[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
UNITED STATES PATENT AND TRADEMARK OFFICE
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
MAY 5, 2010
__________
Serial No. 111-135
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas DANIEL E. LUNGREN, California
MAXINE WATERS, California DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts J. RANDY FORBES, Virginia
STEVE COHEN, Tennessee STEVE KING, Iowa
HENRY C. ``HANK'' JOHNSON, Jr., TRENT FRANKS, Arizona
Georgia LOUIE GOHMERT, Texas
PEDRO PIERLUISI, Puerto Rico JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois TED POE, Texas
JUDY CHU, California JASON CHAFFETZ, Utah
TED DEUTCH, Florida TOM ROONEY, Florida
LUIS V. GUTIERREZ, Illinois GREGG HARPER, Mississippi
TAMMY BALDWIN, Wisconsin
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DANIEL MAFFEI, New York
JARED POLIS, Colorado
Perry Apelbaum, Majority Staff Director and Chief Counsel
Sean McLaughlin, Minority Chief of Staff and General Counsel
C O N T E N T S
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MAY 5, 2010
Page
OPENING STATEMENTS
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, and Chairman, Committee on the
Judiciary...................................................... 1
The Honorable Lamar Smith, a Representative in Congress from the
State of Texas, and Ranking Member, Committee on the Judiciary. 3
The Honorable Zoe Lofgren, a Representative in Congress from the
State of California, and Member, Committee on the Judiciary.... 4
The Honorable F. James Sensenbrenner, Jr., a Representative in
Congress from the State of Wisconsin, and Member, Committee on
the Judiciary.................................................. 5
The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in
Congress from the State of Georgia, and Member, Committee on
the Judiciary.................................................. 6
The Honorable Adam B. Schiff, a Representative in Congress from
the State of California, and Member, Committee on the Judiciary 8
WITNESSES
The Honorable David J. Kappos, Under Secretary of Commerce for
Intellectual Property and Director of the United States Patent
and Trademark Office
Oral Testimony................................................. 8
Prepared Statement............................................. 11
Mr. Robert D. Budens, President, Patent Office Professional
Association
Oral Testimony................................................. 25
Prepared Statement............................................. 27
Mr. Damon C. Matteo, Chair, Patent Public Advisory Committee,
Vice President and Chief IP Officer, Palo Alto Research Center
Oral Testimony................................................. 40
Prepared Statement............................................. 42
Mr. James H. Johnson, Board Member, Trademark Public Advisory
Committee, Southerland Asbill & Brennan, LLP
Oral Testimony................................................. 49
Prepared Statement............................................. 51
UNITED STATES PATENT AND TRADEMARK OFFICE
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WEDNESDAY, MAY 5, 2010
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:36 a.m., in
room 2141, Rayburn House Office Building, the Honorable John
Conyers, Jr. (Chairman of the Committee) presiding.
Present: Representatives Conyers, Watt, Lofgren, Johnson,
Quigley, Schiff, Maffei, Smith, Sensenbrenner, Lungren, Issa,
King, Franks, Jordan, and Poe.
Staff present: (Majority) Perry Apelbaum, Staff Director
and Chief Counsel; Christal Sheppard, Counsel; (Minority) Sean
McLaughlin, Chief of Staff and General Counsel; and Allison
Halatei, Counsel.
Mr. Conyers. Good morning. The Committee will come to
order. We always welcome everyone for coming to this hearing
today, an oversight hearing on United States Patent and
Treatment Office. And our objective this morning is to review
the operations and plans of Patent and Trademark Office under
the leadership of Director David Kappos.
There are several questions that I think will dominate our
discussion today. How is the office performing with respect to
the patent examination backlog, and what plans are in place to
reduce the backlog going forward? What steps has the office
taken and will take to ensure that the United States patents
are and remain at the highest quality possible? What are the
funding needs of the office, and how can these needs be best
met and realistically met?
Now, the patent and trademark protection is increasingly
important to the U.S. economy. Our studies indicate that
intellectual property accounts for as much as 60 percent of the
total United States exports and generates millions of high-
paying jobs.
So without a doubt, the role of the Patent and Trademark
Office is critical to the success of us coming out of the
downturn in the economy that we are now experiencing. It is
also critical to that success that the office filter out bad
patents and trademarks, while strengthening deserving patents.
So funding, of course, is the key to improving quality and
bringing down the backlog. The heart of the matter is that the
lack of adequate and dependable funding for the agency has
prevented us reducing the backlog, maintaining the high quality
of patents approved, and being more generally overall
effective.
And so, to me, the Patent and Trademark Office needs
reliable and sustainable funding, which means that fee setting
authority--is important and that there needs to be an end to
the fee diversion that has plagued us across the years.
Our Chairman emeritus, Jim Sensenbrenner, knows about this
first hand. Even his predecessor, Henry Hyde, worked with us in
a bipartisan way on this Committee, to try to remove the
roadblocks. Currently, Lamar Smith, Zoe Lofgren, and Howard
Berman have all played major roles in trying to grapple with
this problem.
So the question is, how do we do it? And what might we do?
Patent and Trademark expects to make between $146 million and
$232 million in fees. Some would say this is great, but the
problem here is that, while the agency runs on user fees, it
relies on congressional appropriations to get the fees back.
And so far, the Congress hasn't taken any action to ensure that
Patent and Trademark receives those unanticipated new fees.
Without action, these fees are likely to be diverted as
they always have been. And so, to ensure that this organization
has access to this funding, I intend--that the number of us on
the Committee work directly with the Appropriations Committee
and its Chair, the Honorable David Obey, to try to correct this
problem that has been going on for so long.
Now, to address the longer-term funding challenges, there
has been increasing discussion about giving the patent and
trade office fee-making authority, as was posed in the
President's 2011 budget. While the current fee structure was
meant to encourage the filing of patent applications, the fact
that fees are back-loaded means the agency may not even have
enough money to cover examination costs, and the backlog builds
up, and the months turn into years, and I think I will hear
from our witnesses today what that means in the real world.
In the past, appropriation bills allowed the trade of--
patent and trademark to use up to $100 million above their
appropriation if the agency collected more fees than it planned
on. I would like to make sure that they have such a buffer
against diversion in the next budget coming up.
And a number of us plan to bring this directly to the
attention of our friend, Chairman David Obey.
Now, the other issue is reducing patient pendency, how long
it takes, and going along with it, increasing quality. I
understand that Undersecretary Kappos and Deputy Director
Sharon Barner's efforts at increasing quality of patents and in
reducing patent pendency is regarded as their number-one
objective.
However, it seems impossible that you are going to, within
10 months, support your goals of 10 months to first action and
20 months to total patent pendency. I think you folks are
great, but I don't think you are miracle workers.
I have talked to those who say that if everything goes
well, it often takes as long as 51 months. And so I doubt that
efficiencies can cut patent pendency by half, unless we do
something far more drastic. And so, I support the examiner
count system, giving patent professionals more time to do
quality examination. By giving them more time, we will actually
make pendency longer, as well.
So we need to discuss this, how your hiring experienced
examiners is going, and how will it reduce the backlog, and I
think improvements to the system is a big goal, and it is a
necessity should not be delayed.
I salute your goals, and we want to help you get there with
them. And so I thank you very much, and I would like now to
listen to Lamar Smith, who has worked with us carefully on this
matter over the years.
Mr. Smith. Thank you, Mr. Chairman.
Mr. Chairman, as part of the Judiciary Committee's
oversight responsibilities, we are here to examine the
operations of the United States Patent and Trademark Office, or
PTO.
Director David Kappos' job is difficult, but he is working
hard to reform and modernize the agency. The importance of PTO
to inventors, trademark-holders, and the American economy is
widely acknowledged.
Our hearing this morning complements other efforts to pass
meaningful patent reform in the 111th Congress. We are working
hard with the Senate to develop necessary changes to their bill
that will improve patent quality and discourage frivolous
lawsuits. I am hopeful about that outcome.
That said, the PTO is one of the most important agencies of
the Federal Government, but it is not often regarded as such.
Its work affects the productivity and economic growth of our
Nation, as well as the standard of living for all Americans.
For over 200 years, the PTO has been responsible for
issuing U.S. patents and trademarks. The PTO also advises the
secretary of commerce and the President on patent, trademark,
and copyright protection, as well as trade-related aspects of
intellectual property.
In recent years, Congress worked with the Bush
administration to provide full funding for PTO operations.
Following this trend, the Obama Administration recommends that
we authorize PTO to collect and spend more than $2.3 billion in
the upcoming fiscal year, subject to appropriations.
Observers estimate that more than $700 million have been
diverted from PTO coffers since 1991, funds that could have
been put to good use by the agency.
Like you, Mr. Chairman, I support ending this fee
diversion. And I support the Committee's efforts to provide the
agency with more control over its fee schedule and related
funding.
This doesn't mean we won't exercise necessary oversight as
appropriate, but PTO will solve more of its problems if it is
able to respond more nimbly to its financial needs as they
arise. This change, coupled with our ongoing push to end fee
diversion, will position PTO as a first-tier 21st-century
agency.
But if Congress does provide PTO with 100 percent funding,
the agency will have a greater responsibility to explain any of
its shortcomings and correct them.
Specifically, the Committee and PTO must explore the patent
application backlog, the state of the agency's I.T.
infrastructure, hiring and retention of patent examiners, the
relationships between management and examiners, and the amount
of time examiners require to process patents.
Mr. Chairman, I would like to conclude by recounting an
event that illustrates the importance of the PTO. This involves
Dr. William Thornton, architect of the Capitol, who was
appointed by Thomas Jefferson as the first superintendent of
the agency.
During the War of 1812, British redcoats marched on
Washington to burn the city. Thornton realized they would
eventually get to the Blodgett Hotel, which housed hundreds of
patent models. Hurrying to the scene, he argued to the
commanding British officer that burning the hotel and all of
its contents would serve no purpose.
In an impassioned speech, Thornton said the models were
useful to all mankind, not just to Americans. Anyone who burned
them would be condemned by future generations, as were the
Turks who burned the Library at Alexandria.
Thornton proved convincing, and the Blodgett Hotel was
spared; in fact, it was the only government building not
damaged during the attack. Disappointingly, Thornton's reward
was a congressional order to vacate the premises. Since the
Capitol building had been burned, Congress needed a new meeting
place, and the Blodgett was the most suitable venue.
Nearly 200 years later, the PTO is no less valuable.
Everyone here understands the importance of the patent system
to our knowledge-based economy.
