[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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                       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:]
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                               __________
    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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