Chief of Staff for the United States Patent and Trademark Office
Stanford Law School Remarks
September 10, 2014
Remarks as Prepared for Delivery
Thank you for that warm introduction. It's fantastic to be back home in the Bay Area and to see so many friends, former colleagues, and a few former litigation adversaries here today.
It's been a year since I joined the President's team as Chief of Staff at the United States Patent and Trademark Office. Suffice it to say, this has been a very intense year -- and a stark reminder that snow and oppressive humidity are real things and not just something you see on TV.
My time in Washington thus far has been an exhilarating opportunity to expand my work at the intersection of technology, law and politics. I certainly wasn't the first one at this intersection, but it's been amazing to see how crowded that intersection has become.
Intellectual property, or IP, including patents, trademarks and copyrights, is no longer a topic reserved for highly technical or specialized scientific and legal circles. IP now permeates all fields of interest, all layers of society, and all parts of our daily lives.
As IP has grown more prevalent and important, the debate about how to ensure that the patent and copyright systems continue to "promote the progress of science and useful arts," as the Constitution provides, has never been more fervent.
But, wherever one comes out in that debate, there can be no debate on these fundamental points: that the novel ideas and creative works protected by strong IP rights have the potential to drive the state of the art forward by leaps and bounds. And, even more, that the protections afforded by those rights can also attract the critical resources required to take new inventions and creations to the market.
Which is why we at the PTO, the Department of Commerce, and the Obama Administration, are working aggressively to ensure that America's IP system is balanced, keeps up with technological evolution, and is poised to fuel the creation of good jobs, promote competitive markets, and sustain an economy built to last throughout the 21st century.
TRANSFORMATION & ACCELERATION
When I first arrived in Silicon Valley in September 1990 as a Stanford freshman, I did so without a computer. I wrote my papers on a word processor I brought from home and an Apple IIe in the dorm computer cluster.
I played meticulously curated mix tapes with songs I taped off the radio on my boom box.
That year, fewer than 100,000 U.S. utility patents were issued, and 911 patent infringement lawsuits were filed.
In September 1997, fresh from my post-bar road trip and newly arrived as a litigation associate at the former Heller Ehrman law firm, I was assigned to my first patent infringement lawsuit, one of about 2,000 suits brought that year.
I wrote my briefs on a Gateway 2000 computer using WordPerfect version 7. I was still using that boom box although mostly because I am cheap, certainly not because it was the state of the art.
About 110,000 patents were issued in 1997.
In 1999, the height of the dot com boom, the first BlackBerry pager, TiVo DVR, and Wi-Fi devices hit the shelves. For my part, I felt very professional sporting a stylish, albeit large, mobile phone holstered on my belt.
Like everyone else, I used the Internet to learn more about the technologies and people involved in my cases, as well as to look up stock quotes, sports scores, and news stories. The year before, in 1998, the Digital Millennium Copyright Act was signed into law, establishing safe harbors that limit the liability of Internet service providers under certain circumstances, including when they act responsibly in hosting copyrighted content posted or transmitted by their subscribers, enabling me and millions of others to readily find useful content on the Web.
1999 was also the year of the first complete sequence of a human genome, which would have seemed science fiction not too many years earlier.
Of course, those of us who are children of the 1980s took special joy in the fact that, 17 years after Prince released the song, it was truly, finally, "time to party like it's 1999."
In 1999, the 6 millionth U.S. patent was issued, eight years after the 5 millionth patent.
There were nearly 2200 patent suits, over twice the number as a decade earlier.
Fast forward to 2011. My boom box had been displaced by a portable media player, which stored my entire music collection on a device that fit in the palm of my hand. Of course, it couldn't tape songs off the radio but I had switched to satellite radio, so it no longer mattered.
My smartphone weighed much less than my first mobile phone and about one three-hundredth as much as my old computer, with a processor that was 7 times as fast, and was covered by-according to some accounts-250,000 patents.
Perhaps not surprisingly then, the 8 millionth U.S. patent issued, only five years after the seven millionth.
At the same time, the number of patent lawsuits had skyrocketed to nearly 4000, over four times the number 15 years earlier, as did the cost of defense against such a suit, to the tune of an average of 2.5 million dollars a pop and often much more.
