    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

               OVERSIGHT OF THE U.S. PATENT AND TRADEMARK OFFICE

    =======================================================================

                                     HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                         COURTS, INTELLECTUAL PROPERTY,
                                AND THE INTERNET

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               SEPTEMBER 13, 2016

                                   __________

                               Serial No. 114-90

                                   __________

             Printed for the use of the Committee on the Judiciary

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          Available via the World Wide Web: http://judiciary.house.gov

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                           COMMITTEE ON THE JUDICIARY

                       BOB GOODLATTE, Virginia, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
        Wisconsin                        JERROLD NADLER, New York
    LAMAR S. SMITH, Texas                ZOE LOFGREN, California
    STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
    DARRELL E. ISSA, California          STEVE COHEN, Tennessee
    J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
    STEVE KING, Iowa                       Georgia
    TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
    LOUIE GOHMERT, Texas                 JUDY CHU, California
    JIM JORDAN, Ohio                     TED DEUTCH, Florida
    TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
    JASON CHAFFETZ, Utah                 KAREN BASS, California
    TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
    TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
    RAUL LABRADOR, Idaho                 HAKEEM JEFFRIES, New York
    BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
    DOUG COLLINS, Georgia                SCOTT PETERS, California
    RON DeSANTIS, Florida
    MIMI WALTERS, California
    KEN BUCK, Colorado
    JOHN RATCLIFFE, Texas
    DAVE TROTT, Michigan
    MIKE BISHOP, Michigan

               Shelley Husband, Chief of Staff & General Counsel
            Perry Apelbaum, Minority Staff Director & Chief Counsel

                                     ------

        Subcommittee on Courts, Intellectual Property, and the Internet

                     DARRELL E. ISSA, California, Chairman

                      DOUG COLLINS, Georgia, Vice-Chairman

    F. JAMES SENSENBRENNER, Jr.,         JERROLD NADLER, New York
    Wisconsin                            JUDY CHU, California
    LAMAR S. SMITH, Texas                TED DEUTCH, Florida
    STEVE CHABOT, Ohio                   KAREN BASS, California
    J. RANDY FORBES, Virginia            CEDRIC RICHMOND, Louisiana
    TRENT FRANKS, Arizona                SUZAN DelBENE, Washington
    JIM JORDAN, Ohio                     HAKEEM JEFFRIES, New York
    TED POE, Texas                       DAVID N. CICILLINE, Rhode Island
    JASON CHAFFETZ, Utah                 SCOTT PETERS, California
    TOM MARINO, Pennsylvania             ZOE LOFGREN, California
    BLAKE FARENTHOLD, Texas              STEVE COHEN, Tennessee
    RON DeSANTIS, Florida                HENRY C. ``HANK'' JOHNSON, Jr.,
    MIMI WALTERS, California               Georgia

                           Joe Keeley, Chief Counsel

                        Heather Sawyer, Minority Counsel

                                C O N T E N T S

                                  ----------

                               SEPTEMBER 13, 2016

                                                                       Page

                               OPENING STATEMENTS

    The Honorable Darrell E. Issa, a Representative in Congress from
      the State of California, and Chairman, Subcommittee on Courts,
      Intellectual Property, and the Internet........................     1
    The Honorable Bob Goodlatte, a Representative in Congress from
      the State of Virginia, and Chairman, Committee on the Judiciary     3

                                    WITNESS

    The Honorable Michelle K. Lee, Under Secretary of Commerce for
      Intellectual Property, Director of the U.S. Patent and
      Trademark Office
      Oral Testimony.................................................     5
      Prepared Statement.............................................     7

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Material submitted by the Honorable Darrell E. Issa, a
      Representative in Congress from the State of California, and
      Chairman, Subcommittee on Courts, Intellectual Property, and
      the Internet...................................................    29
    Prepared Statement of the Honorable Jerrold Nadler, a
      Representative in Congress from the State of New York, and
      Ranking Member, Subcommittee on Courts, Intellectual Property,
      and the Internet...............................................    42

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Response to Questions for the Record from the Honorable Michelle
      K. Lee, Under Secretary of Commerce for Intellectual Property,
      Director of the U.S. Patent and Trademark Office...............    64
    Prepared Statement of the Computer & Communications Industry
      Association (CCIA)........................................70
                           deg.OFFICIAL HEARING RECORD
          Material Submitted for the Hearing Record but not Reprinted

    GAO Report (GAO-16-883T), Statement for the Record by John Neumann,
        Director, Natural Resources and Environment. This report is
        available at the Subcommittee and can also be accessed at:

        http://www.gao.gov/assets/680/679830.pdf

               OVERSIGHT OF THE U.S. PATENT AND TRADEMARK OFFICE

                                  ----------

                          TUESDAY, SEPTEMBER 13, 2016

                            House of Representatives

                Subcommittee on Courts, Intellectual Property,
                                and the Internet

                           Committee on the Judiciary

                                Washington, DC.

        The Subcommittee met, pursuant to call, at 1:05 p.m., in
    room 2237, Rayburn House Office Building, the Honorable Darrell
    E. Issa (Chairman of the Subcommittee) presiding.
        Present: Representatives Issa, Goodlatte, Smith, Chabot,
    Jordan, Chaffetz, Walters, Nadler, Chu, DelBene, and Johnson.
        Staff Present: (Majority) Vishal Amin, Counsel; Zack Walz,
    Clerk; and (Minority) Jason Everett, Minority Counsel.
        Mr. Issa. The Subcommittee on Courts, Intellectual
    Property, and the Internet will come to order. Without
    objection, the Chair is authorized to declare a recess of the
    Committee at any time.
        We welcome everyone here today for this hearing on the
    subject of oversight of the United States Patent and Trademark
    Office, and I would now recognize myself for a short opening
    statement.
        In 2011, the America Invents Act, the AIA, became the most
    substantial reform of the United States patent law since 1836.
    The AIA reestablished the U.S. patent system as a global
    standard, and I am proud that each of us on the dais here today
    was part of making that a law.
        As we continue to work to uphold the integrity and
    competitiveness of the American patent system, we have a
    constant challenge to realize that there are many who would
    like to undermine it with weak or, in fact, improperly granted
    patents. This is a constant challenge for the PTO.
        Today, we have the administrator here, who every day has to
    find ways to improve patent quality while working with an
    expanding workforce that covers not just the historic patent
    office here or the new one in San Jose, but, in fact, a massive
    amount of examiners who are in virtually every State remotely
    working on the work in both patent and trademark.
        It is important that we, in concert with the PTO, continue
    to look at whether these programs are working. That means a
    review of many areas, including the challenges faced by the
    covered methods patents program, which we certainly want to
    have remain in effect. Reforming our patent system includes
    costly patent litigation and an economic issue, not a partisan
    issue, one with billions of dollars at stake and the very
    essence of American competitiveness at stake.
        But, along with ensuring the patent litigation system is
    properly balanced, we must also examine the internal processes
    of the PTO. On July 20, 2016, the General Accountability Office
    issued two significant reports. The first report detailed a
    dramatic rise in patent litigation from 2007 to 2015 and noted,
    by 2015, nearly 50 percent of all defendants named in patent
    infringement suits were sued in none other than the Eastern
    District of Texas.
        Therefore, one of the questions undoubtedly in today's
    hearing, perhaps many times, will be the venue reform question,
    one that is both before this Committee on a regular basis, but
    also one which is before the courts now in the Kraft case.
        That first report made seven recommendations to the PTO
    concerning improving patent quality and patent clarity. The
    second GAO report identified ways to improve patent quality
    through stronger search capabilities to find all the relevant
    prior art and improve the PTO's monitor of examiners at work.
    And just a couple of weeks ago, the Commerce Inspector General
    issued a strong report detailing serious abuses when it comes
    to logging of time and attendance of patent examiners. Again,
    these are the examiners very often spread throughout all 50
    States in remote locations where they telecommute.
        The report raises serious questions about the integrity of
    the patent system. For innovation to flourish, Americans need
    to ensure that our Patent and Trademark Office is implementing
    procedures to guarantee high quality work from patent
    examiners, whether they are in the offices in Virginia or in
    fact spread throughout the country. If the PTO cannot guarantee
    sufficient oversight of its employees' timecards, how can we
    ensure that patent examiners aren't just rubber-stamping ideas
    without oversight as well?
        The type of fraud and abuse detailed in the IG's report is
    simply unacceptable. But, when coupled with the problems that
    we are seeing with a continued patent backlog and with patent
    quality, it becomes even more pressing for these problems to
    resolve swiftly and effectively.
        Today, I hope to hear from the Director both on the steps
    her agency is taking to adopt these recommendations made by the
    GAO and on whether any disciplinary action is being taken as a
    result of the fraud against the PTO and the American inventor.
    I look forward to getting answers to these important questions
    and seeing what changes the agency will implement to squash
    this abuse and ensure our patent examiners are doing the
    thoughtful work and are being reviewed positively.
        Before recognizing the Chairman of the full Committee, I
    want to make an individual statement, and that is, we all know
    that a great many examiners, both here and remotely, work
    diligently to do their job, and today, we are talking about the
    exceptions and the outliers, and not a system that very often
    has dedicated people working extra hard to try to improve
    patent quality. And I want to make it clear that the GAO was
    not saying this was everyone, but in fact was concerned about
    some.
        And with that, I would recognize the Chairman of the full
    Committee for his opening statement.
        Mr. Goodlatte. Thank you, Mr. Chairman. I appreciate your
    holding this hearing.
        When we look at the array of agencies and departments
    within the Federal Government, only a certain number carry out
    a mission that is explicitly called for in the Constitution.
    The U.S. Patent and Trademark Office at the Department of
    Commerce is one such agency. As the PTO carries out its
    constitutional mission, we need to conduct appropriate
    oversight to ensure that our IP laws are being implemented
    fairly and in line with congressional intent.
        Over the past several years, the PTO has been tasked with
    implementing the America Invents Act, which was signed into law
    nearly 5 years ago, on September 16, 2011. I believe that it
    continues to be imperative for this Committee to examine the
    rules and procedures that the PTO has adopted to implement this
    important law, in particular, the various post-grant
    proceedings called for in the AIA.
        The AIA post-grant proceedings were designed to create a
    cost-effective alternative legal forum at the PTO to provide a
    simpler way to review questions of patentability, thus reducing
    the costs of frivolous litigation on job creators. These past 5
    years have demonstrated how important the PTO post-grant
    proceedings are, particularly the inter partes review process.
    It is important for all patents to be subject to IPR, and
    maintaining a strong IPR process is paramount to ensuring
    strong patent quality going forward.
        As the PTO continues to operate these proceedings, it is
    important for them to work fairly for both the patent owner and
    those accused of infringement. Additionally, based upon the
    statistics and cases being reviewed through the business method
    transitional program, it continues to be a success and is
    operating quite well. It will be important for this program to
    remain strong in the future.
        And when it comes to the courts, we are seeing the Supreme
    Court hearing a significant number of patent cases. I think
    that is important, that the PTO has the ability to file amicus
    briefs in cases that could help improve the patent litigation
    landscape. And if there are roadblocks that prevent the PTO
    from filing amicus briefs in important Federal circuit cases,
    then that is something we should also look into.
        In addition, the PTO is taking steps to improve patent
    quality internally with improved prior art searches and clearer
    guidelines. While I applaud these efforts, I also hope to hear
    from the Director on the additional steps that the PTO is
    taking to implement the recommendations made by GAO in the two
    reports which I requested, that were issued publicly in July.
        The GAO indicates that the increase in the number of patent
    infringement lawsuits being filed can be directly attributed to
    concerns over patent quality. While the Patent and Trademark
    Office has taken steps to improve patent quality, the GAO found
    that more work is needed in this area. And when it comes to
    patent search technology, I would hope that the PTO is
    modernizing their systems to at the very least, make use of the
    types of search engine technologies widely available today.
        I am also concerned about patent examiners who refuse
    patent applications multiple times, requiring the applicant to
    make changes to fix the application, only to then refuse the
    application based on entirely new reasons or prior art. Patent
    quality is important, but we also need to make sure that for a
    patent applicant, their application is reviewed consistently
    and that examiners are up front with applicants. It shouldn't
    simply be the luck of the draw when it comes to an examiner
    efficiently reviewing your patent application or dragging it
    out for years.
        On the patent quality front, I strongly believe that the
    PTO should not simply be in the business of granting patents
    and leaving the mess created for the courts and Congress to
    fix, but rather focus on tightening the requirements for patent
    eligibility to reduce the overall number of weak or overly
    broad patents from entering the system. This includes patents
    on so-called incremental innovations that may unnaturally
    extend monopolies beyond a single patent term and hinder price
    competition.
        There are also some patent applications that have been
    pending for a very long time. These pre-GATT or submarine
    patent applications have, in some cases, been pending for 30 or
    40 years. This long pendency is not the fault of the PTO, and I
    appreciate that the PTO previously provided Congress with a
    report detailing these several hundred pending submarine patent
    applications.
        Apart from being a drain on PTO resources, if such
    applications were to issue as patents today, they would be
    entitled to a 17-year term and would not expire until the year
    2033. Moreover, because these applications have not been
    published, the public has no notice that the patents may issue
    and no opportunity to provide the PTO with prior art that could
    directly apply to the overly broad claims in many of these
    applications. And so I call on you to provide Congress with
    these submarine patent applications immediately.
        Patent and trademark quality are key components of the
    PTO's overall mission, but I also want to ensure that the PTO
    is properly spending the fees that it collects and that its
    employees are acting appropriately when it comes to hiring
    appropriately qualified individuals. I am deeply troubled by
    the recent Commerce Department Inspector General report on time
    and attendance abuse within the PTO. The amount of wasted man-
    hours that could have been spent reducing the patent backlog is
    astounding, not to mention the millions of taxpayer dollars
    that were wasted paying USPTO employees for work they were not
    doing.
        I hope to hear more from the Director on the steps being
    taken to ensure that patents are examined properly,
    consistently, and efficiently.
        Intellectual property powers the engine of American
    innovation and creativity. It creates new jobs and helps grow
    our economy. And I look forward to hearing from Director Lee on
    these important issues. Thank you.
        Mr. Issa. I thank the Chairman.
        Without objection, other Members' opening statements will
    be made part of the record.
        And with that, we welcome our panel of one. And, Madam
    Director, I would ask that you please rise to take the oath.
        Do you solemnly swear the testimony you are about to give
    will be the truth, the whole truth, and nothing but the truth?
        Ms. Lee. I do.
        Mr. Issa. Please be seated.
        Let the record indicate the witness has answered in the
    affirmative.
        Secretary Lee, I will not give you the usual lecture on the
    red and the yellow and the green. We will take your opening
    statement as long as it runs. But, I would say that it also
    will be placed in the record in its entirety. You are the
    reason for this hearing. Welcome. You are recognized.

