[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
U.S. PATENT AND TRADEMARK OFFICE:
THE AMERICA INVENTS ACT AND BEYOND,
DOMESTIC AND INTERNATIONAL POLICY GOALS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
COURTS, INTELLECTUAL PROPERTY,
AND THE INTERNET
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JULY 30, 2014
__________
Serial No. 113-110
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
______
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
HOWARD COBLE, North Carolina ROBERT C. ``BOBBY'' SCOTT,
LAMAR SMITH, Texas Virginia
STEVE CHABOT, Ohio ZOE LOFGREN, California
SPENCER BACHUS, Alabama SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa Georgia
TRENT FRANKS, Arizona PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas JUDY CHU, California
JIM JORDAN, Ohio TED DEUTCH, Florida
TED POE, Texas LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah KAREN BASS, California
TOM MARINO, Pennsylvania CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri
[Vacant]
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
------
Subcommittee on Courts, Intellectual Property, and the Internet
HOWARD COBLE, North Carolina, Chairman
TOM MARINO, Pennsylvania, Vice-Chairman
F. JAMES SENSENBRENNER, Jr., JERROLD NADLER, New York
Wisconsin JOHN CONYERS, Jr., Michigan
LAMAR SMITH, Texas JUDY CHU, California
STEVE CHABOT, Ohio TED DEUTCH, Florida
DARRELL E. ISSA, California KAREN BASS, California
TED POE, Texas CEDRIC RICHMOND, Louisiana
JASON CHAFFETZ, Utah SUZAN DelBENE, Washington
BLAKE FARENTHOLD, Texas HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia ZOE LOFGREN, California
RON DeSANTIS, Florida SHEILA JACKSON LEE, Texas
JASON T. SMITH, Missouri STEVE COHEN, Tennessee
[Vacant]
Joe Keeley, Chief Counsel
Heather Sawyer, Minority Counsel
C O N T E N T S
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JULY 30, 2014
Page
OPENING STATEMENTS
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Chairman, Subcommittee on Courts,
Intellectual Property, and the Internet........................ 1
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, Ranking Member, Committee on the
Judiciary, and Member, Subcommittee on Courts, Intellectual
Property, and the Internet..................................... 2
The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Chairman, Committee on the Judiciary 4
The Honorable Jerrold Nadler, a Representative in Congress from
the State of New York, and Ranking Member, Subcommittee on
Courts, Intellectual Property, and the Internet................ 6
WITNESS
The Honorable Michelle K. Lee, Deputy Under Secretary of Commerce
for Intellectual Property and Deputy Director of the United
States Patent and Trademark Office, United States Department of
Commerce
Oral Testimony................................................. 8
Prepared Statement............................................. 11
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, Ranking
Member, Committee on the Judiciary, and Member, Subcommittee on
Courts, Intellectual Property, and the Internet................ 3
APPENDIX
Material Submitted for the Hearing Record
Response to Questions for the Record from the Honorable Michelle
K. Lee, Deputy Under Secretary of Commerce for Intellectual
Property and Deputy Director of the United States Patent and
Trademark Office, United States Department of Commerce......... 44
U.S. PATENT AND TRADEMARK OFFICE: THE AMERICA INVENTS ACT AND BEYOND,
DOMESTIC AND INTERNATIONAL POLICY GOALS
----------
WEDNESDAY, JULY 30, 2014
House of Representatives
Subcommittee on Courts, Intellectual Property,
and the Internet
Committee on the Judiciary
Washington, DC.
The Subcommittee met, pursuant to call, at 3 p.m., in room
2141, Rayburn House Office Building, the Honorable Howard Coble
(Chairman of the Subcommittee) presiding.
Present: Representatives Coble, Marino, Goodlatte, Chabot,
Farenthold, Holding, Collins, Smith, Nadler, Conyers, Chu,
DelBene, and Jeffries.
Staff Present: (Majority) Vishal Amin, Counsel; Olivia Lee,
Clerk; (Minority) Jason Everett, Counsel; and Norberto Salinas,
Counsel.
Mr. Coble. Good afternoon, ladies and gentlemen. The
Subcommittee on Courts, Intellectual Property, and the Internet
will come to order.
Without objection, the Chair is authorized to declare a
recess of the Subcommittee at any time. We welcome all the
witnesses and those in the audience as well with us today. I'll
give my opening statement, and then I'll recognize the
gentleman from Michigan.
Intellectual property forms the foundation of our nation's
innovation economy. The issues surrounding copyrights,
copyrights--strike that--patents, copyrights, and trademarks
affect nearly every business in America, both large and small.
That is why today's oversight hearing over the office tasked
with managing our nation's intellectual property laws is so
vitally important.
Back in 2011, we passed the America Invents Act, the AIA,
that was most substantial--the most substantial reform to U.S.
patent law since the 1836 patent law, or Patent Act. The AIA
re-established the U.S. point system as a global standard, and
over the past 3 years the U.S. Patent and Trademark Office has
worked to implement the various provisions of the AIA to ensure
that the bill realizes its full potential to promote innovation
and create jobs. Our priority is to ensure that the PTO's
implementation of the AIA has been in line with congressional
intent. While the AIA rewrote the underlying patent law and
procedures at the PTO, the dramatic rise in abusive patent
litigation over the last several years necessitated our work to
address abusive patent litigation. Through election year,
patent--though in an election year, pandering and politics
thwarted our efforts in the Senate. The fight goes on, and I'm
certain that the Innovation Act, which passed the House last
year with 325 votes and the support of the White House, will
ultimately become law. We need to build on our work with the
Innovation Act to ensure that the U.S. patent system operates
fairly.
Abusive patent litigation is a scourge on our economy, and
it is the product of those taking advantage of loopholes in the
current system to engage in what amounts to litigation
extortion. In that vein, I call on the USPTOq to address the
issues surrounding pre-GATT, or submarine, patent applications.
Some of these applications have been sitting at the PTO longer
than I've been in Congress. These are applications that, if
issued, would receive 17-year terms of protection from the date
that they issue--from the date they issue, not the date they
were filed. But this is not the PTO's fault. This is a result
of legal gamesmanship by applicants. Such dilatory behavior by
these applicants reflects the serious abuse of PTO procedure,
it seems to me. I called on the USPTO to use its--to use its--
strike that--to use their existing authority under the law to
start publishing these dilatory applications so that the public
has notice if vital technologies like those that cover the
personal computer or the Internet are to be ripped from the
public domain.
American innovation cannot be held hostage to frivolous
litigation from weak or overbroad patents. Companies are
shutting down and folks are losing jobs. We need to work
together to ensure that the American economy does not continue
to suffer.
I hope to hear more today from our esteemed witness and the
steps that need to be taken to promote America's innovation
economy and create jobs.
I'm now pleased to recognized the gentleman from Michigan,
the Ranking Member of the full Judiciary Committee, Mr.
Conyers, for his opening statement.
Mr. Conyers. Thank you, Chairman Coble.
Today's hearing provides a long overdue opportunity for us
to review our ongoing efforts to strengthen our nation's
intellectual property system, and so I'm pleased that the
Honorable Michelle Lee, the Deputy Under Secretary, will be
here with us to help us understand the overall strategy for us
moving forward.
The health of our intellectual property system is integral
to the health of our nation's economy. It provides critical
incentives that foster innovation, which in turn creates jobs.
For example, IP-intensive industries account for more than a
third of the U.S. gross domestic product and support about 40
million jobs in the United States.
So as we examine the work of the Patent and Trademark
Office, here's what I think we ought to be looking at
carefully. The office, to be truly effective in protecting the
integrity of our intellectual property system, we must ensure
that the agency has sufficient resources, and I'm sure this is
going to be seen as the most basic problem before us.
Unfortunately, the current funding mechanism has failed the
patent system by allowing an estimated billion dollars in fees
over the last two decades to be diverted to other agencies, and
that's why many of my colleagues and myself have introduced
H.R. 3349, the Innovation Protection Act. It's bipartisan
legislation that establishes a permanent statutory funding
mechanism for the United States Patent and Trademark Office.
This legislation would ensure that the office receives a
consistent stream of funding that would better enable the
agency to address abusive patent litigation.
A major contributing factor to the problem of abusive
patent litigation is the issuance of ambiguous or poor quality
patents. Thus, the most effective step we can take is making
sure that such patents are not issued to begin with, and by
ensuring sufficient resources for USPTO would be a most
important step in the right direction. With ample resources,
the USPTO could hire and retain more examiners to increase
patent examination quality and to issue strong patents. It
would modernize the IT system to examiners--available to
examiners to improve the speed and quality of the examiners'
work product. And with more funding, it could provide examiners
more technical training and expertise.
Accordingly, I'd like to hear from the Deputy Director
about the impact the current funding mechanism has had on
USPTO's past and future efforts to improve patent quality--
patent examination quality.
Now, a strong U.S. intellectual property system also
requires that the Patent and Trademark Office register
trademarks worthy of the protection of such authority that
conveys to trademark owners. Trademarks provide owners a legal
right against unlawful infringers. They also incentivize owners
to produce high quality products and services. Otherwise, the
trademark owners' reputations suffer. The upward trend in
trademark registration application reflects the increasing
awareness of the importance of the trademark.
And so I will put the rest of my statement in the record,
and yield back the balance of my time, Mr. Chair.
Mr. Coble. I thank the gentleman from Michigan.
[The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, Ranking Member, Committee on
the Judiciary, and Member, Subcommittee on Courts, Intellectual
Property, and the Internet
Today's hearing provides a long-overdue opportunity for us to
review the ongoing efforts of the U.S. Patent and Trademark Office to
strengthen our Nation's intellectual property system.
The health of our intellectual property system is integral to the
health of our Nation's economy. It provides critical incentives that
foster innovation, which, in turn, creates jobs. For example, IP-
intensive industries account for more than one-third of the U.S. Gross
Domestic Product and support about 40 million jobs in the United
States.
So as we examine the work of the U.S. Patent and Trademark Office,
there are several factors that should be considered.
To begin with, for the Office to be truly effective in protecting
the integrity of our intellectual property system, Congress must ensure
that the agency has sufficient resources.
Unfortunately, however, the current funding mechanism has failed
the patent system by allowing an estimated $1 billion in fees over the
last two decades to be diverted to other agencies.