More companies were being sued for patent infringement that had rarely if ever had anything to do with patents, such as restaurants and retailers. The discussion about patents and patent policy became the talk of CEOs and the mainstream press, not just technologists and the patent bar. Public Radio's This American Life produced an hour-long segment on patent litigation, and the "smartphone wars" were chronicled on the front pages of The Wall Street Journal and The New York Times.
An increasing number of the suits were being brought by patent assertion entities whose sole business is enforcing patent rights, and that do not necessarily use the patented invention to make any product or provide any service.
Against that backdrop, in 2011, President Obama signed into law the Leahy-Smith America Invents Act.
Nothing is real in Washington till you give it an acronym, and this law of course became known as the AIA.
The AIA effected a sea change in aspects of U.S. patent law, including aligning the U.S. with the rest of the world by awarding patents to the inventor who is the first to file a patent application instead of giving priority to the first to invent.
The law also empowered the PTO to keep the fees it collects from patent and trademark applicants and trial and appeal board petitioners. As a solely fee-funded agency that receives no taxpayer dollars, the PTO is dependent upon those fees for our operations, including fast tracking patents and bringing our IT systems into the 21st Century.
The AIA also established new post-grant review proceedings intended to streamline patent disputes, making them more efficient and less expensive.
Running up to, and even after, passage of the AIA, more and more, questions were being asked about the state of our patent system, and whether it had kept up with the changes in technology and business of the past several decades.
Many of the same questions about IP and its impact on business and society were being asked of the copyright system, particularly as technological changes transformed the ways in which consumers of creative works read, viewed and listened. New technologies also meant that it was easier to create and, in many cases, copy these works.
And IP transformations in recent decades are not limited only to patents and copyrights. Particularly with the development of the Internet and the expansion of advertising and distribution pathways globally, branding and - importantly -- trademark protection of a brand is critical.
Thankfully, filing a trademark application is easier than ever, with revolutionary improvements at the PTO and in trademark offices around the world to enable electronic filing and harmonize filing requirements. New application filings have increased 240%. And, especially notable for those of us in the Bay Area, filings in the "wine and spirits" class have increased dramatically, from 1400 new applications 17 years ago to well over 8000 applications in 2013.
Now that's a tidbit for cocktail conversation.
IMPACT AND UNDERPINNINGS OF IP
There's little doubt that IP, and the industries it supports, have a significant impact on the economy. A 2012 Department of Commerce report found that industries that most intensively use patent or trademark protection, or are primarily responsible for the creation and production of copyrighted materials, account for almost 30% of American jobs and over 60% of merchandise exports.
But, more than an economic driver, protecting IP in a balanced and effective way is also critical to good government and core American values of equal opportunity and justice.
The Constitution grants Congress the power "To promote the Progress of Science and useful Arts" by granting to inventors and creators an exclusive right to their inventions and creations, for a limited time in exchange for public dissemination of those inventions and works.
The IP system recognizes that providing incentives, particularly economic incentives, is the best way to encourage people to focus their attention, talents, and resources on a particular task. The incentive of exclusive rights for a limited time has proven over the years to be a powerful one. As President Lincoln, the only President who ever held a patent, said: "The patent system added the fuel of interest to the fire of genius."
Of course, there are other incentives as well. For example, the PTO's Patents for Humanity prize competition rewards innovators who deploy game-changing technologies to meet global humanitarian challenges in medicine, nutrition, sanitation, household energy, and living standards. Winners can expedite select proceedings at the PTO and receive public recognition of their work. If you have a patented invention that's making a difference globally, I encourage you to apply for this year's competition before the new, extended, deadline of October 31.
Our patent system is democratic (with a small "D") and empowering. Anyone can come up with a novel idea. If you do so and obtain a patent, the patent system has your back against those who would try to use what you've patented without your permission. As I'll discuss in greater detail later, the USPTO is working hard to expand access to the patent system for all inventors, even those who have few or limited resources.
Our copyright system, protecting creativity of a different (although sometimes related) sort, is perhaps even more democratic (again, with a small "D"). More than ever before, content creators - ranging from individuals at home to large corporations - are able to create or distribute multiple perfect copies of creative works seamlessly, and without regard to national borders. And copyright registration is a relatively simple and inexpensive method for any creator or producer to protect their rights under copyright.