    TESTIMONY OF THE HONORABLE MICHELLE K. LEE, UNDER SECRETARY OF
    COMMERCE FOR INTELLECTUAL PROPERTY, DIRECTOR OF THE U.S. PATENT
                          AND TRADEMARK OFFICE

        Ms. Lee. Thank you. Chairman Issa, Chairman Goodlatte, and
    Members of the Subcommittee, thank you for this opportunity to
    discuss the operations, programs, and initiatives of the United
    States Patent and Trademark Office.
        I am very proud of the work that we do to serve American
    innovators by helping to provide the intellectual property
    rights they use to raise investment capital, to build their
    businesses, and to bring their products and services to the
    marketplace
        Our mission is to deliver high quality and timely
    examination of patent and trademark applications and rulings
    from the Patent Trial and Appeal Board, to promote effective
    domestic and international intellectual property policy, and to
    provide IP information and education worldwide.
        Our work is more important than ever before because of the
    growing importance of IP to our economy. And we have worked
    hard to offer an array of programs and initiatives that serve
    America's innovators, carried out by one of the most highly
    educated and talented workforces anywhere in the Federal
    Government.
        Mr. Chairman, I am pleased to report that our business is
    thriving, and I believe that is a good sign for our economy.
    This fiscal year, we expect to receive more than 600,000 patent
    applications and more than 300,000 trademark applications.
        On the patent side, we have reduced the patent application
    backlog by 28 percent since its all-time high in January of
    2009, despite a 4 percent year-over-year average increase in
    filings, and we continue to make further progress in reducing
    the backlog and the pendency of applications.
        Our customers and stakeholders expect us to issue quality
    patents. Patent quality is a top priority of mine as I lead
    this agency. It is why I launched the Enhanced Patent Quality
    Initiative. We want to ensure that we are issuing the highest
    quality patents possible now and well into the future. High
    quality patents give greater certainty to patent owners of
    their rights and reduce the potential for abusive litigation,
    permitting our companies to focus on innovation
        Based on extensive feedback we received from internal and
    external stakeholders, the agency is focusing its efforts on 11
    specific programs designed to meaningfully strengthen the
    quality of our work product, our processes, our services, and
    the measurement of patent quality.
        In providing a quality check on issued patents, our Patent
    Trial and Appeal Board has done an admirable job in developing,
    implementing, and administering the post-grant review
    proceedings established pursuant to the AIA. The proceedings
    are functioning as intended by Congress to serve as a faster,
    lower-cost alternative to district court litigation in testing
    the validity of a patent. More than 5,300 post-grant petitions
    have been filed to date. That is more than three times the
    number we expected.
        And even with that level of filings, I am pleased to say
    that the PTAB has a perfect track record in meeting its very
    strict statutory deadlines and a respectable affirmance rate at
    the United States Court of Appeals for the Federal Circuit.
        Turning to our trademark operations, I am proud of the
    trademark team and their ability to maintain optimal backlog
    and pendency levels. Even with applications topping 300,000 a
    year, it takes an average of just 10.1 months to receive a
    final decision on a trademark application.
        On the international front, the USPTO continues to play an
    important role in promoting high quality IP systems around the
    globe to the benefit of our innovators and our creators. Our 13
    IP attaches on the ground are in important trade centers around
    the globe where they advocate for U.S. IP policy positions and
    help Americans navigate foreign IP regimes.
        On the domestic front, I am pleased to report that all four
    of our regional offices are up and running in Detroit, Denver,
    Dallas, and San Jose, and are very much appreciated by the
    regional innovation communities. As envisioned by the AIA,
    these offices not only help us recruit and retain a highly
    qualified workforce of patent examiners and PTAB judges, but
    importantly, they provide inventors and entrepreneurs easier
    access to USPTO personnel and the wide range of resources we
    offer in support of innovation.
        Finally, with respect to the DOC OIG's recent report on
    patent examiners' time and attendance, I want to be clear that
    the USPTO takes any allegation of wrongdoing in our workplace
    very seriously. Any hour claimed by any of our employees as
    worked that is not is unacceptable.
        In recent years, we have invested significant time and
    effort on improving the overall workforce management of our
    operations. We have taken numerous concrete steps, including
    requiring new training for our employees and supervisors,
    updating policies, adding controls, and building tools for our
    supervisors.
        The recommendations made by the National Academy of Public
    Administration and the OIG's work will help us continue to
    strengthen our oversight while leading the way in a telework
    program that is a crucial piece of our organizational and our
    workforce strategy.
        Mr. Chairman, my written statement has more detailed
    information on our operations, programs, and work. Thank you.
        [The prepared statement of Ms. Lee follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                       __________
        Mr. Issa. Thank you.
        I would note that there is a delay on many of the Ranking
    Members from being here, and it is unavoidable, and they will
    join us as soon as possible.
        I would like to now go out of order and recognize the
    Chairman of the full Committee for his questions. The gentleman
    from Virginia is recognized
        Mr. Goodlatte. Well, thank you, Mr. Chairman.
        And, Secretary Lee, thank you again for joining us today.
        My first question relates to the GAO and Commerce Inspector
    General reports that provide avenues for ways to improve the
    patent application review process. I am very concerned with
    what is being done to ensure that patent applicants are having
    their applications reviewed fairly and consistently.
        What happens if an applicant, through the luck of the draw,
    got the short straw and had one of those poor-performing or
    derelict patent examiners reviewing their application?
        Ms. Lee. Well, thank you very much, Chairman Goodlatte, for
    the opportunity to answer that question.
        Let me just say that our examiners come in and they are
    trained from the day they walk in on all the patent eligibility
    requirements. They are trained for 4 months, they come with
    their technical degrees, oftentimes advanced, and their job is
    to understand the statutory requirements for patentability. So
    we work very hard to make sure that they are applying that
    consistently and accurately across the examination corps.
        We have reviewed processes, we have a quality tracker, we
    have annual reviews, and, in fact, quality constitutes an equal
    portion of their performance review as production. It is 35
    percent for quality and 35 percent for production, so for a
    total of 70 percent.
        In short, we expect a quality product and a quality
    examination from our examiners, and we work hard to train them.
    And with our master review form that we are soon to roll out,
    it is going to measure every one of the statutory requirements
    in detail, including clarity, and we are going to be gathering
    three to five times more data points, which then we can fold
    back and more precisely train and improve for consistency
    across the corps.
        Mr. Goodlatte. I completely agree that most patent
    examiners are well trained, well educated, and dedicated to
    their work. But, we do find there are some who engage in a
    shell game of refusing the application, requiring multiple
    changes to fix the application, only to refuse the application
    again on entirely arbitrary reasons, which has the effect of
    dragging out the process for years on end. And that is just not
    what I think you intend or what the law intends in terms of how
    long it might take somebody to get patent protection.
        Ms. Lee. That is right. And pursuant to our compact
    prosecution practices and procedures, we require our examiners
    to identify every statutory basis for rejection for each and
    every claim that they are examining up front and early, because
    that is the only fair way. We then provide that to the
    applicant, the applicant has the ability to respond, and the
    prosecution proceeds accordingly.
        But, it is not fair to withhold rejections. For every one
    of the claims that is before the examiner, every one of the
    statutory rejections, they are instructed to identify all the
    bases for rejection so that the applicant can respond. It is
    not meant to be hiding the ball or delaying the provision of
    those sorts of references that we find.
        Mr. Goodlatte. Thank you.
        On the issue of patent quality, I want to ask you about the
    EpiPen patents. I understand that Epinephrine is not under
    patent protection but the delivery vehicle is and has been
    under some sort of patent protection going back to the 1960's
    and 1970's. Apart from a lot of marketing, I believe the
    current EpiPen only enjoys a patent on the safety cap on the
    needle.
        I am curious as to whether such an incremental innovation,
    clearly based on previously issued patents and prior art going
    back nearly half a century, truly meets the standards for
    patentability, including obviousness. When prior patents have
    expired and you have a modest addition like the EpiPen safety
    cap, then we are not talking about the light bulb here.
        Has the PTO looked into this patent or has an IPR challenge
    been filed? Is there anything that can be done to promote
    competition in this marketplace when we have seen the dramatic
    increases in the cost of this important safety device?
        Ms. Lee. Yes. Well, thank you very much for that question.
    And let me just start by saying that patents are a key driver
    of investment and innovation. And any number of factors, I know
    this from the private sector and my experience in the private
    sector, they are any number of reasons that go into affecting
    the price of a piece of patented technology or a product or
    service.
        And what I would say is, in this case I am not aware of any
    challenge that has been brought against the feature that you
    describe. However, our Patent Trial and Appeal Board
    proceedings are available to all, and if there are folks who
    think that the patent should not have issued, it would be
    considered before our Patent Trial and Appeal Board, and we
    would look at the facts of the case, the arguments presented,
    and the prior art cited to determine whether or not that patent
    should remain.
        Mr. Goodlatte. Because I think that case shows just how
    important the PTO post-grant proceedings are, particularly the
    inter partes review process. It is important for all patents to
    be subject to IPR, and maintaining this program is paramount to
    ensuring strong patent quality going forward.
        Mr. Chairman, thank you.
        Mr. Issa. I thank the Chairman.
        I will now go through my round of questioning.
        Director, the case in the Federal circuit, TC Heartland v.
    Kraft, that is a big thing, isn't it?
        Ms. Lee. It pertains to a very important issue, which is
    the issue of venue.
        Mr. Issa. And with 50 percent of all patents going through
    the Eastern District of Texas, although this case, oddly
    enough, is an Indiana versus Delaware case, this could decide
    very much the reallocation of suits to be more broadly
    throughout the country, couldn't it?
        Ms. Lee. It has implications on venue, yes.
        Mr. Issa. And in your past work in the private sector,
    venue means a great deal, doesn't it, especially as to cost to
    somebody brought to a court well outside of where their
    engineers and their corporate headquarters are. Is that
    correct?
        Ms. Lee. That is right.
        Mr. Issa. And this was decided initially by a three-judge
    panel. Are you prepared to ask for a full en banc in that case
    or to weigh in with an amicus?
        Ms. Lee. So we are considering all of those issues, and of
    course we work together with our colleagues in the Department
    of Justice and the solicitor's office and so forth before we
    take any kind of amicus positions on behalf of the U.S.
    Government. But, for any key critical intellectual property
    issue, and this is certainly one of them, we would certainly be
    taking it into consideration.
        Mr. Issa. Okay. We have already established, this is a big
    deal. It really is affecting it. When will we know whether or
    not the Justice Department is giving you a green light to make