That is why I, along with many of my colleagues on this Committee,
introduced H.R. 3349, the ``Innovation Protection Act.'' It is
bipartisan legislation that establishes a permanent, statutory funding
mechanism for the USPTO.
This legislation would ensure that the Office receives a consistent
stream of funding that would better enable the agency to address
abusive patent litigation.
A major contributing factor to the problem of abusive patent
litigation is the issuance of ambiguous or poor quality patents.
Thus, the most effective step we can take is making sure that such
patents are not issued to begin with. By ensuring sufficient resources
for the USPTO, this would be accomplished.
With ample resources, the USPTO could hire and retain more
examiners to increase patent examination quality and to issue strong
patents.
It could modernize the IT systems available to examiners to improve
the speed and quality of the examiners' work product.
And with more funding the USPTO could provide examiners more
technical training and expertise.
These all contribute to superior patent examination quality.
Accordingly, I would like to hear from Deputy Director Michelle Lee
about the impact the current funding mechanism has had on the USPTO's
past and future efforts to improve patent examination quality.
Second, a strong U.S. intellectual property system also requires
the USPTO to register trademarks worthy of the protection such
authority conveys to the trademark owners.
Trademarks provide owners a legal right against unlawful
infringers. They also incentivize owners to produce high quality
products and services, otherwise the trademark owners' reputations
suffer.
The upward trend in trademark registration applications reflects
the increasing awareness of the importance of trademark.
And, the Office has an important responsibility to ensure that the
public interest is served well regarding the agency's trademark
registration approval process.
Just last month, for example, a non-political, administrative
tribunal within the USPTO cancelled the trademark of Washington's
professional football team after having determined that the trademark
was disparaging to Native Americans.
Section 2 of the Trademark Act specifically provides, in pertinent
part, that a trademark is ineligible for registration if found to
disparage an individual or group.
Accordingly, I would appreciate having our witness address whether
this law needs to be further strengthened.
Finally, we must consider the challenges presented by international
competitors.
Our intellectual property system is the envy of the world because
it forms the foundation for our inventiveness and dynamic business
culture. It is clear that the protection and enforcement of
intellectual property is vital to maintaining our competitiveness
globally.
Unfortunately, some other countries, particularly China and India,
do not share our view of promoting and protecting intellectual property
rights.
I would like the Deputy Director to discuss whether there are
measures that Congress should consider to better equip her agency to
prevent and deter international infringement of U.S. intellectual
property rights.
I thank the Chairman for holding today's hearing and I look forward
to hearing Ms. Lee's testimony.
__________
Mr. Coble. The gentleman from Virginia, the Chairman of the
full House Judiciary Committee.
Mr. Goodlatte. Thank you, Mr. Chairman.
And Deputy Director Lee, welcome.
When we look at the array of agencies and departments
within the Federal Government, only a certain number carry out
a mission that is explicitly called for in the Constitution.
The U.S. Patent and Trademark Office is one of them. As the PTO
carries out its constitutional mission, we need to conduct
appropriate oversight to ensure that our IP laws are being
implemented fairly and in line with congressional intent.
In recent years, the PTO has been tasked with implementing
the America Invent Act. The AIA was the most significant reform
to U.S. patent law in my lifetime. I believe that it is
imperative for this Committee to examine the rules and
procedures that the PTO has adopted to implement this important
law, in particular, the various post-grant proceedings called
for in the AIA. The post-grant proceedings were designed to
create a cost-effective alternative legal forum at the PTO to
provide a simpler way to review questions of patentability,
thus reducing the cost of frivolous litigation on job creators.
It is important for the PTO to operate these proceedings as
true alternatives to the courts. It is also important for the
programs to operate fairly for both the patent owner and those
accused of infringement.
It also appears that the business method transitional
program has been implemented successfully by the PTO and is
operating quite well. I hope to hear more from the Acting
Director on this provision of the AIA.
With regard to frivolous patent litigation, I remain
confident that the Innovation Act, which passed the House with
325 votes, will become law. Though some in the Senate caved to
election year politics and special interests, this is a bill
that truly puts our economy first. I appreciate the support of
the White House for the Innovation Act and, in particular, the
provisions that went directly to curtailing abusive patent
litigation, specifically a modernized fee-shifting statute
based on the Equal Access to Justice Act.
As we work to enact the Innovation Act, the PTO is also
taking steps to improve patent quality internally with improved
prior art searches and clearer guidelines. While I applaud
these efforts, I also want to caution against attempting to
simply implement provisions of the Innovation Act through
rulemakings. In some instances, we have seen proposed
rulemakings for issues like attributable owner disclosures that
have Draconian penalties and little to no benefit in reducing
frivolous patent litigation or improving patent quality. These
kinds of rulemakings could impose an exorbitant tax on business
and innovation. While we share the common goal of approving the
patent process, we must tread carefully. Rulemakings are not a
substitute for congressional action.
On the patent quality front, I strongly believe that the
PTO should not simply be in the business of granting patents
and leaving the mess created for the courts and Congress to
fix, but rather, focus on tightening the requirements for
patent eligibility to reduce the number of weak or overly broad
patents from entering the system.
There are also some patent applications that have been
pending for a very long time. These pre-GATT, or submarine
patent applications, have in some cases been pending for 30 or
40 years. This long pendency is not the fault of the PTO, and I
appreciate that the PTO provided Congress with a report
detailing these several hundred pending submarine patent
applications.
Apart from being a drain on PTO resources, I believe that
the public has a right to know if widely adopted technology
could suddenly be removed from the public domain. If such
applications were to issue as a patent today, they would be
entitled to a 17-year term and would not expire until the year
2030. Moreover, because these applications have not been
published, the public has no notice that patents may issue that
claim the invention in question, and the public has no
opportunity to provide the PTO with prior art that could
directly apply to the overly broad claims in many of these
applications. And so I call on you to exercise your authority
under existing law to publish these applications immediately.
Patent and trademark quality are key components of the
PTO's overall mission, but I also want to ensure that the PTO
is properly spending the fees that it collects, that its
employees are acting appropriately when it comes to hiring
appropriately qualified individuals and that the PTO's IP
attaches have appropriate resources and authority in our
embassies abroad. When it comes to our efforts overseas, we
need to ensure that our IP trade agenda, IP attache program,
and training and capability building programs are in line with
compelling U.S. economic interests and job creation.
Intellectual property powers the engine of American
innovation and creativity, it creates new jobs, and helps grow
our economy. I look forward to hearing from Director Lee on
these important issues.
Thank you, Mr. Chairman.
Mr. Coble. I thank the gentleman.
The distinguished gentleman from New York and the Ranking
Member of the Subcommittee, Mr. Nadler, is recognized.
Mr. Nadler. Thank you, Mr. Chairman.
Today, we conduct an oversight hearing of the Patent and
Trademark Office. A strong patent system is important to foster
innovation. Patents serve as one the key drivers of the
Nation's economy. I hope that today we will consider what steps
we can take to continue to improve the patent system. To do
this, we will examine the implementation of the Leahy-Smith
America Invents Act of 2011, which was the largest modification
to U.S. patent law in more than 50 years.
The America Invents Act was designed to help process patent
applications faster, reduce the applications backlog, increase
patent quality through expedited patent challenges, and to
improve examiner recruitment and detention.
The PTO is a fee-funded agency and the America Invents Act
provides a model for funding to ensure that the USPTO receives
access to the user fees collected each year.
As we study these issues today, I want to stress that I
believe that it's very important that the PTO continue to
receive all of these funds so that it can continue to issue
high quality patents.
The bill gave the PTO fee setting authority, which has
allowed the PTO to develop an operating reserve. This enables
it to launch new initiatives in response to the customer's
needs. To date, the office has implemented most of the
provisions of the America Invents Act. Of the 37 America
Invents Act provisions, 28 were delivered on time. Though this
implementation rate has been a success, I would like to hear
today about the planning and implementation of the patent
review processing system. This system was launched in a new
Patent Trial and Appeal Board and is the board's e-filing and
case management system for trial proceedings.
The America Invents Act required the office to establish
three or more satellite offices by September 16, 2014. The PTO
opened one satellite office in Detroit in July 2012 and
recently opened another one in Denver. I would like to hear how
these offices are helping to reduce the patent backlog and how
these operations--their operations have been running so far.
As we examine the continued implementation of the America
Invents Act, we will study why changes are needed, if any, for
the patent system as a whole. One of the key goals of the
America Invents Act was to help the PTO quickly review patent
applications, and another goal was to establish higher quality
patents, and the PTO has worked to achieve that goal.
I'm happy the PTO has made improving patent quality a top
priority. I would like to hear how the PTO plans to improve
patent quality as it continues to implement the America Invents
Act. Also, as quality continues to improve, we expect this will
play a large role in curtailing abusive patent litigation. In
recent years, there has been increasing awareness about abusive
patent litigation. There's also been a public and private
effort to combat it. We need to continue to develop other
creative solutions to deal with instances of such litigation
without diminishing the rights of legitimate patent holders. In
particular, the House passed the Innovation Act last December
with strong bipartisan support to address many of the concerns
that have been raised about abusive patent litigation. During
our work on the bill, we heard from many stakeholders about how
the bill could be modified and improved, and we attempted to
work with all interested parties. The Senate has continued to
work on this important issue, but the bill has been put on hold
as stakeholders continue to attempt to work out their
differences. We must not become discouraged as we continue to
attempt to find common ground to deal with this problem.
Last year, the Administration announced seven legislative
recommendations designed to increase transparency of patent
ownership information to curtail abusive litigation and ensure
high quality patents. We should continue to study these
recommendations as we continue to develop ways to improve the
system.
I would also like to hear today about efforts, such as the
intellectual property rights attache program, that the PTO has
taken to work with our trading partners to improve intellectual
property rights and enforcement.
The Supreme Court has recently issued several opinions that
impact some of the legislative issues we will discuss today.
For example, in the Octane and Highmark cases, the court issued
opinions lowering the standard for awarding attorney's fees in
patent cases.
I would like to hear how the Patent Office is working on
executive actions to address the question of overly broad
patent claims, particularly in the context of software.
The Administration has called on the PTO to provide new
targeting training toward examiners on the scrutiny of these
types of claims. I commend the PTO for developing four training
modules focused on functional claiming under Section 112(f),
which is often used in software patents. This is an important
step in taking the executive action to increase patent claim
clarity seriously.