The conviction that anyone, from any station in life, can be an inventor or creator, and make a living - or even a fortune - from their invention or creation runs deep in our American spirit and, beyond our borders, to many around the world.
Ensuring that law and policy are aligned with that spirit, that Americans are given equal opportunity to invent and create, and that our system of justice will support them, is my conviction as an American and my commitment as a public servant.
CHIEF OF STAFF
I took my appointment from the President last September, leaving Silicon Valley for the Nation's Capital, and found myself, as I said earlier, in the middle of the intersection of technology, law, and politics on a much larger scale.
So what, exactly, is a Chief of Staff?
Journalist John Baldoni describes the chief of staff, across organizations, as being the leader's "champion," "confidante," "administrator," and "organizer." Others have called the Chief of Staff a "gatekeeper"-although, as a fan of the movie "Ghostbusters," I tend to prefer "keymaster."
As Chief of Staff, I am the principal advisor to the head of the PTO, Deputy Director Michelle Lee, helping run our 12,000 employee, $3 billion agency and managing our policy coordination and external outreach and engagement.
At its core, my job is to help ensure the USPTO is achieving its mission-optimizing patent and trademark quality and timeliness, and providing leadership to improve IP policy, protection, and enforcement worldwide (not just patents and trademarks but all forms of IP including copyrights and trade secrets).
To do so, I work hand-in-hand with the PTO's leadership team and colleagues at the White House, the Department of Commerce, and across the federal government, as well as the innovation community globally.
BECOMING AN ATTORNEY
While my role as Chief of Staff is not a legal one, my background and perspective as an attorney comes into play daily.
I became an attorney, even though I didn't know a single lawyer before I went to law school, because I knew that there was a system, a set of institutions and rules, that helps order our society. I also knew that there is a difference between making things happen and having things happen to you. And I knew that my better understanding the system would not only give me the power to pursue my own course but also the ability to help empower others.
I know that many of you share that same view. The commitment of the legal community to take action beyond itself, a commitment lived out every day by the groups represented here, provides a critical opportunity for attorneys to make a broader impact beyond achieving good results for their paying clients.
I focused my legal career on intellectual property due to a perfect storm of interest, opportunity and geography. My interest in technology and its impact on society and business started before I reached high school. As I said earlier, when I graduated from law school, patent lawsuits were on the rise, and general practice law firms like the one I joined were building their patent litigation practices. And, of course, in the Silicon Valley, IP is as much a part of the culture as hiking in the foothills, cheering for the Giants to go to the World Series, and Hobee's coffee cake.
I want to speak briefly to the law students and junior lawyers in the audience who are interested in IP but have doubts or have been dissuaded since they do not have a degree in a technical field. While a technical degree is required to be a member of the patent bar, IP litigators as well as trademark and copyright practitioners do not need technical training. Many of the most successful patent litigators, including some in this room, have degrees in the social sciences or humanities. And that's a good thing.
Just as IP pervades our society and helps drive our economy, the IP legal community should accommodate the talents of interested, committed attorneys, regardless of their college degree. And, remember, members of juries and judges (unless they're Patent Trial & Appeal Board judges) are unlikely to have a technical background at all, let alone one directly relevant to a particular lawsuit.
A good IP lawyer needs to understand not only the technical issues in a case but also how to explain those issues to those with little or no technical knowledge or background. So, if you are a quick study and can work with colleagues and experts to get up to speed on the technical issues, and have good lawyering skills, don't give up your IP aspirations. I'm glad I didn't.
TRANSITION TO PUBLIC SERVICE
People often ask me how I've found my transition to public service from private practice. On the one hand, it has been a big change. The diversity of issues and breadth of impact that is part of my daily life as Chief of Staff is far greater than in my former role as a patent litigator.
A day may start out with a briefing on the upcoming World IP Organization General Assemblies in Geneva, and finish with an interagency meeting at the Department of Commerce on copyright issues, with meetings in between on the agency's patent quality initiative, management of our four satellite offices in Silicon Valley, Detroit, Denver and Dallas, and next year's budget.
I'm learning an entirely new set of rules, regulations and bureaucratic idiosyncrasies. And I'm wearing ties every day, not to mention the occasional pair of long underwear during the winter.
I am definitely not in Silicon Valley anymore.