    those filings?
        Ms. Lee. I would have to check where we are in the process,
    but we have had conversations on this topic.
        Mr. Issa. Okay. Would you agree to keep the Chair informed
    of that? I obviously have a very strong personal interest
    because if this case cannot be resolved fully--or even if it
    is--it could affect whether or not legislation goes forward
    here. And from my understanding, the Fed circuit pretty much
    said in the three-judge panel: We will let Congress handle it.
        Now, I have no problem with them saying that, but we do
    need finality before we would take a three-judge panel.
        So for us it is a big deal, and if you would just keep us
    informed. And is it possible for you to share any of the draft
    thoughts you have on this case with us? I would appreciate it
    if you could do that also.
        Ms. Lee. We would be glad to follow up and share with you
    as much as we can.
        Mr. Issa. I appreciate that.
        At previous hearings going back a long way, there was a
    challenge to looking at telecommuting or telework workers. Many
    of those included observations that some were not actually
    working during the time they said they were working, and
    efforts were made to try to verify whether somebody was giving
    you sort of their 8 hours for 8 hours.
        Can you briefly tell us what you believe you have been able
    to accomplish in ensuring that people that are at work are at
    work?
        Ms. Lee. Yes. Well, thank you very much for the opportunity
    to address that very important issue. And let me just start by
    saying that my team and I do not tolerate any time and
    attendance abuse. Any hour that is claimed as work that is not
    worked is unacceptable. It is not fair to the American public,
    and it is not fair to the vast majority of our hard-working
    employees.
        So what I will say is, since the time we last spoke, my
    team and I have undertaken a number of initiatives to enhance
    our workforce management, processes, and procedures, including
    during that 15-month period during which the OIG conducted its
    study. We retained the National Academy of Public
    Administration, a respected third-party independent auditor to
    come into our operations in 2014. They were at the USPTO for
    months looking at our teleworking program and our workforce
    management procedures.
        They issued a report in July of 2015 largely affirming that
    the USPTO has controls in place to manage its workforce and
    concluded that it is unlikely that time and attendance abuse is
    widespread and that it is not unique to teleworkers.
        That said, they made 23 recommendations for improvement.
    The USPTO has implemented or taken actions to respond to all 23
    of the recommendations.
        Our supervisors also have tools to manage their employees,
    and I would like to share with you a very specific example to
    give you an idea of the tools they have. They have got this
    online dashboard, and every supervisory patent examiner has the
    ability to see for every one of his or her employees every
    piece of work product that lands on his or her desk, when she
    picks it up, how long it is taking to resolve the matter,
    whether it is ahead of schedule, green; whether it is
    approaching the deadline, yellow; or whether it is past its due
    date or expected time, red.
        So it is in a heat map-like format for every one of their
    employees for every piece of work product at a glance, and that
    is whether the employee is working in our Alexandria campus or
    teleworking full or part time or working in one of our regional
    offices, including in some of your home districts. So we have
    very accurate and very helpful tools for them to manage and get
    a sense of what their workforce is doing.
        Keep in mind that our examiners also have measurable and
    quantifiable job requirements on production, quality, and
    timeliness. Also, in February of 2015, the USPTO implemented a
    policy requiring all supervisors and full-time teleworkers to
    remain logged into the USPTO during work hours; also to use
    collaboration tools such as instant messaging or the chat
    function and presence indicator, which indicates green or red
    as to whether or not you are available; also to provide work
    schedules to their supervisors in advance.
        We have provided guidance to supervisors on how to monitor
    indicators of time and attendance abuse, including
    responsiveness to supervisory communications, inconsistent
    workload activity--if they are submitting work inconsistently,
    that could oftentimes be an early sign of time and attendance
    abuse--and customer complaints.
        Recently, we have retrained all our supervisors and all our
    employees on time and attendance policies and gotten 99 percent
    of our teleworkers to take a refresher course on their
    teleworking obligations and to recertify their teleworking
    obligations. And as to that 0.01 percent, we are going to get
    them when they return from leave.
        Furthermore, we have made trainings annual, not just a one-
    and-done, and they are on topics such as how to effectively
    manage a workforce, including time and attendance oversight
    guidance, including a publication of an agency-wide telework
    management handbook on how to manage in a telework environment,
    including expectations and how to record time.
        And also, and importantly, I have made clear to every one
    of the employees at the USPTO that time and attendance abuse is
    not tolerated and that we will take any and all actions when we
    find violations.
        So the combination of all those efforts, Mr. Chairman, I
    think provides for us the controls and oversight we need to
    ensure that our employees are meeting their performance
    obligations and their telework obligations and are really
    giving you all the confidence that you deserve and the American
    public deserves on our operations.
        Mr. Issa. And with the 19 seconds remaining in my time, I
    am going to ask you what could be a simple question and a
    difficult answer. Would you welcome legislation that would put
    an absolute time limit on pending patents that in the opening
    statement were called submarine? In other words, Congress
    mandating that we bring to a conclusion patents which were
    applied for before I entered Congress.
        Ms. Lee. Yes. Thank you very much for that question. It is
    a good question.
        With regard to those pre-GATT applications, I can't speak
    too much about them because a number of them are subject to
    litigation, but what I will say is many of them have numerous
    claims. And they are complicated issues, and the applicant
    involved has been--we have been involved in resolving them.
        So I think it would be hard to--well, it would be hard to
    have an absolute time limit, but I want to let you know that we
    are working on it. We have got a dedicated team of 14 full-time
    patent examiners focused on those issues. With regard to a
    certain category of the pre-GATT applications that are not the
    subject--not belonging to one particular applicant, we have
    reduced the number of pre-GATT applications by 80 percent, from
    100 to 20.
        So what I would say is, if you would, please allow the
    agency to do its work. We know it is a priority. It is a
    concern I share with you. We need to move those patent
    applications along, and we are taking all the steps we need to
    move those along.
        Mr. Issa. Thank you.
        The gentlelady from Washington.
        Ms. DelBene. Thank you, Mr. Chair.
        And thank you, Secretary Lee, for being with us today and
    for all of your time.
        While the Innovation Act, H.R. 9, has stalled right now,
    patent reform remains as important as ever, and I hope it is
    something that we are able to resume very soon.
        I am particularly interested in seeing venue reform, and I
    wondered if you would agree that forum shopping has distorted
    the landscape of patent litigation in many ways, and do you
    think there needs to be reform to prevent patent trolls from
    abusive forum shopping?
        Ms. Lee. Thank you very much, Congressman, for that
    question. And as I testified before the House, I think it is
    probably a little over a year ago, what I said in that
    testimony still holds true now, which is I think that any
    opportunity to reduce the opportunities and advantages of forum
    shopping would be advantageous and we should consider.
        So I know there are various pieces of legislation that are
    pending that have been introduced. The Administration has not
    yet taken a position on any specific piece of legislation.
        But, really having litigants adjudicate their patent
    disputes in courts where they have meaningful ties makes a lot
    of sense, and this should be one of a number of proposals that
    we consider as we look to strengthen our already very strong
    patent system.
        Ms. DelBene. What type of impact do you think reform would
    have on the broader landscape, and particularly on market
    forces that drive patent legislation today?
        Ms. Lee. Are you talking about venue reform or are you
    talking about broader reform?
        Ms. DelBene. Venue reform, in particular.
        Ms. Lee. Well, I think as to venue reform, if you eliminate
    the opportunity for gamesmanship, that has advantages at every
    stage of litigation. So I know a number of the proposals in the
    previous pieces of legislation that were introduced dealt with
    discovery and dealt with summary judgments and attorney's fees.
        But, if there are no opportunities for gamesmanship,
    basically you end up in a court and you have a court that is
    equitably deciding all of these issues, that influences the
    management of the case throughout the entire case, from the
    summary judgment stage to the discovery stage to the damages
    award fee stage, and is again, I think, one of the things
    amongst others that we should consider in terms of avenues to
    potentially strengthen our already strong intellectual property
    system.
        Ms. DelBene. Thank you. I also would like to urge your
    continued work on the inter parte, the IPR review process.
    Clearly, the process has not been without some controversies
    and difficulties. I wonder if you could talk to us a little bit
    about what you have been doing to ensure patent quality through
    the IPR process while also ensuring that the process isn't
    abused.
        Ms. Lee. Yes. Thank you very much for that question.
        The Patent Trial and Appeal Board proceedings are a
    critical piece for ensuring that we have quality patents in our
    system. I have launched an Enhanced Patent Quality Initiative,
    which is meant to focus on making sure that the USPTO issues
    top quality patents before it leaves our office.
        But, as to the patents that are already in the system, the
    Patent Trial and Appeal Board, as Congress intended, as you all
    intended, was meant to be a quality check. Are there patents in
    the system which under today's law should not be? And if so,
    the public has the opportunity to bring that back to the agency
    with a panel of three technically trained judges who are
    steeped in patent law to consider whether or not certain claims
    should remain or whether or not they should be invalidated in
    light of the arguments presented, the prior art references
    cited, and so forth.
        So it is serving, as Congress intended, as a means to
    providing a faster, lower-cost alternative to district court
    litigation in terms of testing the validity of the patent. We
    have about 269 judges on board, many of them come from our
    regional offices, a super talented team. And we are making sure
    that these proceedings are as effective and fair as possible by
    continuing to revise the procedures as we get input from our
    stakeholders and from the people who use the proceedings.
        We have issued new rules, fine-tuning the rules governing
    the Patent Trial and Appeal Board, and I continue to say that I
    remain open to any and all additional changes that the public,
    in a consensus-like manner, tells us we need to make, provided
    it is within the statutory mandates of Congress.
        Ms. DelBene. You mentioned the Enhanced Patent Quality
    Initiative, and I want to applaud you and the PTO for launching
    that. And the GAO's findings indicate there is more work needed
    to be done to ensure the quality of patent applications that
    are approved.
        Can you give us an idea of how you measure quality and how
    you look at that? Because those metrics are going to be
    important to understanding whether the program is successful or
    not.
        Ms. Lee. Yeah, of course.
        So let me just step back a moment and address the GAO
    quality report. I want to thank the GAO for their work on this
    issue that I care very deeply about, which is patent quality.
        The GAO made seven recommendations on enhancing patent
    quality, and we agreed with all seven of them. In fact, even
    before the GAO report published, the PTO already began working
    on issues addressed in all seven of the recommendations. In