Finally, we should make sure that American companies
continue to receive adequate patent protection in key overseas
markets.
This hearing will provide us with an opportunity to
evaluate the efforts of the PTO to implement the America
Invents Act and provide suggestions of how we can improve the
patent system going forward.
I look forward to hearing from the witness, and I yield
back the balance of my time. Thank you.
Mr. Coble. I thank the gentleman.
The statements of other Members of the Subcommittee will
made part of the record without objection.
Before I introduce our distinguished witness today, Ms.
Lee, I'd like you to stand and be sworn, if you will.
[Witness sworn.]
Mr. Coble. Thank you. You may be seated. Let the record
show that the Ms. Lee responded in the affirmative.
Our witness today is the Honorable Michelle Lee, Deputy
Under Secretary of Commerce for Intellectual Property and
Acting Director of the U.S. Patent and Trademark Office. In her
position, Ms. Lee provides leadership, oversight and day-to-day
management to one of the largest intellectual property offices
in the world, which consists of 12,000 employees. She also
serves as one of the principal advisors to the President on
both domestic and international intellectual property matters.
Prior to her role as Deputy Director, Ms. Lee served as the
first Director of the Silicon Valley Patent and Trademark
Office, where she established and led the new office. Her
experience also includes being the first Head of Patent
Strategy at Google, where serving as the company's Deputy
General Counsel, she--while serving as the company's Deputy
General Counsel. She received her J.D. from the Stanford Law
School and her M.S. and B.S. in electrical engineering and
computer science from the Massachusetts Institute of
Technology.
Ms. Lee, we're delighted to have you with us.
I must advise all of you, we expect a vote on the Floor
imminently, so at that time, we will declare a brief recess,
should be no more than 35 or 40 minutes, I'm thinking.
Ms. Lee, there's a timer before you on your desk. When the
green light becomes amber, you're being warned you have a
minute to go. And if you can wrap up on or about 5 minutes. You
won't be severely punished if you fail, but on or about 5 would
be fine. We're pleased to have you with us today.
TESTIMONY OF THE HONORABLE MICHELLE K. LEE, DEPUTY UNDER
SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DEPUTY
DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE,
UNITED STATES DEPARTMENT OF COMMERCE
Ms. Lee. Thank you, Chairman Coble.
Mr. Coble. Put the mike on, Ms. Lee.
Ms. Lee. Okay. Thank you.
Chairman Coble, Chairman Goodlatte, Ranking Member Nadler
and Ranking Member Conyers, and Members of the Subcommittee,
thank you for this opportunity to discuss the USPTO's options,
operations, programs and initiatives.
Mr. Chairman, promoting innovation, stimulating growth, and
creating an environment that generates high-paying jobs
continues to be a top priority of the Obama administration and
vital to our country's long-term competitiveness. I'm honored
to be a part of an agency that directly serves America's
entrepreneurs by providing the intellectual property protection
they need to secure investment capital and allowing them to
build their companies and bring cutting-edge products and
services to the global marketplace.
I am also very proud to be a part of an agency that was
ranked as the number one best place to work in the Federal
Government out of 300 agency subcomponents by the Partnership
for Public Service Survey. This ranking is a tribute to my
predecessors, to the USPTO's management team, our employee
unions and, most importantly, to our 12,000 dedicated
employees.
Mr. Chairman, our business is thriving, and I believe that
is a good sign for the economy. This fiscal year, we expect to
receive nearly 600,000 patent applications and more than
450,000 trademark applications. We have reduced the patent
application backlog by 24 percent since January of 2009,
despite an on average 5 percent increase year over year in
filings, and we continue to make progress in reducing the
backlog and the pendency of applications. Our trademark team
has long been at its optimal backlog and pendency targets. On
average, it takes just 10.3 months to receive a final decision
on a trademark application.
The USPTO and the American public continue to benefit from
the legislative changes enacted by the Leahy-Smith America
Invents Act. During the last 3 years, the USPTO has fully
implemented these changes to modernize the U.S. patent system,
transitioning from a first inventor to file system,
establishing timely and cost-effective post-grant review
proceedings, and taking advantage of new authority to enable
sustainable funding.
Mr. Chairman, the Administration believes that additional
legislative changes building on the AIA would further enhance
patent quality and lessen abusive patent litigation. This
Committee deserves substantial credit for moving forward a bill
that addresses these goals. We continue to hope that a bill can
reach the President's desk, and are committed to working with
Congress and our stakeholders to build balanced and effective
consensus legislation.
In the meantime, we are not waiting. We are implementing an
array of initiatives to improve our patent system now and for
the future. We have launched a multifaceted enhanced patent
quality initiative to expand examiner training, both legal and
technical; to collect more data to further improve our
examination process and training; to harness the power of the
crowd, or public, to find the best possible prior art during,
and not after, examination; and to gather input from all of our
stakeholders on how further to improve quality.
High quality patents reduce the potential for abusive
litigation, permitting our companies to focus on innovation.
For those who receive abusive demand letters or lawsuits, we
have launched an online toolkit to help them know their rights
and available resources before entering into costly litigation
or settlement. We are committed to helping under-resourced
applicants benefit from the patent system through our pro bono
and pro se assistance programs and in increasing the
transparency in our patent system.
Further, our Patent Trial Appeal Board is operating exactly
as you, Congress, intended. We are providing a faster and
lower-cost alternative to district court litigation in
determining the validity of patents. As required by the AIA,
every one of our trials to date has completed with a high
quality ruling within the statutorily-required 1-year deadline,
despite an increasing volume of petitions, more than 1,600 per
year, which is more than 200 percent of that originally
predicted.
Moreover, as also required by the AIA, we have opened four
satellite offices to increase our capacity to handle
applications and to provide services and information to help
entrepreneurs and inventors. Offices in Detroit and Denver are
already up and running in permanent space and have patent
examiners on the ground locally. Permanent offices in San Jose
and Dallas will officially open next year. Patent Trial Appeal
Board judges are working in all four locations on appeals and
post-grant review proceedings. These satellite offices have
been extremely well received by the local innovation
communities and play a strategic role in helping the USPTO
fulfill its mission.
Mr. Chairman, with our colleagues at the Department of
Commerce, we issued a green paper last year that analyzed key
copyright issues in the digital environment. We are currently
engaging with our stakeholders and the copyright office to
develop recommendations.
Finally, on the international front, the USPTO continues to
play a significant role in promoting protection and enforcement
of intellectual property rights for our innovative companies
entering foreign markets.
Mr. Chairman, my written statement contains more detailed
information about our many domestic and international
intellectual property related activities, and I thank you for
this opportunity and am pleased to answer any questions you or
your Committee Members may have.
Mr. Coble. Thank you, Director Lee, for being here and for
your testimony.
[The prepared statement of Ms. Lee follows:]
__________
Mr. Coble. We try to confine ourselves to the 5-minute rule
as well, so I will start with a quick question to you, Ms. Lee.
The USPTO IP attache program has been an important part of
the United States international IP advocacy. The two countries
of highest priority have been China and India. If you would,
Ms. Lee, speak more to the key issue that the PTO's attaches
are working on in those countries, particularly on the issue of
trade secret theft in China and in India, the changes that we
are seeing or hope to see in regards to patents protection. And
market access under the newly elected pro-reform prime
minister.
Ms. Lee. Thank you, Mr. Chairman, for your question about
the IP attache program. That program is designed to have IP
experts on the ground. We currently have IP experts on the
ground in just under a dozen countries, including three in
China and one in the U.S. Embassy in India.
And what our IP attaches do is they serve multiple
purposes. One is they advise American companies who are
entering that country on the IP landscape on a range of issues,
including patents, trade secrets and copyrights, and how to
protect their intellectual property. In addition, our IP
attaches work closely with the host government. They work with
judicial officials to make sure that the country has rules that
are in compliance with and we can influence and share
similarities and values on IP. So we work with judicial
officials, we work with law enforcement officials there, we
work with policy makers there. Really we're trying to create an
environment that is favorable for American businesses to export
their products and services overseas.
Specifically, in terms of what we are doing in China, I
mentioned we have three IP attaches on the ground there. We
also have a team of dedicated China experts at the USPTO. I co-
chair the U.S.-China Joint Commission of Commerce and Trade,
and we will be meeting--on the IP working group--earlier this
fall to discuss important topics, including trade secrets and
other intellectual property matters. And we provide training to
American companies in the United States through what we call
our China IP road show. We go to multiple cities throughout the
country advising companies on the IP landscape in China.
And on the front--on the Indian front--we are working
together, of course, through our IP attache program and also
through our Global IP Academy to train policymakers, judicial
officials and law enforcement officials. The same is true for
representatives from other countries as well besides India and
China.
Mr. Coble. I thank you for that. Director Lee, I want to
commend you for your stewardship at the PTO and thank you as
well for working closely with us on the Innovation Act. I
appreciate that. There are a good number of people who are
intellectual property advocates who believe you would be a rock
solid Director of the agency. Now, my record for endorsements
is dismal, so I won't dare call this an endorsement, because it
might end up being a liability, but you've been very--we
appreciate very much the exchange we have enjoyed with you
during your tenure there.
If you would, with that in mind, what are some of the key
challenges that you've faced as Acting Director?
Ms. Lee. So I have to say I'm blessed to be the current
leader of an agency that, for the most part, Mr. Chairman, is
exceedingly well run. I've got an extremely talented and
capable senior executive team and advisors by my side, and none
of the good work that I'll describe to you over the course of
the day could be accomplished without the help of that team,
but as we look ahead, certainly one of the challenges we face
is that our Patent Trial and Appeal Board proceedings have been
extremely popular.
Members of Congress, with their foresight, created these
AIA trials. There are three new post-grant proceedings,
including post-grant review, inter partes review, and covered
business method review. And I have to say, the public's
interest in and appetite for these proceedings is significant.
As I mentioned in my opening comments, there have been
about 1,600 petitions filed per year, and that's 200 percent
more than we originally projected. So a goal--or a challenge of
the agency, a challenge that I think we are absolutely up for,
is to ensure that we continue to issue high quality rulings
from our Patent Trial and Appeal Board within our very strict
1-year statutory requirement. We have hit all of our deadlines
so far, and I'm optimistic that we are--we can meet the
challenge going forward, but it's something we will need to
keep our eye on.