On the other hand, my transition to public service has not required a big change in my focus. Through my work in the community, in philanthropy, and in politics, as well as through pro bono matters in civil rights and other areas, I've always set my sights on making a broader positive impact.
But there's no question that today I look at my role and my purpose very differently. Because now, my client is the American people. They are as engaged and demanding as the clients I had in private practice. As they should be.
It's just as important to listen to what they have to say. It's just as important to be a loyal and fervent advocate for their interests. And it's just as important to get it right.
During my tenure thus far, patents have been a primary IP policy focus at the USPTO, specifically whether and how to reform our patent and patent enforcement system.
The Constitution provides for a patent system but that provision is not self-executing. It gives Congress power, but it doesn't tell us what patent law should look like. The patent system we have is the result of decisions made by Congress, the Administration and the courts, each attempting to strike the right balance between rewarding the risks that inventors and their backers take, and protecting consumers and competitors from misuse of the patent-holder's exclusive rights. In other words, so the system's benefits continue to outweigh the costs.
Although much of the attention recently has been given to legislative efforts at patent reform, we can, and should, ensure that the patent system is balanced and effective through multiple ways-legislatively through Congressional action, judicially through rulings from the courts, administratively by actions taken by the PTO and other agencies, and of course with input and action from all of you.
Fewer than 18 months after the AIA passed, during a Google+ fireside hangout (speaking of technological advances), President Obama was asked about the impact on high tech startups of demand letters and lawsuits by patent assertion entities, or so-called "patent trolls." He responded that the AIA "made progress" on "some" issues but that, and I quote, "our efforts at patent reform are only about halfway to where we need to go."
What's left is changing the economics of patent litigation to address the problem of abusive patent litigation. While not the only challenge facing our patent system, addressing this issue is imperative.
Right now, a complaint doesn't require much detail, so it's relatively inexpensive for a plaintiff to file one and initiate a lawsuit. However, for most operating companies, which develop and sell products and services, there are strategic considerations to evaluate before sending a demand letter or filing suit, including the possibility of patent counterclaims, disrupting relationships with suppliers and partners, and triggering the mutual assured destruction of legal department budgets that discovery can become.
Patent assertion entities are different, because they don't have these strategic barriers to threatening or filing suit. They don't have to worry about a defendant's asserting its own patent portfolio against them, and they have no relationships with suppliers and partners, or typically much to produce in discovery.
For defendants in a patent case, the costs are immediate and significant. I don't have to tell this audience how expensive it can be to have a law firm review a complaint and the patents-in-suit, and do a preliminary analysis of possible defenses and damages.
And let's not forget discovery. A defendant will have to review and produce documents relating to allegedly infringing products or services, and additional documentation for the damages portion of the case. That's to say nothing of the cost and distraction of depositions, and we haven't even started talking about expert witnesses yet.
And as you know if you've stayed up for days preparing, working with witnesses and eating several thousand calories in red licorice and mini-candy bars (the ones with peanuts can serve as dinner), it costs even more to take a case to trial.
The average "big" case, with over $25 million at issue, would cost $5.5 million to defend. And the small one, with less than $1 million at issue? $700,000. Which means that the cost of defense can amount to 70% or more of the exposure. It's no mystery why there is pressure to settle even if the case is weak on the merits.
Going to trial isn't costless for the plaintiff, either. But some patent assertion entities build their business around the idea that they can send hundreds, even thousands, of vague demand letters to companies that will do the math and pay for a license just to avoid litigation expenses. If the PAE business model appears to be thriving, it's because it has the economics of patent litigation on its side.
Now, reasonable people may differ about the effects that different proposals for reform might have on the patent system as a whole, or even whether non-judicial measures are required at all.
Certainly, on the judicial front, there have been important developments. In the Supreme Court's last term, the Court made it easier for district courts to award attorney's fees to prevailing parties in patent cases in the Octane and Highmark cases, adopted a higher standard for claim clarity in Nautilus, and laid the groundwork for aggressive challenges to certain categories of patents (such as business method and software patents) in CLS Bank.
For my part, I think that it's possible for those in the legislative and executive branches to take positive steps to correct the imbalance in the system while still providing inventors with the incentive to invent, and patent owners with the ability to enforce their patent rights appropriately.
