[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF THE UNITED STATES
PATENT AND TRADEMARK OFFICE
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
MAY 22, 2018
__________
Serial No. 115-58
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Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
_________
U.S. GOVERNMENT PUBLISHING OFFICE
32-964 WASHINGTON : 2018
COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JERROLD NADLER, New York
Wisconsin ZOE LOFGREN, California
LAMAR SMITH, Texas SHEILA JACKSON LEE, Texas
STEVE CHABOT, Ohio STEVE COHEN, Tennessee
DARRELL E. ISSA, California HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa Georgia
LOUIE GOHMERT, Texas THEODORE E. DEUTCH, Florida
JIM JORDAN, Ohio LUIS V. GUTIERREZ, Illinois
TED POE, Texas KAREN BASS, California
TOM MARINO, Pennsylvania CEDRIC L. RICHMOND, Louisiana
TREY GOWDY, South Carolina HAKEEM S. JEFFRIES, New York
RAUL LABRADOR, Idaho DAVID CICILLINE, Rhode Island
BLAKE FARENTHOLD, Texas ERIC SWALWELL, California
DOUG COLLINS, Georgia TED LIEU, California
KEN BUCK, Colorado JAMIE RASKIN, Maryland
JOHN RATCLIFFE, Texas PRAMILA JAYAPAL, Washington
MARTHA ROBY, Alabama BRAD SCHNEIDER, Illinois
MATT GAETZ, Florida VALDEZ VENITA ``VAL'' DEMINGS,
MIKE JOHNSON, Louisiana Florida
ANDY BIGGS, Arizona
JOHN RUTHERFORD, Florida
KAREN HANDEL, Georgia
KEITH ROTHFUS, Pennsylvania
Shelley Husband, Chief of Staff and General Counsel
Perry Apelbaum, Minority Staff Director and Chief Counsel
C O N T E N T S
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MAY 22, 2018
OPENING STATEMENTS
Page
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the
Judiciary...................................................... 1
WITNESSES
The Honorable Andrei Iancu, Undersecretary of Commerce for
Intellectual Property, Director of the U.S. Patent and
Trademark Office, U.S. Department of Commerce
Oral Statement............................................... 3
OVERSIGHT OF THE UNITED STATES PATENT AND TRADEMARK OFFICE
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TUESDAY, MAY 22, 2018
House of Representatives
Committee on the Judiciary
Washington, DC.
The committee met, pursuant to call, at 10:00 a.m., in Room
2141, Rayburn House Office Building, Hon. Bob Goodlatte
[chairman of the committee] presiding.
Present: Representatives Goodlatte, Chabot, Issa, King,
Gohmert, Poe, Marino, Labrador, Collins, DeSantis, Buck,
Ratcliffe, Johnson of Louisiana, Biggs, Rutherford, Handel,
Lofgren, Johnson of Georgia, Bass, Jeffries, and Demings.
Staff Present: Shelley Husband, Staff Director; Branden
Ritchie, Deputy Staff Director; Zach Somers, Parliamentarian
and General Counsel; Tom Stoll, Subcommittee on Courts,
Intellectual Property, and the Internet; David Greengrass,
Minority Senior Counsel; and Veronica Eligan, Minority
Professional Staff Member.
Chairman Goodlatte. The Judiciary Committee will come to
order. Without objection, the chair is authorized to declare
recess of the committee at any time. We welcome everyone to
this morning's hearing on oversight of the United States Patent
and Trademark Office. I will begin by recognizing myself for an
opening statement.
Thank you, Director, for testifying before the committee
today. America continues to be the leader in innovation. We
brought the world the light bulb, the telephone, the Model T,
the airplane, the television, the microwave oven, computer
chips, personal computers, and so much more. We are now the
leader in developing artificial intelligence; software; cures
for disease. The list of life-altering and life-saving
inventions created in this country is endless.
Our Founding Fathers recognized the need for a strong
patent system to foster an environment of invention and thereby
grow the economy and create jobs. A strong patent system
enables large and small companies alike to invest in R&D so
that they may develop the next great American innovation. To
achieve those goals, patents must be of the highest quality.
Innovative companies must be able to rely with certainty on the
legitimate patents they are granted, while allowing other
businesses to innovate without stepping on the rights granted
to the patent owner by the PTO.
It is equally important that the patent system include
mechanisms for weeding out invalid patents so that they may not
be used to harass legitimate businesses or to extort the
revenue that companies need to grow. During the 112th Congress,
this committee passed the America Invents Act to address patent
litigation abuse and stop patent trolling. This included
establishing the PTO's inter partes review proceedings.
The committee's efforts to deter patent trolling have been
a resoundingly success. The combined effects of our efforts,
along with several important court decisions, have deprive
patent trolls of many of the weapons they used to extort
payments from innocent companies. In recent years, abusive
patent litigation has decreased substantially, as has the cost
of defending a patent claim.
Some stakeholders say these reforms have gone too far. They
argue that many startups and small businesses can no longer
rely on their patents to secure funding needed to grow. They
argue that uncertainty surrounding the validity of patents in
the U.S. has forced large companies and investors to look
outside of the U.S. to other countries where their investments
in the development of new technologies can be better protected.
They point to the PTO's IPR proceedings as contributing to
this perception of uncertainty surrounding patent. Users of IPR
proceedings argue that they are needed to invalidate the many
improperly issued patents that overworked patent examiners
continue to issue.
In this hearing we will investigate whether the PTO is
implementing AIA post-grant review proceedings as Congress
intended to address patent litigation abuse and whether it is
doing so in a manner that is fair to patent owner and
petitioner alike. We want to hear from Director Iancu regarding
what, if any, changes he is considering making to these
proceedings. We also want to hear how he plans to improve
patent examination to ensure that examiners issue only valid
patents.
