Remarks at American Intellectual Property Law Association (AIPLA) Mid-Winter Meeting

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

AIPLA Mid-Winter Institute

January 30, 2014

Remarks as Prepared for Delivery

Thank you, Wayne, for that kind introduction. Before I go any further, I'd like to congratulate Wayne. As just two days ago the Department of Commerce awarded him their highest honor for public service, in the form of a Gold Medal for his role on Patent Public Advisory Committee and helping to ensure effective implementation of the AIA. Congratulations, Wayne and a heartfelt thank you for your service. Let's give Wayne applause.

It's an honor to be here with you today. Thank you for the invitation to deliver the morning keynote address. I'm very pleased to be making my first public address as Deputy Director of the United States Patent and Trademark Office at the AIPLA Mid-Winter meeting in sunny Phoenix, Arizona. The agency's relationship with AIPLA is extremely significant because your organization represents the interests of so many stakeholders. Plus, Todd really knows how to pick the right locations for his winter meetings, especially when the temperature in D.C. is in the twenties!

It has been a whirlwind three weeks since I began my new duties, but I have a great leadership team that has helped with the transition. I'd like to acknowledge my Chief of Staff, Andrew Byrnes, and my Chief Communications Officer, Todd Elmer, who are here today. And of course I am not new to the agency. I spent the last year as Director of the Silicon Valley office. Before that, I served two terms on the Patent Public Advisory Committee with Wayne Sobon as a colleague. For those of you who don't know, by statute, the Patent Public Advisory Committee must consist of citizens chosen to represent the interests of the diverse users of the United States Patent and Trademark Office. During my time on PPAC, I served with members who represented biotech and pharmaceutical companies, high technology companies, a food technology company, patent asserters and patent defendants, and solo inventors. Serving on this committee has allowed me to work with, hear, understand and build bridges with ALL stakeholders.

In my current role, this is critical to doing my job effectively. To share even a bit more about myself, I was born and raised in the Silicon Valley and have spent the majority of my 25-year career there as an engineer and IP attorney. I am the product of an immigrant family and a beneficiary of the economic prosperity created by our innovation economy. My father was an engineer and so too were all the dads on the street I grew up. They worked for tech companies both small and large, often founded by just one person who created an invention, patented it, and obtained venture capital funding. Some companies succeeded, and some did not. But, those that did created tremendous economic prosperity for all!

I have focused my professional life on creating innovative technologies and/or enabling those who do. I view my current role as an opportunity to do more of the same. In my new role as Deputy Director, I am committed to working together with you to advance the agency's ability to support our incredible innovations. With that, let me pause and turn to the state of the IP community and the USPTO. It is a tremendously exciting time to be part of the intellectual property and innovation communities in this country and across the globe. And every level of the administration shares in this excitement, as do our stakeholders.

In my opinion, the USPTO has never been better poised to effect positive change as it further fuels our nation's innovation economy. Let me share with you why I am so excited.

Good news #1: In December, the holiday season brought some tremendous news to the USPTO. During that month, the agency was named the "Best Place to Work in the Federal Government." This story is a remarkable one, and I love to tout it because I was not directly responsible for it. Rather, all of my dedicated and hard-working colleagues at the USPTO made this ranking possible. To trace the agency's progression, we went from 105th in 2009, to 56th in 2010, to 19th in 2011, to 5th in 2012, and to 1st place this year.

To repeat, from 105th place to 1st place in just 5 years! Remember not too long ago when the USPTO was plagued with low morale and high turnover? Not anymore. From my observations, and as reflected in the performance of the agency, employee morale is at an all-time high; our management/labor relationships are strong and healthy; and our managers are seasoned and effective.

Good news #2: the budget. Two weeks ago, 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 to 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.

As you all know, things have not always been so bright recently with our budget. In 2013, the USPTO found itself unexpectedly subject to sequestration. We all greatly appreciated the support and patience the IP community demonstrated during this time. During those difficult times when the rest of the federal government shutdown, we remained open due to some funds in reserve and continued processing the patent and trademark applications that help drive our country's innovative economy and doing the best that we could-as we did all year-to thrive and excel in an austere fiscal environment.