As I said before, fixing this imbalance is just one part of the puzzle. But it's an essential part, because the last thing we need as our economy gains traction again is for researchers, inventors, and small businesses to be distracted from innovation by litigation.
Building a patent system that remains effective and balanced as technology continues to transform at a rapid pace demands that we look at the system as a whole over the long term. It also demands that we not stand still and wait in the hopes of reaching a legislative solution.
That's why, at the PTO, we're redoubling our commitment to issue the best quality patents possible. While quality has always been our #1 goal, there are new opportunities provided by the AIA's allowing the agency greater access to the fees it collects, our continuing progress toward our target patent application backlog and pendency, and, as I started off this speech, the increasing attention to patents.
Our enhanced patent quality initiative, announced at Stanford Law School by Deputy Director Lee in late June, is the most ambitious in the agency's history.
In part, the initiative leverages the PTO's implementation of several Administrative actions announced by the White House "designed to protect innovators from frivolous litigation," "strengthen our patent system[,] and foster innovation."
We're working to increase the level of scrutiny given to proposed patent claims that may be too broad-to optimize the quality of patents, particularly software patents. We're providing targeted training for patent examiners, including four new training modules on how best to examine functional claims. We've launched a pilot program that allows applicants to use glossaries in patent specifications to define terms, leaving no doubt as to their meaning, to the examiner, and potential future adversaries, judges and juries down the road.
We're making it easier for companies, experts and the general public to provide more relevant prior art to the PTO. We're refining our existing third-party prior art submission program, exploring other ways for the public to submit prior art (particularly non-patent literature), and updating our guidance and training for examiners to more effectively use crowd-sourced prior art. By encouraging the innovation community to uncover and submit hard-to-find prior art, we're actively enlisting the innovation community in our pursuit of quality.
We're expanding our Patent Examiner Technical Training program, which ensures that experts in industry and academia can provide relevant technical training to our patent examiners, whether in person at our headquarters in Virginia or at our satellite offices. This is another area where you can have a direct impact on the quality of patents we issue.
Speaking of satellite offices, although our Silicon Valley satellite office is in temporary space until we open in San Jose City Hall next Spring, we have 19 PTAB judges on site and are actively engaging with stakeholders across the Bay Area and beyond. The head of our Silicon Valley office, John Cabeca, is here today.
We're also helping to make sure that under-resourced independent inventors, start-ups and small businesses are able to access the USPTO by providing dedicated resources to pro se applicants who lack legal representation, and working with our partners nationwide to expand the AIA pro bono program. Assistance from the PTO or from a patent attorney can be critical in preparing the necessary documents to help ensure that, if an invention is patentable, a quality patent is issued as quickly as possible.
If you're a patent prosecutor, I strongly encourage you to lend your skills to inventors who need your help through the California Inventors Assistance Program, which is run by the California Lawyers for the Arts. You can learn more at www.calawyersforthearts.org/CIAP.
And there's a lot more under way.
Our recently created Office of International Patent Cooperation is working closely with other patent offices globally to create and expand automated tools that enable examiners to share prior art, making it more efficient to obtain patent protection worldwide.
We're making necessary investments to ensure that our 21st century agency actually has up-to-date IT systems. Our next generation systems include our comprehensive Patents End to End project, which is designed to streamline patent prosecution from application to issuance.
And, speaking of data, we collect a lot of data during the patent examination process - and will be able to collect a lot more using Patents End to End. We want to take the lessons we learn from the data and feed them back into the earliest stages of examination in order to improve quality from the first touch of an application. Over time, we plan to analyze data at every operational level, not just to increase quality but strategically deploy resources and manage the agency even more effectively.
But data are not only for the agency's internal use. They are the fuel that powers today's economy. We recognize that making the PTO's data more widely accessible to the innovation community not only supports the Administration's goal of transparency but also will lead to greater understanding of what we do and empower third-party innovators to create new, useful products and services utilizing that data.
Perhaps most importantly, we want to hear from you, our stakeholders, about how you think we can ensure and measure patent quality. This fall, the PTO will host a patent quality roadshow to share with our stakeholders much more information about the quality initiative and to receive your input on what we can do better. The tour will come through Silicon Valley so please stay tuned for more information and plan to participate.