With the impending expiration of fee setting authority, the
committee will also take this opportunity to investigate
whether efforts to curb fee diversion are still working as
intended, whether the PTO is using its resources wisely, and
whether it is setting reasonable fees. The committee will want
to investigate the status of the application backlog; the
possible transfer of user fees to the Department of Commerce as
part of a shared enterprise program; efforts to address
international IP theft, trademark search quality, and any
actions the agency has taken to address concerns regarding
waste discovered in connection with previous examiner time and
attendance investigations.
I want to thank the Director for his participation in this
hearing, and I look forward to delving into these very
important issues.
Mr. Nadler is not yet with us, so we will proceed to the
testimony. We welcome our distinguished witness, and if you
will please rise, I will begin by swearing you in.
Do you swear that the testimony that you are about to give
will be the truth, the whole truth, and nothing but the truth,
so help you God?
Mr. Iancu. I do.
Chairman Goodlatte. Thank you. Let the record show the
witness answered in the affirmative.
Andrei Iancu is the Undersecretary of Commerce for
Intellectual Property and Director of the PTO. Before joining
the PTO, Mr. Iancu was a managing partner at Irell & Manella,
LLP, where his practice focused on intellectual property
litigation. Prior to his legal career, he was an engineer at
Hughes Aircraft Company.
Your entire written statement will be made a part of the
record, and we ask that summarize your testimony in 5 minutes.
There is a timing light on the table for that purpose. Director
Iancu, we are very honored to have you with us today. Thank
you, and you may begin.
STATEMENT OF THE HONORABLE ANDREI IANCU, DIRECTOR OF THE U.S.
PATENT AND TRADEMARK OFFICE, UNDERSECRETARY OF COMMERCE FOR
INTELLECTUAL PROPERTY, U.S. DEPARTMENT OF COMMERCE
Mr. Iancu. Thank you. Chairman Goodlatte, Ranking Member
Johnson, and members of the committee, good morning and thank
you for this opportunity to discuss the operations, programs,
and initiatives of the United States Patent and Trademark
Office.
I am honored to be here with you today and proud to
represent an agency that plays such an important role in our
Nation's innovation, entrepreneurship, and overall economic
growth. While I have been on this job for only a few months, I
have already seen the experience, dedication, and
professionalism of the office's employees. Together we are
focused on engaging in a new dialogue surrounding the patent
system, a dialogue centered on the brilliance of inventors, the
excitement of invention, and the incredible benefits they bring
to the American economy and country as a whole.
For the intellectual property system to function as
intended, rights owners and the public must have confidence in
the system. I believe that we need to take steps to strengthen
that confidence. This requires focusing our efforts on an
intellectual property system that is reliable, predictable, and
high quality, and that promotes inventors, invention, and
investment.
Mr. Chairman, my written statement has detailed information
on an array of USPTO programs, initiatives, and recent
accomplishments. In the time I have remaining, I would like to
highlight some issues of particular interest. First, we are
pleased that the administration and Congress continue to
provide the USPTO with access to all anticipated fee
collections to support a budget that maintains the workforce we
need and that improves operations.
A critical factor in managing the agency's budget has been
fee setting authority, which is scheduled to expire this coming
September. This authority has allowed the agency to efficiently
and cautiously adjust user fees as needed to recoup operational
costs and drive effective operations. We look forward to
working with this committee on legislation that extends this
important authority as soon as possible. I want to thank
Congressmen Chabot and Johnson for introducing legislation on
this issue yesterday.
Second, on patents. We are carefully reviewing the AIA
trial process conducted by our patent trial and appeal board to
ensure that the agency's approach to these critical proceedings
is consistent with the intent of the AIA and relevant court
rulings and the overall goal of ensuring predictable, high-
quality patent rights. We recently issued guidance on the
impact of the recent SAS case of the Supreme Court that
requires the USPTO to decide the patent ability of every claim
challenged in a petition when an AIA trial is instituted.
Although in the near term this adds work for the parties
and our administrative patent judges, our board is well-
positioned to address the increase at this time. We are
assessing whether further adjustments, procedural or
substantive, or additional resources will be needed.
Earlier this month, we also published the notice of
proposed rulemaking that would change the claim construction
standard for interpreting claims in PTAB proceedings to the
same standard used in patent litigation in district courts and
at the ITC. We are also studying the institution decision, the
amendment process, and the variety of standard operating
procedures, among other things.
The current patent eligibility legal landscape is another
critical area, and we are considering ways to increase the
certainty and predictability of the eligibility analysis. At
the PTO, we are working to provide more concrete tests to the
extent possible, given Supreme Court precedent, to guide
examiners and the public toward finding the appropriate lines
to draw in this area. Last month, for example, we issued
guidance with respect to the conventionality analysis in step
two of the Alice framework.
This is an area we must all address and one on which we
will continue to engage stakeholders and the public and should
Congress decide to explore a legislative adjustment of section
101, we would work with this committee to explore viable
options. Third, on the trademark front, we are working to
manage a recent increase in foreign filings and to assess ways
to declutter our register in a balanced manner.
Finally, with respect to our technology, we are continuing
to improve the USPTO's infrastructure for all operations,
including production systems for both patent and trademark.
Thank you again for this opportunity to testify today, and I
look forward to your questions.
Chairman Goodlatte. Thank you, Director. We will now
proceed under the 5-minute rule with questions, and I will
begin by recognizing myself. You have stated that the PTO is
examining how and when the PTO institute post-grant
proceedings, the standards it employs during proceedings, and
how the PTO conducts the overall proceedings. What specific
changes to AIA post-grant proceedings are you likely to make in
the coming months, and why are these changes necessary?