But today is a new and brighter day on the funding front. Now, you ask, what impact will this improved financial outlook have on the USPTO and you? Briefly, there will be more money for, among other things,

  • hiring additional examiners and administrative patent judges;
  • permanent locations for our satellite offices,
  • necessary investments in our IT systems; and
  • additional education and outreach to our stakeholders.

Under our mandate in the America Invents Act to open satellite offices, I am delighted to report that the agency is fully running in Detroit, where examiners are examining applications and Patent Trial and Appeal Board judges are adjudicating cases. With the approval of our requested spending authority for 2014, we can now recommence with moving our other satellite offices from temporary to permanent space. And, we can hire more PTAB judges and begin hiring examiners.

In Denver, we anticipate moving from our temporary space in Lakewood into the Byron G. Rogers Building this summer. In Silicon Valley, we expect that my colleagues in the Menlo Park temporary office will move to a permanent office in the San Jose City Hall this coming winter. And in Dallas, we anticipate opening our final permanent office downtown in the Terminal Annex Federal Building in 2015. So stay focused for a satellite office opening near you!

As the former Director of the Silicon Valley satellite office, I can tell you first hand that our satellite offices already-and will continue to-play an increasingly important role in helping the USPTO achieve its goal of promoting and protecting American innovation.

How so?

One, making our resources more easily and widely available to the innovation community, such as via education, training local on-site examiner interviews (either in person or via secure video link), and eventually, participation in the local Patent Trial and Appeals Board proceedings (either in-person and/or via video);

Two, by permitting the USPTO to tap into previously untapped talent in recruiting and to help retain existing talented employees who may need to move outside the DC area to live;

And three, by providing a hub of innovation, education, and outreach to the local innovation communities.

Our solid financial situation also means that we will continue with much-needed IT investments. On the patents side, we are planning to continue development of our "Next Generation" systems, including our comprehensive Patents End to End (PE2E) project. PE2E is designed to streamline patent prosecution from application to issuance, furthering our goal of compact prosecution. Based on input directly from our examiners, PE2E unifies a lot of computer-based patent examiner tools into one simple interface. We already have examiners using it in a pilot project, and they speak very highly of how the integrated system improves productivity and makes examination easier. And, importantly, to our stakeholders we will be undergoing an overhaul of our website to make it easier for you to locate the information you need.

Next, I'd like to give you an update on our work in key areas-patents, the Patent Trial and Appeal Board, international patent law harmonization, trademarks, and copyrights.


When talking about patents, I must start with our ongoing efforts to reduce our unexamined patent application backlog. In the last fiscal year, we saw a 6.2 percent increase in applications over the previous year. Despite that 6.2 percent increase, in fiscal year 2013 we successfully reduced the backlog of unexamined patent applications by more than 23,000-a 4 percent decrease-thanks to our expanded corps of patent examiners and a number of internal improvements to our IT systems and processes.

Perhaps most gratifying, however, was our reduction of the Request for Continuing Examination, or RCE, backlog by nearly 17,000 in fiscal year 2013. This backlog, you may recall, was an area of special concern for the agency at the end of 2012, and likely for many in this room. We achieved this RCE reduction through public input and new programs and initiatives like our Quick Path Information Disclosure Statement Pilot Program, known as QPIDS, and our After Final Consideration Pilot Program, known as AFCP.

QPIDS eliminates the requirement for processing of an RCE, with an information disclosure statement filed after payment of the issue fee. It promotes our ongoing efforts toward compact prosecution and pendency reduction. AFCP authorized additional time for examiners to search and/or consider responses after final rejection. Under AFCP 2.0, examiners also use the additional time to schedule and conduct interviews to discuss the results of their search and/or consideration with you. I encourage you to take advantage of our QPIDS and AFCP programs when it makes sense in your cases.

