Remarks by Deputy Director Peter at the FCBA Santa Clara: Recent Developments Affecting Litigation in, and Appeals from the PTAB, ITC, and District Courts

Remarks delivered at the FCBA Santa Clara:

Recent Developments Affecting Litigation in, and Appeals from the PTAB, ITC, and District Courts

Deputy Director of the U.S. Patent and Trademark Office Laura Peter

April 8, 2019

Santa Clara, California

As prepared for delivery

Good afternoon everyone, and thank you for your kind introduction. It’s a pleasure to be back here at my alma mater today. I have many fond memories of this campus during law school. I remember them planting palm trees along the road, which they said cost $10,000 each. My friends and I joked that we each paid for one of them with our tuition!

I remember being humbled and excited when Supreme Court Justice Antonin Scalia spoke at my law school commencement. Did you know that Scalia actually got married in the chapel on campus? And he received an honorary degree from Santa Clara University in 1987 when he gave the commencement address at his son John’s graduation. As I’m sure you know, Justice Scalia served on the Supreme Court for 30 years until his death in 2016. You have no doubt read many of his witty judicial opinions. Scalia has said, “I am something of a contrarian, I suppose. I feel less comfortable when everybody agrees with me.” That independent spirit is one of the cornerstones of great thinkers and innovators.

The Bay Area’s spirit of innovation dates back to the 1800s. During the Gold Rush, Levi Strauss established a wholesale dry goods business on Sacramento Street in San Francisco to help outfit the miners. One of his customers, a Nevada tailor named Jacob Davis, regularly purchased bolts of cloth from Strauss and made them into pants. Davis came up with the novel idea to place metal rivets at the points of strain on the pants, at the pockets and elsewhere, to make them more durable for the miners. In 1873, Davis received U.S. patent no. 139,121 for his invention of “Fastening Pocket-Openings.” Davis enlisted Strauss as a business partner and riveted “waist overalls” soon became Levi 501 jeans.

According to a recent analysis, Santa Clara County is a leading center for innovation today. Between 2000 and 2015, almost 143,000 patents were granted to Santa Clara County residents alone. This is over triple as many as to San Diego County residents, who ranked number two. So what makes Santa Clara so innovative? Perhaps it’s the highly educated population; in Santa Clara County there are over half a million adults over the age of 25 who hold an undergraduate degree, which is the 10th highest figure in the country.

One notable Santa Clara University graduate is Frank Cepollina, who received a bachelor’s degree in mechanical engineering before joining NASA in 1963 and entering the space race. Cepollina developed the concept of modular spacecraft that could be serviced while in orbit. Although in-space servicing is now routine, his ideas were revolutionary and deemed impossible at the time. But Cepollina’s philosophy was “Never believe the word ‘no’!” He finally got a chance to prove his wild theory in 1984, leading the first ever in-orbit spacecraft repair of the then failing Solar Max satellite. Cepollina went on to lead the historic 1993 effort to correct the Hubble Telescope’s blurred vision and five subsequent Hubble repair missions.

Cepollina’s quest for discovery began at a young age. “I used to have fun, taking things apart and seeing how they worked. The mechanics would sometimes look at me and just shake their heads.” Cepollina went on to become associate director for NASA’s Satellite Servicing Capabilities Office at the Goddard Space Center. His many honors include induction into the National Inventors Hall of Fame, NASA’s Exceptional Achievement Award, and the NASA Outstanding Leadership Medal. Cepollina’s work has far-reaching effects. His technology has been used to help detect breast cancer and create improved microchips.

Remarkable inventors such as Frank Cepollina remind us how important it is to have a strong, stable, and reliable intellectual property system. According to a recent report by the U.S. Chamber of Commerce’s Global Innovation Policy Center (GIPC), the U.S. remains the strongest intellectual property system in the world. Notably, the U.S. moved up this year to tie for 2nd place in the patent rights rankings, a move up of 10 spots from the prior year. The 2019 Chamber report recited our USPTO PTAB reforms as a primary basis for the improved rankings this year.

But, in order for us to remain worldwide leaders in the economy and innovation, we must continue to improve our IP systems. We must continue to stimulate and incentivize innovation. For with reliable patent rights, inventors are more likely to persevere to find the best solutions, investors are more likely to risk the capital required to bring these inventions to market, and all of society benefits from important life-altering inventions.

To increase the reliability and predictability of U.S. patents, we have initiated a number of changes at the USPTO in the past year. Specifically, we have made changes with respect to patent subject matter eligibility under Section 101 and proceedings at the Patent Trial and Appeals Board (PTAB).