Mr. Iancu. So, just a couple of weeks ago we had proposed a
new rule to change the claim construction standards to make it
the same as the standard used in district courts and at the
ITC. The main motivations for that change would be to increase
predictability and consistency with other proceedings on an
issued patent and to increase judicial efficiency.
We are looking at the amendment process, among other
things, to increase the ability and to simplify the process for
amendments during the AIA trial process itself, and we can go
into more details about that as needed. We are also looking at
the institution process. The office has discretion as provided
by the AIA on institution once the substantive standard is met,
and there are a variety of things to consider during the
institution process.
For example, have the same issues been considered already
by the examiner during the initial examination or by a court in
parallel litigation or otherwise? Those are just some examples.
And we are also looking at the actual hearing itself; we have
heard from stakeholders that perhaps there is not enough time
in some of the proceedings at the hearing. Some folks have
asked whether there can be testimony, witness testimony, at the
hearing, or an increased opportunity for such testimony. There
are pros and cons for those issues.
Chairman Goodlatte. Let me stop you there and go to a
couple of other questions I want to get in my time here. You
have stated that the U.S. Supreme Court's recent decisions
regarding and establishing a new patent eligibility test are
difficult to follow and that something must be done to provide
better clarity on where the line of eligibility should be
drawn. Can you explain in some detail the problem with the
Court's current patent eligibility test and what if anything
should be done to fix it?
Mr. Iancu. Sure. So, the Supreme Court's framework from
Alice is a two-step analysis that the courts and the Patent
Office are implementing. And there is some confusion in
industry as to what some of the terminology means and what is
patentable and what is not patentable.
So, things such as what exactly is an abstract idea? What
exactly does it mean to be directed to--those specific words:
directed to--the abstract idea? What does it mean to be
conventional, which is part of step two? And what we can try to
do from the office's perspective within that construct is to
try to provide better guidance for our examiners and,
obviously, the applicants who come before us as to some of
those terms, as we did last month when we provided additional
guidance as to the term ``conventional.''
What does it mean, and how should the examiners document
it? That was an example of things we can do, and we are looking
at providing additional guidance on some of the other aspects.
Chairman Goodlatte. The AIA established a reserve fund
whereby Congress appropriates back to the agency fees collected
from its users, and excess revenue is deposited to a PTO
account. Is the PTO annually receiving all the funds it
collects from its users, or are some of those funds not being
appropriated back to the agency?
Mr. Iancu. By and large Mr. Chairman, we have been
receiving our appropriated funds. The only exception in memory
was during sequestration. But other than that, the system is
working, I believe, as intended and as provided in the AIA.
Obviously, fee setting authority, as I have mentioned in my
testimony, is critically important, and hopefully we can work
on that before it expires in September.
Chairman Goodlatte. With the impending expiration, can you
explain how the agency has demonstrated that it is capable of
setting fees to only recover the cost of examining patent
applications and registering trademarks and not more?
Mr. Iancu. Sure. So, we are entirely funded by user fees.
We are not funded by taxpayer funds, and we carefully watch our
expenses. We very cautiously raise fees; it is a multiyear
process. Before we raised the last fees, it took several years
to go through that process. We go through a public comment
period; we have the public advisory committees, the patent and
trademark advisory committees, that look at what we do, and we
discuss with them those efforts.
And I should say that we do not only raise fees. Sometimes
we lower fees in order to drive a more efficient operation. So,
for example, we lowered some trademark filing fees in order to
make sure that we encourage electronic filing. That is just one
example.
Chairman Goodlatte. Thank you very much. My time has
expired. The gentlewoman from California, Ms. Lofgren, is
recognized for 5 minutes.
Ms. Lofgren. Thank you, Mr. Chairman, and I have been
looking forward to this hearing. Mr. Iancu, this is the first
time we have had a chance to meet, and there have been some
proposed changes in the office that, frankly, cause me concern.
I wanted to express my concern on the rulemaking on claims
construction from BRI to the judicial standard.
Congress has been active on this, and as the chairman
knows, we worked very hard, and we worked in a bipartisan basis
to accomplish a reform. And we did that in the context of
competing interests and consideration of various alternatives.
And in the end, the standard was a part of a much larger
package to decrease patent litigation, and we accepted this.
And it just causes me concern, especially in light of the
recent Supreme Court decision upholding the constitutionality,
that the office would move forward and move in a different
direction. I am not saying that it is unlawful, but it does
seem to me to circumvent Congress' prerogative on this issue.
And, you know, you are seeking for us to eliminate our
prerogative to set fees while you are assuming our prerogative
in a way that I think is disturbing, honestly.
Now, as I have looked at the suggestions on why this is
necessary, I have not found them compelling. One concern I have
as well as the potential of res judicata arising from district
court interpretation tying the hands of the PTAB, which does
not happen now because there are different standards.
And if you make this change, the PTAB could be bound by res
judicata to follow a district court or the ITC's finding and
validity, which would completely blow up what we were trying to
do as a Congress to clear this out. I did not see anything in
your testimony addressing that threat, which is a potential,
but it would be a very serious one for us.
You know we were well aware of the competing views on this
among different industries, and when we made the decision that
we did, you know, it is hard to get legislation passed and into
law. This was a rare exception to how hard that was, and signed
into law, and the Republicans and Democrats worked together to
make it happen.
And it looks to me that the people who disagreed with the
decision and lost in the Congress; they went to the Supreme
Court. They lost in the Supreme Court, and now they are going
to you, and you are reversing what the Congress decided to do
and what the court said was permissible to do. So, I have a
concern about that.
