Wednesday, November 16, 2016

USPTO - Director Michelle K. Lee at the IAM Patent Law and Policy Conference

Director Michelle Lee recently evaluated the current state and results of her tenure at the USPTO at the IAM Patent Law and Policy Conference:

"Thank you and good morning.  It’s a real pleasure to be with you here today. Throughout the day we’ll be prognosticating about what IP policy will look like in the next administration. This morning, I’d like to share with you my thoughts on: the current state of the U.S. Patent and Trademark Office, and how it situates us to meet our future challenges and opportunities.

What we all know is that IP is increasingly important to the success of our economies. That is perhaps best illustrated in a major study on the economic impact of IP intensive industries that was just published by the USPTO in collaboration with our DOC colleagues at the Economics and Statistics Administration. This report found that IP-intensive industries directly and indirectly supported more than 45 million jobs in 2014, or nearly 1/3 of all U.S. jobs. These findings parallel the recently released joint EPO and EUIPO study that found that approximately 38% of all employment in EU stems from businesses that have a higher than average use of IP rights. So, whether you’re in D.C., or London, or anywhere in between or beyond, IP remains a vital driver of economic growth. And that is why I believe the incoming administration must and will continue our effort to promote innovation fueled by a strong and robust IP system. Support for IP in the United States has a long history of bipartisanship, and there’s no reason to imagine that changing with a new president and a new Congress, both of whom have economic growth as a top priority.

Because we will spend much of today looking forward, allow me to look back on what we’ve done during this administration and how it positions us for the work ahead. Back in January 2009, when President Obama was first sworn into office, the USPTO’s patent application backlog and pendency numbers were at all-time highs. Today, both our backlog and pendencies are now lower than they’ve been in more than a decade, and they continue to go down. That is hardly the only success story. But it’s emblematic of how much the USPTO has charged forward the last eight years, and how strongly it is positioned to face future challenges. This has been a team effort, with incredible work done by my predecessors including former Director Dave Kappos, Congressional cooperation, the incredibly dedicated and talented staff at the USPTO, and all of our stakeholders. Together, we have put the agency in a spot where we are well-suited to tackle the challenges and opportunities ahead.

Today, we are financially more secure thanks to the America Invents Act, a milestone of this administration, which gave us, among other things, fee setting authority. Additionally, we are more customer-service oriented and more responsive to stakeholders than ever before. We’ve constantly welcomed—in fact solicited—feedback and input, and are willing to refine and improve where needed. We’ve had more RFC’s, Proposed Rules, and roundtables than ever before – including on such topics as: our Enhanced Patent Quality Initiative, our 101 guidance, our PTAB implementation and refinements, and our transparency of patent ownership proposal.

Thank you for your input, patience and help responding to each. We’ve also brought a broader range of services to support American innovators where and when needed, including: Through four Regional Offices across the country, and over a dozen IP attaches across the globe. And, we’ve worked to provide you with more access to examiner interviews increasing the number of interview hours by more than 232% in just 8 years. Finally, and importantly, the USPTO’s relationships with all of its partners is healthier and stronger than ever before –that’s with the public, our employees, Congress, and within the administration.

I want to take a brief moment on this topic, because I really do believe it is key to the agency’s success – past and future. Thinking back to even just 10 years ago, the relationship with the public was nowhere near as collaborative, transparent, or productive as it is today. The agency often did not seek much input on examiner guidance or implementation rules. In fact, almost 10 years ago, the USPTO was sued in Tafas v. Dudas, when it decided to move ahead—over much public opposition—to adopt rules that would have placed additional burdens on patent filings. And interviews weren’t encouraged as they are today. Together, we have changed that dynamic. Second, we’ve strengthened our working relationship with our employees. All told, we have enjoyed some of the highest rankings in the Partnership for Public Service’s list of Best Places to Work in the Federal Government. And we all know, an engaged workforce produces better work product and services. We have also maintained a healthy working relationship with Congress on both policy proposals and operational issues. From the passage of AIA, to the Defend Trade Secrets Act, to technical assistance on various legislative proposals, we have engaged with our colleagues on the Hill in impactful ways and the USPTO’s voice is a respected one. Finally, the USPTO is effectively fulfilling its role as principal advisor to the president and administration on IP policy. I’ve been pleased with the confidence the president and the Secretary of Commerce have shown me and my team, allowing us to pursue policies and programs in the best interest of our innovators. All of this: the greater financial security, the increased customer service orientation, and the better relationships with all of our stakeholders, has enabled us to make real progress on our priorities, and positions us for even greater success going forward. There is strong evidence of this in a number of important areas, including patent backlog and pendencies, quality and  policy.