    some cases, we have been working on these initiatives for a
    year or more. And we appreciate the GAO's acknowledgment of our
    good work in this area.
        Now, we recognize we have more work to do, and the USPTO is
    fully committed to continued leadership and enhancement in this
    critical area.
        On your question about measuring patent quality, one of the
    key prongs in our Enhanced Patent Quality Initiative is to
    improve the way in which we are measuring patent quality. And
    we held a patent symposium and we got input, and one of the key
    issues we discussed is, look, there were 2,200 attendees, how
    can we improve the way in which we are measuring patent
    quality?
        And we got a lot of feedback. They made some suggestions
    about how they wanted the way that we used to measure patent
    quality modified. And that is what we have done. We have taken
    that input to heart. We are modifying the ways in which we
    measure the patent quality. For the most part, they like the
    seven subcomponents that fed up to our quality composite. We
    are going to keep those, and we are going to look for any
    additional factors that are good measures of patent quality.
        Also, we are working on a master review form which measures
    for every statutory requirement for patentability how did the
    examiner do on each of those, including on clarity of the
    record. And that will be a very powerful tool, and we have
    gotten extensive stakeholder public input on that, and it will
    generate three to five times more data when we are
    electronically recording all those data points so that we can
    then go back and precisely train certain art units, certain
    technology centers, because we will have statistically
    significant data, to be much more precise on our trainings and
    areas for improvement.
        Ms. DelBene. Thank you.
        I yield back, Mr. Chair.
        Mr. Issa. Thank you.
        I now ask unanimous consent that letters addressed on the
    subject of this Committee from the Consumer Technology
    Association be placed in the record. Without objection, so
    ordered.
        And another one from the Internet Association be placed in
    the record. And again, without objection, so ordered.
        [The information referred to follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Issa. We now go to Chairman of the full Committee, Mr.
    Goodlatte, for his questioning. Oh, I am sorry, you are right,
    I did go to you.
        Mr. Smith.
        Mr. Smith. Thank you, Mr. Chairman.
        Director Lee, thank you for your testimony today, and I
    appreciated your response to the earlier question about how
    your post-grant rules are working, and I know you are still
    sort of waiting for that to shake out.
        I wanted to ask you more broadly, and you spoke broadly,
    and I would like to ask you to be more specific as to what
    other improvements you feel are needed for the America Invents
    Act. And by the way, I won't take any suggestions personally.
        Ms. Lee. Well, let me see. I mean, a lot of good was
    achieved out of the AIA, thanks to your leadership and the
    leadership of many in this room, including the establishment of
    the regional offices. I can't tell you what a success that has
    been for our agency and our innovation community.
        The change from the ``first to invent'' for the ``first to
    file'' was a necessary step for the harmonization, and of
    course the AIA Patent Trial and Appeal Board proceedings are
    providing the faster, lower-cost alternative to district court
    litigation.
        Mr. Smith. What improvements or changes would you like to
    see? Within reason.
        Ms. Lee. On the Patent Trial and Appeal Board proceedings
    front, those are complicated proceedings, and the USPTO did a
    very good job of taking a first crack at implementing those
    proceedings, all sorts of procedural determinations, fleshing
    out and filling in some of the details that we needed to do
    when we implemented them that were not included in the statute.
        And over time we got experience with these proceedings, we
    got a lot of input from our stakeholders. And one of the first
    things that I did in my job as head of the agency, even before
    I was sworn in as Director of the USPTO, was to engage in a
    multiple-city listening tour to find out how we could improve
    those proceedings, to make sure that they were as effective and
    fair as possible. And we got a lot of input.
        Mr. Smith. So an ongoing process.
        Ms. Lee. It is an ongoing process. And with our rulemaking
    and with our taking into account the input that we get from the
    users of our system, I think we can continue to strengthen
    them.
        Mr. Smith. You mentioned a couple of areas, and that is
    good to hear.
        Let me jump to an entirely different subject, and that is
    the ability of our innovators, the ability of our inventors to
    protect their patents in foreign courts. I think they
    oftentimes have problems. If so, what can we do about it?
        Ms. Lee. Yes. So we spend a good part of our time and
    resources making sure that American innovators encounter a
    level playing field when they want to ship and sell their
    products overseas. It is in America's interest that we ship as
    many products and services overseas as possible.
        And so what we have is we now have, I mentioned our IP
    attache program in my opening statement, we have 13 IP attaches
    across the globe. And these IP attaches are associated with the
    U.S. embassies oftentimes, and they help American innovators
    navigate the intellectual property regime in various foreign
    countries.
        These IP attaches also work with policymakers to help craft
    legislation containing values and IP values that we share to
    make sure that there are appropriate protections, remedies, and
    consequences for violation infringement.
        All to make sure that American innovators again are
    confident that when they ship or sell their products overseas,
    they encounter a level playing field.
        Mr. Smith. Okay. I have one more question, and then I would
    like to yield the balance of my time to the Chairman of the
    full Committee, Mr. Goodlatte.
        My last question is this. You face this delicate balance
    between trying to process patent applications both quickly and
    thoroughly. You had the GAO report where 70 percent of the
    patent examiners said they wished they had more time.
        What reforms do you envision in the near future being made
    to enable you to reduce the backlog, which you have done so
    well, I think you said 78 percent, but to continue to reduce
    the backlog and process patent applications, but doing so in a
    very thorough way? What reforms that have not yet been
    implemented do you anticipate? Very briefly.
        Ms. Lee. Thank you very much. We are already looking at--
    and this is before the GAO report came out and before the IG
    report came out--across our examination corps, are we
    allocating the correct amount of time, the proper amount of
    time for our examiners to do this very challenging job?
        Mr. Smith. So you are thinking about increasing the time
    allotted?
        Ms. Lee. I think we need to remain open. In some instances,
    more time; in some instances, less. What we need to do is make
    sure that we are giving the appropriate amount of time to
    accomplish this very challenging task.
        Mr. Smith. Thank you, Director Lee.
        I yield the rest of my time to Mr. Goodlatte.
        Mr. Goodlatte. I thank the gentleman for yielding.
        I just want to follow up on that general area. The IG has
    apparently found that some of your employees have quite a bit
    of extra time, because they are simply collecting a paycheck
    without actually working. The last time you were here, I
    believe you told us that you have zero tolerance for this type
    of behavior, which I very much appreciate.
        In the aggregate, accounting for employee privacy, how many
    examiners at the PTO have you or your staff identified as
    delinquent either in the Patent Division or Trademarks, and
    have you taken any disciplinary action as of this date with any
    such employees?
        Ms. Lee. Yes. So we have taken action for time and
    attendance abuse, and that ranges anything from counseling, to
    a letter of reprimand in the employee's file, to suspension, to
    termination, and repayment of moneys paid for hours worked that
    were not worked.
        I know during the period during which the OIG conducted his
    investigation, from August of 2014 to November of 2015, we have
    already taken action against a number of the employees
    identified in that group.
        So we can and we will continue to take all appropriate
    actions anytime we find time and attendance abuse.
        Mr. Goodlatte. Thank you very much.
        Mr. Issa. Thank you, Mr. Chairman.
        We now go to the gentleman from Georgia, Mr. Johnson.
        Mr. Johnson. Thank you, Mr. Chairman and Ranking Member,
    for holding this important hearing.
        And I thank the witness today for her testimony, which is
    quite valuable.
        Today's hearing is a testament to your leadership and
    focuses upon issues that are protected by our Constitution and
    fundamental to the ability of American companies and inventors
    to remain competitive in the global marketplace. Under you,
    Secretary Lee, I want to commend you for the improvements that
    you and your team have made to the Patent and Trademark Office.
    The PTO was ranked as the best place to work in the Federal
    Government in 2013, and you have diligently worked to not only
    cut costs in this post-sequestration environment, but also to
    improve internal processes so that the patent backlog can be
    addressed.
        Despite these improvements, however, there are still some
    concerns overshadowing the Patent Office's success that deal
    with patent quality and diversity. The PTO was once criticized
    and faced litigation for alleged discriminatory practices in
    its hiring and promotion of patent examiners, especially
    against African American women. How has the telework program
    increased the USPTO's ability to recruit and retain high-
    skilled examiners from diverse backgrounds?
        Ms. Lee. Thank you very much, Congressman, for that
    question. And I have the privilege of serving as the first
    woman head of the United States Patent and Trademark Office in
    our country's history, and it is a tremendous honor and
    privilege. And one of my very big initiatives is to make sure
    that we are recruiting and retaining the top technical talent
    that we can get, the top talent across the board, technical and
    nontechnical, across all demographics.
        And we have mentoring programs. I have the Office of Equal
    Employment Opportunity director reporting directly to me,
    providing me with information on our programs to retain our
    very critical talent and to recruit very diverse talent.
        It is an issue that I care very deeply about not only
    within the PTO. And I might add that within the PTO, we have
    more women executives than, dare I say, the average in the
    private sector, and we are looking to recruit and retain more
    candidates of diverse backgrounds into every level of the
    Patent and Trademark Office.
        And externally, outside the Patent and Trademark Office,
    one of the issues that I found when I asked the question is
    that about 15 percent of the U.S.-based inventors that were
    listed on patents were women, and we would like to see more.
    And we would like to see individuals from diverse backgrounds
    taking advantage of programs that we create, like Camp
    Invention, where we bring elementary school-age kids to the
    camp.
        It is a 1-week summer enrichment program. They learn a
    little bit about making, designing, building, prototyping, a
    little bit about intellectual property. And we give special
    scholarships, working with Invent Now as our partner in this,
    to kids from underprivileged backgrounds. Why? Because we can't
    afford to leave behind any inventor or any potential future
    entrepreneur. It is that important to our country's future
    success.
        Mr. Johnson. What is the name of that program?
        Ms. Lee. It is Camp Invention. And actually that is just
    one of the many initiatives we have to encourage all of our
    citizens to be excited about invention. I would like nothing
    more than for all of our children across all demographics,
    across all geographic regions of this great country of ours, to
    want to grow up to be inventors and to want to be
    entrepreneurs.
        So I can get you a whole long list of issues that we are
    very proud of, but there is a lot more work to be done in terms
    of expanding the diversity both in terms of our inventor and
    applicant base, but also within the agency itself.
        Mr. Johnson. All right. That will be great. I look forward
    to my fellow Members of the Congressional Black Caucus being
    able to know about Camp Invention and participate in it.
        As mentioned in the 2016 GAO report on patent examiners,
    has the USPTO conducted an overall analysis of its examiners,