Now, it is my understanding, according to the study out of
the PTO Office, that 83 percent of all petitions challenging
Orange Book-listed patents resulted in a patent being
unchanged. So, I do not consider, you know, the death squad
argument a very persuasive one. You know, one of the reasons
why this works is that during the process you can do claim
amendments. Are you looking to eliminate claim amendments if
you go to this judicial standard as well? In which case, that
would thoroughly, I think, undercut what the Congress tried to
do and, I fear, return to the kind of unbridled patent fooling
that led us to work together to make some changes.
So, I guess those are a lot of questions without much time
for you to answer, but I think they are significant ones, and I
think they are shared among many members, both Republicans and
Democrats. So, if you could address those issues.
Mr. Iancu. Sure. Let me try to be brief in the amount of
time left here. So, first of all, the AIA statute provides for
discretion to the Patent and Trademark Office----
Ms. Lofgren. I did not challenge that you did not have the
discretion, but that using the discretion was essentially
preempting the prerogative that the Congress had given an
indication to do.
Mr. Iancu. So, this is an exercise of that discretion based
on 5-plus years of experience. You know, it turns out, after
more than 5 years and thousands of petitions for post-grant
review, IPRs, and the like, that more than 80 percent of our
petitions and the patents in our--in IPR--are involved in
parallel litigation. And one of the purposes of the proposal is
that we want consistency, perhaps, between the office and
district court litigation and the ITC, which, again, more than
80 percent of the patents are involved in.
Among other things, it reduces gamesmanship between the
various forum, and it really does work to enhance and drive
towards the congressional intent that was behind the AIA to
provide an alternative to district court litigation. So,
getting the standards closer together or on the same page would
reduce the potential discrepancy and therefore enhance the
forum as a true alternative to litigation.
To answer, Congresswoman Lofgren, the last question, as I
mentioned in my opening statement, we do plan to have an
amendment process and to enhance it. And then, one final point:
in order to have a predictable patent system that folks can
rely on, it seems that the meaning of a patent--when one sits
down to look at a patent and try to invest in it or invent
around it, where the owner or the public--it seems that the
meaning of that patent or the boundaries of that patent, at
least objectively, should not depend on the forum on which it
might happen some years down the line that that patent is
challenged in if one is to make predictable decisions based on
that patent.
So, those are some of the reasons behind our proposal, and
obviously the proposal is up for comment, and we will see what
the public has to say.
Ms. Lofgren. Mr. Chair, I know that my time has expired,
but----
Chairman Goodlatte. It has expired.
Ms. Lofgren. If I could ask for just 30 seconds.
Chairman Goodlatte. You have already got 2 minutes and 30
seconds.
Ms. Lofgren. But there are so few of us here.
Chairman Goodlatte. Someone can yield to you, and you can
follow up.
Ms. Lofgren. All right.
Chairman Goodlatte. The chair recognizes the gentleman from
Ohio, Mr. Chabot, for 5 minutes.
Mr. Chabot. Thank you, Mr. Chairman. Mr. Director, back in
2016 the House Oversight Committee conduced a review of your
agency and found there to be over $18 million in unsupported
hours paid by the PTO, including at least one employee who was
paid for 730 hours that he did not work, resulting in the
erroneous payment of $25,000 to the employee. At the time, the
Inspector General testified that the PTO did not fully address
all the recommendations issued in the 2015 report.
While the legislation that I introduced yesterday, along
with my colleague on the other side of the aisle, Mr. Johnson,
gives the PTO Director the ability to raise and lower fees to
support the operations of the PTO, since you have been
Director, what has the agency done, and what is it doing to
address examiner time and attendance abuses described in the
2015 general report?
Mr. Iancu. Congressman Chabot, this is a critically
important issue to me and to the Office. No abuse should be
tolerated, and any abuse needs to be quickly discovered and
promptly dealt with. All of the recommendations by the OIG have
been implemented, and more. Things such as badging in and
badging out have been implemented now; logging in and logging
out as well; use of collaboration tools; and mandatory schedule
notifications to managers. Things of that sort have been
implemented, and we continue to look at whether other measures
are necessary. But we have gone beyond what the recommendations
were, and for good reason, because this is such an important
issue.
Mr. Chabot. Thank you very much. I will move on. What is
the PTO doing to investigate reports that there has been a
flood of questionable trademark applications from overseas,
many containing false information?
Mr. Iancu. This is a very important issue as well. The
number of applications, trademark applications, from China, for
example, have increased more than 1,100 percent in the past 5
years, and we believe that a significant number of those and
some others from overseas are fraudulent. They have fraudulent
claims to use, for example.
So, the office has, first of all, dealt with the increase
well. In other words, we have staffed up; we have worked more
efficiently, so our pendency times and things like that on the
trademark operations have not suffered.
Mr. Chabot. Is the number that accurate? Let me just ask
you this, because my time is kind of limited, too. Is it
reasonable for us to believe that you will give additional
scrutiny to those coming from overseas, especially those in
which there is some indication they may be questionable?
Mr. Iancu. We are, and we are looking at some additional
measures as well that we can discuss, time permitting.
Mr. Chabot. Thank you very much. And again, because I am
running out of time; I do not think I have time for two. But,
one, is there any evidence that suggests that some large
companies are using IPR proceedings as a tool to invalidate the
patents of small companies--I happen to be the chairman of the
House Small Business Committee right now--to prevent them from
growing and becoming a competitive threat?
Mr. Iancu. You know, I am not aware directly of specific
statistics to that extent. Having said that, the process is
available to be used as necessary by folks who have questions
about the validity of a patent. If there is any abuse on any
side we need to look at it carefully and address it, obviously.
Mr. Chabot. Okay. We may be providing some information
about that to you, and we would welcome working with you on
that. I do have time for one final question; I have got all of
42 seconds. What is the current status of the patent
application backlog?