Moving from our various backlog reductions to training of our patent examiners, we continue to train on topics and issues to improve patent quality and clarity. We implemented a multi-phased training program for examiners on improving patent claim clarity through more effective examination of 112(f) "means-plus-function" claim elements. In view of the feedback from our Software Partnership Roundtables and associated request for comments, the materials focus on identifying 112(f) language and making the record clear when 112(f) is invoked.

A first training module has been completed and deployed, focusing on identifying 112(f) claim elements, especially when traditional "means" language is not used in order to capture more functionally drafted claim elements. We have also deployed a second module focusing on clarifying the prosecution record, for example, when functional claiming elements do not use the word "means" but nevertheless invoke 112(f) claim interpretation, or when claim elements use traditional "means" language but do not invoke 112(f).

These sorts of recordations will save many arguments and much money down the road in litigation. As I said, these modules are available on the USPTO website for your information and review. We also hosted a roundtable about the use of glossaries in patent applications, and heard from many stakeholders that this is an exciting area for further action-which we are eager to pursue in the coming months.

Of course, as you know, Congress is also actively working on legislation related to these and other issues regarding patent litigation. As President Obama said in the State of the Union Tuesday night, we must pass a patent reform bill that promotes innovation, not litigation. The House introduced, and on December 5, 2013, cleared the Innovation Act with an overwhelmingly bipartisan vote of 325 to 91. Currently, we are actively and increasingly engaged with the Senate on its own legislation and we look forward to working with all of you on these issues to achieve our shared goal of an effective and balanced IP system that protects and encourages the innovation so critical to our nation's on-going economic prosperity.


Turning from patents to our Patent Trial and Appeal Board (PTAB), I'm pleased to say that PTAB had a great FY 2013. For one, Chief Judge James Smith has been joined by a significant number of new judge colleagues. Since September 2012, the board has more than doubled in size to a total of 179 administrative patent judges. By June of this year, the board aims to hire an additional 60 judges. If you want to join the ranks of our excellent judges or know someone who would be a good candidate, I encourage you to apply. A job posting can be found at

Fueling the judge hiring, the number of ex parte appeals and petitions and administrative trials resulting from the inter partes review, covered business method review, and derivation provisions of the America Invents Act is on the rise. We only put into effect most of our PTAB proceedings in September 2012, and the number of petitions we received exceeded even our largest expectations. As of January 23rd, the board had received petitions for 836 inter partes reviews, 109 covered business method reviews, and 4 derivation proceedings. Of all of those petitions, there have been decisions on whether to institute trials on 349 inter partes reviews and 35 covered business method reviews. We've seen 75 settlements among inter partes reviews parties and 8 among covered business method parties.

We are less than four months into this fiscal year, and already have more covered business method petitions than we had in all of FY 2013. With 305 inter partes review petitions so far this fiscal year, we already have half of last year's total number. The ever-increasing number of petitions is proof positive that the public appreciates the board's ability to resolve disputes about patent rights earlier and more efficiently than in the past using these alternative proceedings. As the America Invents Act intended, this adds greater certainty to and confidence in our patent system.

We know there is much excitement about these proceedings, and that they are being watched closely by the public. This includes how often patents are upheld versus invalidated. On that point, I wouldn't read too much into any apparent trends in rulings. The one and only one job of the Patent Trial and Appeal Board is to call the shots neutrally and accurately based on the facts and the case law. The board has no agenda, and the rulings fall where they may.


Let us shift our focus now to another area of interest to our stakeholders, our continuing push for international patent harmonization. The agency is making solid progress toward substantive international patent law harmonization, which is essential in today's interconnected global economy.

Through our migration to a first-inventor-to-file system triggered by implementation of the America Invents Act in March 2013, the USPTO sits at the forefront of harmonization efforts. We have trained all of our examiners on the new first-inventor-to-file statutory framework through a series of training classes. In total, our 8,000 examiners received overview training in March 2013 and comprehensive training in the summer. If you stop to think of the magnitude of the effort required, that is a noteworthy accomplishment. Additionally, we have, and are continuing to develop, a library of computer-based, first-inventor-to-file training classes for examiners covering topics such as how to know whether an application is subject to review under the AIA or under pre-AIA law. All of these materials are available on our website, and I encourage you to check it out if you have not so already.