Mr. Coble. I thank you.
I see my red light has illuminated. Let me try to get one
more question in.
How is the Patent Trial and Appeal Board handling the
backlog pending appeals?
Ms. Lee. So we have a backlog of our ex parte appeals, and
the backlog with the AIA trials is just beginning to build. So
I guess the key is that with the AIA trials, we've been hitting
our 1-year statutory deadline. So we need a little bit of
backlog, because we want to make sure that our Patent Trial and
Appeal Board judges are fully engaged and they're not sitting
around waiting for cases to be filed, but the backlog of the
AIA trials is something that we need to keep an eye on, but
I'm--I mean, the good news is that we seem to be hitting our
deadline.
Mr. Coble. I thank you for that. I see my time has expired.
The gentleman from New York, Mr. Nadler.
Mr. Nadler. Thank you, Mr. Chairman.
Ms. Lee, do you think that the USPTO currently has the
resources and flexibility to continue to reduce the patent
application backlog, to shorten patent pendency, improve patent
quality, and enhance the administrative appeal and post-grant
processes? Do you have enough resources?
Ms. Lee. So thank you for the question, Congressman Nadler.
That's a very important question. And I have to say, with the
implementation of the AIA, right, and the ability to keep our
user fees, that has been a tremendous improvement over past
years. We now have, working with our stakeholders, an operating
reserve, which also very favorably impacts our ability to
deliver in terms of reducing backlog and pendency, and
improving quality. I mean, prior to the implementation of the
AIA, we were on a year-to-year budget, and if there were
fluctuations in fees, important projects like patents quality
or even, for example, IT investment, IT investment was
oftentimes the first thing to go.
So now that we're able to set our fees, which we engaged in
a very comprehensive outreach to our stakeholders to set it at
an appropriate level, now that we have an operating reserve,
which provides a little cushion for fluctuations in terms of
filings or what have you, I think we are very much able to
focus on further reductions on the backlog and pendency, and
I'm very excited to be giving an enhanced emphasis on patent
quality. We're really at a point in our history where, like no
time in the recent past, we're truly able to focus on----
Mr. Nadler. So your testimony is that not only is it a
great improvement, but it's adequate at this point?
Ms. Lee. Yeah. I think we set our fees based upon what we
think it costs us to provide----
Mr. Nadler. Okay.
Ms. Lee [continuing]. The service. So as long as we can
keep it----
Mr. Nadler. Yes. Thank you.
Ms. Lee. Yes.
Mr. Nadler. Now--thank you. How have you improved on your
efforts to train the patent examiners to ensure they stay
abreast of the latest developments in the law?
Ms. Lee. So we have initiatives underway to--we give them--
when the Supreme Court comes out with rulings, we take a look
at those rulings, and if they affect examination processes,
then what we will do is we will issue guidance to our examiners
on how to examine in light of the new case law.
In addition, we are constantly training our examiners on
the new developments in the case law, not just through the
guidance, but through training in person on video. Much of that
training material is available on our Web site for the public
to see. And we also have technical experts from outside the
walls of the PTO come into the PTO. They are the experts in
perhaps the latest in computer vision technology or artificial
intelligence or semiconductor manufacturing, and they have the
ability to come into our office through our patent examiner
technical program to train our examiners, and that's been
tremendously helpful in terms of keeping our examiners up-to-
date.
Mr. Nadler. Good. That was my next question, which you
already answered.
Do you believe that the fiscal year 2015 appropriation bill
that the House has passed and the Senate Appropriations
Committee has approved will provide the office with the
adequate authority to spend anticipated fee collections as
estimated by the Congressional Budget Office?
Ms. Lee. So, for the fiscal year 2015, the House approved--
the House passed and the Senate approved the USPTO keeping and
spending all that we predict that we will collect in 2015. And
any amount in excess of that--any amount in excess of our
projected fee collections will go into a fee reserve fund. So
to answer----
Mr. Nadler. For the office? For the office?
Ms. Lee. Into a fee reserve fund. And then the way we can
access that fee reserve fund is by submitting a reprogramming
request to our appropriators to access that fund. So it's our
hope that--and we anticipate a slight overage there, and some
amounts of money arriving into that fee reserve fund, we hope
to be able to access those funds as well.
Mr. Nadler. That sounds good. Thank you. As the number of
filings continues to grow, does the PTO plan to provide a full
text searchable database of Patent Trial and Appeal Board
filings? We have heard these filings are in the patent review
processing system site, and there's often very limited
searchability. Do you have any plans to manage these PTAB
filings differently in the future?
Ms. Lee. Thank you for your question on that one. And the
answer is yes. We had a lot to implement when the AIA came out,
including a lot of IT systems to go along with, so it was no
minor feat to get all the processes, the rules implemented and
the IT systems up and running. So, as a first matter, we stuck
to the basic functionality, but it is clearly our goal to add
additional functionality and make it more user friendly to use,
and that includes things like being able to search the text of
our documents. So the answer is yes. And we are looking to
phase out our current system by fiscal year 2015 with hopefully
a next generation system that will be much improved.
Mr. Nadler. Thank you. My last question is really twofold.
Is there any way to predict the number filings for a given
case, and do you have any metrics on which patent review
processing system documents users want to access most often?
Ms. Lee. So let me answer your second question as far as
access to documents. We don't actually currently track which of
the documents are accessed more frequently than others or the
number of accesses, but it is entirely possible that in our
next generation IT systems, that is something we can add,
that's a feature we can add.
And your first question about the number of documents in
any given case----
Mr. Nadler. Number of filings, yeah.
Ms. Lee. Yeah. In any given Patent Trial and Appeal Board
filing, a litigation before the Patent Trial and Appeal Board
is much like the litigation in district court, and I think the
number of documents filed depends upon the number of motions
that the parties may have. So there's always a variable, and at
this point, it's hard to predict the number, given the newness
of the proceedings, but I imagine over time, perhaps we can
gather more data on averages and such, but it depends a lot on
the number of motions filed by the litigants and the number of
opinions that then need to be written afterwards.
Mr. Nadler. Thank you very much.
I've exceeded my time. And I want to thank the Chairman for
his indulgence.
Mr. Coble. Thank you. I appreciate the gentleman.
Thank you, Ms. Lee.
The gentleman from North Carolina.
Mr. Holding. Thank you, Mr. Chairman.
I'm delighted to now of your expertise in international
intellectual property matters and your focus on ensuring that
our companies, you know, have access to foreign markets and our
intellectual property is protected.
I'm concerned about countries that have embarked on some
trademark destruction when it comes to tobacco products and
plain packaging of tobacco. Australia was the first country to
prohibit the use of trademarks on tobacco products in 2011, and
other countries, like Ireland and the United Kingdom, seem to
be taking a similar path toward destruction of intellectual
property rights vis-a-vis trademarks on tobacco products.
So I'd like for you to describe what USPTO's position is on
these proposals and these laws that encumber the use of
trademarks, and specifically, what will USPTO do to defend the
intellectual property system vis-a-vis these trademarks of our
companies?
Ms. Lee. Thank you, Congressman. So are you talking about
the bad faith filing of trademarks in certain countries? So,
for example, if the U.S. has a trademark that they filed for or
registered for in the United States, that other bad faith
actors overseas then go out and file for trademarks?
Mr. Holding. No. I'm talking about when a country enacts a
law, vis-a-vis tobacco products, and says that the company
cannot use their trademarks on a tobacco product. So you have
the plain--you have a pack of cigarettes, and it is a plain
package with no trademarks allowed to be used on there.
Ms. Lee. You know, this is the first time I'm hearing about
this.
Mr. Holding. I'm very surprised it's the first time you're
hearing about it, because it's----
Ms. Lee. So I appreciate the question.
Mr. Holding. It's a----
Ms. Lee. Sounds like it's an important issue. And if you
don't mind, let me discuss with my team, and we will get back
to you with an answer on the record, but that sounds like a
very important issue, and I could see it might be of concern to
some of our stakeholders.
Mr. Holding. Sure. Well, I would appreciate that. I'm
concerned that it's a matter of first impression, because it
has been--you know, obviously it's an important matter
involving, you know, a great deal of resources.
Switching gears a little bit, as you know, in the inter
partes proceedings provisions that were included in the AIA, a
new--you know, as a new, expeditious way to challenge validity
of patents, the basis for invalidating these patents is
strictly limited to Section 102 and Section 103 challenges, and
the tradeoff for the limitation is that a third party can
include all challenge claims of a patent within a petition
seeking an inter partes review and as long as the position--the
petition, excuse me, doesn't exceed the PTO's specified page
limitation.
And assuming that the threshold level has been met by the
petitioner, I'd like for you to tell me why is it that the
Patent Trial and Appeal Board is not instituting review on all
of the alleged claims in a petition but on only some of them?
Ms. Lee. So thank you for your question. And when we review
the petitions, it's my understanding that we do look on a
claim-by-claim basis, and we do indicate whether or not the
petition is granted on a claim-by-claim basis.
Mr. Holding. Okay. What do you think the PTAB's authority
to institute proceedings on less than all of the claims in the
petition is? Do you have--where is the authority for that in
the AIA?
Ms. Lee. My guess is that when the statute came out, it was
not clear as to whether or not the proceedings would be
instituted on all claims or partial claims, but that the USPTO
then had to interpret the rules, and we've done so.
I will say, though, that now that we've had some amount of
experience with these Patent Trial and Appeal Board
proceedings, quite frankly, we are engaging in an eight-city--
and we already engaged in an eight-city road tour where we got
the public's input on ways we can improve the procedures and
the programs by the PTAB so that it can be even more effective.
And if this an issue of concern--and I think we heard some
comments on this issue in our road show--this is absolutely an
issue that we can consider and discuss and re-evaluate.
Mr. Holding. Following up on the road show, you know, I've
heard from stakeholders that the PTO's interpretation of these
proceedings, you know, is adding to the cost, complexity,
burden to the patent system without any gains in efficiency,
economy or clarity. Did you get some responses like that during
the road show?
Ms. Lee. Thanks for sharing that. Actually, we heard quite
the opposite.
Mr. Holding. Okay. Well, good. Good.