Mr. Iancu. It is doing well under our measures. So, our
backlog has decreased; our pendency time has decreased, both
for the first office action as well as the ultimate issuance.
So, the first office action pendency is down to a little bit
over 15 months, total pendency is down to a bit over 24 months,
and we keep improving on those numbers.
Mr. Chabot. Thank you very much. Mr. Chairman, my time just
expired. Thank you.
Chairman Goodlatte. The chair thanks the gentleman and
recognizes the gentleman from Georgia, Mr. Johnson, for 5
minutes.
Mr. Johnson of Georgia. Thank you, Mr. Chairman, and
congratulations to you, Mr. Iancu, on your position. As you
know, the fee setting authority for the USPTO has allowed the
USPTO to efficiently set user fees to recoup operational costs.
I have worked with Congressman Chabot to introduce legislation
that would renew the USPTO's fee setting authority, which is
scheduled to expire in September of this year.
Do you believe that it is important that the USPTO be
allowed to control its finances, and if so, why?
Mr. Iancu. Yes, thank you, Congressman, both to you and to
Congressman Chabot for introducing the legislation yesterday.
It is critically important for our office to be able to set our
fees appropriately. We are entirely based and supported by user
fees; we are not supported by taxpayer dollars beyond what is
provided by our users. We run a more than 12,000-person
operation, $3.5 million budget, give or take, and it is
critically important that we be able to manage efficiently and
effectively the fees and those operations to serve our users.
And as I mentioned a bit earlier, we need to be able to
increase the fees as necessary to continue the highest level of
operations, but sometimes we also reduce fees as appropriate to
run an efficient operation. We have reduced some trademark
filing fees, for example, to encourage electronic filing.
Mr. Johnson of Georgia. All right. Thank you. Let me ask
you this. How is it that you provide training and guidance to
USPTO's employees that support the issuance of high-quality
patents? And is your fee setting ability impacted, or does that
impact your ability to train and your employees?
Mr. Iancu. Yes, absolutely. So, our ability to set the fees
appropriately and efficiently allows us, among other programs,
to train our examiners at the highest levels possible.
Currently, we have consistent training seminars for our
examiners; we have programs for our examiners to work with the
public and with our stakeholders for training purposes, which
is a two-way training kind of thing. All those activities
obviously require resources, and having fee setting authority
is critically important for that.
Mr. Johnson of Georgia. What guidance has the USPTO
provided to patent examiners and the public to understand
Supreme Court decisions issued between 2010 and 2014?
Mr. Iancu. So, with respect to section 101, patentable
subject matter, for example, there have been a number of
Supreme Court cases as well as Federal circuit decisions that
we track very closely, and we issue guidance to examiners
whenever important cases come out from the Supreme Court and
the Federal circuit as well. We provide summaries to our
examiners of those cases, and where appropriate, we provide
guidance of how to implement those decisions in future
examination.
On a going-forward basis, especially with patentable
subject matter, we want to provide forward-looking type of
guidance to our examiners as to where we think the Supreme
Court law is requiring the lines of patentability to be drawn
and how to make it more clear to the examiners and the
applicants that come before them as to how to draw those lines.
Mr. Johnson of Georgia. Thank you. Can you give us a
critique on how you believe the Patent Trial Appeal Board has
been functioning?
Mr. Iancu. I do think that the PTAB has been functioning
well. It has met its statutory deadlines in virtually all cases
with very few exceptions. We have not gone over the 12-month
period; we have never gone over the 18-month statutory period.
So, it has gone well from those points of view. I am aware of
significant criticism; I am also aware of significant support
both ways from stakeholders. There is a lot of attention on our
operations from the PTAB.
There is criticism, as I have mentioned earlier, that there
is an inconsistency between the treatment we provide to patents
in reviewing patents and the PTAB versus the district court,
and to that end we have proposed a change in the claim
construction rule standard a couple of weeks ago. And we are
looking at other potential changes as well on a variety of
subjects, and we will see if we need to make more.
Mr. Johnson of Georgia. Thank you sir. With that, I yield
back.
Chairman Goodlatte. The chair recognizes the gentleman from
California, Mr. Issa, for 5 minutes.
Mr. Issa. Thank you, Mr. Chairman. Director, like Ms.
Lofgren, I am concerned about a change in standards, and I just
want to run through quickly: you oversee the examiners who,
essentially, decide what is patentable, what is not patentable,
what the claims are, and they do so based on their expertise,
correct?
Mr. Iancu. Yes, correct.
Mr. Issa. Okay. And when somebody comes back to the Patent
and Trademark Office for an inter partes reexamination, you
currently use essentially a de novo standard, because you are
able to look at it to a great extent in the same way as the
examiner looked at it but with new information, correct?
Mr. Iancu. Well, I do not know that I would say that it is
de novo, because the original examination is of record.
Mr. Issa. No, I understand that, but I said, ``Except as to
new information.'' In other words, the question that a judge is
being faced with is ``Here is something we did not previously
consider. Had an examiner had it, would they have granted this
claim?'' And if they look and say, ``With this new information,
the answer is no,'' they make that decision. So, their judgment
is much more similar to the examiner than it is to the
restrictions that an Article III judge has under current law,
correct?
Mr. Iancu. I do not know that I would put it quite like
that, because----
Mr. Issa. Well, I am putting it like that because you are
considering moving a standardization to the standard that an
Article III judge has, which is a deference to the examiner.
Mr. Iancu. There is a presumption of validity that exists
in district court litigation. Having said that, if I may----
Mr. Issa. Go ahead, please.
Mr. Iancu. Having said that, a significant difference
between a PTAB proceeding on an issued patent versus the
original examination is that for the PTAB proceeding, just like
in district court, the original record in its entirety is
available to the PTAB panel. And from that point of view, that
proceeding is much more akin to what happens in district court.