During this administration, we have: reduced the backlog of unexamined patent applications by approximately 30% despite an average four percent year-over-year increase in filings, reduced our first action pendency by 38% to 16.2 months, and reduced total pendency by ~25% to 25.3 months. Armed with greater finances and a shrinking backlog, we embarked on an unprecedented effort to enhance the quality of patents – a core goal of the agency. There is a cost to society when the USPTO issues a patent that we should not issue, just as there is a cost to society when we don’t issue a patent that should issue. And just as there is a cost to society when there is a patent in the system that the USPTO properly issued but that is no longer valid in light of changes in case law. Recognizing this, we have enhanced the quality of patents in our system, both before they leave our office through our Enhanced Patent Quality Initiative led by a new Deputy Commissioner and a newly created department within the Patents solely focused on this effort and after the patents return to the office through our PTAB and other post grant review proceedings.
Addressing the second prong first, the new PTAB proceedings have significantly changed the patent landscape – both litigation and prosecution. We have had more than 5,000 PTAB petitions filed to date, and these proceedings are meeting our Congressional mandate of providing a faster, more cost efficient quality check on the patents in the system. With extensive input from all of you, we have worked hard to implement and conduct these proceedings as fairly and effectively as possible. That’s why I asked my team to engage all of you in a series of listening tours that led to a set of “quick fixes” in 2015 and then more substantive revised rules last April. That’s why we took it upon ourselves to assess the frequency of motions to amend and the reasons for their grants and denials. And, that’s why, in response to input from stakeholders about serial PTAB patent challenges, I asked my team to study the data to determine whether, to what degree and under what circumstances, patents were being challenged multiple times and whether those challenges might be improper or unfair. Our study produced some interesting data that I believe will better inform our discussions on this topic. We will be publishing a request for comments within the next several weeks, sharing details of the data we gathered, asking if our data matches your experiences, and welcoming what, if any, next steps might be appropriate in light of the data. Bottom line, we’re listening to you and applying your input to identify how and where we can do better.

These PTAB proceedings have proven a valuable check on patent quality, particularly in the later part of a patent’s lifecycle. At this point, it makes sense to bring greater resources to bear if there are questions about a patent’s validity. The economics are different at the beginning of a patent’s lifecycle. The value of a patent is often not fully known at time of filing perhaps due to the nascency of the technology, industry and/or market, and the time and resources afforded during examination are typically limited. Innovation isn’t served if the USPTO only strives to issue very expensive “bullet-proof” patents after many years of examination. Extensive time and expense would mean that innovators would file too few patent applications, given finite budgets. If over time the industry and the market determine that a piece of patented technology is valuable and the public believes it is not valid under current law then there is an economic incentive to expend greater resources to test the validity of the patent.  And a panel of technically trained judges steeped in patent law is well-suited to perform this double-check quickly and efficiently. In short, to best incentivize innovation, the USPTO needs to issue IP rights that are as certain, reliable and affordable as they can reasonably be, and offer post-grant proceedings that quickly, accurately and cost-effectively test the validity of patents, proven to be of economic importance, if questions of validity arise. With all of that said, it is essential that these post-grant proceedings are properly calibrated so that they provide a quality check but do not bar deserving patentees from enforcing their patent rights. It’s why a number of the protections in the AIA are so important, such as restrictions on timing of challenges, thresholds petitioners must meet for institution, and strict estoppel provisions. It’s also why the agency is committed to revising our rules as many times as needed so these proceedings are as fair and effective as possible within our Congressional mandate. It’s why it is critical, within this framework, the USPTO issue the very best quality patents possible.