Ms. Lee. We heard that these proceedings are providing a
cost-efficient and more timely manner in which to adjudicate
the validity of the patents with the expertise of a technically
trained panel of three judges. And based upon the increase in
our petitions filings, they seem to be very popular.
Of course, that said, I'm sure there's plenty of room for
improvement, and we are, as I said, eager to engage the public
in that conversation to make those proceedings even more
effective and even more useful to the----
Mr. Holding. Good. Well, I'll share the input from some of
my stakeholders and you can share some of the other input, and
we'll compare notes.
Ms. Lee. Appreciate it.
Mr. Holding. Thank you.
Ms. Lee. Thank you.
Mr. Holding. Thank you, Mr. Chairman.
Mr. Coble. I thank the gentleman.
The distinguished gentleman from Michigan, Mr. Conyers.
Mr. Conyers. Thank you very much.
Deputy Under Secretary Lee, we have a sequester. I think
there has been some kind of an agreement worked out with
appropriators about how much of your fees that you collect are
kept back. And it seems to me that with all the creative
strategies that you've discussed, we have a problem of our own.
And I'm not sure if maybe new appropriators may work out
something with you that would be better than the present
situation, but most of your progress, or much of it, is going
to be obstructed by the appropriation processes in the
legislative body.
Do you have any words of wisdom or a view about how we
might deal with this matter, which seems to be to me at the
heart of our relationship right now that's creating the
problem?
Ms. Lee. So, Congressman, are you talking about the $148
million that we lost in sequestration and the impact that it
had on the agency, because, you know, as a result of the
sequester, we had to cut a number of our critical IT projects,
right? We were well underway, we were implementing those, and
we had to make some very expensive and costly cuts to the
investment in our IT program. In addition, we had to stop the
hiring that was occurring and we had to stop the expansion of
our satellite offices in certain cities. Fortunately, Detroit
was already up and running, so Detroit was not affected, but we
couldn't hire more patent examiners.
So when we talk about our goals of reducing backlog and
pendency times, right, due to the sequester, we had to slow
down our reductions on those fronts, and our timelines of
achieving, for example, 10 months until a first office action,
or a total pendency of 20 months, got bumped out further
because of the sequester.
Mr. Conyers. Absolutely. And we're proud of our Detroit
office, and we're pleased that it was selected. I'd like to go
out there and visit, but I've been informed that we don't have
a director of that office yet. And so I know you're probably
looking for it, so you can't promise me that we're going to get
one right away.
How can you be working with so many people in one location
and there's no director in about the second year almost of its
existence?
Ms. Lee. Right. So I'm happy to share with you the progress
we've made in terms of the hiring of the director in the
Detroit office. I'll share with you what information I can, and
that is we put up a job posting. And I have to say, there was
incredible interest, and we've seen a number of very talented
candidates who have submitted applications. So we've reviewed
those applications and we've ranked them, and we are in the
process of selecting a handful of candidates to come back to
our office in the next couple of weeks for interviews, and we
are very excited about the prospects there.
That said, in the meantime, we've also been engaging in--
you know, you've got the examiners on the ground there doing
the work of the agency, and we have Patent Trial and Appeal
Board judges there working on appeal cases, and we engage in a
variety of outreach and education efforts, but with our
director, we hope to do even more.
Mr. Conyers. Well, that is encouraging. I'm glad to hear
that.
Now, has it occurred to you that there may be a need for
even further transparency in the patent system?
Ms. Lee. What sort of transparency are you referring to?
Mr. Conyers. Well, that it's clearly understood by those
that are seeking patents that the way to get there is more
easily accessible and determinable by them through a little bit
more transparency. Don't you think it's a pretty complicated
process, without it being anybody's fault? It's just the nature
of the beast here.
Ms. Lee. Right. So I--the USPTO has a number of efforts
underway, and the satellite offices help us tremendously in
terms of increasing the transparency of the patent system to
our stakeholders. So everything from, you know, how do you file
a patent, how do you register your trademark, what issues might
I consider in terms of trade secrets to protect my business,
right, just the general training and education and background
on intellectual property and intellectual property awareness,
we're using our satellite offices to, and our Alexandria
office, to provide greater transparency there.
Also, with our satellite offices and through Alexandria,
we're also looking to provide more transparency on our goals
and our metrics and our programs and procedures. And we're
always seeking public input on them, such as the Patent Quality
Initiative.
Also, we are going to be engaging in outreach to our
stakeholders on what they view as patent quality and what the
agency can better do or do more of to increase the quality of
patents.
So, as far as transparency goes, we have metrics on our Web
site. But I agree with you, Congressman. I mean, the more
transparency on the work of the PTO, how you navigate the
system and what we provide, I think the better for the
innovation economy in our companies and our innovators.
Mr. Conyers. Ms. Lee, I thank you.
And I thank the Chairman.
Mr. Coble. You're indeed welcome.
Mr. Farenthold, the gentleman from Texas.
Mr. Farenthold. Thank you very much, Mr. Chairman.
Ms. Lee, I appreciate you coming to talk to us today.
First and foremost, I want to put in a plug for the patent
reform bill that Mr. Jeffries and I authored, along with the
remainder of the House-passed Innovation Act. It sure would be
nice if the Senate would pick that up.
I want to go on to some recent problems that came out of an
Inspector General's report from the Department of Commerce
recently talking about the Patent Trial and Appeal Board, or
PTAB, and the Office of the Commissioner of Trademarks. Their
findings demand immediate attention and hands-on corrective
action, with PTAB fraud, waste and mismanagement resulting in,
and I'm quoting from the IG report, ``more than $5 million in
wages and bonuses,'' being paid to employees from 2009 to 2013
who were not actually doing any productive work. According to
the IG, some of the 20--I'm sorry--30 to 50 paralegals involved
spent more than half their time that way over multiple
consecutive years. Despite PTAB managers being fully aware of
this, it appears that little corrective action was taken until
they noticed the Inspector General's investigation last year.
Worse still, the report details how PTAB paralegals,
supervisory paralegals, specialists and senior management
involved received more than three quarters of a million dollars
in bonuses, and appallingly, 95 percent of the paralegals
received the absolute highest performance rating.
Now, we did have three whistleblowers out of this group of
paralegals who reported this, so I think that's outstanding
that we have a Federal workforce saying, ``Hey, we're doing
nothing, why are we getting paid for it?'' But it did go on for
a long time.
And in the case of the trademark offices, we've seen
violations of Federal law, regulations and ethical standards
that go directly to the top of the organization, to the
commissioner of trademarks herself. According to the review,
Commissioner Cohen was personally, repeatedly and substantially
involved in hiring of an obviously unqualified and repeatedly
rejected applicant, who just happened to be the live-in
boyfriends of her daughter.
In addition to the allegations involving Commissioner
Cohen, the OIG reported that the hiring practices at the USPTO
regularly involve the use of ``preferences,'' that are, if not
illegal, are at the very least, they show some unreasonable
favoritism.
Regarding the PTAB IG report, I have several questions.
And, Ms. Lee, have you met with the IG to discuss these
reports?
Ms. Lee. Yes, I have.
Mr. Farenthold. And what's your view of the recommendations
of the OIG?
Ms. Lee. Yeah. Well, thank you, Congressman, for the
opportunity to address these two very, very important issues.
Let me just say that the USPTO takes the allegation and the
work of the OIG very seriously and view it with utmost
importance. And we are carefully reviewing the Patent Trial and
Appeal Board matter, the report, which just came out yesterday,
and we are reviewing it in terms of evaluating appropriate next
steps. We will provide a full response within 60 days, as
required, and will include in there details of our intended
next steps with regards to each of the allegation--or the
allegations and with regards to each of the recommendations
made in the report.
Let me just say, though, that much of what the OIG
recommended in terms of management and organizational
improvements is already underway or already completed at the
USPTO, including the elimination of the paralegal timekeeping
issue, which is at heart in the report. This is because as soon
as the IG identified this issue in February of 2013, the USPTO
conducted its own investigation and confirmed the problem. We
further commissioned a second independent investigation by
Grant Thornton, a third-party expert group, which recommended
structural improvements to the PTAB program.
And as I said, therefore, many of the recommendations in
the IG report are already completed or are in the process of
being completed.
Mr. Farenthold. All right. Well, the IG expressed some
concerns that one of the reasons this was allowed to continue
was fear of angering some of the unions. His recommendations
specifically call for a review of the labor agreement to ensure
that the PTAB can implement policies or even modify terms that
is needed to prevent waste and abuse of government resources.
If you generally are following up on the report, can this
Committee assume that you will do everything you can to review
these labor agreements and make sure that managers are held
accountable?
Ms. Lee. Absolutely. Absolutely.
Mr. Farenthold. All right. Well, listen, I appreciate this.
Let's talk about the commissioner. I'm out of time. We'll talk
about the commissioner of trademarks in my second round of
questioning. Thank you.
Ms. Lee. Okay.
Mr. Coble. I'll give you 1 more minute, the gentleman from
Texas.
Mr. Farenthold. Thank you very much.
When did you first become aware of the issue with the
commissioner?
Ms. Lee. I think our office first became aware of it about
3 weeks ago when the OIG met with us.
Mr. Farenthold. Do you agree that the Commissioner of
Trademarks is an at-will employee?
Ms. Lee. I believe she is.
Mr. Farenthold. Okay. Well, I understand you have until
September 7th to comply with the requirement that you respond
in 60 days. Do you think you'll be able to take any action with
respect to Ms. Cohen before then?
Ms. Lee. So we've already taken actions. I mean, basically,
as soon as we received the IG's report on this issue, we
immediately conducted a review of the hiring for the position
that was at issue in this case. We also created a task force,
which is composed of high-level officials in the PTO as well as
an independent outside third-party expert in this area to look
at the USPTO's hiring practices.
I mean, the USPTO values impartial, fair, and transparent
hiring processes, and we intend to reply fully to all of the
allegations within 60 days, but we're just evaluating the facts
now. We received the report 3 weeks ago, and we will follow up
and take the appropriate----
Mr. Farenthold. My final request is you keep us apprised of
both of these matters as they develop.
Ms. Lee. Absolutely.
Mr. Coble. The gentleman's time has expired.
Ms. Chu, let's try to get--we have a vote on, but the
gentlelady from California, Ms. Chu.
