Remarks by Director Andrei Iancu at the PPAC Public Hearing on Proposed Patent Fee Schedule

September 6, 2018

Remarks delivered at the PPAC Public Hearing on Proposed Patent Fee Schedule

Director of the U.S. Patent and Trademark Office Andrei Iancu

September 6, 2018

Alexandria, Virginia

As prepared for delivery

Good morning, everyone. Thank you to those of you in the room, and those of you watching online, for joining us today for this special public hearing focused on patent fees.

This is a very important topic in planning for the future of the USPTO and ensuring we are in the best possible position to enhance the country’s innovation ecosystem by providing strong, reliable, and predictable intellectual property rights.

As I’ve said before, and I truly believe, the U.S. intellectual property system is a crown jewel of the nation’s economy, culture, and history. Protecting IP is vital to maintaining the incentives for research and development, creating quality jobs, driving our economic prosperity, and providing incredible benefits to society as a whole. The USPTO’s ability to issue timely, reliable patents—both today and in the future—is a critical part of that.

As you are aware, the Leahy-Smith America Invents Act (AIA), which was passed by Congress with bipartisan support in 2011, made several significant changes to the U.S. intellectual property system. Among those changes, and most germane to our discussion here today, was that the Act granted the USPTO authority to set its own patent and trademark fees by rulemaking to recover the aggregate estimated cost of operations for patents and trademarks. Congress granted us this authority because it recognized that the USPTO, in collaboration with the larger intellectual property community,  is uniquely positioned to determine the most appropriate fees that will both promote innovation and provide sufficient revenue to sustain the USPTO services designed to protect that innovation.

As I alluded to, it is essential that we remain in touch with our stakeholders as part of this process.

Yes, this public hearing is a required part of the fee adjustment process, as specified by the legislation of the AIA. But beyond that, these opportunities to interface with you are crucial in ensuring that we set and adjust fees in such a way that we are aiding you, the inventors, whether you are doing research and development at a large corporation, performing research at a college or university laboratory, or following your own imagination at home or elsewhere.

The more viewpoints we hear, the better information we have to continuously improve the innovation environment for everyone. This is why I’ve enjoyed working closely with the PPAC since joining the USPTO six months ago, and why I look forward to hearing the testimony today and reading the PPAC report about our proposals to set and adjust patent fees.

In a few moments, our acting deputy director, Tony Scardino, will provide a little more detail about why we are proposing fee adjustments at this time, and our director of the Office of Planning and Budget, Brendan Hourigan, will provide the details of those proposals.

I’m sure you’re all anxious to hear these details, since that’s what brought you here today, but first I want to speak briefly about the importance of the USPTO’s fee-setting efforts.

The USPTO first exercised its patent fee-setting authority in 2013.

The results of that effort helped the USPTO, among other things:

  • Reduce the patent application backlog and decrease pendency
  • Allowed the office to begin building a patent operating reserve
  • Advanced key policy considerations while taking into account the cost of individual services.

For example, the USPTO introduced in 2013 the 75 percent fee reductions for micro entities and expanded the availability of the 50 percent fee reduction for small entities, as required by the AIA. The second iteration of patent fee rulemaking under the AIA authority followed a biennial review of fees, costs, and revenues that began in fiscal year 2015.

The fee adjustments that resulted from this review went into effect on January 16, 2018. Targeted adjustments were made that allowed the office to make progress on a number of goals, including continued work towards patent pendency goals, the improvement of quality, and maintaining prudent levels of financial reserves.

The adjustment also allowed the office to make investments in our IT systems, although significant additional work remains. Indeed, you are no doubt aware of the weeklong outage that we experienced last month with regard to our PALM database, a key component of dozens of internal and external programs that we use in processing patent applications.

Most of the legacy systems we operate have not had a major upgrade in years. We are now focused on a fundamental review of our IT needs and options going forward. While we were able to restore our services without data loss and make upgrades to improve the reliability of PALM, we clearly have much more work to do.