Mr. Chairman, I look forward to working with the Committee
and Director Kappos to make the PTO even stronger and more
productive and responsive to the needs of the inventor
community and our country so we can enhance our international
competitiveness and strengthen our economy.
Thank you, Mr. Chairman. Yield back.
Mr. Conyers. Thanks, Lamar, for that little-known piece of
American history.
Mr. Smith. History lesson.
Mr. Conyers. I would like to invite Mel Watt to make any
welcoming or opening remarks that he may share.
Mr. Watt. Mr. Chairman, I appreciate the offer. I am happy
to welcome the witnesses, but don't have an opening statement,
so I will pass and await the wonderful wisdom of our panelists.
Mr. Conyers. Before I recognize Chairman Emeritus
Sensenbrenner, let me yield to Zoe Lofgren of California.
Ms. Lofgren. Well, thank you, Mr. Chairman. And thank you
for having this hearing. I think it is a very important one.
As we all know, we have worked on reform of patent law for
many years, going back to H.R. 400 in 1995. And these things
can get contentious, and I think at this point we have
contention once again. And, therefore, it is especially
important that we are having this hearing to focus on what we
can agree on, how we can help the office in its pendency
problem.
You know, although the parties are often sharply divided
here in Congress, this is one of those items where we have had
marvelous bipartisan communication and effort. It has really
been very rewarding to work across the aisle as a team on these
issues that are so important to our country, so I am very
interested in hearing from the witnesses about the idea of
allowing the office to set its own fees, even on a temporary
basis. Let's see how it works, as well as, you know, not having
enough money, but also having some certainty as to what you are
going to have to use and how that would work to bring down the
pendency.
I wanted to raise another issue, as well, that I think
might have usefulness in the office. I understand that there is
a question or reform, the possibility of field offices that
would help in recruiting and also might help in terms of
telecommuting as work stations, and I was recently--actually
yesterday--in Silicon Valley at home, and I was told that 49
percent of all the patents issued in the United States come
from Silicon Valley. So that might be a good place for a pilot.
I know that the representative from the professional
association will want to make sure that the amenities are good
enough. That is exactly the role he should play, but let me
tell you that starting at an average of 75 degree temperature
in the summer and 65 in the winter, it only gets better from
that, so I think members would be happy with the amenities in
the valley, and I am hopeful that I can work with both the
association and the management as we pursue that.
It is absolutely essential that we do something on pendency
and quality. Our patent examiners are overwhelmed with volume.
And that has to affect their productivity. It is just there is
no other way around it.
So this is very important. I think we will be able to work
together collaboratively to come up with solutions.
And, Mr. Chairman, I want to commend you for holding this
hearing and yield back.
Mr. Conyers. Did I hear in your comments an invitation to
Silicon Valley?
Ms. Lofgren. Sure. We should review the potential satellite
site sometime maybe in August or January, either one.
Mr. Conyers. Thank you.
I now turn to the former Chairman of this Committee, Jim
Sensenbrenner, whose experience in this subject is as deep and
wide as anybody on the Committee, and thank him for all the
work he has done on the--over the years on the subject matter.
Mr. Sensenbrenner. Well, thank you very much for the
compliment, Mr. Chairman. And let me return it by saying that
this is an issue that we all agree on.
The enemy is not in the Committee. The enemy is in the
Appropriations Committee and over on the other side of the
Capitol.
I spent about 2\1/2\ years during my chairmanship to try to
convince the appropriators that what they were doing was really
hurting American productivity. And I wasn't able to do that by
myself, and I had to enlist the then-leadership of the House of
Representatives to do that, and we were able to prevent a fee
diversion from fiscal years 2005 to fiscal year 2009.
However, fiscal 2010 is another story. And we may have a
fee diversion of as much as $116 million. And this is
completely unacceptable, because as the economy gets better, we
are going to have more patent applications go in and take the
money away to process those applications promptly, it's
certainly a step backwards.
I want to make two points. You know, one is, is that I
don't have a problem having the patent office set its own fees,
but the quid pro quo on that has to be able to prevent the
appropriators from diverting the fees, because if the fees go
up and the patent office can't use those fees, then we are
full-speed reverse, rather than reverse a step at a time.
The other thing that I think is most important is that,
with a fee diversion, the patent office can't do what it needs
to do in order to reduce the backlog and improve the quality.
And this Committee is hamstrung in being able to do proper
oversight over the patent office to make sure that the
taxpayers' money is being spent properly.
Now, if the additional money from fees isn't being used by
the patent office, then it can't be spent either properly or
improperly, and we are stuck in catch-22.
So what I would like to say is, we are in this together.
You need the additional money to be able to cut the backlog.
You need the additional money in order to provide the improved
quality that is necessary so that a patent is less likely to be
attacked, should there be litigation on infringement.
And, you know, in my opinion, we need to have, you know, a
much better attitude nationally, not just here on Capitol Hill,
on the importance of patents in terms of preserving our
lifestyle, because our lifestyle is dependent upon increased
productivity.
So, Mr. Kappos, we are from the government, and we are hear
to help, so tell us how.
Mr. Conyers. Thank you, Jim.
Judge Hank Johnson?
Mr. Johnson of Georgia. Thank you, Mr. Chairman. I want to
thank you for holding this very important hearing.
And for some time now, the USPTO has struggled with
timeliness and quality in reviewing patent applications.
Currently, there are over 750,000 patents representing
inventions and innovations which is stuck in line at the USPTO,
and this number is growing.
We have to fix the pendency problem, and I salute Director
Kappos for setting an aggressive goal of reducing pendency by
half. At the same time, the USPTO has struggled with getting
quality right, first by issuing patents on so-called inventions
that should never have been granted, and more recently by
significantly cutting back on the number of patent applications
that are approved.
Both these problems--timeliness and quality--has a direct
impact on jobs, innovation, and the economy. This is not an
esoteric discussion, ladies and gentlemen. This is about
getting new drugs, new technologies, and new innovations out
into the world.
What if there was an invention just sitting on the shelf at
the USPTO that could have been used to prevent or ameliorate or
clean up oil spills, such as the one that we are suffering from
down in the Gulf of Mexico?
Another problem underlying the entire system is the
agency's information technology infrastructure. Lack of
adequate funding for the last several years has put the
agency's I.T. in a precarious position. Its aging systems are
crashing and are not meeting the needs of examiners.
This is impacting the agency's ability to deal with the
backlog and quality problems. Since Director Kappos has taken
the helm at USPTO, the agency has announced several new
initiatives to address the backlog, patent quality, and the
I.T. infrastructure challenges. I commend him for that effort.
I look forward to hearing about the USPTO's new programs,
particularly efforts to get to patentability decisions early in
the examination process, changes to how examiners are rewarded,
and greater use of international partnerships that share patent
examination burdens.
I am also interested in hearing about the relationship
between these initiatives and the USPTO's funding situation. In
particular, the USPTO makes the case that the current fee
structure is not capable of meeting the USPTO's needs. That
office needs flexibility, in my opinion, to adjust its fees and
expenditures according to circumstances that arise.
The current economic slump and rebound is a perfect
example. In fiscal year 2009, the office fell behind its fee
collection due to the economic downturn, and Congress had to
step in to protect examiner jobs. In fiscal year 2010, filings
rebounded, and revenues have outpaced the USPTO's projections,
so Congress will have to step in yet again if the USPTO is to
have access to all the funds it collects.
Fee-setting authority would no doubt give the USPTO more
flexibility, which I support, but I also want to be sure any
additional fees go to worthwhile purposes. I hope Director
Kappos can explain how the agency plans to use any additional
fees collected and how the money spent will address the
backlog, patent quality, and I.T. infrastructure.
I also want to remind everyone that Article I, Section 8 of
the Constitution of the United States states that Congress
shall have power to promote the progress of science and useful
arts by securing for limiting times to authors and inventors
the exclusive right to their respective writings and
discoveries. I tell you, those founding fathers were on top of
things, and I wonder how they would look at us at this time
with the state of our USPTO being challenges as it is today.
So I thank you, and I look forward to all of the witnesses'
testimony. Thank you.
Mr. Conyers. Dan Lungren is a senior Member of the
Judiciary Committee, and we yield to him this time.
Mr. Lungren. Thank you very much, Mr. Chairman.
I am here to listen to our guests. And after hearing both
the Chairman and the Ranking Member, I think the issues that I
am concerned about have been fully articulated, and I await
their hearing.
Mr. Conyers. Steve King, do you want to greet the witnesses
or make any opening comments?
Mr. King. Mr. Chairman, I would greet the witnesses and
thank you very much. And I pass on my opening comment and yield
back the balance of my time temporarily. Thank you, Mr.
Chairman.
Mr. Conyers. Well, that rarely happens around here. Thank
you, sir.
Trent Franks, good morning.
Mr. Franks. Mr. Chairman, I am just glad to be here.
Mr. Conyers. Okay.
Mr. Quigley?
Mr. Quigley. Mr. Chairman, I am always just glad to be
here. I am anxious to listen to our witnesses.
Mr. Conyers. Well, I am glad you didn't say that you were
glad to be here and hope to be back, but we are always glad to
have you here, as well.
Adam Schiff, could I yield to you at this time?
Mr. Schiff. Thank you, Mr. Chairman. I just wanted to
mention that I think the most important part of the patent
reform legislation in either house, frankly, will be whatever
we can include to deal with the backlog at the Patent Office
and make sure the Patent Office has the fees and revenues
necessary to eliminate that backlog for all intents and
purposes. I think we need to develop a 5-year plan to get that
done.
We are working on some proposals to help try to structure
that and encourage that, that we hope will be part of any
legislative effort, and I look forward to hearing what you all
have to say today.
Thank you, Mr. Chairman.
Mr. Conyers. Thank you.
We welcome our witnesses, James Johnson, Damon Matteo,
Robert Budens, and first witness, David Kappos, undersecretary
of commerce for intellectual property and director of the
United States Patent and Trademark Office.
We will put your distinguished bio in the record. And you
were not responsible for IBM pulling out of this agreement,
although you have worked with them in the past. But we welcome
you here and know of what you have been doing with this new
responsibility that is yours.
We met--a few of us met, Lofgren and myself and--met with
the secretary of commerce and yourself about matters relating
to this office, particularly the patent bill that seems to be
stalled somewhere between the House and the Senate. But we
appreciate what you are doing, and we invite you to make your
statement before the Committee now.
Welcome.
TESTIMONY OF THE HONORABLE DAVID J. KAPPOS, UNDER SECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED
STATES PATENT AND TRADEMARK OFFICE
Mr. Kappos. Well, good morning, Mr. Chairman. And I will
start by saying, I am very glad to be here, and I do hope to be
back.