Our global harmonization efforts were augmented by several other activities in fiscal year 2013 besides our first-inventor-to-file migration. In January 2013, we launched the Cooperative Patent Classification (CPC) system in partnership with the European Patent Office. CPC is a common, internationally compatible classification system for technical documents used in patent examination. The CPC incorporates the best classification practices from both offices, and we are hard at work implementing it across USPTO operations.

The CPC database jointly maintained by the USPTO and European Patent Office (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 that CPC eventually will be used by more than 45 patent offices worldwide, and thus we are proud to have led the effort with the EPO. We remain on target to "retire" the United States Classification System, or USPC, at the end of this calendar year.

Additionally, we are working with other IP5 countries to develop a "Global Dossier," which is a system to simplify the viewing and management of applications filed in the U.S., China, Europe, Japan, and South Korea. Although the Global Dossier is still at a very early stage, it holds great promise for improving the way that global patent protection is obtained and new technological information is disseminated worldwide.

The IP5 also endorsed the development of the Patent Prosecution Highway Pilot Project among all IP5 offices. The Patent Prosecution Highway enables an applicant who secured granted claims in one participating patent office to receive an expedited examination of comparable claims in other patent offices. The Patent Prosecution Highway has been one of our agency's most successful initiatives with other countries, starting in 2006 as a small pilot between the USPTO and the Japanese Patent Office and expanding over the course of the intervening eight years to now include 26 offices around the world. Moreover, apart from its increased availability in other patent offices, the Patent Prosecution Highway offers applicants great financial benefits. Our stakeholders report a potential savings per case of about $10,000, and sometimes more, through the Patent Prosecution Highway. Consequently, we will continue to push to expand the Highway with additional offices.


Moving to trademarks, there also is much good news to share. Trademark pendency data remains right in our desired sweet spot, with 2.5 to 3.5 months for a first action and 12 months for a final disposition.

And I have some very good news to report. The USPTO is planning to hold a Trademark Expo this fall at our Alexandria campus. As some of you may know, we were unable to hold one last year, the first time in years we did not put on this fabulous outreach effort. Now it's back, and it will be better than ever. The free, two-day event educates the public about trademarks and their importance in the global marketplace, working with other government agencies, nonprofits, and corporations. The 2012 Trademark Expo attracted more than 17,000 visitors of all ages.


Lastly, moving from trademarks to copyrights, good news abounds. Last summer we released a Green Paper titled "Copyright Policy, Creativity, and Innovation in the Digital Economy." The paper, written with our colleagues at the National Telecommunications and Information Administration, is the most thorough and comprehensive analysis of digital copyright policy issued by any administration since 1995.

The Green Paper recognizes the importance of copyright as an engine of creativity and expression, as well as the impact that the Internet has had on the creation and distribution of creative works. To that end, the paper discusses the importance of continuing to appropriately balance rights and exceptions as the law is updated, ensuring meaningful online enforcement, and furthering the development of an efficient online marketplace.

We have been soliciting public comment and convening roundtables on these and a number of other key issues identified in the Green Paper. The input we received from both will help the USPTO, the Department of Commerce, and the Obama administration to develop policies to ensure an updated, balanced, and effective copyright system that continues to drive the production of creative works while at the same time preserving the innovative power of the Internet and the free flow of information. Further, copyright reform is on the Congressional radar, and we are working closely with key members as they consider changes to copyright law on some of the very topics addressed in our Green Paper.

I hope I've given you a good idea of the state of the USPTO and an update of some of our key initiatives. IP is the currency of innovation, and innovation is the only sustainable source of competitive advantage. My team and I look forward to working with you to advance our shared goal of promoting an efficient and balanced intellectual property system in the United States and around the world.

Thank you again for having me here today.