    of their skill, of their technical competency, to identify
    potential gaps in technical skills? And if so, what steps have
    you taken to address these gaps?
        Ms. Lee. So we have taken steps to identify gaps in the
    skill sets of our examiners. What we do is when we make new
    hiring decisions, we tend to try to fill the gaps that we have.
    And also, with our existing employee base, we have worked very
    hard to continue to provide them technical and legal training,
    as the case law develops and changes, which it inevitably does,
    and importantly, as technology changes.
        We have a program where we pay for our examiners to go back
    to get technical education in new areas of the technology so
    that they are examining and they know how to examine at the
    state-of-the-art level in these whole range of new technology
    areas that we are all hearing so much about.
        Also, we have a patent examiner training program where we
    work with the private sector and academics where they volunteer
    to provide time, and they come to the Patent and Trademark
    Office or they come to our regional offices and they give a
    lecture on their area of expertise. And we can then televise
    that across all of our examination corps so that everybody who
    is examining in that area has the benefit of that educational
    training. It is provided for free and makes perfect sense.
    These people are in the industry. They have the state-of-the-
    art knowledge and expertise. The technology changes quickly.
        So we train and keep our examiners at the top level of
    technical expertise through any number of these initiatives,
    and we are always looking to do more, and the public has helped
    us keep them up to date on the technologies, and we are very
    appreciative of that.
        Mr. Johnson. Thank you.
        And, Mr. Chairman, I yield back
        Mr. Issa. Thank you, Mr. Johnson.
        We now go to the gentleman from Ohio for his round of
    questioning
        Mr. Chabot. Thank you, Mr. Chairman.
        Madam Director, this past June, the GAO found that primary
    examiners have the least amount of time to examine patent
    applications, and therefore these applications often undergo
    the least amount of supervisory review.
        What oversight measures has your office taken to ensure
    that each application undergoes a thorough examination,
    regardless of whether the examiner is a primary or a junior
    examiner?
        Ms. Lee. Thank you very much for that question,
    Congressman.
        It is interesting, I have got the GAO report that tells me
    that some 70 percent of our examiners volunteer and have
    uncompensated overtime in order to meet their minimum
    production requirements. And I have the IG report which is
    telling me that due to technological efficiencies, that the
    examination job has been so easy that we should consider
    reducing the time.
        Clearly, the issue of the adequate amount of time for our
    examiners is an important issue, and I had mentioned that even
    before the publication of the GAO report and the OIG report, at
    the PTO we are undergoing a comprehensive study about the
    amount of time that each of our examiners has for tasks that
    they need to perform. And it is not fair to our examiners if
    they are volunteering time. On the other hand, it is not fair
    to the public if the tasks are too easy and we are giving too
    much time.
        So it is my job and my team's job to find the appropriate
    amount of time for each of the tasks, and that is what we are
    committed to do.
        Mr. Chabot. Thank you.
        It is my understanding that examiners have minimum
    production goals based on time allotted for the number of
    office actions that they have to complete, and examiners may
    earn bonus for exceeding the minimum production goals. What are
    the minimum production goals, and what criteria do you use to
    determine the time allotment?
        Ms. Lee. Yeah. Thank you very much, Congressman.
        The production goals vary, depending upon the seniority of
    the examiner. Clearly, the more junior examiners who are
    getting up to speed on the state of the art and are not as
    experienced are going to have lower production requirements.
        I would be glad to have my office follow up with you at
    each of the various levels what their production requirements
    are. But remember, it is not just production, it is also the
    quality. And we expect all of our examiners, and all of our
    examiners are trained to produce a quality product. So quality
    is a prerequisite for all of our activities.
        Mr. Chabot. Thank you.
        Approximately, you have, what, over 8,000 examiners? Is
    that what you said?
        Ms. Lee. I think we are up to 8,500, but I can get you the
    precise number.
        Mr. Chabot. Okay.
        Ms. Lee. It is a substantial body of examiners.
        Mr. Chabot. I know at one point a fair number, the number I
    had, was about half worked out of their homes. Is that still
    the case?
        Ms. Lee. That may be true full-time or part-time, some
    combination. But I can, again, get you those numbers.
        Mr. Chabot. Obviously, if they are in their homes, there
    can be an issue of supervisory concerns that one might have.
    Are there any extra measures that you take if they are working
    out of their home, for example?
        Ms. Lee. Yeah. So let me just point back to the National
    Academy of Public Administration report. They did an extensive
    study of our telework program, and they found that time and
    attendance abuse was not widespread and that it was not unique
    to teleworkers and that we had substantially the controls in
    place necessary to manage our workforce.
        I would be glad to share with you the programs that we have
    and the tools that we have. I mentioned the online dashboard. I
    think you were here when I explained the online dashboard. That
    is a very powerful tool to know exactly what your employees are
    doing, the work product they deliver, and when they deliver it.
        Mr. Chabot. I know at one point that there were some
    significant problems with the folks at home. I am wondering,
    have you seen improvement in that area?
        Ms. Lee. So the National Academy of Public Administration
    looked at this issue and found that there was no real
    difference between those working at home, in terms of
    misconduct and productivity, versus those in the office.
        That said, we do have controls in place. We train our
    supervisors to monitor for varying levels of submission of work
    product. We require a number of our employees to--well, all our
    full-time teleworkers and all of our supervisors to log into
    the USPTO network during working hours, to participate and use
    collaboration tools, such as the instant messaging and the chat
    functions. And we train our supervisors on teleworking
    workforce management, how to approve hours, how to spot abuses
    or potential abuses as they may arise.
        Mr. Chabot. What is the current pay range that your patent
    examiners have?
        Ms. Lee. Pay range?
        Mr. Chabot. Yeah. From what to what?
        Ms. Lee. I would be guessing. So my guess is----
        Mr. Chabot. You don't have to guess.
        Ms. Lee. Okay. Thank you.
        Mr. Chabot. If you can get that to us, I would appreciate
    it.
        Ms. Lee. Okay. I would be glad to follow up with you.
        Mr. Chabot. And then finally, are you familiar with the
    terms ``end loading'' and ``mortgaging''?
        Ms. Lee. Yes, I am.
        Mr. Chabot. Would you explain what those--and I have only
    got a half a minute here--but could you explain briefly what
    those are and the problems that those can potentially cause?
        Ms. Lee. Sure. Absolutely.
        So end loading is where an examiner submits a large chunk
    of work near the deadline, not evenly but right near the
    deadline. That is not misconduct. That has implications on
    quality because the supervisor then has a whole bunch of work
    and a short amount of time to review it.
        And to address the end-loading issue, the agency has
    implemented the Consistent Credit Initiative, which
    incentivizes our employees to submit the work product over a
    smoother period of time, and it allows us to identify bunching
    up of delivery of work product.
        And mortgaging is where you are submitting work that is
    incomplete for credit, and that constitutes misconduct. And we
    take action when we find mortgaging activities occurring.
        Mr. Chabot. Thank you. My time has expired.
        Mr. Issa. I thank the gentleman.
        I would announce for everyone that we are going to take the
    Ranking Member of the Subcommittee and then we are going to
    break for two votes and return immediately.
        Is it four?
        I apologize, four votes, and then return immediately
    following the last vote.
        With that, the gentleman from New York is recognized.
        Mr. Nadler. Thank you, Mr. Chairman.
        First of all, let me ask unanimous consent to submit my
    earlier statement for the record.
        Mr. Issa. Without objection, so ordered.
        [The prepared statement of Mr. Nadler follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                   __________
        Mr. Nadler. Thank you.
        Ms. Lee, with reference to the IG report alleging time and
    attendance abuse, which I think has been referenced before,
    critics of the report have questioned its methodology, which
    allegedly is unlikely to have identified all the hours that
    patent examiners worked.
        The IG constructed a digital footprint for each examiner,
    including ID badge swipes into the building, in-office
    workstation records, records for when teleworkers logged into
    the system remotely, and the USPTO's internal system for
    tracking patent applications. These records were then matched
    with the hours that examiners claimed to have worked.
        Relying purely on this digital footprint, however, I would
    think cannot account for hours that an examiner may have worked
    offline. The agency also does not track when employees leave
    the building, only when they enter, since ID badge data is used
    for security purposes, not time and attendance.
        Given these problems with the methodology, do you think
    that the IG report may have underreported the amount of time
    that they were spending the time working?
        Ms. Lee. Thank you very much, Congressman, for the
    question.
        And let me just say that any hour claimed as work that is
    not worked is unacceptable. And we do thank the OIG for their
    report, and that report will play an important resource and
    will be an important tool for the USPTO in our ongoing
    commitment to further strengthen our workforce management
    practices.
        Mr. Nadler. Let me just ask, do you think that given what I
    just said, the IG report may, in fact, have understated--may
    have overstated the problem, the amount of time not really
    worked?
        Ms. Lee. It is possible.
        Mr. Nadler. Thank you.
        My second question is, assuming that they didn't overstate
    it, in the IG report, what percentage of all the hours the IG
    reviewed were unsupported?
        Ms. Lee. Two percent of all the claimed hours by an
    examiner that lacked a digital footprint were unsupported.
        Mr. Nadler. So the total number of unsupported hours was 2
    percent in violation of the USPTO's time and attendance
    policies, assuming that they didn't underreport?
        Ms. Lee. So let me just be clear. The IG looked at all
    the--some 14.7 million hours. They found some 289,000 hours
    that lacked a digital footprint, and that constitutes 2 percent
    of the total hours claimed.
        However, in the period, the last 9 months of the study,
    that 2 percent number dropped down to 1.6 percent, and that was
    after the USPTO launched some new policies and controls in
    February of 2015. That number dropped down to 1.6 percent.
        Mr. Nadler. I would think that most employers would think
    1.6 percent is not too bad.
        Let me just say that I hope that the report does not lose
    sight of the bigger picture. Over the last 5 years, the backlog
    of unexamined applications has shrunk significantly, whether
    only 98 or 98.5 percent of the time was spent properly. In that
    time, the backlog of unexamined applications has shrunk
    significantly and patent quality has been steadily increasing,
    although we can improve both. But, the fact is those two things
    are true, and I congratulate you and the office for those.
        And I thank you. And I yield back the balance of my time.
        Mr. Issa. The gentleman yields back.
        And as promised, we will take a recess until as quick as we
    can come back after the last vote, probably be about 30
    minutes. We stand in recess.
        [Recess.]
        Mr. Issa. As promised, the Committee will come back to
    order.
        Director, as you know, it is good to be Chairman, because
    any extra time flows to the Chair.
        I have a line of questioning I would like to beg your
    indulgence on, and this goes to the core of patentability.
        We deal every day with patents disproportionately. We are