To Chairman Conyers, Ranking Member Smith, Members of the
Committee, thank you for the opportunity to appear here before
you today and to discuss the United States Patent and Trademark
Office's operations and our various new programs and
initiatives.
As you know, the USPTO currently faces a number of
significant challenges and difficult budgetary environment. We
have made process improvements, and we have made progress in
recent months to address a number of these challenges, which I
have detailed in my written testimony. Reducing patent pendency
and improving patent quality are our top challenges, and
America's competitive advantage in the innovation economy
depends in very large measure on our ability to meet these
challenges.
Mr. Chairman, innovation is a principal driver of the U.S.
economy. It is an engine of economic growth, and it is a
creator of jobs. Promoting innovation, stimulating economic
growth, creating high-paying jobs are key priorities of the
Obama administration and of the USPTO. We are proud of the role
that the USPTO plays in serving America's innovators and
providing the intellectual property protection they need to
secure investment capital and to bring their products and
services to the marketplace.
Yet today, we face a huge backlog of patent applications,
long pendency rates, and an outdated I.T. infrastructure. Our
ability to effectively address these challenges is limited by
our current budgetary constraints, and we propose significant
changes to our 2011 budget and our budget process.
We have developed our fiscal year 2011 budget based on the
resources needed to achieve our goals. The good news is that we
have begun to see a rebound in user fee collections in recent
months, a trend that reflects both an upward-bound economy and
success we have had in increasing production at the United
States Patent and Trademark Office.
We currently project that the USPTO will collect between
$146 million and $232 million more than its appropriation for
fiscal year 2010. Without access to these additional fee
collections in fiscal year 2010, we will be unable to achieve
our goal of reducing first-action pendency to 10 months until
2014, and our goal of 20-month total pendency is now unlikely
to be achieved until 2015.
While our funding constraints are very real, our new
leadership team has developed and implemented a broad array of
initiatives to improve the speed, efficiency and quality of
patent processing and improved the overall operations of the
office. We have taken steps to improve the examination process
by encouraging more interaction between examiners, applicants
earlier in the process.
We have made the USPTO an employer of choice by offering
workplace benefits, including telework opportunities, provided
enhanced training of examiners and supervisors to ensure
consistency in examination, promoted work-sharing efforts with
foreign patent offices to better manage our common workloads,
and developed customer-friendly initiatives, including our
ombudsman program, project exchange, and our green tech pilot.
These initiatives and positive results we have seen to date
are described in more detail in my written statement.
Mr. Chairman, progress toward our strategic goals is
dependent on a number of important elements. Among them are
providing the agency with authority to set appropriate fees,
authorizing an interim fee adjustment on patent fees, and
creating an operating reserve to ensure adequate reserves to
address multi-year budget plans.
As you know, Mr. Chairman, pending patent reform
legislation contains a number of provisions that will improve
USPTO operations and the patent system in general. Over the
last four Congresses, the House and the Senate have weighed
possible reforms to the patent system. In that time, many of
the difficult legal issues related to the intellectual property
system have been addressed by the courts.
I personally witnessed the House lead much of the
discussion around the proposals being considered now in Senate
515 as far back as the year 2000. The USPTO and the
Administration support your efforts and those of your
colleagues in the Senate to enact a fair and balanced bill this
Congress, and we will continue to support your efforts going
forward.
We appreciate your continued support of the USPTO, and we
look forward to working closely with you and the Members of
this Committee to meet the challenges before us. Thank you.
[The prepared statement of Mr. Kappos follows:]
Prepared Statement of the Honorable David J. Kappos
__________
Mr. Conyers. Thank you for starting us off.
We now turn to Mr. Robert Budens, who is U.S. Patent and
Trademark Office, Department of Commerce for many years, going
back to 1990. He has had a lot to do with the Patent Office
Professional Association, has been on the executive committee.
This is the employee organization.
And we know that you have some issues that you are hoping
will be fairly addressed and resolved in the pending
legislation. We welcome you here today, sir.
TESTIMONY OF ROBERT D. BUDENS, PRESIDENT,
PATENT OFFICE PROFESSIONAL ASSOCIATION
Mr. Budens. Thank you, sir.
Chairman Conyers, Ranking Member Smith, Members of the
Committee, POPA represents more than 6,200 patent professionals
at the USPTO, including more than 6,000 patent examiners who
determine patentability.
When I addressed the Oversight Subcommittee in February
2008, the relationship between the USPTO and its examiners was
particularly strained. Attrition was high; morale was low; and
the agency and POPA were in the midst of a contentious
negotiation over a new collective bargaining agreement.
Today, I believe POPA and the USPTO are in the midst of a
revolutionary and, I hope, long-lasting change in our
relationship. Under the leadership of Mr. Kappos, the parties
have agreed to solve problems through less adversarial and more
collaborative and interest-based methods.
Since August 2009, the USPTO and POPA have had a joint task
force in place, led by Deputy Commissioner for Patents Peggy
Focarino and myself, that has addressed several issues
regarding time for examination. Among other things, these count
system initiatives provided for the first increase in time
since 1976, time for examiner-initiated interviews, realignment
of examiner work credit to better reflect when work is done,
and an improved awards system.
In recent months, POPA and USPTO have addressed many other
issues, including telework, patent applications on green
technologies, and expansion of the first action interview
pilot. These and other changes we have worked on together have
led to a decrease in attrition and a new level of morale that
is noticeable within the examining corps. Allowance rates are
starting to go up, while the backlog of applications has gone
down.
Nevertheless, a number of issues remain of concern to POPA.
While the count system initiatives have provided some
additional time for examiners, more work needs to be done to
address the question of whether examiners in each particular
technology have sufficient time to do a quality job.
To address this issue, the agency and POPA have been
working together with an outside contractor to do a more in-
depth study of examination time. POPA has no doubt that the
study will show that further increases in time are needed to
provide quality work. Obviously, increases in examining time
will necessarily require hiring more examiners if the USPTO is
to meet the pendency goals of Secretary Locke.
Recently, there has been increasing interest in work-
sharing between the world's patent offices as a means of
increasing efficiency. Examiners, however, already use search
results performed in other countries, so there is no room for
efficiency gains by this approach. To truly increase efficiency
and reduce pendency, a work-sharing program must reduce the
number of issues and examiner needs to address, and it must do
so early in prosecution.
POPA believes that work-sharing must be done as soon as an
applicant becomes aware of prior art and/or relevant rejections
from a first patent office. At that point, the applicant should
amend or cancel claims or otherwise constructively address the
prior art and rejections from the first patent office in
accordance with the laws of the other patent offices in which
the applicant has filed a similar application. Thus, the issues
facing examiners in those other offices will be reduced, and
there will be a real increase in efficiency.
Several issues concerning patent reform continue to concern
POPA. We are dismayed that the 1-year grace period for
inventors and the requirement for examination to be performed
by U.S. examiners have both been lost in the proposals
developed by the Senate. We encourage this Committee to ensure
that these provisions are included in any final patent reform
legislation.
POPA continues to have serious concerns with the proposed
post-grant review process. We believe this process will siphon
considerable resources away from initial examination while
providing little benefit to the intellectual property
community. Post-grant review will not decrease the cost of
owning a patent; it will only serve to provide one more
expensive and time-consuming process that a party may use to
protract litigation.
With respect to the budget, POPA recognizes that the agency
needs agility in adjusting its fees in responding to changing
economic conditions. Therefore, POPA supports the creation of a
reserve fund that will allow carryover of unused fee income
from year to year and limited fee-setting authority for the
agency.
POPA does not, however, support giving the agency the
authority to create new fees or eliminate existing fees with
respect to basic filing, search and examination activities. We
believe that the authority to create such new fees or terminate
existing fees should remain in the hands of Congress.
In addition, the agency's access to its fees should not be
obtained at the expense of the oversight responsibilities of
Congress. Our experience is that congressional oversight has
been very valuable.
Finally, since the future of patent reform legislation
remains in question, we encourage the Committee to consider a
standalone bill to address the agency's long-term funding and
fee-setting authority.
Thank you for this opportunity to present our views.
[The prepared statement of Mr. Budens follows:]
Prepared Statement of Robert D. Budens
__________
Mr. Conyers. Thank you very much.
We are going to carefully review some of the points that
you have emphasized in your presentation. We are grateful that
you are here today.
Our third witness is Mr. Damon Matteo of the Patent Public
Advisory Committee. I am going to put his biography in the
record. He has won more awards in intellectual property than
anybody I know of and also speaks frequently, writes
frequently, and has a very extensive management background in
intellectual property matters.
And we welcome you warmly to the Committee today.
TESTIMONY OF DAMON C. MATTEO, CHAIR, PATENT PUBLIC ADVISORY
COMMITTEE, VICE PRESIDENT AND CHIEF IP OFFICER, PALO ALTO
RESEARCH CENTER
Mr. Matteo. Thank you. Good morning, Chairman Conyers,
Ranking Member Smith, Members of the Committee.
It is my great pleasure to be here on behalf of the Patent
Public Advisory Committee of the United States Patent and
Trademark Office, more commonly known as PPAC. Again, my name
is Damon Matteo. I am the chairman of PPAC.
I am particularly grateful for the opportunity, because
this testimony comes at a pivotal time, one of transitions in
the world economy, the innovation ecosystems, the intellectual
property landscape, and certainly at the USPTO itself. And now
perhaps more than ever, we find all of these factors linked and
essential in achieving economic success.
Yet a key link in that chain, the USPTO, is laboring under
infrastructure and funding challenges that threaten its
progress on many important initiatives, challenges----
Mr. Conyers. Pull your mic up a little closer, please.
Mr. Matteo. Oh, certainly. Is that better? Great.
But challenges inevitably create opportunity, and ours is
to ensure and enhance the U.S. patent system's ability to
support U.S. innovation, job creation, and economic success. In
order to keep the USPTO the premiere intellectual property
office in the world, PPAC believes a series of high-level
issues need to be addressed and recommends focused efforts and
measured objectives for pendency and backlog reduction.
As a first step, we understand the USPTO is targeting 10-
month pendency to first action on the merits, 20 months total
pendency, and also to shrinking the backlog which currently
stands at over 700,000 patent applications.
With regard to patent quality, improving the patent process
and the product itself, attendant information search and work
processes is key in providing greater certainty around the
timing, scope and validity of patents. And in support of these
initiatives, I will echo perhaps Mr. Conyers' notions about the
budget, recognizing both the residual impact of the recent
economic downturn and constraints imposed by limited financial
vehicles at its disposal.