Patents that are issued correctly, clearly and consistently across the Patent Examination Corps. And, it’s why I launched the Enhanced Patent Quality Initiative in 2015, so patent owners can have greater confidence and certainty of their rights in this new environment. Today we’ve got about a dozen initiatives underway that, we believe, will meaningfully move the needle on enhancing patent quality. This includes making sure we’re getting the most relevant prior art before our examiners as early as possible by: making prior art cited in our PTAB proceedings available to the examiner handling a related pending child application, and transitioning our all our examiners from the decades old, antiquated U.S. Patent Classification System to the updated, increasingly global Cooperative Patent Classification System. It also includes drilling down on best practices such as clarity of the record, developing new and better ways to measure our progress, through our Master Review Form and new Quality Metrics, and, importantly, reviewing the amount of time our examiners need to do their work in light of these changes and other larger changes within the patent system.

So, this is what we’re doing at a high level, but I’d like to share more specifics about one of our programs, our “Clarity of the Record Initiative” and some of the great progress we have been making on our Clarity of the Record pilot program. The goal of this program is to develop best practices on how much detail to include in certain key parts of the prosecution history, for example: Interview summaries, or reasons for allowance, or construction of 112(f) limitations. Regarding interview summaries: How many times have you reviewed a file history, noted the patent rejected and then seen the patent allowed after an interview with minimal or no changes to the claims and little or no explanation for the allowance? In this pilot, we worked to provide more detailed summaries including the substance of the examiner’s position, details of any agreement reached, and a description of next steps following the interview. After the pilot concluded, we measured 22 data points focused on clarity, and found an average of 15% improvement in clarity between the pilot examiners and a control group. On reasons for allowance: How many times have you reviewed a prosecution history, and there is nothing in the record to indicate why the claims were allowed by the examiner? Because it is at the discretion of the individual examiner to set forth reasons for allowance, those reasons have not always been included in every Notice of Allowance. In this pilot, we trained participants on setting forth reasons for allowance in every Notice of Allowance. At the conclusion of the pilot, we found a 25% improvement in the clarity of reasons for allowance between the pilot and control group. On claim interpretation:  How many times have you seen a prosecution history, where there was clearly an issue about how a claim was interpreted, but the record was devoid of any explanation of the interpretation? In the pilot, the examiners were given training on explicitly setting forth key claim interpretations to minimize ambiguities. For example: Explaining all Section 112(f) presumptions and whether the presumptions were overcome, Identifying on the record the structure in the specification that performs the function, and when a prior art reference is used to reject multiple claims, clearly addressing specific limitations in each claim that provide the basis for the rejection. With our trainings on interview summaries, reasons for allowance and claim interpretations, we saw a statistically significant improvement in clarity when examiners used these best practices. Also, the clarity of the record initiative furthers the goal of compact prosecution by encouraging the applicant to rebut the examiner’s on-the-record position promptly and directly if there is disagreement. In short, we are already taking steps to clarify the record and you will see our examiners doing so increasingly over time. And importantly and necessarily, we are simultaneously reviewing the amount of time needed for this effort, and will work with the public to determine the desired amount of additional clarity and appropriate time to achieve the goal.

Of course, patent quality also means applying the law accurately and clearly even in areas of the law that are evolving including, for example, the 101 jurisprudence on what is patent eligible subject matter. As many of you know, we’ve spent a fair amount of effort on this in recent months and years. Following major court rulings, we’ve revised our examination guidance, with input from all of you, multiple times and trained our examiners on the new guidance. And, we just announced in a Federal Register Notice two roundtables focused exclusively on the topic of patent eligible subject matter. At the first roundtable, held just yesterday, we discussed potential updates to our examination guidance, and at the second roundtable, on Dec. 5, we will discuss the impact of the current 101 jurisprudence on innovation, what changes might be considered to further support innovation, and whether such changes are best achieved legislatively, judicially or administratively. We thought it would be helpful to begin the public discussion, to create a record of where there is agreement or disagreement and what, if any, improvements would be helpful to make. We welcome your participation on this important and complex issue. As I hope you can see from this quick run-down of our initiatives, we are very excited about our Enhanced Patent Quality Initiative. It is an ambitious effort that is yielding some results now and will yield even more in the future. To learn more about our progress to date, please join us – on December 13, at the USPTO, where we will spend a good part of the day sharing details of the results of each of the dozen or so Enhanced Patent Quality Initiatives. We think you will like what you hear.