The same record is available.
Mr. Issa. Let's continue on, because I want to get this one
thought in, and it is going to take the whole time. So, when
you go to an ex parte reexamination, essentially going back to
a senior examiner--but let's just say it is the same examiner
for purposes of the public understanding that there is no
difference--those examiners do look at the record and the new
evidence, and they make a consideration essentially. And I have
had examiners give me this personally for years; they
essentially are making a de novo decision there.
They are looking and saying, ``If the original examiner had
known this, would he or she have given it?'' And sometimes they
are even looking at a material mistake. But the reality is ex
parte reexaminations have a standard that is much more similar
to PTAB than to Article III. Is that not correct?
Mr. Iancu. Well, a reexamination is being conducted by
examiners in the----
Mr. Issa. Okay. Well, let's go back to ex parte
reexamination, then. At the time that PTAB was envisioned,
there were groups that wanted a one-and-done, and they wanted
this other standard, and they did not get it. So, now here we
are; you have a court which has a bad habit, which is it does
not amend patents. And you and I have spoken offline, so let me
just run through a question for you, and information for the
public and the others on this panel.
Currently, the PTAB judge does not have the benefit of the
expertise of the examiners, and we, you and I and others, have
called that an on-ramp. In other words, can we bring examiners
from the other part of your operation as undersecretary in to
provide direct guidance and help for the patent, PTAB, judge so
that we can have more amendments and a more accurate
reexamination?
And then, the second part of the question is because at the
end of this they may have a shambles of a patent, but they
still have patentable material, can we have an equally
expedited process through an ex parte reexamination? In
whatever time the chairman would give you, I would like your
thoughts on both how we could give you the on-ramp capability,
specific authority to use examiners from the other part of your
operation to make the system work better, hopefully, and then
what your thoughts would be on a post-PTAB conclusion of a
quick reexamination to empower the patent holder to legitimize
whatever patentable material is left.
Chairman Goodlatte. The time of the gentleman has expired,
but the Director may answer the question.
Mr. Iancu. Thank you. So, the amendment process is very
important, Congressman Issa, because it is part of the AIA. The
statute does provide for an amendment, the right to have some
amendments considered, and it requires that any amendment claim
should be addressed in the final written decision.
The statute likewise requires that the final written
decision come within 12 months after institution, barring some
extension up to 18 months. So, that means that whatever
amendment needs to take place, part of the statute needs to
happen during the AIA time frame. We are looking at how to do
that in an expeditious and efficient manner that allows the
parties in the IPR process, or the PGR, as it may be, to
participate and have an appropriate amendment.
And potentially, an on-ramp, as you call it, perhaps
bringing up an examiner to assist is one option among many, and
that we can do at the Office within our current system if,
logistically, it works out. We can also do an ex parte reexam
afterwards or at any time the provisions are in place. And the
question that the Congressman raises with respect to an
expedited option; that is something we are looking at as well.
Mr. Issa. Thank you, Mr. Chairman.
Chairman Goodlatte. The chair thanks gentleman and
recognizes the gentlewoman from California, Ms. Bass, for 5
minutes.
Ms. Bass. Thank you, Mr. Chair. Director, I would like to
ask you one question, and then I want to yield some time to my
colleague. I wanted to know what actions that your Office is
planning to take to engage stakeholders on issues related to
patent qualities.
Mr. Iancu. Sure. So, we have a whole variety of programs at
the PTO to address patent quality and to improve and increase
the quality of the patents that we issue. It is a very
important issue for us.
To address the Congresswoman's specific question about
engaging stakeholders on that issue, we spend a lot of time
with stakeholders; I have myself. We have several programs on
the specific issues; so, in particular, we have a program where
we have meetings between our examiners and stakeholder groups
at large to discuss the technology and issues surrounding
improving understanding of that particular technology.
We also have meetings, and we encourage meetings between
examining groups and companies, where, again, the understanding
of a specific technology area can be developed both from the
PTO's point of view and the public's point of view.
Ms. Bass. How are those meetings noticed? How do people
know about them?
Mr. Iancu. Well, there are discussions with stakeholders
directly.
Ms. Bass. They are public announcements of meetings?
Mr. Iancu. You know, I am not sure. I have been there only
3 months, so I do not know if there are public announcements,
but I can look into that.
Ms. Bass. Okay, thank you. And I will yield my time to Ms.
Lofgren.
Ms. Lofgren. I thank the gentlelady for yielding. I just
wanted to get back to the questions I was asking earlier, which
is, you know--and I think my colleague from California, Mr.
Issa, got into some of this as well--the biggest patent quality
issue is overbroad claims. And you know, the IPR was envisioned
not just as a way to invalidate patents but to bring some
sanity back to the scope.
There is an issue relative to what evidence can be brought
to bear on that decisionmaking, but I am interested in, instead
of going to the judicial standard, why you might not seek our
legislation to provide for greater evidentiary provision as an
alternative.
And I also want to say: my staff has been investigating
this in terms of the USPO; we have looked at the change. And
they have been told that in the past, not a single past PTAB
decision would have been decided differently under a judicial
claim construction. And if that is the case, I do not see how
greater predictability and certainty would be the result, that
generally these are the same issues.
I sound unduly critical; I hope I do not, because we do
appreciate you and everybody in your office. But your scope is
the efficiency of the office and the like. You know, we were
responding to, you know, the Eastern District of Texas and
everybody having to appear and be held up by patent trolls,
which is really not the focus of your office. And so, I am
concerned, however well-intentioned your efforts are in terms
of, you know, your world, with some missteps we end up where we
were before we adopted the bill.