Our job is not done when the patent issues. The validity of an issued patent can be challenged through an administrative patent trial held by the Patent Trial & Appeal Board (or PTAB). Since September of 2012, the number of filings of petitions has grown from zero to over 2000, many more than predicted. If the PTAB were a federal District Court, it would be the number #1 court in patent cases.
As a marker of the value of these proceedings, the Court of Appeals for the Federal Circuit recently overturned a district court's failure to grant a stay in favor of a PTAB proceeding. The court cited the value in PTAB's resolving the parties' dispute, and determining whether the patent was valid, in advance of a district court opinion.
So as we strive to ensure that the patent system works for innovators -- for those who hold patents and those who do not, and for those who are asserting infringement and those who are accused of it - as well as for the public as a whole, there is no silver bullet, no single step by Congress, the courts or the PTO that will itself bring the system into perfect alignment or keep it there. But I am confident that all of us working together can and will keep the system effective and balanced, and a force for innovation.
SEAT AT THE TABLE
Ultimately, the key to building a stronger, more consistent, and more nimble 21st century IP system requires the engagement of people who will live and breathe the consequences day by day-IP practitioners, the broader business and legal community, all of you here.
That engagement, that conversation with all who have a stake in the IP system, is a priority for the PTO and the Administration. It's a conversation that helps identify and define problems and potential solutions. It's a conversation that we've been having since before I arrived, and it's a conversation that will continue well into the future.
Before I came to DC, I thought that "having a seat at the table" was a metaphor rooted in some historical practice. But I've learned that in conference rooms throughout Washington, there actually is a table, and that having a seat there means that you're part of the conversation among those who will influence the decisions that get made.
At the same time, while there are seats at the table, there are just as many seats not at the table, lining the walls of the room. And if you're in one of those seats, against the wall, you are most definitely not "at the table."
Among those in the government, there is an unwritten protocol about which of us gets to sit at the table at any particular meeting. Some know to sit against the wall even if there are empty seats at the table. But you, as a private citizen individually or through an association of people, can literally have a seat at the table.
I make this distinction not because I spend a lot of time thinking about seating arrangements (which my wife forbade after our wedding), but because it's a helpful illustration of what engagement in this process looks like-because there is a difference between commenting on the process from the outside and being a part of it.
And I bring this up because there are voices that are in that room - perhaps even in this room -- that aren't at the table, that have deep expertise when it comes to IP and innovation, and the ramifications of each on the real world.
So to each of you I'd say, be a part of this process and join us at the table. Taking that seat requires effort and engagement. But, whether you engage by responding formally to a Request for Comments or Federal Register Notice, participating in one of our many topical roundtables across the country, or relaying your views more informally to us and other policymakers, your participation matters. We and our colleagues across the government are listening.
To go back to the question, then: how have I found the transition from private practice in Silicon Valley to being Chief of Staff at the PTO?
For one, I have come to appreciate how intertwined technology, law, and politics really are, even more than I appreciated from my vantage point in Silicon Valley.
A lesson I've taken from my experience thus far in government is that there is nothing automatic about innovation, or the laws governing innovation. (There's not even a consensus about what innovation means, but that's the subject of another speech. Maybe next year.)
What we have today is the result of choices we have made about how to best foster innovation, including striking the right balance between rewarding inventors and creators, and enabling the next generation.
And as the pace of technological change accelerates, we have to revisit old choices and make new ones, to ensure that "the next big thing" isn't governed by a patent system that was designed for my word processor back in Wilbur Hall at Stanford, or a copyright system of the boom box and VCR era that doesn't account for the amazing new pathways that technology has blazed for creating and disseminating creative works.
From our perspective today, the intersection of technology, law, and politics in 1990, when I arrived in Silicon Valley, seems quaint, like a meeting of country roads somewhere in the Central Valley. Today, that intersection seems more like the 101 and the 92 (or the 101 and the 84, or the 101 and the 280, pretty much the 101 and anything). It's crowded and sometimes complicated. But it's an essential part of the path to where we want to go, where we need to go as an economy and as a society.
I left my home in Silicon Valley to come to Washington, at least for a time, because I believed - and still believe -- this is an "all hands on deck moment" for innovation and IP in this country. The issues are too important, the timing too critical, and the impact too great.
Now you don't have to change jobs or move across the country as I did. But if we're going to navigate through this intersection to a better IP system, it's going to take all of us, sitting around the table, working together.
Thank you very much.