PPAC supports the prudent application of several novel
mechanisms to help and enhance and support the USPTO's
operations. The first is to give the USPTO time to limit its
administrative fee-setting authority to better accommodate
funding needs and also to better align costs and incentives
with fees.
PPAC suggests setting the bounds of this fee-setting
authority, its duration, measurement against agreed metrics for
success, the scope of the fees, for example, as a percentage
increase, and with possible oversight by Congress and/or PPAC.
PPAC also supports legislation to permanently end fee
diversion and/or earmarks which sideline USPTO revenues that
should be directed at its operations, in particular now when
the PTO is facing such difficult financial situations.
In addition, PPAC encourages the USPTO to expand its
modeling of revenue and operational scenarios with an emphasis
on identifying priorities, as well as contingency planning, to
support and inform optimal strategy developments and tactical
execution. PPAC also supports allowing the USPTO to employ more
flexible financial tools such as establishing operating
reserves.
Infrastructure: Extended periods of inadequate funding have
left much of the USPTO's I.T. infrastructure aging, unstable
and barely able to meet the tasks at hand. PPAC sees investment
and provision of attendant incremental funding in these I.T.
infrastructure as on the critical path to success for the USPTO
realizing many of its key objectives.
PPAC also enthusiastically supports the USPTO's recent
efforts to totally revisit in a fundamental fashion its I.T.
infrastructure. Process, a common thread that binds many of the
USPTO's other initiatives, enhanced process understanding and
optimization will figure prominently in the USPTO's ability to
realize benefits from many other initiatives and to expanding
the work exemplified by the count system, work share, among
others.
Organizational and hiring: At the core of any organization
or its people, culture, and work practices, PPAC encourages the
USPTO to continue its outstanding working in hiring, retention,
training, to explore new ways to embrace a truly nationwide
workforce and to foster a culture that inspires and rewards
performance and initiative.
PPAC supports and applauds the broader trajectory of the
USPTO, but also encourages vigilance to ensure that visibly
articulated goals, such as pendency reduction, are not
accomplished at the expense of other PTO objectives or its
resources.
The USPTO clearly faces many significant challenges, but it
is also poised to make significant progress against many of
them. In our short time together, I have done my best to
articulate the challenges, opportunities and requisites for
success from a PPAC perspective.
PPAC stands ready to work with the USPTO, with Congress in
support of the U.S. patent system, the innovation economy. And
in closing, on behalf of myself and the PPAC, I would like
again to express my appreciation for this opportunity to speak
with you about these important issues relating to the United
States Patent Office.
Many thanks.
[The prepared statement of Mr. Matteo follows:]
Prepared Statement of Damon C. Matteo
__________
Mr. Conyers. Attorney James Johnson manages the
international enforcement of the trademark and copyrights of
many of the most famous and valuable brands. And this includes
filing oppositions and lawsuits to protect valuable
intellectual property rights. He also focuses on unfair
competition and domain name disputes.
And so we are happy to have you here as our final witness,
sir.
TESTIMONY OF JAMES H. JOHNSON, BOARD MEMBER, TRADEMARK PUBLIC
ADVISORY COMMITTEE, SOUTHERLAND ASBILL & BRENNAN, LLP
Mr. Johnson. Good morning, Mr. Chairman and Members of the
Committee.
My name is Jim Johnson. I am with the Atlanta office of
Sutherland Asbill & Brennan. I am here today representing the
Trademark Public Advisory Committee.
My entire professional life has been committed to
trademarks. I started out working in the trademark office as an
examiner, then as trademark counsel for Kellogg's, then Coca-
Cola, and now with Sutherland Asbill & Brennan.
I want to thank you for this opportunity to speak with the
Committee and to share the concerns of the trademark community
with the trademark office operations. As you, Mr. Chairman,
correctly noted at the beginning of this hearing, the
intellectual property protects and promotes the economic engine
that this--that runs this country, and the founding fathers
recognized the importance of intellectual property from the
very beginning.
Our job is to, therefore, protect and nurture this system
so that it can continue to protect and nurture this great
economic country.
I want to talk about the breach of the fence. As you know,
there is a law that prevents the use of trademark dollars for
patent matters. Recently, due to the economic crisis, the
patent office got the authorization to borrow up to $70 million
until June 30, 2010, to use for patent matters.
The director has assured us that, based on current
projections, such borrowing won't be necessary, but our plea to
you and plea to the Committee from the TPAC is: Keep the fence
intact now and forever.
We have had ample discussions on the issue of fee
diversions. And we agree and we are pleased to note that the
Committee supports the view that fee diversion is very bad for
the patent and trademark system.
A couple other issues I would like to bring to your
attention. One is the unauthorized practice of trademark law
before the office. We are hearing anecdotal reports from
examiners and from other PTO officials that there are parties
that are representing others before the trademark office when
they are not authorized to do so. In other words, they are not
lawyers.
We are in process of assessing how big this situation is,
and we will address it when we figure that out. But potentially
the problem is that parties who don't know how to handle
applications and things for parties are going to take
unnecessary resources from the office. And as Abraham Lincoln
said, when you represent yourself--even a lawyer who represents
himself will have a fool for a client.
We also want to take this opportunity to issue kudos to the
trademark operation and the director. The trademark office has
performed in an outstanding manner in a very difficult economic
environment. They have created a surplus even when filings were
down.
We also applaud the director's decision to maintain
pendency at 2\1/2\ months to 3\1/2\ months from the filing of
the application.
To put matters in perspective, when I was an examiner back
when there were 13 colonies, it often took a year from the time
an application was filed to when an examiner first looked at
it. So to be at 2\1/2\ months is a tremendous accomplishment. I
don't want to suggest that the office got better once I left,
but those are the facts.
We also would like to note that the trademark manual of
examining procedure--it is the manual in which the examiners
and the outside public relies--needs to be updated more often
and continually, so for the obvious reason that you need a good
resource material review.
We have also heard talk about the funding for the new
computer system, and that has to occur in that--and everyone
seems to be in agreement on that issue.
The Trademark Trial and Appeal Board is also working well,
and the only issues we note there is, their manual of examining
procedure needs to be updated continually, and we understand
that they are working toward that.
The chairman of the Trademark Trial and Appeal Board needs
to be finally appointed. We have had acting chairmen since
October of last year. And we need a better structure there, so
to whatever you can do to promote that or make that happen,
that would be good.
And finally--and we would note that TPAC needs to be
restructured. And we have outlined in detail the--in written
materials what has to happen, but what we have now is the terms
aren't aligned properly, so you have gaps in membership.
And the chairman of the TPAC comes from outside of the
Committee, so he has a large transition period. He also doesn't
need to be chairman for 3 years, because the job of chairman is
tremendously demanding, so we need to have a more appropriate
succession plan.
So thank you again for this opportunity to speak to the
Committee. We are very pleased with trademark operations, Lynne
Beresford and her management staff, Debbie Cohn and Sharon
Marsh, have done a tremendous job, and under the leadership of
Director Kappos, so we are very happy, we are very proud, and
we just need a few things to work on.
Thank you again.
[The prepared statement of Mr. Johnson follows:]
Prepared Statement of James H. Johnson
__________
Mr. Conyers. Thank you all for opening us up to some of the
nuance that goes on.
Mr. Kappos, can you make Attorney Johnson feel more
comfortable about all these people practicing without a license
before you? Have you heard about that before?
Mr. Kappos. Yes, I have, Chairman Conyers. Thank you for
that question. And as Mr. Johnson pointed out, we are looking
into that now. The issue was first raised, in fact, by
trademark office examiners, and so we are working with the TPAC
to look into that issue now and do the fact-finding that we
need in order to determine what actions need to be taken.
Mr. Conyers. Mr. Budens, I notice nobody else mentioned
much about the concerns that you listed. I think there were
five or six of them maybe. Is there any friendly advice you
want to share with your other three witnesses this morning
while we are all in the room together?
Mr. Budens. Other than they should always listen to POPA,
because, you know, we are in the trenches right there, I think
some of our concerns are unique to the association, because we
are internal to the agency, we are dealing with the day-to-day
work of the agency.
But I think some of our concerns also look to the outside.
Now, I don't--for example, our concerns with the post-grant
review process proposed in the patent reform legislation. I
have a rather simplistic view of it, Mr. Chairman. I don't have
the business acumen of my colleagues here on the panel.
But it seems in the 20 years that I have been looking at
patent examination and, you know, patents working their way
through the system, it seems that, no matter what happens, if a
patent--we issue about 150,000-plus patents a year. Only a
handful of them ever get into litigation and get real serious.
But it seems to me, you know, patents that are important go
through the process. If one party somewhere determines that
there is some serious money at stake here, that patent is going
to make its way into the courts and through the litigation
process one way or the other.
And what I see as that, when there is serious money at
stake, the losing party isn't going to stop, you know, because
the patent office said no in a re-exam or says no in a post-
grant opposition. They are going to go onto the next level of
the appeal process and continue on.
So my view of post-grant opposition right now, my concerns
with it, is that it will simply interject another level or step
of litigation that will prolong the uncertainty, the period of
uncertainty of that patent, and will increase the expense of
the patent holder of maintaining that patent.
And I think ultimately in the long term I am concerned that
that will weaken the system and, you know, perhaps make our
innovators think of other possibilities or other directions to
protect their intellectual property. That is a serious concern
that I think we have.
I am also concerned that it will--there has been some talk
about being able to accomplish this in, you know, a 1-year
period. I have not seen us actually accomplish too many things
in a 1-year period before, so I am a little concerned that that
will happen. And if it does happen, I am worried that it will
come at the expense of initial examination.
And I am a firm believer that the job we do is important,
and we really need to be doing the job right the first time,
when an examiner picks up the case and do a quality
examination, and put the strength in the patent, you know, up
front, and that, I believe, will in the long term, you know,
diminish litigation and create a stronger patent system.
Mr. Conyers. Mr. Matteo, do you think standalone
legislation may be our final resort, if we can't really reach
agreement? And do you have any hopes or fears about such
legislation?
Mr. Matteo. I am sorry, Chairman Conyers. Do you mean with
respect to post-grant opposition?
Mr. Conyers. No, I mean with respect--if we can't work out
a patent bill, that we just write a single bill continuing the
patent office and giving them the power and the money and the
authority that they need to keep going on.
Mr. Matteo. Extension of status quo, in other words? I
think my initial reaction to that is, once you take the
pressure off, you are much less likely to get an end result
that I think we are all hoping to achieve on a number of
fronts, fee diversion, for example. So I would--while it may be
an expedient solution, I suspect that having done so would
probably, again, relieve the pressure and keep us from
ultimately getting where we want to go.