Although the statutory language regarding patentable subject matter has remained virtually unchanged since the 1790s, we all know that recent judicial decisions have introduced a degree of uncertainty to the application of the law. This has led to confusion for applicants, attorneys, and our examiners who wrestle with these issues every single day.

The USPTO has been working hard to clarify patentable subject matter under Section 101—of course, within our statutory authority and judicial precedent. As many of you know, over the last year we have issued guidance to examiners regarding the “conventionality” analysis in the second step of the Mayo/Alice framework, “method of treatment” claims, and most recently a revised framework for 101 subject matter eligibility analysis that synthesizes the law and streamlines the 101 analysis at the USPTO.

Our examiners have welcomed this new guidance on Section 101. Since the release of the 2019 Revised Patent Subject Matter Eligibility Guidance (“the 2019 PEG”) in January, we have been diligently training our employees. Now, nearly all patent examiners and PTAB judges have received training. By initial accounts, it appears that this new guidance has resulted in more clarity for examiners. For example, from January thru December of 2018, on average 14.3% of office actions in artificial intelligence were allowances. Since the training in January, the average has increased to 35.9%. Of course, we cannot directly attribute this increased allowance rate to the revised 101 guidance, since there are many factors that go into determining allowability.

To help keep the public informed, the new guidance and related materials are available on our website. We also conducted a Patent Quality Chat in January. You can find the recording of this online as well. As we begin to use this new guidance in examination and at the PTAB, we are also reviewing public feedback.

Over the past year, we have also initiated a number of changes at the PTAB. Among other things, we updated the Trial Practice Guide, we published two new Standard Operating Procedures; we published a final rule changing the claim construction standard in AIA trials at the PTAB to match the standard used by district courts and by the ITC; and just recently, we initiated a claim amendment pilot program in AIA trials.

The first SOP outlined the procedures the Board uses for assigning (or reassigning) judges to cases and clarified that the PTAB will expand panels only in very limited circumstances, generally where consistency among multiple related cases is needed. And even then, the expansion must be done with the approval of the director and advance notice to the parties.

The second SOP created a Precedential Opinion Panel (POP), which governs precedential and informative decisions of the Board. This panel will help to increase consistency on issues of exceptional importance to the agency. Members of this panel are by default the USPTO director, the commissioner for patents, and the chief judge, although this authority can be delegated to a pre-defined list of individuals for a particular case.

On January 31, we held our first POP panel hearing, in the case of Proppant vs. Oren Technologies regarding the questions of issue joinder, same-party joinder, and the impact of a time bar on joinder under 35 U.S.C. §315. A decision issued on March 13 finding that the office has the discretion to allow same party joinder and/or issue joinder; however, this discretion will be exercised only in limited circumstances. We also recently designated four previous decisions as precedential with respect to the topics of motions to amend and live testimony, and designated one previous decision as informative with respect to applying the revised 101 guidance.

After reviewing the public comments, we recently published a Federal Register Notice regarding a pilot program for motion to amend practice before the PTAB. This pilot program applies to all AIA trial proceedings instituted on or after March 15, 2019, and provides patent owners with two new options. A patent owner may choose to receive preliminary guidance from the Board on its motion to amend, and a patent owner may choose to file a revised motion to amend after receiving the PTAB’s preliminary guidance (if requested).

This pilot program is designed to ensure that post grant proceedings are not all-or-nothing. It’s not in the interest of the patent system as a whole to invalidate a patent entirely if the specification actually describes patentable subject matter and appropriately scoped claims can be drafted. Therefore, the amendment process should allow the patent owner a meaningful opportunity to draft narrower claims. We are holding a Patent Quality Chat for the public on the new pilot program tomorrow, April 9, from 12-1 p.m.

And, finally, on March 14 we appointed Scott Boalick as new chief judge of PTAB and Jacqueline Bonilla as new deputy chief judge, positions in which they have both been acting since September 2018. Chief Judge Boalick and Deputy Chief Judge Bonilla have both been instrumental in helping to develop and implement these new PTAB reforms over the last year.

To ensure that the patents we issue are predictable, reliable, and of high quality, we have also focused on improving the tools patent examiners use to do their jobs. As you are no doubt aware, finding the most relevant prior art during the examination process has become an increasingly difficult task.