    almost always talking about utility patents, 20-year term,
    subject to how long they take to get processed. But, there are
    other patents, including design patents. And over the years,
    there have been proposals for other patents of shorter
    duration, including one related to auto body parts, dress
    design, and so on.
        Let me ask you a series of questions in hopes that your
    expertise, in combination with future work, could give us some
    insight. I just want to have these questions on the record.
        In the biological and pharmaceutical industries, and even
    medical devices, when there are serious questions which we do
    not know the answer to, by definition, aren't we in a discovery
    process of the unknown?
        Ms. Lee. Yes.
        Mr. Issa. And if the discovery of the unknown is by
    definition an invention, then any time there is a creation of a
    product that is a useful advance in the sciences, it enjoys the
    possibility of patent protection, wouldn't it?
        Ms. Lee. That is right. New, useful, and nonobvious. Those
    are the requirements.
        Mr. Issa. So let me run you through a hypothetical
    question. Let's just say that this is a medical device. It has
    never been around before--or it is been around before. So we
    have this device. What we don't know is, is it safe and is it
    effective.
        If those are unknowns and the very act of discovering
    whether something, which is not known to be safe and effective,
    becomes known to be safe and effective, isn't that potentially,
    subject to the definition of Congress, a patentable discovery?
        Ms. Lee. So something that has existed in the past, not
    known to be safe or useful, but then discovered to be safe and
    useful.
        Mr. Issa. Right. Let's just take, for example, a
    hypothetical: Aspirin. We know a chemical compound. Do we know
    that it is safe and effective for reducing heart disease if
    taken in a certain way?
        Ms. Lee. So your question is?
        Mr. Issa. My question is--and this is a hypothetical
    question, but it leads to a whole question of inherent
    patentability if defined by Congress--if, in fact, Congress
    were to choose to view the question of the unknown is something
    safe and effective, and that safe and effectiveness requires
    clinical trials and statistical analysis and ultimately proof
    that something has a level of effectiveness, is that a useful
    advance in science? The answer, of course, is yes. And then the
    hypothetical is, why wouldn't that potentially be the subject
    of a new or innovative type of patent?
        Ms. Lee. So if it exists in nature and there is no
    additional work necessary to create it or to achieve it, then
    under the current law it is not eligible for patent protection.
        Mr. Issa. Let's go through patentability for a moment. If
    somebody has a product, let's say opium, and they go through
    the process of preparing and using it in a different way, have
    they not many, many times received patents on various
    combinations of opiates?
        Ms. Lee. They may have.
        Mr. Issa. So it is not a question of is a substance or
    anything known, it is a question of is there a new advancement
    in the science. And I am taking you through--and I am happy to
    yield when somebody else comes in--I am taking you through this
    because we have a challenge that you are very familiar with.
        In the world of IPR, we have a vast industry who, although
    objections to patent after the fact in non-inter parte but ex
    parte, have been around a long time, and patents have been
    reduced or eliminated countless times by ex parte motions taken
    up by the PTO and ultimately found, because of some 102, 103,
    some prior art, usually not to be patentable.
        The industry has come to us time and time again and said:
    We have this odd situation. We have the invention, which we
    rely on in order to make the investment, and the investment is
    not an investment in just development, it is an investment in a
    massive search of clinical science to determine two fundamental
    things, safety and efficacy. And efficacy is an unknown.
        So I ask you, again, in this long-term exchange, if
    efficacy is an unknown for any substance, and efficacy for a
    dosage in combination with something is discovered, separate
    from the other many things that are in patentability, don't we
    have a fundamental of an advancement in science that we are
    inducing that, in fact, Congress, in concert with the
    President, could choose to write patent law that would allow
    that to be patentable without being inconsistent with our
    Founders' instructions to us?
        Ms. Lee. You can choose to write laws on whatever you would
    like and with input from stakeholders, of course, I imagine,
    influencing that development, but it is not inconsistent with
    that which exists currently.
        Mr. Issa. I ask this because it is going to be, if you and
    I do our jobs well, it is going to be over a period of time
    harder and harder for people to know whether or not they have
    an investable new technology. Well, you can't wait until your
    patent is granted to begin the process of developing useful
    medicines and medical devices. And so we have a challenge, you
    and I, which is our mandate is not to give people exclusivity
    for a period of time. Our mandate is to promote these
    advancements in science.
        So I leave you with that. I will go to the gentlelady from
    California. I started with it and I leave you with it, because
    I believe that as we end this Congress, this is the kind of
    thinking that we need to look at if we want to take that next
    step in the promotion of useful sciences.
        Yes, ma'am.
        Ms. Lee. So if you would, Mr. Chairman, if you would allow
    us, let me think about that further and the issues that you
    raised, and let us get back to you and myself get back to you
    on that very interesting topic. It is an interesting issue.
        Mr. Issa. I look forward to it. Thank you.
        The gentlelady from California, Mrs. Walters.
        Mrs. Walters. Thank you, Mr. Chairman.
        Director Lee, the correlation between strong intellectual
    property systems and innovative economies cannot be denied.
    Moreover, less developed economies benefit greatly from those
    innovations over time.
        Unfortunately, maintaining strong intellectual property
    rights continues to be a contentious issue at the United
    Nations. And recent efforts at the U.N., particularly the U.N.
    High-Level Panel on Access to Medicines, seem to be dedicated
    to preventing the adoption of stronger global laws needed to
    protect creators and innovators overseas.
        That panel also seems resolved to circumvent the minimum
    standards that have already been agreed to at the WTO, which
    could undermine the United States IP system that is responsible
    for our own innovative success.
        Can you please tell me how the Administration has responded
    to the U.N. High-Level Panel on Access to Medicines and what
    the plan is to ensure the U.N. serves to reinforce rather than
    challenge sound IP policies?
        Ms. Lee. Thank you very much, Congresswoman, for that
    question.
        And let me just start by saying that the USPTO supports
    expanding access to medicines, but it is important to consider
    really all aspects of this complex issue. And the U.N. High-
    Level Panel on Access to Medicines raised some serious concerns
    for us, particularly because of the process followed in
    appointing the panel and also because of the narrow focus and
    the biased mandate of the panel.
        Let me give you an example. There is an unjustified
    assumption of IP policy incoherence between the rights of
    inventors, trade rules, human rights laws, and public health.
        The Administration responded to the establishment of this
    panel and expressed concerns. We worked with an interagency
    group to formulate our response. And they have not yet come out
    with a report, but when they do, we will review it carefully
    and, of course, take appropriate steps.
        So to answer your questions about what are we doing
    generally in the U.N. to make sure that we are promoting
    intellectual property rights and the importance of them, we
    routinely work with our peers in the United States Government
    to ensure that the U.N. serves to reinforce sound IP policies
    that promote the interest of innovators as well as consumers.
        And I know, myself, I oftentimes engage on a bilateral
    basis with other countries who share our IP values precisely to
    achieve some of these goals.
        Mrs. Walters. Thank you.
        Mr. Issa. I thank the gentlelady.
        I do believe we have Members coming back, so I inquire what
    your schedule is like. How much longer do you have to be with
    us?
        Ms. Lee. As long as you need me.
        Mr. Issa. I love that kind of talk.
        Let's go back. You asked for more time on the submarine
    patents. The question, I guess, I have is, how much more time
    do you think we really need? When do you think, in your crystal
    ball, we would get past these legacy applications that now go
    back pre-1997?
        Ms. Lee. So thank you very much for that question. And let
    me get back to you on the precise amount of time. I would have
    to check. There are a whole bunch of cases pending. They are
    all in various stages.
        But, as to what Congress can help us do with regard to
    these pre-GATT applications, I know Congress has asked us
    repeatedly for information to publish the applications and so
    forth. And one can publish these applications only under one of
    two ways. One is by act of Congress, and secondly is by a
    showing of special circumstances.
        And the Committee had requested that we publish these
    applications. I will say that a pre-GATT applicant sued the
    USPTO challenging our determination of special circumstances.
    And although the Federal circuit found that the PTO did not
    abuse its discretion in finding special circumstances in that
    case, based upon the prior lawsuit and in light of the Federal
    circuit guidance, we decided we would best spend our energy and
    resources, and, quite frankly, the resources of the Department
    of Justice and the court system, by pushing forward those
    applications.
        But, there is something that Congress can do. I know you
    considered legislation in the past.
        Mr. Issa. We have a perfect draft of it, I believe.
        Ms. Lee. So we would be delighted to work with you to
    support any legislation you might propose on that front.
        Mr. Issa. Well, I will take you up on that offer because I
    do think that if we put that place marker going into the next
    Congress, it might cause everyone to realize it is now time.
        Let's talk about your search tools. There was quite a bit
    of discussion earlier about the various individuals who may
    have or may not have given you their full due.
        I told you we would be having people coming back.
        Do you believe that we need to continue to make a
    substantial investment--you need to make a substantial
    investment--in better tools to search more broadly and
    effectively for existing art? And if so, is that a unique
    requirement that you don't share with Commerce? It is kind of a
    two-part question there, is that requirement significant, do
    you think you have it? And does anyone else in Commerce share
    it to where it really is a joint project?
        Ms. Lee. Thank you very much for that question.
        One of the key prongs of our Enhanced Patent Quality
    Initiative is to get the most relevant prior art before our
    examiners as early as possible. And the key to getting relevant
    prior art can be improving our search tools. So the agency is
    absolutely focused on this.
        And one of the initiatives in the Enhanced Patent Quality
    Initiative is--I mean, I come from the world of artificial
    intelligence, I know that technology has evolved significantly
    in the past 10 years. And should not the agency be looking at
    these technological developments to see if the computer can
    automatically generate some relevant search results to identify
    relevant prior art so that by the time it comes to the
    examiner, they have a place to start?
        Now, we are just exploring this. It is pretty early on. It
    is something that we have discussed in our conversations with
    the stakeholders. Any and all tools that we have to get the
    best prior art before our examiners as early as possible will
    lead to a high-quality patent.
        And one other initiative that we have--I mean, we have many
    initiatives, but we have this initiative called the Global
    Dossier program. And I am very proud about this because it
    makes a lot of sense. It has a fancy name, but it is a fancy
    name for a very simple concept.
        And basically what we have done is we have worked with the
    five top patent offices across the globe--the United States
    Patent Office, the European Patent Office, Japanese, Korea, and
    China--and the file histories of their applications are now
    available online in a single portal that the entire public and