Ms. Lofgren. Would the gentlemen yield? I want to make sure
I understand. I didn't understand your comment that it would
take the pressure off on fee diversion, because the idea is to
end fee diversion, was what the Chairman is proposing. Did I
understand your comment?
Mr. Matteo. No, I actually I believe I must have
misunderstood the question.
Ms. Lofgren. I see.
Mr. Matteo. I wasn't aware that it was relevant to fee
diversion. If the question is, in the absence of being able to
pass the patent bill in aggregate, would a standalone bill vis-
a-vis fee diversion be something palatable? Then the answer is
an unequivocal yes.
Ms. Lofgren. Thank you.
Mr. Matteo. Sorry if I misunderstood the question.
Mr. Conyers. David Kappos, what say you?
Mr. Kappos. Well, thank you, Mr. Chairman. So, relative to
keeping the bill together versus taking a fee setting and other
issues, I think that we have a heritage opportunity here on the
part of the intellectual property system overall to pass
legislation that is generations in the making and that is badly
needed.
And I think we should take advantage of that opportunity
and press on and get comprehensive patent reform done that
includes all of the changes needed for the PTO, including fee-
setting authority and the others, but also all the other
important changes that will move the U.S. patent system back to
the gold standard of patent systems and will advantage U.S.
innovators for many, many years, and hopefully generations to
come.
So I applaud the work that the House has done, the
leadership the House has taken in getting the bill to where it
is now. And the Administration would like to continue to
support the House and the Senate in moving this legislation to
completion, comprehensive patent reform legislation.
Mr. Conyers. But we are in this period of intransigence. We
are intransigent now. We seem to be stuck. Someone asked me
where we are since we met with you and the secretary. And I
said, quite frankly, I don't know.
But at least you come to the table optimistic. That is a
good sign. Well, I will match my optimism with your optimism,
we still are stuck. I don't know what is the holdup.
Ms. Lofgren. Would the gentleman yield? And I appreciate
our colleagues on the other side of the aisle for indulging me,
but are you saying, Mr. Kappos, that if our diligent efforts to
do a comprehensive bill falls short--and I have been working on
this since 1995, along with the Chairman--that no thanks to the
fee-setting increase? You would rather not have that and the
end of diversion?
Mr. Kappos. Yes, my view is that we can get this
legislation done.
Ms. Lofgren. Yes, but if you are wrong--you are not a
legislator. Mr. Conyers has been here a number of decades that
I have learned to respect and admire his legislative savvy. You
are saying no thanks to fee authority?
Mr. Kappos. I would like to continue to work with this
Committee and with both houses of Congress to get complete,
comprehensive----
Ms. Lofgren. No, we got that. And if that fails, you don't
want the ability to set fees? Is that what you are saying?
Mr. Kappos. I truly think it would be preliminary for me to
make a comment on that now.
Ms. Lofgren. I think that is stunningly disappointing that
you would rather not have the money, but certainly the advocacy
groups, the patent holders, and the technology sector feels
quite differently.
Mr. Conyers. Well, you tried, Lofgren. [Laughter.]
We will now--let's see if Trent Franks can do any better.
Mr. Franks. Now the Chairman is being optimistic.
I think all of us understand that one of the great elements
of America is this idea of free enterprise and someone
launching out to do something that they think can not only
serve their fellow human beings, but also serve themselves and
their families. And I want you to know, as it happens, I am a
patent-holder, and so I understand that dream.
And I believe that there is a tremendous advantage to our
system in that, if there is anything that seems to be the
product, the outcome of our system, it is this word
``innovation.'' And I think it is almost impossible to
overemphasize the importance of innovation.
I mean, it is--in every area of human endeavor, it seems
like innovation is a really big deal. And so I--like all of
you--want to do everything that we can to maintain and protect
that process.
And it seems like one of the great challenges, Director
Kappos--and this is not a criticism, it is just an
observation--is that it takes--the time that a person has to
spend gaining the patent, through the process application and
then, of course, the pending application, is one of the big
challenges. It is one of the big backlogs.
And I would think that, in a sense, that could spell an
equation where government is standing in the way of innovation,
and that is, you know, a significant impact on our economy and
our jobs and a great deal of things. That seems to me, you
know, that could be or should be one of our number-one
priorities, is to get rid of the backlog.
But there is a concern I have about patent legislation
pending in the House. It is H.R. 1260. It seems to me like it
could worsen that issue rather than improve it. It could make
the process more complex and more cumbersome.
In fact, the Manufacturing Alliance for Patent Policy
released a study by Dr. Scott Shane of Case Western University.
And Dr. Shane found that the House patent bill, according--you
know, this is his opinion, his conclusions--would result in a
reduction in U.S. patent value of around $85 billion.
Now, again, we will have to see how time underscores his
conclusion. He also concluded that a reduction in the value of
U.S. public companies by as much as $225 billion, a reduction
in R&D of up to $66 billion, and as many as--nearly 300,000
manufacturing jobs would be put at risk.
Now, I guess my question to you, Director Kappos, how do
you respond to these findings? What are your conclusions? And
what specific problems do you have with the House version of
the patent reform, as it is at this moment?
Mr. Kappos. Okay, well, thank you for that question,
Congressman Franks. So I recall having seen that study; it has
been months, though. So I will give you general responses.
My view, I completely agree that the backlog is a major, if
not the major problem that faces the agency. And every one of
those 700,000-plus applications that is sitting in our agency
is potentially tens, hundreds or even thousands, probably, in
some cases of jobs that aren't being created, products and
services that aren't going on the marketplace.
And so fixing the backlog, if you will, addressing the
backlog is clearly job one. I believe that if we can take the
backlog from where it is--over 700,000 applications--to its
optimal level, which is somewhere a little bit over 300,000
applications, which produces a steady workflow through the
agency--we will unleash many new innovations into the U.S.
economy.
We will improve the U.S. trade balance, because there are
so many innovations that come from Americans. We will help put
Americans to work. We will help make Americans more healthy. We
will help save American lives. There is all upside in it.
I see absolutely no risk of doing damage to our economy. In
fact, we will do enormous net benefit to our economy.
Mr. Franks. Well, thank you.
Mr. Chairman, I will just ask one more question, and I will
yield back here. The post-grant review system envisioned in
H.R. 1260 is very different than the current vision in the
Senate compromise bill, S. 515. In fact, as I understand it,
the differences are so profound that some former opponents of
the patent reform bill have now been able to embrace S. 515,
since it seems to largely satisfy at least their primary
concerns.
So, Director Kappos, I will direct a question to you again.
Do you recognize these differences? Can you give us a little
analysis of some of those differences? And do you prefer the
version now being put forward by Senators Leahy and Sessions
over the one that is before the House?
Mr. Kappos. Okay. Well, thank you very much for that
question about post-grant.
So, yes, there are some differences between Senate 515 and
the House version of the legislation. The differences come in
several places, including the threshold that it takes to get
into post-grant challenge, the level of later estoppel that is
given, once a post-grant challenge is completed, some of the
time limits that are involved. There are a number of
differences.
The USPTO in its technical advisory capacity is trying to
support your team here on--the staff on the Judiciary Committee
to work with their counterparts in the Senate in order to
bridge those gaps and make the compromises that are needed in
order to address the issues of parts of the innovation
community that still need to be accounted for.
Mr. Franks. Well, thank you, Mr. Chairman.
I guess, Mr. Chairman, I would just suggest that this
process, this patent process that is essentially wedded to one
of the most unique essences of America, I think, is vitally
important to our society, and I don't ever want to diminish the
incalculable complexity of the job that Director Kappos has to
deal with.
And I am hoping that there will be an effort to pull
everyone together on this thing, because while I have
emphasized the need and the importance of protecting the
integrity and the value of patents because of all the reasons I
have just stated, I have to believe that there is somehow a way
for industry to come together on this one. And it is vital that
we do, rather than just try to cram a square peg in a round
hole, as it were.
And so I guess that would be my thought on it. I understand
Mr. Issa has come into the room. It seems he and I are the only
two people in the Congress that have patents. He has around 30;
I have only 2. But mine are a lot, lot better than his.
[Laughter.]
And so I just wanted to go ahead and leave that on the
record and yield back.
Mr. Conyers. Well, that is a modest statement if I ever
heard one.
Magistrate Hank Johnson?
Ms. Lofgren. Mr. Chairman?
Mr. Conyers. Wait, excuse me. Zoe Lofgren, excuse me.
Ms. Lofgren. I appreciate being recognized, Mr. Chairman. I
do have to run off and chair the California Democratic
delegation meeting.
But before I do, I just want to explore two quick items.
One has to do with the possibility of satellite offices and how
that might help. And we had an office that really--it was a
virtual office, and it is not really what I think we have in
mind on this.
And I understand that the professional association--
disabuse me if I am wrong--wants to be reassured as to
amenities and workspace and the like for patent examiners. And
I think that is legit.
But I am wondering if, as we move forward, it would be
possible to invite the professional association or key people
out to San Jose to take a look at my district, and I think you
will love what you see. I mean, people love living in San Jose.
You know, it is the weather, it is the technology, it is
everything. And I think that we could reassure you tremendously
if as we move forward we were able to do that kind of trip.
So is it fair to ask you in public whether you would be
willing to do it?
Mr. Budens. I have no problems with that, Congresswoman
Lofgren. I actually suspect that the concerns of whether people
would want to go to a satellite office in San Jose are probably
limited.
I think we would have very limited getting people to
volunteer to go back west of the Mississippi, including
possibly myself. I am from west of the Mississippi.
Ms. Lofgren. I would welcome a new constituent.
Mr. Budens. And so I don't think that is--I actually
honestly don't think that is as big a concern. I think more of
a concern to us would be, you know, from an association point
of view, are they going to have similar office space, similar
computer space, amenities and stuff?
And is distance going to affect our I.T. infrastructure
and, frankly, how do we--some of our major concerns are going
to be representational. How do we represent somebody foreign?
Not foreign, but away from--foreign to Washington.
Ms. Lofgren. Some in the valley might say that is good,
but----
Mr. Budens. We haven't had to do that before, so for us, it
is a growing pain.
Ms. Lofgren. Right.
Mr. Budens. I intend to actually--I have intentions of
consulting with some of our other labor leaders in Commerce who
have, you know, nationwide situations, to get some of the fees
for that. But I think your concern is actually probably not
nearly as grave as it needs to be. I think we will probably
have little problem finding people willing to go--you know,
move back out west.
