in ways not seen in the past.

As your business practices become more and more innovative, they also spark the promise of new jobs in even newer industries. And while this makes Silicon Valley businesses more vibrant, this reality also adds more and more contours to an already dynamic intellectual property terrain, and our IP systems must keep up.

That's why conversations such as these are critical. They give us a chance to identify what structural barriers your businesses are facing and in turn empower us to work toward an environment ripe for innovative growth and development. And in the spirit of ongoing collaboration, I want to thank Indira Balkissoon (BUL-KIS-UN) and the entire Joint Venture Silicon Valley Network for gathering all of us today in a dialogue that honestly assesses how we can strengthen our patent system in the face of the modern technological landscape. To that end I also want to thank San Jose Mayor Chuck Reed and Congresswoman Zoe Lofgren for having shared their insights today.

Undoubtedly, we stand at a crossroads in our country's economic evolution. Determined to accelerate the pace of economic growth and job creation, government and business alike strive to do more while working with limited resources.

But the economic security and vitality of the United States has been, and continues to be, deeply rooted in the power of 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 global borders through the power of information technology.

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.

New inventions and new ventures create 2 out of every 3 new jobs in our country, demonstrating that in a world of globalized markets, innovation continues to serve as the premiere source of our competitive advantage. But for cutting edge ideas to see the marketplace and for businesses to sustain themselves over time - strong IP protection is critical.

So while the dynamics of our economic landscape may be shifting, the importance of intellectual property is not.

Since IP rights unleash American ingenuity and equip her with the tools to out-build our economic competitors, we in the IP community are not just in the IP business-we're in the economic development business, the growth business and the jobs business.

That's why a paramount priority of the United States Patent and Trademark Office (USPTO) has been a more simplified and streamlined process to acquire IP rights, ultimately enabling inventors to bring their ideas to fruition faster and compete in global markets sooner.

Count System

We began by overhauling the antiquated "count system" which measured the work of our patent examiners. By convening a joint labor & management task force, we created a new system of incentives that afforded examiners more time to review applications before issuing a first-action. The re-engineered system also established new channels of communication with patent applicants, encouraging an open dialogue about the application to boost the efficiency and quality of the review.


Then we turned to establishing a 3-track examination program that allows applicants to determine the pace at which their ideas are reviewed. If an enterprise is in urgent need of IP protection they can accelerate the speed of review with a fee, and if ideas require a bit more incubation time they can opt for a slowed-down track.

This program, which will be moving forward this year, puts tools in the hands of the innovation community to tier priorities and help manage the patent backlog. And the first part-Track 1-is proceeding immediately, so you will be able to file patent applications for expedited processing as of this Spring.


In addressing issues of quality, we're leveraging the Internet to bring the power of the global technology community to bear on the patent examination process, with the second Peer-to-Patent (P2P) pilot program.

With members of the public afforded the opportunity to submit relevant prior art, the scope of examination is widened, and the quality of our review heightened. Initially one might ask how many nerds out there are like us, and would really spend time providing prior art submissions?

But, shortly after launching the pilot the site received thousands of hits, nearly a thousand pieces of art were submitted and, before we knew it, patent offices in other countries followed suit, and began their own peer-to-patent pilot programs.

Tremendous interest has been displayed since we've launched the second pilot, and the USPTO is looking at how to encourage further program participation and how to expand the initiative to service an even larger scale, and eventually across all applications.

Patent Reform

And while we'll be sure to continue to share lessons learned, I want to point out something these efforts highlight:

o Even in a world where new technologies seem to emerge up faster than we can keep up, innovation is truly enhanced when we take the time to robustly debate and examine ideas.

o Changes to the count system and the P2P pilot ultimately fuse the power of high quality reviews and high quality minds to translate great ideas into great patents.

While these are promising, we must still grapple with an unfortunate reality:

o Hundreds of thousands of ideas sit idle in our system's pipelines, representing untold numbers of jobs laying in wait on the sidelines.

o Adding to that conundrum, in the past 50 years we have seen more technological advancements than in any previous period in history, but with no significant patent reform to keep up with the times.

In this new century, we can't expect tomorrow's economy to take root in yesterday's infrastructure.

Despite the strides we've made, there is much more needed to optimize our infrastructure in order to bring new products and services to the marketplace as fast as possible.

That's why President Obama, Secretary of Commerce Gary Locke and I have been working hard to build widespread, bipartisan support for comprehensive patent reform as is now under consideration in Congress. This legislation enhances our patent system by offering greater certainty about patent rights and alternatives to expensive litigation when patent rights are disputed. Ultimately, the bill would provide the most sweeping reforms to the US patent system in 60 years-arguably 150 years.

Having recently passed the US Senate with an overwhelming mandate of support, 95 to 5, the proposed reform balances IP rights and makes the USPTO a springboard for growth.

o By establishing a First Inventor To File system, patent rights are granted with greater speed and greater certainty.

o A more streamlined structure for post-grant challenges offers fast and cost-effective alternatives to protracted litigation, reducing barriers to growth for small to medium sized businesses, spurring innovation and jobs.