And understanding that we gave discretion to the Office, I
think it would be very smart to have some collaboration with
this committee before you make steps of this nature, because we
had a much broader view of this whole thing than is your legal
obligation to look at. So, I do not know if you have a comment
on this.
Mr. Iancu. Sure, I can comment on a variety of the points
the Congresswoman makes. We are very much engaged with
stakeholders and with members of the committee to discuss this
and many other issues.
Ms. Lofgren. No one talked to me.
Mr. Iancu. And I would be very happy to do so, and we do
have quite a bit of time left in the comment period, and I
would be very happy to come and speak with you as well. Now, to
address a couple of the other points you have raised, the
ultimate question of the breadth of a patent, obviously, it is
not good to be overbroad, but the question is, overbroad to
whom and when? Right?
So, the ultimate question of a patent's enforceability is
when it comes to a court when an owner wants to enforce that
patent and the accused infringer wants to defend against it.
Ultimately, the breadth is in that context and----
Ms. Lofgren. Well, if I may, my time is about to expire.
That is a law school answer, and in the real world we have got
patent trolls out there holding people up. And I see once again
my time has expired, Mr. Chairman, and I yield back.
Chairman Goodlatte. It has indeed. The chair recognizes the
gentleman from Iowa, Mr. King, for 5 minutes.
Mr. King. Thank you, Mr. Chairman. Director, I appreciate
your testimony here this morning, and I would like to start out
with: can you give us a sense of where America has men as far
as the strength of our patent system in this country in
relation to the rest of the world, historically or, say, the
last half a century or so?
Mr. Iancu. I am sorry, Congressman, I missed the question.
Mr. King. Oh, okay. Could you give us a sense of where
America has been in its standing in the world with our patent
system and, say, in relation to the rest of the world over the
last half a century or so?
Mr. Iancu. Yes. So, for a long time in a variety of studies
we have been the number one system in the world. The ranking in
a variety of studies has been decreasing in recent times. There
are a number of studies that we can point to as well as
anecdotally. We hear evidence of that; one example is the U.S.
Chamber of Commerce study where we had been ranked number one
for a number of years, and we fell to number 10 a couple years
ago, and this year we fell to number 12.
I should say that the rankings at the top are close to each
other, so even though we are ranked number 12, we really are
only half a point behind on a scale to eight behind the first
position. And in other words, we can make up ground.
Mr. King. Okay. I like the attitude part of that thing, but
when was the last year we were number one?
Mr. Iancu. I believe 2 or 3 years ago.
Mr. King. Okay. And do you have any idea as to what has
caused that to slip, and is it the other countries are getting
better? We are getting worse?
Mr. Iancu. Well, it is a combination of both, actually,
Congressman, and from our point of view, the various studies
point to two main issues. One is decreased certainty with
respect to patentable subject matter--that is section 101--and
the second is the decreased certainty caused by post-grant
proceedings such as the IPR, and we are looking at the PTO at
ways to address both of those issues.
Mr. King. Did the passage of the American Inventions Act in
2011 impact the result of our standings in the world with
regard to our patents?
Mr. Iancu. The American Invents Act does a number of
things, and some of the things have helped the patent system,
but the one issue that is in the AIA that has negatively
impacted the various rankings is the implementation of the IPR
process. That does not mean that we cannot improve it and make
it work as it was intended by the AIA, and those are the types
of steps we are trying to undertake right now.
Mr. King. Did the changing of the ``first to invent''
versus ``first to file'' impact this?
Mr. Iancu. Congressman, I have not seen specific evidence
of that particular issue.
Mr. King. It would come to you anecdotally first?
Mr. Iancu. We would probably see it anecdotally. We have
heard comments on both sides of that issue, but it is not one
of the main issues. The main issues were the couple that I have
mentioned earlier.
Mr. King. Yes, and I appreciate that, and it is valuable
information to this committee. Also, we have heard the
President talk about the piracy of U.S. intellectual property
by the Chinese in particular. And he has pegged that number, at
least in Twitter, at $300 billion a year. Do you have any data
that supports that or contradicts it? Would you speak to the
scope of that?
Mr. Iancu. I personally do not have that with me right for
today. I can definitely look into that. However, I do know that
the piracy of the intellectual property of American companies
is very, very large, and we fully support, and we do work in
the interagency process in the administration. We do support
the administration's efforts in this area.
Mr. King. Okay. I would like to point out to you that I
have introduced legislation a number of years. In this Congress
it is H.R. 1048, and what it does is it directs the U.S. Trade
Representative to conduct a study, which I understand he
already does, to determine the value of U.S. intellectual
property that is pirated by the Chinese and then to apply a
duty on all products coming from China in the amount equivalent
to recover that intellectual property loss plus an
administrative fee and then distribute those proceeds to the
rightful property rights owners.
It is a self-correcting piece of legislation that
essentially says if you are going to steal from us we are going
to back-charge you for it, so go ahead and keep it up. And that
is in the repertoire of our trade negotiators today, and I
wanted to point that out to you, and I noticed you wrote down
H.R. 1048. Do you have any comments on that?
Mr. Iancu. Well, all I will say is that we definitely
support efforts to enforce our intellectual property worldwide
and to protect our companies from having their IP stolen.
Mr. King. Thank you, Director. I appreciate it. I yield
back, Mr. Chairman.
Chairman Goodlatte. Thank you very much. The chair
recognizes the gentleman from Rhode Island, Mr. Cicilline, for
5 minutes.
Mr. Cicilline. Thank you, Mr. Chairman. Thank you to our
witness. Many U.S. patent holders are finding that technology
that they have designed has been usurped and at times reverse-
engineered in a foreign jurisdiction. For example, some U.S.
businesses who sell their products in China find that another
company has replicated their design and obtained a Chinese
patent for the U.S.-owned product. Of particular concern to me
is the theft of American design defense technology.