Ms. Lofgren. Thank you very much. And that is good to know.
And we will keep in touch on that.
The second question--and I will throw it out to whoever
wants to answer--obviously, you know, we have been trying to do
legislative fixes to various elements of patent law. And as we
have, the courts have moved ahead, I mean, with the eBay case.
I mean, you know, we were told it would be the end of the
world if we did anything with injunctive relief, and the world
did not end. You know, it is fascinating.
We have the Bilski case coming up, and we don't know what
the court is going to decide, but, you know, you listen to the
arguments, you have some ideas. And, of course, they could
surprise us. It is going to be soon.
It is possible--or is it possible, I guess is the
question--that Bilski will be clear enough that will make
adjudication of patent applications simpler and relieve the
burden going forward on the office. Who wants to answer that,
or no one?
Mr. Kappos?
Mr. Kappos. Thank you, Congresswoman Lofgren. So without
speculating about the Supreme Court's decision in the Bilski
case, I think it is quite possible that it could be very
helpful to clarifying standards to--for the first time in many
years--providing direction to the USPTO and to the entire
Federal court system underneath the Supreme Court that will
enable us to put new, strong, clear guidelines in place for our
examiners to do a really solid job of examining patent
applications relative to statutory subject matter and the
courts to give us guidance and to take a lot of tension out of
what has developed into stated law that has become difficult to
navigate over time.
Ms. Lofgren. Right.
Well, Mr. Chairman, I am going to yield back because of my
other obligation, but I want to thank you again for this
excellent hearing, and I look forward to working with you,
trying to get resources into the office, and I am sure that
will be a bipartisan effort.
Mr. Conyers. Darrell Issa, top patent-holder in the
Congress, is recognized.
Mr. Issa. Thank you, Mr. Chairman.
And what would make the gentlelady from San Jose presume
that San Diego wouldn't work equally hard and prevail? After
all, we do have beach volleyball, better fresh air, stunning
views, and a lower cost of living, and, of course, Telecom
Gulch is in San Diego. So do what you want. We are united on
movement west. But after west, it could be southwest.
And may the gentlelady give my regards to our colleagues.
Now, onto less serious matters, look, getting a West Coast
opportunity for us to get the best and the brightest to help
with our side of the problem, to me, is essential. If you are
in telecom, if you are in some of the new health sciences, or
if you are in, if you will, just high tech in general--now that
the gentlelady has left, I could say Silicon Valley; I just
couldn't say it with her in the room--it is very clear that it
is awful hard to get people to move back, particularly if they
are in a senior status, if they end up commuting, and I see
them on the aircraft coming back, working the week in
Washington and heading back, or telecommuting.
But either way, it is less than it would be if we could
have an office. And I think certainly for professionals, if
this is a choice between being forced to work out of one's home
only or be in Washington, that doesn't really give them the
opportunity to work in a collaborative fashion.
And this Committee has held numerous hearings on the idea
of telework. And I would say to Mr. Budens, you already have a
problem of people who are seldom in Washington that you oversee
their well-being, and they do come on our video screens and
show us that they are in their flip-flops, and they seem quite
comfortable with their basements. So we think we can do that.
I have a couple of questions that are only sort of
tangentially on task for today, but, Mr. Kappos, we don't get
you very often, so I am going to take full advantage.
For three--really, into the fourth Congress, I have been
trying to get patent pilot, as we call it, the patent reform
education act, if you will, through. It has left the House
repeatedly. It died in the Senate with no opposition.
It finally found opposition, which apparently it costs
money to have judges and clerks be better at prosecuting
patents, even though it is only a few million dollars.
I want to approach one thing for the PTO. If the training
element of providing judges who decide to specialize or who, in
fact, simply are going to be facing cases, if their ability to
get up to speed on patents, both old law and hopefully new law,
if within our fee setting of your fees we were able to set a
fee and earmark it, that you were able to collect against
either new patents or re-exams or all of your other renewals,
would that be acceptable to you?
And I ask this because, as you know, I have been out to
your facility. I realize you have foreign dignitaries coming
through all the time for various trainings that--and I found it
incongruous that we train people from outside the country, but
not our own judges to any great extent. Would that be something
that you would be interested if the funds were provided?
Mr. Kappos. Well, thank you for that question, Congressman
Issa. And I will answer it in just a second.
I would start by saying, as a California native who was in
both San Diego and the Bay Area, as well as Los Angeles----
Mr. Issa. You know the desirability of San Diego.
Mr. Kappos. That is right. As recently as last week, I
could tell you that all three of those areas would be wonderful
places to have West Coast operations for the PTO, not the least
of which is my home area of the Los Angeles area, in addition
to the two that have already been mentioned.
Now, relative to the question----
Mr. Issa. Oh, do you have a particular part of Los Angeles?
We don't want to just say ``Los Angeles,'' because that lets
you get a pass on too much. Are we talking about the valley?
Are we talking about Simi Valley?
Mr. Kappos. We are talking about Orange County.
Mr. Issa. Orange County, okay. You know, that is a whole
different group. You have now alienated all the Los Angeles
downtown. [Laughter.]
Please.
Mr. Kappos. So relative to training judges, the USPTO would
be very supportive of taking a role in training judges. As you
point out, we have a wonderful facility, truly state-of-the-
art. We do train a lot of overseas judges, as well as patent
office officials. We think we can play a valuable role.
We do not think that it is extraordinarily expensive. You
know, the space is already there, and it is already completely
outfitted. And without talking about details or dollars, from a
principle base level, I would have no issue with working out a
mechanism for funding that kind of training.
I think it is absolutely the right thing to do for our
country. It is absolutely the right thing to do for our Federal
judges, magistrates, and all others who are involved in the
intellectual property system.
Mr. Issa. Excellent. The second one is one near and dear to
my heart, which is this new problem we have of false marking.
As you know, coming out of what is yet not a final decision,
but a three-judge panel of the Fed circuit, we have a broad
decision that essentially everyone has standing to claim that a
patent is either false marketing because it doesn't apply to
the product it is on, or that it has expired and thus
deceptive, and hundreds and hundreds of cases have been brought
strictly on that one part.
I think there is approaching 100 just in the Chairman's
area of Michigan. You have a specialist in your area, Mr.
Chairman.
Those cases, obviously, have a cost. Hundreds of cases have
a cost to the court. And yet we have an oddity, and I would
like you to comment on it. That is that the ``revenue that
might be received by the Federal Government as a portion of
these false marketing claims is calculated as a loss if we
eliminate those cases,'' even though it is not yet a final
decision, but the cost to the court for having hundreds of
cases is not counted.
Can you reconcile how we would bring that, just knowing
what patent cases are like in the courts? And I know it is
outside your jurisdiction a little bit, but maybe you can
understand what I can't understand, why there is a PAYGO
problem there.
Mr. Kappos. Well, thanks for that question, Congressman. I
would be happy to comment on it, both from my role advising the
Administration, but also, you know, generally knowing how the
industry works.
But, first of all, there is a cottage industry that has
rapidly developed around false marking suits. The last I knew,
there were well over 100 filed, all in, of course, Federal
district courts, to my knowledge, anyway.
And the cost related to those in terms of the
administration of justice on the court system is going to be
high. You are talking about, you know, Federal lawsuits.
The cost to the litigants on both sides, both especially
the parties who are being sued on this, you know, sort of
brand-new area of the law, frankly, windfall area of the law
could be expected to be very high. It costs at least in the
hundreds of thousands of dollars, if not into the millions of
dollars, to defend patent-related suits. And given the possible
damages, I would expect that those who are sued would have to
mount pretty significant defenses.
And the other thing that to me is very speculative right
now is the availability of awards, because there has been very
little jurisprudence developed in this area, essentially one
case that sort of caused this cottage industry to form.
So, unfortunately, I can't reconcile, you know, how there
could be a PAYGO kind of a problem right now. I think there is
tremendous speculation occurring in the area of false marking.
Mr. Issa. Well, the CBO has scored that there could be $4
million to $12 million of revenue to the Federal Government,
could be kind of a guess, but they defend that, as well they
should, that they were asked to guess, they guessed.
A hundred cases defended--let's say 50 of them defended
vigorously. What would you guess that is to the court, not the
litigants, but to the court? Would it be more than $4 million
to $12 million on balance?
Mr. Kappos. Well, you know, we are both guessing now a bit,
but my guess is that it would be somewhere certainly in that
range, and that doesn't even count the cost on the side of
defending the litigation, that is, you know, deadweight drag.
Mr. Issa. Okay, so we will assume that our guess on the
other side is as good as the CBO's guess.
Lastly, I would like you to comment on the real question. I
heard earlier the request for fee setting capability. And in
the long run, I actually think that we should transition to
that.
But what if this Committee had the legislation and the
inclination to allow you to build a true line of credit not
from excesses achieved that were unanticipated, but against
revenues that are historically inevitable based on your
renewals and other fees?
Is there any reason that you could find that that wouldn't
be the most logical? Since we lose money on the applicant, and
we make money down the road, wouldn't that be the more
logical--just I am leading you--but wouldn't that be the more
logical thing for us to do, is to allow you to essentially have
a line of credit against revenue that is historically
predictable?
Mr. Kappos. Okay, so thank you for that question, and it
really goes to having financial tools available for the USPTO
to run its operations in a more businesslike and sustainable
fashion. And while we haven't asked for a line of credit, it
certainly would be something that we would be happy to work
with----
Mr. Issa. Right, and I use the line of credit. In
government, it is not truly that, but it is fee anticipation, I
think is the term I have been told to you.
Mr. Kappos. Right. So what we have requested is the ability
to form a reserve, because one thing we don't have a problem
with at the USPTO right now is collecting revenues. We are
actually, as I point out, collecting much more than we have the
authorization, the appropriation to use this year.
And so if we could have access to those collections, one of
the things that we would be doing is forming a reserve, which
is sort of the flipside of a line of credit----
Mr. Issa. Select and retain.
Mr. Kappos. Right, to be able to use money that we are
collecting this year in the future and build up a buffer so
that we can operate the USPTO in a more business-like fashion.
Mr. Issa. Okay. I want to thank you for that answer,
because, Mr. Chairman, I do believe that in the years that we
have worked together on eliminating fee diversion, we really
haven't done the second part, which is the fee retention of the
fee anticipation.
And I do believe that, around the appropriators, it is
within our jurisdiction to do those two, recognizing that they
may still feel that to use it requires them--but to use it
versus to have it seem to be two different things. And if we
can make sure that they have it, then I suspect that the
appropriates will always allow them to use it for good cause.