Through this legislation, the PTO is empowered to retain the fees necessary to ensure high quality patent reviews. Not only does this give us a chance to improve quality without adding a dime to the deficit, but it allows the USPTO to actually use your fee payments to do the job you're paying us to do in the first place!

And in a globalized world, comprehensive patent reform will increase productivity by enabling greater cross-border work-sharing between the USPTO and other patent offices.

This updated patent infrastructure also levels the playing field for independent inventors and small businesses seeking to participate in the global marketplace-enhancing American competitiveness. To this end, we've embarked on a lively conversation with key trading partners and patent offices overseas about ways to harmonize substantive patent norms, to ensure the global patent system accelerates global commercial activity, rather than impeding it as can be the case now.

In the decade we've been debating patent reform, the system has largely moved sideways-with the exception of the good work the courts have done. So here we are, years later, and each patent application sitting idle in our backlog represents a job that could-have-been. Each file that hasn't been reviewed because of insufficient resources represents a market that could-have-been.

To ensure that we are able to out-build, out-educate and out-hustle our economic rivals-we can no longer remain bystanders, witness to chokeholds on innovation. We must get patent reform completed now.

Start Up America

The capacity for growth of any inventor or entrepreneur rests in their ability to raise capital, spur additional research & development, and ultimately bring their ideas to the marketplace.

Many patent-reliant industries, including biotechnology enterprises and diagnostic services, require timely and high-quality patents to foster research and secure these resources. That's why our Administration is taking concrete actions to improve the environment for high-growth innovation through the Start-Up America Initiative.

By building partnerships with the private sector, the Department of Commerce and the Small Business Administration match up to $2billion 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.

IT & e-Petitions

Ensuring generation-changing ideas reach markets quickly, requires capable information technology systems. Our IT at USPTO certainly leaves a lot to be desired. So we've set out to fix it too, and we're beginning to make some progress. One particular area you'll be interested in is petitions.

Last year we received around 35,000 petitions. Many thousands waited for months until our staff could process them. Well, now that has changed. In one of the first components of our new IT system, we've introduce a new web-based, fully automated system that will enable you to retrieve instant-grant and certification in many petition categories-one-third of all petitions to be exact. The new system will offer fast service, move requests along in minutes, that now take months-and make better use of PTO staff's time by allowing them to focus on other work.

Developing a better information technology system for the PTO also requires equipping all of you with the right tools and information to make everyone's lives easier. That means optimizing the speed and accuracy of our current search tools to answer your patent application questions. And it also means building out a community wiki to give office staff, practicioners and applicants alike a chance to share, update and pull down information to better inform their efforts.

In truth, what all these efforts strive to do, is keep up with a new reality. In a single generation, revolutions in technology have transformed the way we live, work and do business.

Today, just about any company can set up shop, recruit talent, and move their products wherever there's an Internet connection. They're also moving these products on an intellectual property backbone.

Meanwhile, nations like China and India realized that with some changes of their own, they could compete in this new reality. And so they started educating their children earlier and longer, with greater emphasis on math and science.

So, yes, the world at times can appear staggeringly different, and the competition for jobs is real, and it is global.

But 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, more nuanced technologies and trade associated with the IP--

o According to the World Bank, in 2009 (the last reported year with available data), the revenues and royalties generated from the licensing fees for patent protected products in the US amounted to $89 billion dollars, far outpacing the next four most powerful economies combined.

A smart growth economy, therefore, isn't rooted in an infrastructure that just blindly pushes along IP for the sake of numbers, but rather one that adeptly incubates good ideas, offers high quality reviews, and swiftly brings the best products to the marketplace.

Green Tech

This smart innovation, and the infrastructure that makes it happen, writes the next chapter of American growth and that's why we want to do everything possible to make sure that sort of intelligent technologies that your business grow here in the Bay Area. Because ultimately that story of boom and growth will be one that creates jobs and continues to find new ways to address social needs.

o It's the story of Los Gatos company, Calera, which is finding new ways to capture carbon dioxide (CO2) from the burning of fossil fuels and convert it into building materials such as cement.

o By patenting a process that accelerates the absorption of gas and minerals from harmful carbon emissions and turn them into sustainable building blocks for housing construction, companies like Calera are leading the way in using smarter technologies to address everyday needs, while curbing the risk of pollutants to citizens everywhere.

The ability to develop tools in the name of cause-based enterprising is an endeavor that may still require investment capital, but leaves the rest of the world inspired through human capital-and that's an example of the sort of nuanced innovation that continues to mark excellence in American leadership.

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 additional innovation and promote green collar jobs that provide our world with alternatives to harmful energy practices. This ensures that the US is not just the world's Chief Global Competitor, but also its Chief Global Citizen.

Ladies and gentleman, a changing world requires new partnerships and new solutions.

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.

Boosts in R&D investment, public-private partnerships, and cause based technologies are all essential to 21st century business. And the Commerce Department and USPTO are leading in creating 21st century business opportunities in our country.

Part of that endeavor will be researching ways in which we can expand our strategic workforce and harness the cutting-edge thinking Silicon Valley can bring to strengthening our patent system.

But if there's anything you take away from our conversation, please recognize that the end of these efforts is not just to manage 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 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.