We’ve clearly made tremendous progress over the past eight years, but of course, we have more work to do to further strengthen our patent system’s ability to promote innovation in our ever changing environment. As I said earlier, I’m optimistic the incoming administration will share our appreciation of the importance of intellectual property as a driver of economic growth. As I look ahead, I foresee legislative patent reform changes will continue to be discussed in Congress, though those conversations will likely occur later in the term after some of the other priorities including filling a Supreme Court vacancy, immigration and tax reform are addressed, and any legislative patent reform will likely be more targeted, rather than the comprehensive reforms we’ve seen in prior Congresses. I would hope any legislative proposal will take into account the numerous positive changes that have occurred recently in the patent system including: through the courts, including on attorneys fees, pleading requirements and discovery limits, and at the USPTO through the PTAB and the agency’s efforts to improve the quality of patents in our system. As far as issues, I predict legislative discussions may include venue reform and possibly changes to Section 101 and PTAB. On venue, with nearly half of the patent cases filed in 2015 filed in a single district out of 94 federal judicial districts, it is easy for critics to contend that plaintiffs seek out this district preferentially for the wrong reasons. And the mere perception that there are advantages to be gained by forum-shopping challenges the public’s faith in the patent system. So there will be continuing pressure for legislative (and likely judicial) action on the issue of venue. The scope of any legislative reform remains to be determined, but I predict that the focus will be on more targeted, rather than comprehensive reform as we saw these past couple Congresses. Further, I anticipate that the USPTO’s work across the globe to ensure that other countries have strong IP protections adequate enforcement mechanisms and remedies, and appropriate technology transfer (or licensing and competition) policies, will continue in the next Administration particularly in such countries as China and others. This is a President-elect that has promised economic growth and job creation in our country, and IP will necessarily be a key piece to achieving that goal.

With that, let me conclude by saying that I firmly believe that the USPTO is healthy, well-functioning and poised to successfully handle whatever challenges and opportunities lie ahead.  Our issues are important, complex and nuanced. And while not everyone will always agree with all that the agency does, we are well prepared and poised to work together to accomplish our shared priorities and address the challenges ahead. When President Obama was inaugurated in 2009, his focus was on leading this nation’s recovery from the Great Recession. One of his first acts was to ask the Smithsonian to provide for display in the Oval Office some patent models that demonstrated past American innovation that led to new jobs and new industries. The president said that throughout our history, Americans solved problems through innovation and IP. He wanted to see reminders of that every day as he encountered the challenges he faced. The Smithsonian provided him with three models: Samuel Morse’s telegraph (1849),  John Peer’s gear cutter (1874), and Henry Williams’ steamboat wheel (1877). As I stood behind the President in the Oval Office earlier this year when he signed the Defend Trade Secrets Act, I couldn’t help but notice those three models along the wall to my left—still there almost eight years later—and feel extraordinarily humbled and honored. I feel that same honor and humility today standing before all of you and reflecting on just how much we have accomplished under this administration.  I’ve been fortunate to lead the USPTO at a time when intellectual property issues have been front and center on the consciousness of the American public and President and to have had the opportunity to help guide the direction in a small way. My hope is that the President-elect keeps the patent models from Morse, Peer and Williams in his office as a reminder of the importance of intellectual property to the economic prosperity that I know he wants for our country.

Thank you for all your support of the work of my team and I know that we all will continue to work together to ensure that our greatest inventions are yet to come. Thank you."

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