And I thank the Chairman. Mr. Chairman, I yield back.
Mr. Conyers. Thank you, Darrell.
Magistrate Hank Johnson?
Mr. Johnson of Georgia. Thank you, Mr. Chairman.
Mr. Kappos, I am concerned about fees, pendency, quality,
all of those kinds of issues, and I am also concerned about
diversity in the workplace.
I wanted to--and before I do that, I will say that Mr.
Johnson and I--if anyone was concerned or alarmed in any way--
we are not related. He is much smarter and good-looking than I,
but it is good to have you here, sir.
And I am glad to know that you were a former patent
examiner, as well. I did not know that.
Mr. Johnson. Trademark examiner.
Mr. Johnson of Georgia. Hmm?
Mr. Johnson. Trademark examiner. I was on the trademark
side of the aisle.
Mr. Johnson of Georgia. Oh, okay. You are on the trademark
side, okay. Kind of right there in the mix, but let me ask Mr.
Kappos, I understand that, as part of your recruitment program,
you have been reaching out to historically Black colleges and
universities. And I certainly want to applaud you for that.
Can you specifically describe those efforts? And in
particular, how does the agency reach out to Black colleges and
universities or colleges that are designated as Hispanic-
serving institutions?
And also, there still remains some work to be done to
increase diversity among top-level staff and management in
USPTO. What percentage of your GS-13, 14s and 15s, and SCCs--
SCSs, I am sorry--are minorities?
Mr. Kappos. Okay, well, thanks, Congressman Johnson. That
is a great question and something that I feel very, very
passionately about, and I will try and answer as many facets as
I can.
Obviously, the statistics we will need to supply after the
hearing. I don't have those at my fingertips in terms of GS-
12s,-13s, et cetera.
So we take diversity extremely seriously at the USPTO in
all of its forms. We are, indeed, trying to recruit new
examiners, and we are trying to do that with an eye toward
diversity.
One way to get to universities that have a high proportion
of diverse students is simply to go there and speak there,
which I have personally done and personally spent time with
students trying to encourage them to come and apply for
opportunities at the USPTO.
Relative to the leadership corps, I agree with you that the
leadership corps of the USPTO can be more diverse and needs to
be more diverse. And the way you get a leadership corps to be
more diverse is pipeline. You have to go into the people who
are being considered for promotion and being developed into the
leadership corps, and that is exactly what we are doing at the
USPTO, to try and develop a more diverse pipeline for future
promotion into leadership at the PTO.
The last thing I would mention is that we actually have a
terrific--in general, the agency has got a terrific track
record, including being officially recognized by--as one of the
best agencies in the Federal Government relative to diversity
and actually inaugurating as many as five new affinity groups
during fiscal year 2010.
So just, you know, in the time that Deputy Director Barner
and I have been at the USPTO, we have made very definitive
steps to move diversity to center stage at the USPTO.
Mr. Johnson of Georgia. Thank you, Director Kappos.
In the recent past, there have been some patent examiners
who have alleged that there was racial bias by their
supervisors in performance evaluations. And, of course, that is
crucial to this pipeline effort, which I definitely understand
is the way to go with creating more diversity in the workplace.
What are the procedures that the USPTO uses to address such
allegations? And has the USPTO ever identified instances of
racial bias?
Mr. Kappos. Okay, well, thank you for that question. Like
other Federal agencies, we have an office of civil rights at
the USPTO that we charge with investigating issues regarding
racial bias and the like.
We are in the process of recommending or coming into
Congress with some recommended reorganizational initiatives
that will include making sure that that office of civil rights
gains attention at the very top of the USPTO management, and
meaning myself and Deputy Director Barner personally taking
charge of that office, to ensure that any allegations are
handled and are investigated in the most careful and
appropriate manner.
So we take diversity, as I said, very, very seriously. We
take allegations of bias of any sort, especially race-based
bias, extremely seriously. And we are actually literally in the
process of coming into Congress with recommendations to make
moves that will strengthen our ability to deal with those
matters.
Mr. Johnson of Georgia. And as I understand it, you are
going to be looking at hiring about 1,000 patent examiners
over--each year for over a 3-year period. And that creates
opportunities--significant opportunities to correct any
imbalances that may exist with respect to diversity, and that
includes African-Americans, Latinos, women. It includes Asians
and what have you.
And so I look forward to seeing the results of your
initiatives, which I applaud you for.
Mr.--is it ``Budens'' or ``Budens''?
Mr. Budens. ``Budens.''
Mr. Johnson of Georgia. ``Budens.'' Okay, Mr. Budens, what
support services does POPA provide employees who feel that they
have been discriminated against?
Mr. Budens. I thank you.
Mr. Johnson of Georgia. And after that, I want you to
explain to me how patent examiners are rewarded or
incentivized--and I guess I would want to hear from both of you
all on that. And also if you could elaborate on your concerns
about the transfer of fee-setting power to the agency as
opposed to Congress retaining that authority and whether or not
perhaps a sunset provision and any relinquishment of our fee-
setting authority to the agency would make you fee more
comfortable.
Mr. Budens. Okay, thank you. That is a handful there.
On the first question----
Mr. Johnson of Georgia. I just didn't want to bog us down
too far on the workplace diversity, which, of course, is very
important, but there have been some other issues raised, well.
Mr. Budens. On your first issue, POPA is the exclusive
representative under the Federal labor management statute of
patent professionals at the USPTO, both the examiners, and we
also have other professionals--we have some librarians,
accountants, et cetera.
As the exclusive representative, we have the statutory
responsibility of representing all, you know, members of our
bargaining unit, regardless of race, creed, color, sexual
orientation, et cetera. That is in our Constitution, and it is
also required by law.
So when someone, you know, gets in trouble with management
or whatever, they have the right and the opportunity to come to
POPA, and we will, you know, look into their case, and we will
represent them before management, if we have looked at their
case and believe that they have a justifiable grievance before
the agency.
We have a negotiated grievance procedure that covers most
aspects of an employee's work life. And we use that fairly
aggressively. I am happy to say that over the course of the
last year or so that we are working together much better.
And, in fact, I am happy to say that in the last year, we
have not had to run--take a single case to arbitration against
the agency. And I commend Director Kappos for the fact that we
are working much better together in resolving employee issues
and coming to resolution to those.
But we will handle employee issues, anything that is
covered by the fair labor, you know--not the fair labor side,
the Federal labor management statute and our grievance
procedure, we take a very serious look at, and we represent a
lot of employees. They have to come to us, you know, for us to
be aware of what their issues are, but most of them do, and we
try and fix the problems wherever we can.
Mr. Johnson of Georgia. Now, on that point, if you could
provide me with some numbers in terms of complaints of racial
discrimination and over, say, the last 3 or 4 years, 3 to 5
years, and how those were resolved, I would greatly appreciate
it.
Mr. Budens. I will see what I can do. We generally don't
keep track of those numbers. And our numbers, I would point
out, are not--would not necessarily be reflective of problems
at the agency, because the only ones we are going to see are
the people who come to us.
A lot more people go out the door of the agency than will
necessarily come to POPA. Many people, if they get--you know,
if they get into a conflict with the agency, either choose to
just resign and leave the office or go their route.
So while I will see what we can do about getting--you know,
looking back at, you know, the cases we have handled over the
last several years on our grievance side, I would caution you
that there are anecdotal and, you know, may not necessarily
accurately reflect the overall situation at the agency.
Okay, I think your second question--let's see. You had a
question--oh, you want to know about the awards. We have had an
award structure in place for a number of years that basically
was directed at production of the examiners and only awarded
examiners at three distinct increments, 110 percent, 120
percent, and 130 percent production above their requirements of
their performance appraisal plan.
Recently, as part of these count system initiatives, we
have put in more granularity to that award system and put in
awards at 105 percent and 115 percent and 125 percent and 135
percent, as a means of trying to put, you know, awards within
the range of more people. Prior to this change, if somebody,
you know, was doing 113 percent, 114 percent, they had no
motivation to try and get to 120 percent if they didn't feel
like they could do it, so they could drop back to 110 percent.
Now we have--by increasing the granularity of the award
structure, we are hoping to see more examiners who are at that
level, for example, go for the 115 percent award, even though
they might not be able to make 120 percent. And, therefore--and
by doing so, we are hoping to bring a large number of
examiners, you know, maybe a little smaller way.
But if we are doing it with a large number of examiners,
the productivity of the examining corps is going to go up. And
I am hoping you will see that in a reduction of the backlog.
Your third question was on the----
Mr. Johnson of Georgia. Does that have anything to do with
quality of the reviews?
Mr. Budens. There is a quality element in the existing
structure right now, where if you--you have to maintain either
commendable or fully successful performance in all the other
elements of the performance appraisal plan, which includes
quality elements and work flow.
So there is a quality built in. We do not have at this time
an actual quality award for quality performance as opposed to
the productivity award. Happy to consider doing that, you know,
as soon as David and I can have a chance to sit down and talk.
The problem we have had in the past with a quality award is
determining how you measure the quality. One of the concerns we
have is that we need to have an objective standard, you know,
for employees, as objective as quality can be, and that is not
very objective, unfortunately, but to figure out, as objective
a standard as we can come up with, so that we don't have a
situation where, you know, a particular supervisor, you know,
likes examiner Kappos and will make sure they have good quality
and give them award, and they don't like, you know, examiner
Matteo and, you know, don't give them awards.
So that has really been one of the problems in trying to
create an award system, just based on quality.
Your third question goes to our concerns about fees. We are
all in favor of the agency getting a reserve fund, as Mr.
Kappos mentioned, and we think that is a great idea, and we
should have--you know, we hope you all will find a way to
institute it and allow us when we have carryover money to put
it in a rainy day fund.
The concerns we have with the fee-setting authority
actually evolves from something basically totally separate, and
that was--some of you will painfully remember the adventures
where you had with the rules-making packages for claims and
continuations.
And the concern really arises out of what I think was a
total refusal to listen to the comments of the public when we
went through that rulemaking procedure. That rulemaking
procedure gained an incredible--you know, had the largest
negative response from--in comments I think of any rulemaking
package in the history of the PTO.
And so what our concern is, is if the agency was willing
to--you know, and I am not looking at this current
Administration, but if an Administration is in place that would
be willing to just look at the rulemaking and just listen to
the comments and then ignore them completely, I get real
concerned when that turns into some serious money in reference
to raising fees and stuff.