    our patent examiners can access.
        So if I am a patent examiner examining a patent in the
    United States, one of the first things I might choose to do is
    go online to this portal and see what my peer examiners found
    in a related application. Doesn't mean I am not going to do my
    own search. Of course, I will. But, having the benefit of that
    so that when I pick up the application and when I do a search,
    I have got some pretty good references.
        And keep in mind that a patent's validity depends upon all
    the prior art on this globe regardless of the language. So most
    of our examiners are primarily English language, English is
    their main language of proficiency, but the prior art
    references, if you are litigating a patent, they are going to
    comb the corners of the Earth. They are going to look for that
    Japanese reference. They are going to look for the German
    patent reference. And those could be invalidating references.
        So for us to issue the very best quality patent possible,
    it helps that we take advantage of the native language
    expertise of examiners across the globe, have access to that,
    and take that into consideration before we issue a patent.
        So that is not a search tool, so to speak, but it is taking
    advantage of search work that has been done by other patent
    offices across the globe and taking advantage of it. So that is
    another example of how we are getting prior art before our
    examiners as early as possible.
        Mr. Issa. And I might characterize that then as an active
    search rather than a passive search when you have other
    entities that may be able to illuminate you beyond that which
    you would find in a static search.
        Ms. Lee. And also, I mean, I can go on, through our Patent
    Trial Appeal Board proceedings. The stakes are high in those
    cases. It is a litigation. A lot of money is spent by counsel
    to identify the prior art. And you know what, if there is a
    pending related application that is still in our examination
    corps, why shouldn't that examiner have the benefit of all the
    hard work and effort that outside counsel has spent in terms of
    looking for those invalidating prior art references on a
    related application?
        And through our Enhanced Patent Quality Initiative and
    consistent with the GAO report on patent quality, we have
    launched a pilot program to do exactly that. We should be
    taking advantage of those references that we find in PTAB
    litigation and in a related application and fold that back so
    we issue better quality patents.
        Mr. Issa. I look forward to seeing that part.
        The gentlelady from California, Ms. Chu.
        Ms. Chu. Well, first, thank you, Chairman Issa, for keeping
    this hearing open. I truly appreciate it.
        Well, Director Lee, did OIG investigators conduct
    interviews with staff about reporting hours and timekeeping
    practices? Do you think that a more extensive investigation,
    including employee interviews and observations of employee
    behavior, would have resulted in different conclusions?
        Ms. Lee. I don't believe they conducted interviews. What
    they did was they looked at hours claimed by the examiners and
    identified those hours that were claimed that lacked a digital
    footprint through computer network log-in, log-out data,
    through badge-in security data. It did not take into account,
    for example, the fact that some of our examiners just may work
    offline. They may print out a prior art reference and choose to
    read it.
        Also, there may have been simple misrecordings of hours. If
    an examiner works very hard Monday through Thursday, more than
    the 8-hour day, and doesn't work Friday, but yet records 8
    hours Monday through Friday, that could be a misrecording of
    hours. And I am not saying that misrecording is not
    problematic. It is certainly a problem and that is something
    that we are going to fix. But, is that fraud? Was that service
    denied to the United States Patent and Trademark Office? No, it
    is not.
        Let me just say that if we find any time and attendance
    abuse, any hour claimed as work that has not been worked, we
    will take all appropriate action.
        Ms. Chu. And we want to ensure that examiners are working
    at optimum levels to avoid increasing the backlog of unexamined
    patent applications. During this period in which OIG conducted
    its investigation of patent examiner time and attendance, did
    the backlog for pending patent applications increase or
    decrease?
        Ms. Lee. Thank you very much for that question,
    Congresswoman. In fact, I looked up the answer to that question
    myself as I was reviewing the report, and I actually have for
    you the precise statistics.
        During that 15-month period from August of 2014 to November
    of 2015, that was the period of the OIG investigation, the
    USPTO was delivering results. The backlog of unexamined patent
    applications was reduced from 616,000 to 557,000, a decrease of
    almost 10 percent, the first-action pendencies were reduced
    from 18.9 months to 16.8 months, and the total pendency was
    reduced from 27.5 months to 26.4 months, all while our filings
    were increasing on an average rate of about 4.5 percent.
        So we were delivering results to our stakeholders. Now, the
    question is, might we have delivered 2 percent or 1.6 percent
    more? And my job is to find out if we could have, and if we
    could have, to do so.
        Ms. Chu. Well, that is certainly good news.
        And with regard to the telework program, are there any cost
    savings associated with it?
        Ms. Lee. There are a lot of cost savings. As an executive
    and as a leader of the organization, I can't tell you how
    valuable the telework program has been for us and the success
    of the agency. I come from the tech sector. I know how scarce
    really talented technical talent is to get. It helps us recruit
    and retain top national talent across the country.
        It also helps us maintain productivity. We all in
    Washington had to deal with the Metro slowdown or shutdown.
    Guess what? During that period of time, because of our telework
    program, our employees continued to remain productive.
        Also, if you will remember, during the winter of 2015, we
    had a rather rough winter. There were a number of government
    closings. And I looked up the statistics, and on average during
    the winter snow days of 2015 December, the average patent
    examiner maintained close to 92 percent production rate. The
    average trademark examiner was more productive when they were
    teleworking than when they were in office, 106 percent
    production rate. And the Patent Trial and Appeal Board judges
    met every one of their strict statutory deadlines.
        So on average, the PTO issued 4,000 more patents per year,
    decreasing our backlog, because we worked during government
    shutdowns. Those are our conclusions, our facts, but the NAPA
    report too found that the telework program saves the USPTO $7
    million per year by working during the shutdowns, and that
    doesn't count the savings in real estate on average. In 2015,
    we saved $38.3 million per year.
        All of that said, it is very valuable for our stakeholders,
    very valuable for the agency. It is my job to make sure that
    you all and the American public have the confidence that you
    deserve in our operations, in the accountability of all that we
    do, and we are committed to doing so.
        Ms. Chu. Well, that is a very good point about the cost
    savings. And I appreciate that you do have this telework
    program. I am assuming that there are some improvements in
    terms of the reporting that you would make?
        Ms. Lee. In terms of the--I am sorry?
        Ms. Chu. Are there any improvements that you would make
    with the telework program?
        Ms. Lee. Yes. We have made a lot, and we will continue to
    make any additional improvements as is necessary after we
    review the data very carefully. I am glad to go through those.
    We went through them earlier in the hearing, but I am glad to
    run through them.
        We have implemented or taken action that responds to all 23
    of the recommendations from the National Academy of Public
    Administration. They came in in 2014, they looked at our entire
    telework program, they looked at our workforce management
    procedures. They concluded that it was unlikely that time and
    attendance abuse is widespread and that it is not unique to
    teleworkers. They also concluded or affirmed that the USPTO has
    controls in place to manage its workforce.
        Also, I described an online dashboard, and I would like to
    share that with you because we think it is a very powerful tool
    to managing our employees. And basically what it is, for every
    one of our patent supervisors, for every one of the employees
    he or she supervises, in real time continuously he or she can
    see all the pieces of work product that are on that examiner's
    plate--when that examiner picks it up, are they ahead of
    schedule in addressing it, are they on time, are they late.
        And it is in a heat map-like format, in green if you are
    ahead of schedule, yellow if you are kind of approaching the
    deadline, and red if you are running late.
        So it is continuously updated for all of your employees
    that you are supervising. Whether they are located in
    Alexandria, whether they are located or teleworking part time
    or full time, or whether they are located in one of the
    regional offices, that is an at-a-glance view of what your
    workforce is doing.
        So we think that is a very powerful and a very effective
    management tool, not to mention the fact that our examiners
    have clearly very quantifiable and measurable production
    requirements, timeliness requirements, and quality
    requirements.
        And in February of 2015, we implemented new policies for
    all supervisors and all full-time teleworkers requiring them to
    log into the PTO network during working hours; requiring them
    to use collaboration tools, like the instant messaging chat
    function; requiring them to use presence indicator to indicate
    whether they are available or they are in a meeting or on the
    phone or even there; providing schedules to supervisors in
    advance; and providing a lot of guidance to our supervisors on
    how to manage or monitor indicators of potential time and
    attendance abuse, such as responsiveness to supervisory
    communications, such as inconsistent workload.
        If an examiner is submitting work inconsistently, that can
    oftentimes be an early sign of time and attendance abuse. And
    we have a Consistent Credit Initiative which is meant to
    identify early on and to help kind of smooth out the submission
    of work product. And of course if there are customer
    complaints, that will also be assigned.
        So we have a whole bunch of tools, a lot of training that
    we were doing. And if we need to do more as a result of the
    very helpful work from the Office of Inspector General, we are
    committed to doing more.
        Ms. Chu. Thank you.
        I yield back.
        Mr. Issa. Thank you.
        I want to go through a couple of questions. We had sent you
    a letter, had a letter exchange on the shared services
    proposal. Would you agree that under the current law in which
    we do not allow a diversion of any of your funds anywhere else
    in government, that that is equally true, that there can be no
    allowance of a diversion of funds even within Commerce?
        Ms. Lee. That is right. Let me just step back for a moment
    on the issue of shared services. The goal is to consolidate
    common mission support functions like HR, IT, procurement, and
    financial services. And I applaud Secretary Pritzker for her
    focus on wanting to make the Department of Commerce even more
    efficient. I share that goal with respect to the operations of
    the USPTO.
        I am always looking for better quality service at a lower
    price, whether that comes through a shared services initiative,
    whether that comes through another government service provider,
    or whether I procure it myself. I am open to all options.
        And so far the USPTO has not received any new services
    under the shared services initiative. And we are keenly aware.
    We are always looking out for the interest of--we are not
    taxpayer funded. We are fee funded. And we are very cognizant
    of the money that we spend. We recognize that you oversee our
    actions, our stakeholders oversee our actions, and we are very
    prudent in the way we spend those dollars.
        Mr. Issa. And there is a gentleman in the room who
    specifically oversees those actions for efficiency and
    effectiveness, and that is the Chairman of the Oversight
    Committee, Mr. Chaffetz, who I now recognize.
        Mr. Chaffetz. I thank the Chairman. Appreciate it.
        Director, thanks so much for being here and the work that
    you are doing.
        You oversee some, what, 8,000-plus employees? What is the
    total universe of employees?
        Ms. Lee. The number is actually 13,000.
        Mr. Chaffetz. Thirteen thousand.
        Ms. Lee. So trademarks, Patent Trial Appeal Board, patents,