Ms. Chu. Thank you so much. First, congratulations,
Director Lee, on your appointment as Deputy Director and Acting
Director. I'm so glad to see such a well qualified person in
this position.
Ms. Lee. Thank you.
Ms. Chu. Director Lee, in June, the Supreme Court issued
its decision on Alice Corporation v. CLS Bank International.
The court ruled that the patent claims in question in the case,
which involved the claims to a computerized scheme for
mitigating settlement risk, were ineligible to be patented. How
does this decision impact the Patent Office and how are you
responding to the case?
Ms. Lee. Well, thank you for the question, Congresswoman
Chu. It does affect the examination of cases before us, and as
soon as the ruling came down, we are in a position at the PTO
where we have to offer guidance to our examiners on how to
examine cases, right, if the case law has implications on the
examination process. So, within days of the ruling coming down,
our Deputy Commissioner for Patent Examination Policy issued
initial guidance on examination of these types of claims, and
we have published that. It's posted on our Web site, and we are
seeking public input on our preliminary guidance. We welcome
that input from everybody, and we look forward to receiving
that input. We also receive input from our examination corps,
and if there are further changes to the case law, we are always
willing to and looking to improve our guidance and eventually
making it final until there are further changes in the case law
development.
So, then, after that, we will then train our examiners to
ensure that they're examining in compliance with the guidance,
and for those cases that are still pending that have not yet
been issued a final patent number, we think it's incumbent upon
us to take a look at those cases in light of the new
developments in the case law to make sure that they are still
in a position for allowance or if there needs to be further
change.
Ms. Chu. Thank you. Let me ask about another issue that I'm
very concerned about, and that is patent assertion entities.
Many times, they can be individual consumers or small- to mid-
sized businesses, customers of public safety units in local
governments, and of course, they receive demand letters
alleging patent infringement. For Main Street businesses, it's
certainly difficult to figure out how to react to a demand
letter, especially if they can't afford a lawyer. I understand
the PTO uploaded an online tool kit on its Web site to help
these individuals and businesses. How has the tool kit helped
level the playing field, and have you received feedback from
those who have used it?
Ms. Lee. Thank you very much for the question. We're very
pleased with our patent litigation online tool kit. Basically,
you can go to the USPTO Web site, and if you look under patent
litigation, there are a set of tools that are very useful to
particularly unsophisticated small businesses who are on the
receiving end of these demand letters. You know, what is a
patent? Just because I get a demand letter, does that mean I
need to write a check? Or what are my options if I decide that
I do want to fight this? And on that Web site, they can pull up
information about the litigation history of the patent. They
can pull up information about who else that patent has been
asserted against so that if they want to collaborate with other
defendants in the defense of infringement with others, they can
do so, and this is the kind of information that previously
patent lawyers and litigating attorneys had access to, but if
you were a small business and you're just trying to make a
quick assessment of what are your options, it's really handy to
have these tools, and we've provided that, working with a
number of partners, for free to the stakeholder community, so
we're very excited about that.
Ms. Chu. Well, I think it's a great program. And finally,
let me ask about the pro bono program of the America Invents
Act. I am very interested in this because I was the sponsor of
the amendment in Committee and also a member of the PTO's Pro
Bono Task Force. Many inventors, individual inventors may not
have the resources to get legal assistance, and so this pro
bono program is so important to them, and I was glad to see
that a new charter was signed last fall and an advisory council
was formed. When the charter was signed, it was anticipated
that all 50 States would have a pro bono program by the end of
2015. How many States are currently covered, and is it expected
that the pro bono program will cover all 50 States by 2015?
Ms. Lee. Yes, thank you for the question, and I need to get
you the precise statistics about the number of States that have
pro bono programs in them. I think it's a handful of States,
but it includes Minnesota, California, and a number of others,
but let me get you the answer, and we'll submit it on the
record. Let me just say, though, that pursuant to an
administrative action and a priority, it is our goal to offer
the pro bono program in all 50 States, and we're going to hire
a pro bono coordinator, and we're going to look forward to
working with the members of the patent bar so that we can
provide pro bono services to innovators regardless of their
financial resources or those who are underresourced, I should
say.
Ms. Chu. Thank you.
I yield back.
Mr. Coble. I thank the lady.
The gentleman from Georgia, Mr. Collins, can we do it
tersely?
Mr. Collins. We can do it tersely, efficiently, and get it
over with.
Mr. Chabot. Would the gentleman yield for a moment?
Mr. Collins. For a moment.
Mr. Chabot. Thank you. I appreciate that. I would ask, Mr.
Chairman, for the record, if I could submit some questions in
writing relative to intellectual property rights in India?
Mr. Coble. Without objection.
Thank you very much.
Mr. Collins. Real quickly as we get ready for a vote
series, I'm interested in the transitional program for covered
business methods patents, and it's a special review created by
PTO that came through the AIA. The purpose of the program is to
re-review already issued patents in the field of computer
implemented inventions or software. The reason this program
concerns me is it discriminates against one type of technology,
computer-implemented inventions, over all others. I don't think
that we should really be treating one person's property rights
differently because they made their innovation using software
rather than hardware. CBM proponents have touted the program as
a tool for fighting patent trolls, however the latest
statistics that we've been able to see show that the program
has been overwhelmingly used against operating companies. Has
the PTO performed any research on how the program is affecting
operating companies?
Ms. Lee. Operating versus nonoperating?
Mr. Collins. Yes.
Ms. Lee. That's something that we can look into but we have
not looked into.
Mr. Collins. So you have not--we have not researched this?
Ms. Lee. The petitioners come before us, they have their
cases, we adjudicate their cases, and oftentimes it's unclear
whether they are operating or nonoperating. You have to do some
investigations on that issue.
Mr. Collins. But it is important to the program, and I
think that is something that needs possibly to be looked at as
we go forward.
Ms. Lee. We can look into that.
Mr. Collins. It is also my understanding that the PTO is
pulling back patent applications that have already been allowed
as a result of the Supreme Court's recent decision in Alice v.
CLS Bank which related to the question of whether software
inventions are patentable. While the Supreme Court has
invalidated the patents at issue in the case, the decision
reaffirmed what I've always believed, that software is just
like any other technology, it deserves patent protection when
it is the true invention. How widespread is the impact of the
Supreme Court decision, and how many patent applications at the
PTO will be impacted?
Ms. Lee. So thank you for the question, and we're not
pulling back patents that have already issued. What we have in
our pipeline is a number of cases that may or are affected by
the changes in law by the Alice-CLS Bank case, and in that
instance, before a patent number has been provided, it's
incumbent upon us before the patent leaves the office to apply
the current law. So for cases that have not left our office, we
are taking a look at them, we've reached out to our applicants
and said we are taking a look at that in light----
Mr. Collins. About how many are those?
Ms. Lee. I would have to get numbers, the precise numbers.
Mr. Collins. Can you get those in writing back to us?
Ms. Lee. Absolutely.
Mr. Collins. Thank you. As you know, abusive patent
litigation is also a concern here, and will the PTO's actions
as a result of Alice help ease abusive patent litigations? If
so, how, and can you provide us with data on that or what you
project it will be?
Ms. Lee. So CLS Bank goes to the issue of patent
eligibility and what is patentable subject matter.
Mr. Collins. Right.
Ms. Lee. And abusive patent litigation occurs and exists
for a variety of reasons, including some litigation related
or--but some of them also patent related. I would say that our
initiatives to enhance the scrutiny of functional claiming and
to our efforts to train examiners to put statements on the
record so that if they've considered an issue, right, and
there's a reason for a certain action, that they make the
statement on the record. I think those steps more closely
target the issue of reducing and curtailing abusive patent
litigation. Basically, the clearer the patent, the clearer the
boundaries, the clearer the statements in the record, the less
the opportunity for abuse.
Mr. Collins. Okay. And I appreciate that, and I think the
concern, you know, especially in my previous question of
pulling back patents, and you said is really the--it might harm
that could be if it was for legitimate and innovative patent
applications, you know, look at it from the disadvantage if
it's on a global scale, and you assured me that's not happening
or won't happen.
Ms. Lee. We wouldn't want to issue patents that are not in
compliance with the current case law.
Mr. Collins. Okay. That is good. I think myself and other
colleagues are going to be visiting China. I appreciate the
work that has been done there. We're going there, in fact as
early as this next week, looking at this from an IP
perspective. It is something, as those who follow this
Committee know, that is very close to my heart and something
that I've worked on a great deal.
And on that note, it is tragic that the United States
Senate cannot figure out how to do their job in this area, and
I would love to see them do that. I appreciate the work that
you are doing, and I'm sure you'll be back before us on many
occasions, and I do appreciate your testimony.
Mr. Chairman, I yield back and give you 19 seconds.
Mr. Coble. Tersely done.
Ms. Lee and ladies and gentlemen, we will return
imminently.
Ms. Lee. Thank you.
[Recess.]
Mr. Coble. Mr. Jeffries is recognized for 5 minutes.
Mr. Jeffries. Thank you, Mr. Chair, for yielding.
And thank you, Director Lee, for your presence and for your
service to the country. I wanted to speak for a moment about
the USPTO's law school pilot certification program. It's my
understanding that the program was initially jump started and
piloted in 2008. Is that correct?
Ms. Lee. I think that sounds about right.
Mr. Jeffries. Okay. And can you just describe for us, you
know, how the program works in its current form, what some of
the benefits are, particularly as it relates to law students as
well as clients as well as the innovation community.
Ms. Lee. Yes, thank you very much for the question,
Congressman, and I'm very excited to say that just this
morning, we announced an expansion of our law school
certification program. And to your question, let me explain
what it is for those who may not be familiar with it. I mean,
basically, what we do at the USPTO is we provide temporary
registration numbers to law students so that they can prosecute
patent applications on behalf of clients who otherwise could
not afford to hire an attorney, and they are supervised by law
school professors, so it's really a win-win for both the
students in terms of developing valuable, practical patent
skills, and they may one day become patent examiners or patent
prosecutors or patent litigators, and it's also a benefit to
our innovation community because they get the advantage of
these pro bono services that complement our pro bono program,
so we're very excited to be expanding that program. We
announced it today, and I believe that a law school in your
district, the Brooklyn Law School----
Mr. Jeffries. Yes.
Ms. Lee [continuing]. Has been added to the list I think as
of today.