So while I believe that the--I want the agency to have fee-
setting authority, I want to make sure Congress keeps its
fingers in determining what fees are created. Once you all have
decided that there should be a fee created for a particular,
you know, aspect, statutory process like examination search or
filing fees, excess claims, stuff like that, then I think the
agency--you know, would like the agency to have fee-setting
authority. But I am leery of having it have fee-creation
authority.
Another problem we saw was in 2005 with the initial
attempts to outsource searching. They tried to do that with
creating the fee structure that we currently have. We found
that, and thanks to the hard work of, at that time, the
Subcommittee on Courts, the Internet and, you know,
Intellectual Property, we kind of got that circumvented a
little bit, but that is another major concern we have.
We do want the agency to keep all of its fees and have
access to it. That we agree totally with. How we do that, I am
not exactly sure. I don't see an easy answer to it.
We don't want to see the Congress--you know, the ability to
oversee the agency's actions lost in the process of trying to
solve the fee diversion problem, but I don't--I wish I had an
easy answer, you know, to suggest.
I think one of the issues is, is there a way to get us out
from under the scoring process? You know, because I think that
is a big headache, but I don't even begin to claim to be an
expert on the scoring process. It boggles my brain.
Mr. Johnson of Georgia. Thank you.
Mr. Kappos, anything you want to say about it? And either
Mr. Matteo or Mr. Johnson, if you choose to weigh in on any of
the issues that I have raised or that have been discussed? With
the Chairman's consent, I would like for you to.
Mr. Kappos. Well, thank you, Congressman Johnson. I would
just add to what Mr. Budens has said, that I believe our
examiners are also highly incented by the ability to
contribute, the ability to know that they are doing something
important, and to have the time they need in order to do a good
job, to do a high-quality job in examining patent applications.
And in that regard, I will read a very brief quote from an
e-mail that I received no less recently than last night from an
examiner. I get literally hundreds of e-mails from USPTO
examiners, and this particular person--who, by the way, I don't
know and have never met--says, ``I am supremely grateful for
the work you have done through the revamping of the count
system and now through the production goal study.''
Mr. Budens mentioned both of those.
``The quarter more I get for new cases and the quarter for
finals have made the difference between sink or swim. The 2
more hours we received has also been extremely helpful in
writing quality office actions.''
So this is a person who is writing an e-mail, not to talk
about salary or awards or bonuses or any of that stuff, but to
talk about doing a good job. It is really, really important,
right? It is a key driver to morale. It is a key driver to
retention. It is a key driver to job satisfaction. It is a key
driver to everything that makes an effective workforce. It is a
key driver to leadership, right? And that is what I am here to
bring.
And it is enabling people to know that they are
contributing that I think is a major, major incentive to USPTO
examiners.
Mr. Johnson of Georgia. Thank you all.
Mr. Conyers. We now recognize our Ranking Member, who has
returned, Lamar Smith.
Mr. Smith. Thank you, Mr. Chairman.
Director Kappos, I have a couple of questions to direct to
you. And I was gone for a few minutes, and if you answered
these questions, let me know or give me a truncated answer, one
or the other.
The first question is, in regard to PTO having fee-making
authority, if you did have fee-making authority, what fees
would you consider increasing? And by how much?
A corollary of that is--one proposal has been made that
there be a 15 percent surcharge, 15 percent increase across the
board. If you were to do that or increase the other fees that
you might mention now, would that succeed in reducing the
backlog in months from, say, 35, 37 to the 20-months goal that
you have set for 2014?
Mr. Kappos. Right, well, thank you for those questions,
Ranking Member Smith.
So a number of components to how we think that the fees
would need to be adjusted, one is short term, and that is the
15 percent surcharge. And we gave consideration--before making
that recommendation, we gave consideration to whether it might
be better to recommend an interim or short-term adjustment of
different levels to different fees, and we decided in the end
that it was probably better to make a simple adjustment to all
fees of 15 percent that would enable us to collect money that
we need in order to get going immediately on reducing the
backlog, so----
Mr. Smith. My questions were a little bit more specific
than that. As far as what fees, how much, and would they reduce
the backlog and achieve your goal?
Mr. Kappos. Right, okay. So that is the second part of the
answer, right? Finish with the 15 percent surcharge for short
term. Longer term----
Mr. Smith. Okay, how long is short term?
Mr. Kappos. Short term is between a year and 18 months, and
the reason for that is that, even if we had fee-setting
authority today, we have to go through a comment process,
notice and comment rulemaking, et cetera, et cetera. It takes
at least a year to get that done, okay? So that is why a 15
percent surcharge short term.
Mr. Smith. Okay.
Mr. Kappos. Long term--now, your question, how would we
change fees? There are some fees at the USPTO that are just a
small fraction of the cost to actually do the work.
Re-examination fees, right, as an example, in that part of
the office, fees related to appeals, also. Those fees are a
tiny, tiny fraction--those fees run into the--in most cases, in
to the few thousands of dollars. And the actual cost to perform
the work is in the tens of thousands of dollars. So those fees,
I believe, would need to be raised substantially.
Other fees we would raise potentially not at all, including
some of the fees related to publications, where we want to
incent parties to publish or permit the USPTO to publish----
Mr. Smith. You anticipate that those fees that you propose
raising would allow you to reduce the backlog to the 20-month
goal within 3 or 4 years?
Mr. Kappos. Yes, they will be extremely helpful for us to
get there.
Mr. Smith. Okay, great. My next question goes to something
you mentioned briefly in your prepared remarks, and that is the
perception survey results from individuals who are teleworking.
I have never heard of a perception survey before. It doesn't
sound to me like it is particularly credible. When you ask
individuals if they enjoy working from their home, you can
probably guess the response that you are going to get.
My question is this. Are there any metrics available
showing whether or not those individuals who telework from
their homes or elsewhere actually approve as many patents as
those who don't telework? Is there any kind of an evaluation
that has been made showing whether those individuals are as
productive or possibly more productive or less productive than
individuals who don't telework?
Mr. Kappos. Okay, well, thank you for that question,
Ranking Member Smith.
The answer is, there are some factual indications, and I
will tell you about them. I have give you a couple of examples.
One is that we track statistics regarding sick leave. And
statistically----
Mr. Smith. I am not interested in that. I am interested in
metrics that would show whether those individuals are more
productive or less productive. I would expect them--because as
I understand it, you are not offered the opportunity to
telework until you have worked for USPTO for at least 2 years,
so these individuals will have more experience than the more
junior members. I would expect them to be more productive.
And I am just looking for any kind of a study or evaluation
that has been done showing and comparing work productivity with
those who telework or at least the days they telework compared
to those who don't.
Mr. Kappos. Okay. Well, I guess I am a little confused.
People who are sick aren't working at all, right? So we----
Mr. Smith. And I know--yes, my question, again--and maybe
your answer is there is no such study, and if so, we can
discuss whether or not there should be. But individual metrics
that would have been evaluated comparing the productivity of
those who telework versus those who don't telework, a part of
that might well be more days taken for sick leave versus not.
But I am still looking for the overused word ``bottom
line,'' as far as productivity goes. One way to measure that,
it seems to me, would be by the number of patents that are
approved. I don't know if that is a legitimate metric or not,
but that strikes me as possibly being one. But have any studies
or evaluations been conducted getting at that answer?
Mr. Kappos. Right, okay. So, yes, the kind of study I think
that you are looking for would probably be measuring things
like balance disposals. And we are actually working on that now
to take us--a very cold statistical look at, as you say,
allowance or balance disposals for employees who are on
telework versus those who aren't.
Mr. Smith. But that is a study that you have initiated or
that is about to begin?
Mr. Kappos. It is about to begin, yes, yes. We are just
starting on it.
Mr. Smith. Okay, when would you think that that would be
completed?
Mr. Kappos. I would say a few months, speaking generally.
Mr. Smith. A few months, all right. And I would be
interested in the results when you get them in.
Mr. Kappos. Sure.
Mr. Smith. I would also like to discuss with you, before
you commence that study, if you are interested in discussing
the methodology and questions and some of the metrics that
might be used.
Mr. Kappos. Sure, we would be happy to do that.
Mr. Smith. If that is something that we can discuss
sometime after this hearing, I would appreciate that.
Mr. Kappos. Okay, sure.
Mr. Smith. Thank you, Director Kappos.
Thank you, Mr. Chairman.
Mr. Conyers. You are welcome.
Hank Johnson wanted to add one more question to our
discussion today.
Mr. Johnson of Georgia. Yes, thank you, Mr. Chairman.
Mr. Budens, at page 10 of your testimony, first paragraph,
it says, ``The proposed manager's amendment to S. 515 does not
contain a provision to maintain the 1-year grace period for
inventors filing in the U.S.''
Is that a fact that the manager's amendment in the Senate
leaves that provision out?
Mr. Budens. It is my understanding, unless I missed it
somewhere, you know, in the 100-and-some pages of that bill, I
thought they had moved away from it as they moved toward the
first to file process, and they were looking at more of a
situation where--if I understand the process correctly--where a
particular inventor, his prior art or her prior art references
could not be used against them by the examiner.
However, if somebody else published something in that same
1-year period that was along the same--was related or
disclosed--their invention, you know, through--because they
went to a scientific conference or something, that that could
be used as prior art against them, whereas I think right now
the situation is under 102(a) that the publications would not
be able to be used against the inventor, so that basically the
inventors would have that 1-year period.
And the reason we are concerned about it is because we
think, you know, particularly in the academic communities and
stuff, there is a--you know, in America, we have kind of a
publish-or-perish mentality for people in the academic
communities, and we want to make sure that they can go to
scientific, you know, conferences and disclose their
discoveries and start working--you know, get the information
out to people or go to different technical meetings, you know,
or publish their papers in the science or technical journals
and not be--find themselves having, you know, in a situation
where they suddenly have a body of prior art out against them,
you know, within that 1-year period.
If I have missed it somewhere in the manager's amendment, I
will happily stand corrected. But it was a concern that----
Mr. Johnson of Georgia. If you would, just simply get back
with my office and let us know. If you would clarify that
statement in your testimony, I would greatly appreciate it.
Mr. Budens. We will.
Mr. Johnson of Georgia. Thank you.
And thank you, Mr. Chairman.
Mr. Conyers. You are more than welcome.
My thanks to all of the witnesses. This has been a very
informative hearing. I am going to go through the transcript
with my three staffers back here, and then I am going to take
the liberty with the Members that participated on the
Committee, invite you for just an informal discussion about
some of the issues that have been raised.
And your time and comments have been very valuable. And
with that, the hearing is adjourned.
[Whereupon, at 12:41 p.m., the Committee was adjourned.]