Over the past couple of decades, we’ve seen both a publication and an accessibility explosion. This means the amount of published literature has increased exponentially, and continues to do so. Yet, for any one patent application, there is still only one examiner with a limited amount of time to examine that application and all related art. Parties in litigation or other disputes, however, can devote almost unlimited time and resources to unearth the most relevant prior art.

As a result, a gap often develops between the prior art identified during patent examination, and the prior art an opponent may find during a patent dispute many years later. In an effort to narrow this gap, the USPTO has established a taskforce for identifying and creating artificial intelligence (AI) tools. We hope that AI tools will help search the ever-increasing mountain of information and expedite finding the most relevant prior art, which is increasingly becoming the proverbial “needle in a haystack.”

We are considering several cognitive-assistant tools that, while still allowing the examiners to make the final decision, augment their workflow with machine learning-based suggestions and insights. Through AI and natural language processing based algorithms, we are exploring building patent-specific semantic search tools that would present the examiner with the results relevant to a patent application in the form of a “pre-search” report. We’re also exploring semi-automated tools for “search query expansion,” which are trained to mine technology-specific synonyms with the help of “crowdsourcing” or “examiner-sourcing,” as we like to call it.

This new capability holds the potential to promote consistency in searching and to more quickly surface prior art that may be located in several disparate databases. And that’s important, because one of the benchmarks of a quality patent is whether it can withstand fair challenges down the road. Revealing the best prior art early helps to increase the likelihood that this will happen. Artificial intelligence tools may be able to help us do just that. Additionally, in an effort to reduce the cost of manually classifying patents, we’re exploring the use of AI technology to ensure that we route the “right case to the right examiner.” This, in turn, enables us to organize our workforce more efficiently and, as a result, conduct more effective examinations.

In an effort to glean the best and most appropriate artificial intelligence tools for the USPTO’s purposes, we have solicited input from outside experts across the industry. We are currently reviewing over 60 comments received in response to a recent Request for Information, from not only leading companies but also small businesses in the AI field. We believe the diverse information collected will help us to revolutionize the prior art search paradigm.

We also continue to collaborate with foreign patent offices on ongoing initiatives such as the Expanded Collaborative Search Pilot (CSP) and Global Dossier. We at the USPTO are constantly striving to improve the search and examination of our applications in order to provide a solid, reliable patent grant. We believe these changes collectively will stimulate innovation by providing more predictability and reliability.

From the beginning of our nation, intellectual property has been the engine behind America’s economic and cultural development. Recognizing its importance, our Founders included IP rights in the Constitution itself. In fact, in the body of the Constitution, notwithstanding the Amendments, the word “right” is mentioned only once: It is in Article 1, Section 8, Clause 8, granting the Congress power “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Our Founders were indeed ahead of their time to foresee how important protecting intellectual property rights and stimulating innovation is to the growth and success of our nation. For this nation’s greatest inventors, backed by our patent system, went on to change the world.

Let me leave you with one more story of a remarkable inventor, who continues to change the world today. Dr. Pardis Sabeti is an Iranian-American immigrant whose family fled Iran in 1978 when she was only two years old. A computational geneticist, Dr. Sabeti is currently a professor of immunology and infectious diseases at Harvard University. Her impressive credentials include a bachelor’s in biology from MIT; a master’s and a doctorate in biological anthropology from Oxford University as a Rhodes Scholar; and a medical degree from Harvard University, where she was only the third woman to graduate summa cum laude.

Dr. Sabeti’s genetic research into deadly pathogens investigates how the diseases have evolved in an effort to prevent epidemics, such as the Ebola virus outbreak. By combining computer artificial intelligence and biology, she has created an algorithm to mine the human genome and fight deadly diseases. And, on top of that, Dr. Sabeti is also the lead singer of the pop group “Thousand Days”!

I have always thought that there is a connection between music and science and engineering. Dr. Sabeti exemplifies this. She once noted, “I find that same sense of discovery and quest, as I try to put together the chords and melody and lyrics of a song with all its parts as I do in trying to formulate a scientific idea and bring a research study together. They both require creativity and rigor.” Dr. Sabeti’s perseverance and skill have led to groundbreaking patent-pending work.

Dr. Sabeti’s philosophy is that we should “not be defined by the destruction wrought by one virus, but illuminated by billions of hearts and minds working in unity.” Her advice and work contribute to making our nation and the world a better place through innovation and science. As guardians of the U.S. intellectual property system, we at the USPTO work every day to honor her work and the innovation of others like her.

Thank you again for the opportunity to be with you here today. I welcome any questions you may have.