Mr. Jeffries. No, that's fantastic. Now, as you may know,
Mr. Chabot and I have introduced legislation relative to this
program that would sort of enable the removal of its pilot
status and authorize further the expansion as you move forward
and also ask for a report to the Congress moving forward just
so that we can be informed about the good work that the program
continues to do.
Now, as you expand the program, potentially being able to
offer it as you've done with the announcement today and moving
forward to additional law students, to additional law schools,
will there be an additional cost that will necessitate an
additional appropriation, or am I correct in my understanding
that you have the capacity, at least as of the present moment,
to absorb the expansion internally?
Ms. Lee. So thank you for the question. I'm sure my CFO
will correct me if I'm wrong on this, but my understanding is
that the beauty of this program is that it doesn't involve a
lot of resources on behalf of the PTO. It's the volunteer
students. It's the volunteer professors who agree to oversee
those students, so I think we pretty much have, maybe with a
plus or minus, the resources that we need to expand the
program. If it gets to be so tremendously successful that we
really have to keep, you know, every law school across the
country, then perhaps we might have to revisit the issue in
terms of we want to maintain the quality, but I think, at this
point, given the rate at which we're moving and the law schools
that we carefully select for eligibility in the program, we're
able to manage it.
Mr. Jeffries. Thank you very much. I want to switch topics
for a moment. You have indicated in prior testimony as well as
I think today in an exchange that you support the notion of
patent litigation reform done in a balanced way and saluted the
efforts that the Chairman and many of us on the Committee
undertook last year to try and advance patent litigation
forward.
After that litigation or legislation moved out of the
House, there were two Supreme Court decisions, I believe,
earlier this year that were decided upon relative to the
Section 285 provision. One I believe related to the standard of
review; the other related to the actual substance of Section
285. Can you comment at all as to how you think that may change
the landscape moving forward in terms of where our focus should
be?
Ms. Lee. So thank you very much for the question,
Congressman. I think you're referring to two cases in
particular from the Supreme Court, the Octane Fitness case and
the Highmark case handed down from the Supreme Court on the
issue of fee shifting. And those cases increased the discretion
that the district courts have to award fees to the prevailing
party in a patent litigation dispute. That said, there's still
a requirement that it has to be an exceptional case, and I
think there's still room for legislative reform because I think
companies could benefit from greater certainty about when fees
would be shifted and when they would not, so, right now, with
the current case law of exceptional, there's going to be a lot
of litigation, a lot of motions brought on these issues, but I
think there's room for legislative clarification on that issue.
Mr. Jeffries. Thank you very much.
I yield back.
Mr. Coble. I thank the gentleman.
The distinguished gentleman from Pennsylvania, Mr. Marino,
is recognized for 5 minutes.
Mr. Marino. Thank you, Chairman.
Welcome, Director. It's a pleasure to talk with you. I see
by your credentials you have an extraordinary background and
that you actually worked in private industry as counsel.
I would like to talk with you and get your insight on the
report from the Office of Inspector General concerning the
overpay, if you would, please. Now, I know that you were not
there during that time. You've been in your position for how
long, your present position for how long?
Ms. Lee. I was sworn in on January 13, 2014. So 7 months.
Mr. Marino. Fourteen, okay. When you were sworn in or even
before you were sworn in, were you brought up to speed on the
report?
Ms. Lee. I was informed of the report. It wasn't a report
yet because it had not issued, but the facts and circumstances
surrounding the Patent Trial and Appeal Board paralegal matter
because as I explained earlier today, I mean, the USPTO had
itself been investigating that matter when it first came to our
attention in 2013, so the office was well aware of that issue
as early as 2013 and undertook some efforts.
Mr. Marino. Can you tell me, is there, are there any plans
to hold those responsible that collected the overpay, for the
managers or the supervisors who knew that there was overpay and
no work being done? Is there going to be any retribution, is
someone going to be fired?
Ms. Lee. So thank you for the question. It's a good
question, and what we're doing is we are reviewing the details
of that report, which we just got I think yesterday, and
there's some discussion of that in the OIG's report, and we
will evaluate all options, including the one you mention.
Mr. Marino. Okay. Because the report is very clear. I mean,
you know from your work in private industry, how long would
someone be employed in the company you worked for under those
circumstances?
Ms. Lee. I don't have an answer for that, but I hear your
point.
Mr. Marino. I do. They wouldn't be employed very long at
all, and we have a report from the OIG's office that people
knew that--in fact, they categorized their time sheet, for a
matter of fact, into a completely different area. It was called
``other time,'' very general, other time. And people, through
investigations, it was learned that they were watching
television, surfing the Internet, used social media, such as
Facebook, performed volunteer work for charity from home,
washed laundry, exercised at home, read books, the news, and
magazines, shopped online, cleaned dishes, et cetera. Now, this
is theft from the hardworking taxpayer, and quite honestly, I'm
getting tired of hearing about this. You're not responsible for
this, but it's very frustrating for me because we constantly
hear about this.
And then what adds insult to injury is we hear that people
like this are put on administrative leave with pay. Now, this
is nauseating. This is frustrating, and the people in my
district are fed up with it. So I am asking you that if the
facts you find as the Office of Inspector General states them,
and people were doing these things and lying on their time
sheets, why would they not be fired?
Ms. Lee. So I appreciate your concern, and as I said
earlier, we do take these allegations--and I personally take
these allegations very seriously.
Mr. Marino. Good.
Ms. Lee. And we will get back to you on those issues.
Mr. Marino. I appreciate that, but even more so with the
managers and the supervisors that oversaw this, I just--this is
a perfect example of how large this government has grown, and
the left hand doesn't even know what the right hand is doing,
and we're hiring people who just believe that I don't have any
work to do, so I'm going to collect pay. And we have
supervisors and managers in charge of these people who are not
reporting to you or other individuals that there is something
drastically wrong with the system, but yet we're paying people
for doing--not just doing nothing and sitting at their desk--
but staying at home and reading books and shopping online and
doing laundry. This is just--it's unbelievable what takes place
anymore.
The government needs to be downsized straight across the
board by 50 percent, and then maybe we'll get control on people
that are cheating the taxpayer and not giving the taxpayer a
hard day's work. So I'm asking you once more, you're giving me
your commitment that if these allegations are true and these
facts are accurate, that these people will be fired?
Ms. Lee. We'll take appropriate action.
Mr. Marino. What's ``appropriate action''?
Ms. Lee. We'll have to look at the facts, we'll have to
consider----
Mr. Marino. So do you think the Office of Inspector General
is making these things up?
Ms. Lee. No.
Mr. Marino. Do you think the whistleblowers that came
forward are making these things up? Because what I'm getting
from you now is they probably will not be fired. This is a real
easy, simple question.
I was in industry and worked in a factory for 13 years and
worked my way up to management, and if anything like this
happened in private industry, these people not only would be
prosecuted--fired, but they would be prosecuted as well.
Ms. Lee. I will say, Congressman, that as I mentioned
earlier, our Patent Trial and Appeal Board proceedings are
exceedingly busy now, so I understand----
Mr. Marino. There's no question that you have been.
Ms. Lee. And so they are now fully----
Mr. Marino. You folks are doing a great job.
Ms. Lee. They are now fully engaged.
Mr. Marino. You are doing a great job as director, but
there is no excuse for this. Please do not use the excuse that
you're very busy, because apparently, there was a bunch of
people who collected over $5 million that weren't very busy.
Ms. Lee. I understand.
Mr. Marino. Thank you.
I yield back.
Mr. Coble. I thank the gentleman.
The gentlelady from Washington is recognized for 5 minutes.
Ms. DelBene. Thank you, Mr. Chair.
Thank you, Director Lee, for being here today. I know that
Representative Chu spoke earlier about the Supreme Court's
decision in the Alice v. CLS Bank case, which addressed the
scope of patent eligibility for software-related inventions,
and I was pleased to learn that the PTO was able to issue
preliminary guidance very quickly to patent examiners on how to
interpret that Supreme Court decision, and you mentioned that
the PTO is now accepting comments on the guidance as it helps
draft more detailed guidelines, and thank you for doing that. I
appreciate it. But I do think it's very important that patent
examiners are consistently applying the new case law, and--
because it's complicated, and while the feedback I've heard on
this initial guidance has been that it's clear and thoughtful,
I've also unfortunately heard that, despite this guidance, a
good number of examiners are rejecting some software patent
applications based on a possible misinterpretation of the Alice
case, so I'm concerned about this and am hopeful that we aren't
in a situation where true inventions are being denied patents
based on a misinterpretation of the law, and I'm also worried
that this could lead to an increased number of appeals to the
PTO, and you'll see an increased number, and it can become a
widespread problem if this is allowed to continue. So I
wondered if you could explain what types of quality control the
PTO is putting in place and implementing to make sure that
there's consistency in how the patent applications are being
treated in light of the decision.
Ms. Lee. Yes, thank you very much for your question,
Congresswoman.
We absolutely strive to have consistency in our examination
that complies with our guidance and the case law, and if there
are instances where an applicant thinks that an examiner is not
applying the case law properly, they can't come to an
agreement, they can't see eye to eye on an issue, we have a
patent ombudsman program where the applicant can, without
ruffling the feathers of an examiner, without sort of
jeopardizing that kind of relationship, can escalate it to a
patent ombudsman person so we have another person looking at
the issues to see what the issue is, to see if the case has
been, the rules are being appropriately applied, so I would
just refer you to that. But we have a lot of initiatives in the
agency to ensure consistency. When we issue the final guidance
on the Alice case, we will train all of our examiners. We've
already trained the supervisory patent examiners. We've already
given guidance to our examiners. We already have our technical
directors instructed on the preliminary guidance, but once the
guidance becomes final, we will provide the appropriate level
of training to everybody across the board in much greater
detail, and that information will be posted on the Web site, so
the public can see what our examiners have been directed to
examine toward or to follow.
Ms. DelBene. Do you have a sense of when final guidance
might be coming out?
Ms. Lee. We're targeting September and October, but we--I
think the deadline for receipt of comments is July 31st. We
want to be careful in terms of evaluating and reading and
reviewing all the comments, and we understand that we want to
issue it promptly, but we also want to be accurate about our
guidance.
Ms. DelBene. So what types of things do you use to measure
whether or not you have consistency out there? So you'll train
the examiners on the guidance?