In fiscal year 2017, we conducted another biennial review of our fees, and following that review, we have determined that there is a need for the USPTO to once again set and adjust patent fees. It may seem like we just finished adjusting fees, and indeed, the updated fees have been in effect for less than nine months at this point, but setting and adjusting fees is a lengthy process that requires us to look a few years toward the future.

We anticipate that the proposals we are making now will take effect in January 2021, three years after the previous adjustments, and therefore, we must consider what the financial needs of the office will be at that time and beyond.

The current proposals are a result of lengthy and careful consideration. I believe that both the USPTO and the broader IP community will benefit from the proposed fee structure, as it will allow us to identify and advance policies that deliver a strong, reliable, and predictable patent system. For example, I am focused on improving our information technology systems to better support examination. Further, we all benefit when the USPTO operates with a sustainable funding model.

During previous government-wide shutdowns, the USPTO was able to remain open thanks to our patent and trademark operating reserves. But the patent operating reserve does more than that; it also allows us to make long-term operational improvements and gives us the means to respond to immediate and temporary changes. It protects us against unexpected increases in patent-related requirements or unexpected declines in patent fee collections. It helps minimize the impact of normal fluctuations in fee collections, allowing us to run more efficiently.

Consequently, it is vitally important that we continue to gradually build the patent operating reserve toward the optimal level.

In short, the fees we are proposing will provide us with the resources and flexibility needed to continue:

  • Reducing the patent application backlog
  • Shortening patent pendency
  • Improving patent quality
  • Enhancing patent administrative appeal and post-grant processes
  • Engaging effectively internationally
  • Improving our information technology (IT) infrastructure. 

These fee proposals will also enable the USPTO to continue to build, retain, and effectively manage the highly educated and talented workforce it needs to properly serve you, our critical stakeholder community.

As many of you know, I came to USPTO from the private sector. It has been amazing for me to see how the USPTO, despite being a government agency, runs in many respects like a business. We pay very careful attention to our budget, to our user experience, and to the services we provide. 

As many of you know, we also have a Financial Advisory Board, comprised of executives from throughout the organization, which performs careful financial planning and budget prioritization to ensure that our spending supports our mission, which is directed toward fostering innovation and economic growth by, among other things, providing innovators and entrepreneurs with the protection and information they need to raise capital, build their businesses and bring their products and services to the marketplace. 

As I’ve said before, input on this initial proposal from you, our stakeholders, is critically important. Please let us know your thoughts on these proposals—and not only on areas where you think they can be improved, but also areas where you think our proposals are appropriate.

Today's hearing is the first opportunity to offer feedback on this set of proposals, but it will not be your last opportunity. Some of you will offer testimony today regarding our fee proposals, and following this hearing, you may also submit written comments. Brendan Hourigan will give you information on how to do so shortly.

Additionally, PPAC will provide, as mentioned, a public written report indicating the committee's comments, advice, and recommendations about our proposals, based in part on the oral testimony today and the written comments received in the next week.

Next summer, we will plan to publish in the Federal Register a Notice of Proposed Rulemaking, which will formally outline our fee proposals for public consideration and another round of comment.

After receiving PPAC's and the public's input, we plan to develop our final fee structure and publish it in the Federal Register in the summer or fall of 2020. Following our path forward, we anticipate the new fees would go into effect January 2021.

This process reflects the USPTO's commitment to fiscal responsibility, financial prudence, and operational efficiency. It is critical that our intellectual property system be balanced, and continue to strive toward enhancing the country’s innovation ecosystem and providing strong, reliable, and predictable intellectual property rights.

As I’ve said many times, when patent owners and the public have confidence in the patents we grant, inventors are encouraged to invent, investments are made, companies grow, jobs are created, and science and technology advance to the benefit of our entire society.

So, thank you, Chairperson Jenkins, members of the committee, and all those interested in our patents organization for your thoughtful consideration of this proposal.

Thank you.