    and a whole talented team of administrative support.
        Mr. Chaffetz. So tell me about the software and hardware
    that you are doing. What is the worst--I mean, I worry about
    the Federal employees who are using system software and
    hardware that is really quite outdated. How good or bad is it?
    What is the worst situation that you are aware of in the Patent
    and Trademark Office?
        Ms. Lee. So I can't speak to other bureaus and departments?
        Mr. Chaffetz. No, just yours.
        Ms. Lee. At the USPTO, my sense is that we do have very
    state-of-the-art technology. If you think about it, in order
    for us to support a telework environment, your networks, your
    computer systems have to be pretty modern.
        Mr. Chaffetz. So what software, what operating systems are
    you using?
        Ms. Lee. I believe we are using Microsoft Office.
        Mr. Chaffetz. Do you know what version?
        Ms. Lee. I would have to get back to you on that.
        Mr. Chaffetz. What do you have at your desk?
        Ms. Lee. I don't know what version of operating system I
    have. I know it works.
        Mr. Chaffetz. You know it works.
        Do you have DOS operating systems still at the Patent
    Office?
        Ms. Lee. I would have to look into that. I don't know the
    answer to that question. I do know that we have some legacy
    systems that we are in the process of transitioning to, newer
    systems, and that is a priority of ours. And thanks to the more
    stable fees that we have got, the ability----
        Mr. Chaffetz. Well, so this transition is a curious one.
    That is why I ask pretty much every agency I run across as to
    how dilapidated, outdated their systems are, because I do think
    the transition in dealing--right now we spend some $80 billion
    a year as the Federal Government on IT and it doesn't work.
    Across the board, we spend about 75 percent of that on these
    legacy systems that cost both dollars and people and investment
    to try to keep something above board.
        And I guess what I would ask, if you are not able to do it
    off the top of your head, is to just provide to us a sense of
    who is using what software systems, maybe from worst to best,
    because last time I looked, there was some new stuff, but there
    was really a real problem with the software and hardware that
    you are using in the Patent Office.
        Ms. Lee. So my wonderful staff here has just informed me
    that we use the state of the art. We have Windows 7.
        And as to the legacy system, that is a priority of mine.
        Mr. Chaffetz. You really think that Windows 7 is the state
    of the art?
        Ms. Lee. That is what my staff tells me.
        Mr. Chaffetz. Yeah, well, your staff needs to----
        Mr. Issa. Don't push your luck, though. I think the House
    would be lucky to be all on Windows 7.
        Mr. Chaffetz. I am not suggesting that the House is on the
    top of it either. Don't be following us.
        Ms. Lee. But, to answer your question, Congressman, moving
    off of our legacy systems, my sense is that it is a very small
    part of our operations. I mean, we have had the ability now
    over the most recent several years to set our own fees working
    with Congress. We have been able to get access to all fees. I
    can't tell you what a difference that has made in terms of
    being able to update our IT systems. And a focus, a key
    priority is moving off of the legacy systems.
        Mr. Chaffetz. Since you have been there, any data breaches
    that you are aware of?
        Ms. Lee. Well, I know the entire U.S. Government suffered
    the personnel data breach.
        Mr. Chaffetz. I am asking about yours.
        Ms. Lee. None that I am aware of.
        Mr. Chaffetz. All right. Well, again, I have got like 1
    minute left. I really would appreciate sort of an analysis for
    the 13,000 people and the array of software. You may have some
    people using Windows 7. You may have 10. You may have some
    people on an Apple system. I don't know.
        And I would like, I am not looking for mounds of data, just
    a summary of how many people are using which operating systems
    and an analysis of the range of hardware, if you will.
        Ms. Lee. So my team would be--we will follow up with your
    staff, and we would be glad to get to you the information you
    have requested.
        Mr. Chaffetz. Fair enough. I thank you. And I know that
    Chairman Issa is very keenly aware of this as well. So please,
    if we could work together on this, I would appreciate it.
        Thank you. Yield back.
        Mr. Issa. I thank the gentleman. Before he leaves, I am
    going to ask one question that is pertinent to his Committee.
        In the last Congress we dealt with the District of
    Columbia, which had its own funds and yet was forced to shut
    down. And with great fanfare, that was corrected to where the
    use of its own funds would allow the District of Columbia to
    continue on during a government shutdown.
        Now, you mentioned government shutdowns, but you were
    talking about bad weather shutdowns. You were not talking about
    a lapse in the funding of the government.
        Ms. Lee. Yeah, that is right. When the rest of the United
    States Government shut down due to snow or what have you, we
    continued to remain operational. I will say that because we
    have an operating reserve, we were able to continue operating
    during sequestration.
        And, again, the combination of being able to set our own
    fees and working with Congress to get access to all of our fees
    has made a tremendous difference in the operations. We have a
    reserve, right, so that we have some funds to keep the lights
    on.
        Mr. Issa. The question though for you, Director, was if the
    government does an actual shutdown and only essential personnel
    are allowed to remain at work, you do have to send your
    examiners home under current law. Is that correct? I am getting
    a head shake of no. I want to make sure----
        Ms. Lee. I am sorry, one more time. If the--one more time.
        Mr. Issa. If there is a lapse in the funding of the
    government, and it happened last Congress, did you send your
    people home or were you able to continue working?
        Ms. Lee. We were able to continue working because we have
    an operating reserve, and we can pay the salaries for a period
    of time.
        Mr. Issa. So how long before the Antideficiency Act would
    have kicked in on you, if you know?
        Ms. Lee. What is the Antideficiency Act?
        Mr. Issa. That is the act that forces the government to
    shut down.
        Ms. Lee. Okay.
        Mr. Issa. Without appropriations, you are not allowed to
    spend money that hasn't----
        Ms. Lee. I see. I would have to get back to you on that, to
    answer that question.
        Mr. Issa. Okay. I would appreciate it. I just want to make
    sure that to the extent that we exceed any possible anticipated
    date sometime in the future--we have done it for the District
    of Columbia where they could go on for months, if necessary.
    And I certainly do not want to see examiners stop, because you
    can never catch up. And as you know and I know, we always pay
    the Federal workforce, so they always get paid for that which
    they did not do. And in this case, it really is a challenge
    because you can't catch that back up.
        Ms. Lee. Well, and keep in mind too, we are a fee-funded
    agency. So if they are not working, we are not also getting
    revenue. So it is a double whammy for us.
        Mr. Issa. Very good. Very true. Although those renewals
    would still tick over.
        One more area that I am particularly concerned about is--
    and I will just ask it the way the question is and then I will
    do a follow-up--our country is utilizing compulsory license to
    sidestep patents and trademark secrets in key areas of science
    and technology. And we are talking hypothetically about maybe
    Brazil and India, for example.
        Ms. Lee. So on the issue of compulsory licensing, we
    appreciate a country's desire to protect public health and to
    make medicines available to folks who need it. But, that has
    got to be balanced against the desire to incentivize
    innovation. And you will get no incentive to innovate if you
    are not giving for a limited period of time some period of
    exclusivity so that the inventor or the creator of a patented
    product or technology can recoup the benefits of those efforts.
        So on the area of compulsory licensing, we continue to
    monitor the country's application of the compulsory licensing
    laws. We monitor it closely. And we would just say that
    voluntary licensing is always preferable in the first instance.
        Mr. Issa. One more follow-up, one more question. At a
    previous hearing we talked about China not--if you will,
    dealing in, if you will, bad faith trademark registration. Has
    there been progress made in negotiating that?
        Ms. Lee. It is an issue, in terms of trademark
    misappropriation or trademark squatting in China, it is an
    issue that we are very aware of, we hear a lot from, from
    American companies. I raised it in my bilateral discussions
    with my counterparts in China. And we have conducted workshops
    in China precisely to discuss this issue. So we look to make
    improvements.
        And I will say that China is undergoing some pretty massive
    changes in their entire intellectual property system, including
    patents, trademarks, trade secrets, and copyrights. And the
    USPTO is providing input on their legislative proposals.
        So we are working together very closely. We want them to
    get the right laws on the books. And we continue to provide a
    lot of educational sessions so that we hope that they share our
    IP values.
        Mr. Issa. Well, we have certainly seen Taiwan go from a
    country that did not share our values to a country that has
    made substantial progress. So let's hope that it does occur.
        In the area of tying patents--well, let me say it another
    way. In the United States, we tie the continued ownership of a
    trademark to its continued use. However, some countries are
    trying to tie the make, use, and sell of patents to the actual
    patent. We don't, the United States. What can we do to
    harmonize that standard so that you don't have countries
    essentially forcing the production in order to maintain a
    patent right?
        Ms. Lee. That is an interesting question. We work with a
    lot of----
        Mr. Issa. Same two countries again, by the way, we are
    dealing with.
        Ms. Lee. Yes. So we work a lot with our major trading
    partners. We work with their intellectual property offices
    overseas. And we are actually engaged now in an effort on
    substantive law harmonization. So that could very well be an
    issue that we raise.
        I don't recall--I don't think it has been raised, but
    given--I think, if developments proceed further and more
    concretely in some of those countries, that is an issue that I
    think we would want to look very carefully at and elevate in
    terms of our discussions with them in our harmonization
    efforts.
        Mr. Issa. I have asked you a lot of questions. You have
    been very patient. I think I have given enough time for other
    Members to get back from the vote. So I want to close by
    thanking you very much.
        We do have follow-up questions and some additional
    questions we would ask to be taken for the record, if that is
    okay.
        Ms. Lee. Of course.
        Mr. Issa. Then we will hold the record open awaiting those
    answers.
        In closing, Director, do you have other things you want to
    leave us with in the way of wants, needs, and so on? This could
    be--it certainly will be the last hearing before an intervening
    election.
        Ms. Lee. Yes, thank you very much for that question, Mr.
    Chairman, and there is one matter for your consideration. Our
    fee-setting authority expires in 2018. And I cannot tell you,
    as head of this agency, how helpful it has been to be able to
    set the price of the services that we provide.
        So if Congress in its wisdom could consider a renewal of
    that provision, I know that my successors and anybody running
    this agency and our stakeholders would all benefit from that.
        Mr. Issa. We will take that as one of those deadlines that
    we should not push to the limit but rather work on early in the
    next Congress.
        Ms. Lee. Thank you.
        Mr. Issa. So again, we will leave the record open for
    questions from individuals who were not able to ask them here
    today and the questions the Committee will be delivering.
        And with that, we stand adjourned.
        [Whereupon, at 3:25 p.m., the Subcommittee was adjourned.]

                                A P P E N D I X

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                   Material Submitted for the Hearing Record

      Response to Questions for the Record from the Honorable Michelle K.
    Lee, Under Secretary of Commerce for Intellectual Property, Director of
                      the U.S. Patent and Trademark Office
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

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