Ms. Lee. Yes.
Ms. DelBene. And how do you know it's being applied
consistently, what checks and balances?
Ms. Lee. We have a quality assurance team that selects
applications at random or per technology area to test it for
accuracy and prosecution, and where there is, you know,
evidence that it's not being applied properly, we will
definitely go back and that input will be fed back into both
our examiner training as well as our examination processes,
what can we do to improve the process so that examiners are
able to examine more accurately.
Ms. DelBene. And if it is true that you see an increased
number of appeals, do you then have a mechanism to try to
figure out why you're seeing more appeals and understand?
Ms. Lee. That would certainly be a factor that we would
look to.
Ms. DelBene. Uh-huh. So you check all of that kind of
consistently across----
Ms. Lee. I don't--we should, and I'll have to check with
you to see if we currently do, but I wouldn't be surprised if
we do.
Ms. DelBene. Okay.
Ms. Lee. So let me get back to you on that.
Ms. DelBene. Okay, thank you.
Thank you, Mr. Chair, I yield back.
Mr. Coble. I thank the gentlelady.
The gentleman from Missouri, Mr. Smith.
Mr. Smith of Missouri. Thank you, Mr. Chairman.
Mr. Chairman, thank you for holding a hearing on this
important subject. Also I want to reiterate what a lot of my
colleagues have said about how unfortunate it has been that the
Senate has refused to take up and work with and pass the
bipartisan patent reform bill that we've worked on in this
Committee for quite some time. I hope that maybe they'll figure
out how the legislative process works and decide to govern for
the people of the United States.
So my question, Ms. Lee, thank you for being here, first
off, and talking to us. I'm sure we've all heard that Amazon's
application for .amazon's top level domain was rejected by the
board of directors at ICANN. They're a California nonprofit
which is supposed to operate by contract with the U.S.
Government for the public at large. And my question is, absent
a separate negotiated treaty or other national law, does the
USPTO believe that a foreign country can claim a sovereign
right to a term and prevent use of a mark that the U.S. and
other countries have otherwise granted trademark rights in?
Ms. Lee. So could you repeat the question one more time?
Mr. Smith of Missouri. Okay. Does the USPTO believe that a
foreign country can claim a sovereign right to a term and
prevent use of a mark that the U.S. and other countries have
otherwise granted trademark rights in?
Ms. Lee. You know, I think I need to get back to you on the
record, and I will do so. I appreciate the question, but I want
to make sure that we understand it, and we get to you an
accurate answer, so let me get back to you.
Mr. Smith of Missouri. I appreciate that. Thank you.
Ms. Lee. Thanks for the question.
Mr. Smith of Missouri. One other question. What are the
three key problems that American companies face in China and
India regarding patent and trade secret protection?
Ms. Lee. So our companies work hard. I mean, when they
export their products and services overseas, there's always a
risk and a vulnerability in terms of misappropriation of their
trade secrets or infringement of their patents or copyrights. I
mean, it can be in China; it can be in other countries. We are
working very, very hard with our companies that do business in
China to increase or improve the environment in which they're
operating. We give trade secret training to government
officials in China to create an environment that is more
favorable for our companies, we work with the leaders there, we
bring them to the United States to receive training at our
Global IP Academy so that they share the same values that we do
with regard to trade secrets, patents, and copyrights. And we
have a STOPfakes program, which goal is to curtail piracy and
counterfeiting of U.S. intellectual property matters, so we
have a number of initiatives underway, and we are constantly
striving to improve the environment.
Mr. Smith of Missouri. Do you think that China and India
are in compliance with the international obligations under the
TRIPS agreement?
Ms. Lee. So are you referring to--which aspect of the TRIPS
agreement are you referring to?
Mr. Smith of Missouri. In regards to the patent and trade
secret protections.
Ms. Lee. So there's a lot of patent and trade secret
provisions even under the TRIPS agreement, but----
Mr. Smith of Missouri. Do you think that they're
noncompliant in any provision within the TRIPS agreement?
Ms. Lee. I know there's been some discussion in the area of
compulsory licenses in connection with India, and there have
been certain circumstances where perhaps that may have been
triggered or applied or granted where some might argue was not
in compliance, and that's an issue of concern to us. I mean,
critically, it is important that innovators have the incentive
to innovate, and if compulsory licenses are granted in
circumstances that are beyond the requirements of our TRIPS
agreement, that's an issue of concern for us, and that's what
we work with, with our IP attaches, that's what we work with in
our conversations in our trade negotiations with our partners,
with officials in the Indian Patent Office. We are focused on
that issue to make sure that a compulsory license is granted
where it should be and not granted where it shouldn't be and
therefore jeopardizing of innovation and investment in
innovation.
Mr. Smith of Missouri. Thank you, Mr. Chairman. I yield
back.
Mr. Coble. I thank the gentleman.
The gentleman is recognized for 5 minutes.
Mr. Marino. Thank you, Chairman.
Director, do you have enough personnel to examine newly
submitted patent applications and compare those to already
established patents to avoid future litigation? Do you
understand my question?
Ms. Lee. Do we have enough personnel?
Mr. Marino. To review patents that are newly submitted to
see if those patents already exist or if there is any conflict
between the two?
Ms. Lee. Oh. So that is what we normally do. When an
application comes in, it's the job of the patent examiner to
search what we call the relevant prior art, so they look at
databases of patents that have previously been issued, they
search the literature.
Mr. Marino. I understand the process. What I'm asking you
is do you have enough personnel to adequately do those
examinations?
Ms. Lee. So we're looking to expand the examiner force. We
are using--we're targeting a hire of a thousand examiners in
2014. In 2015, we're targeting roughly 750. We have to see.
Mr. Marino. Good.
Ms. Lee. And also we're using our satellite offices to tap
into for the first time previously untapped talent pools, so
we're very excited about that, and we're looking to expand the
production capacity of the USPTO.
Mr. Marino. I'm glad to hear that. Do you think that hiring
these experts, these additional experts would curtail, I know
it's not going to eliminate, but would curtail frivolous
litigation, particularly when we're talking about patent
trolls?
Ms. Lee. I think hiring additional examiners so that we
have the capacity to examine the patent applications will
ensure that patents issue more quickly, and for our businesses,
right, who create innovations and inventions, it's important
that they be able to have the protection that they need to
enter the marketplace. So the patents need to be examined
properly, and I think the addition of the examiners will help
us reduce our backlog and pendency. So really it's pro-
business.
Mr. Marino. Is there anywhere else in the office that
you're short of personnel?
Ms. Lee. We are hiring on the Patent Trial and Appeal Board
front for administrative patent judges. I mentioned earlier in
the first session that we've experienced record number of
petitions, and there seems to be a tremendous appetite for the
services offered by the Patent Trial and Appeal Board, and
again, we're recruiting nationwide, including through our
satellite offices, and we're getting some outstanding
candidates.
Mr. Marino. Is that the bottleneck at this point? Is that
where things are jamming and then perhaps people are waiting to
do something?
Ms. Lee. So I wouldn't say that things are jamming. I mean,
we're still issuing our final opinions in these Patent Trial
and Appeal Board trials within the 1-year statutory time frame.
We can outdo ourselves and perhaps lower, get it out even more
quickly, but I think we're well within statute, and our goal is
to keep it that way.
Mr. Marino. Well, I know it takes some time to hire a
thousand people, but I hope you do that as expeditiously as
possible.
Ms. Lee. We will, thank you.
Mr. Marino. Thank you.
I yield back.
Mr. Coble. We're about to wind down, Director Lee. Thank
you for being here. Let me put a final question to you. As
Federal agencies have faced budgetary issues, departments have
looked to creative ways to stretch their budgetary dollars.
Does the PTO fund any trade missions or trips for the Secretary
of Commerce or other officials at the Commerce Department or
other agencies?
Ms. Lee. Thank you for your question, Mr. Chairman. I'm not
aware of the PTO funding individuals from the Department of
Commerce on trade missions. I believe the funding comes from
elsewhere, but if my statement is incorrect, we will correct
it, but I'm not aware of our funding of Department of Commerce
officials.
Mr. Coble. And I appreciate that. Let me give you a more
detailed question. Do you have a requirement that the PTO will
only fund trips that are IP focused and would PTO staff be the
primary points of contact or does another agency with less
expertise, such as the ITA, take the lead on the Secretary's
IP-focused trade visits or participation in bilateral forums,
such as the U.S.-India strategic dialogue currently taking
place in New Delhi? If so, does it not make sense for the IP
experts at PTO to take the lead on such trade missions,
especially if PTO resources are being used?
Ms. Lee. So we fund matters that are in line with our
mission, and I'm not sure I understand your question, but is
the question, are we funding travel of ITA members who are
advising the Administration on intellectual property issues?
Mr. Coble. ITA as an example; ITA, yes.
Ms. Lee. So do we fund travel of other individuals outside
of PTO on PTO--on IP-related matters, is that your question?
Mr. Coble. Yeah.
Ms. Lee. Let me get back to you on that.
Mr. Coble. That will be fine. In the same vein, I think
that we need to make sure that the IP attaches in our embassies
have sufficient authority in terms of diplomatic rights and
access to resources. What has the Commerce Department done to
elevate the position of the IP attaches in our embassies?
Ms. Lee. So thank you for the question. Our IP attaches are
a tremendous resource for American companies and the innovation
community. I will say that this is an issue that we've been
working with through the Department of Commerce and others is
that the rank of our IP attaches could be at a higher level. If
you think about it, right, these IP attaches are, you know, on
the ground in the foreign countries; they're working with the
IP leaders in the host country discussing very important
issues, like compulsory licensing and, you know, trade secret
policy and so forth. And in foreign countries perhaps even more
so than the United States, your rank has a lot to do with the
access that you have to appropriate people who can effect
change, so that is one issue that we are looking at to increase
the effectiveness of our IP attaches. They're already doing a
great job, but if you look at ways to further improve, that's
one way.
Mr. Coble. Well, Director Lee, thank you, and thank you in
the audience for your patience. We apologize again for the
delayed hearing, but it's been very worthwhile, and this
concludes today's hearing. Thanks to all for attending.
Without objection, all Members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record. The hearing stands
adjourned.
Ms. Lee. Thank you.
[Whereupon, at 5:11 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record