It is my understanding that PTO's Intellectual Property
Attache program and its Office of Policy and International
Affairs are working to improve policies abroad for the benefit
of U.S. stakeholders. What would you recommend to a U.S.
business that has discovered that its patent has been
misappropriated in a foreign jurisdiction? I have heard from a
number of constituents, actually, about this issue and would
love some guidance from you as to what you think the
appropriate course of action is.
Mr. Iancu. Well, I appreciate the Congressman's mention of
our attaches. They perform critically important functions
overseas and they support our companies doing business
overseas. In a situation as you have mentioned, the U.S.
companies doing business overseas should obviously take
advantage of enforcement mechanisms in those countries. They
can get in touch with our attaches in the relevant region; they
can also get in touch with the USPTO itself here at
headquarters in D.C. and elsewhere. And between our attaches
and folks at the headquarters, we can provide help and guidance
through the enforcement mechanisms in the relevant country that
they are operating in.
Mr. Cicilline. And does that include technical assistance?
Because for a lot of these operations they may not have the
capacity to sort of engage in the work that is necessary to
protect their patents.
Mr. Iancu. Yeah, we can help them understand the local
laws, for example, and how to navigate those and direct them to
the appropriate folks in the relevant jurisdictions for
technical work and the like.
Mr. Cicilline. And are there additional steps that the
attache program in the Office of International Affairs is
taking to reduce patent theft in China specifically? This seems
to be a well-documented problem. Are those offices taking steps
to make a significant impact in that area, and if so, what are
those steps?
Mr. Iancu. Well, we are watching carefully what is
happening overseas and what is happening with the potential
theft of our IP. With respect to China in particular, we have
an office at the PTO that is focused expressly on China and
what takes place there. And through our attaches we keep our
ear closely to the ground to make sure we have the appropriate
information. And I should say that the PTO is working closely
in the interagency process, including with the USTR, to address
the theft of American IP in China and elsewhere.
Mr. Cicilline. Thank you. Thank you, Mr. Chairman. I yield
back.
Mr. King [presiding]. The gentleman yields back, and the
chair will now recognize the gentleman from Pennsylvania, Mr.
Marino.
Mr. Marino. Thank you, Chairman. Welcome, Director.
Congratulations.
Mr. Iancu. Thank you.
Mr. Marino. We have discussed a lot of things:
Constitutional cases; ex parte reviews. I just want to make
something that is very basic a question I have for you. What
are the two or three tools you need to improve the
effectiveness and the efficiency of your office?
Mr. Iancu. So, first of all, we need the fee setting
authority. It is critically important to the fundamental
operation of the office, and as we know, it expires shortly.
But I am very happy to see that there is a bill introduced, and
hopefully we can work on that or other legislation in that
regard.
We are very carefully monitoring the balance of the IP
system on a variety of issues as well. So, the key to a well-
functioning patent system is a careful balance; the rights of
the owners and the rights of the public as one example. We are
meeting with stakeholders across the spectrum and trying to
understand their various needs. So, the discretion given to us
in the various statutes to implement the patent laws and
balance them, balance the process carefully: this is something
we need and that we are implementing with a very steady hand.
Because to achieve balance we just simply have to be
carefully monitoring the various needs on all the sides. And we
are engaged in that process as we speak.
Mr. Marino. Do you have enough qualified personnel?
Mr. Iancu. I think we do. We have more than 12,000
employees of the USPTO, many, many of them with higher
education degrees. The examiners that we have, both on the
patent and trademark side, get significant training, and they
come in with good qualifications. So, overall, I would say,
yes, we have the appropriate levels of personnel.
Mr. Marino. Do you have the state-of-the-art 21st-century
equipment?
Mr. Iancu. We have technology that serves the needs of the
office and of the operations right now. That is a process that
is in the need of continuous improvement. Technology keeps
improving. One thing that we are working on is improving
technology for the initial search process, for example.
Critically important to the patent quality and the
predictability of our patents is that we surface upfront the
most relevant prior art for a particular patent. And given the
growing amount of publications out there, improved technology
might help us in that regard, and we are working towards that
end. So, we have good technology, but we really are always in
the need for improving it.
Mr. Marino. Thank you. I yield back.
Mr. King. The gentleman returns his time, and the chair now
recognizes the gentlelady from Florida, Ms. Demings.
Ms. Demings. Thank you so much, Mr. Chair, and thank you to
the Director for being with us today. With respect to present
trade agreement negotiations, has your office been involved in
seeking to include strong IP protection and enforcement
provisions in a revised agreement? And if so, how has your
office and your employees been involved?
Mr. Iancu. And I apologize; we are speaking about NAFTA,
or?
Ms. Demings. Yes.
Mr. Iancu. Yes? Okay. So, yes, our office is working
closely with the U.S. Trade Representative on NAFTA and,
frankly, other trade negotiations as well. We are providing
technical assistance, including in any such agreements state-
of-the-art IP provisions are critically important, and we do
provide the technical assistance to the Trade Representative in
that respect.
Ms. Demings. How does your office advise the administration
on international and domestic copyright policy issues?
Mr. Iancu. What I just mentioned is one example, working
with the Trade Representative on that. We also work closely
with the Copyright Office itself.
Ms. Demings. And how do you notify the administration,
though?
Mr. Iancu. Well, we work in the interagency process through
the administration and through the Secretary of Commerce, for
example. The second part of my title is Undersecretary of
Commerce for Intellectual Property, so we are called upon to
advise on all intellectual property issues.
Ms. Demings. I know you spoke somewhat earlier about the
attache program and how important and critical it is. Could you
talk just a little bit? I think my colleague kind of ran out of
time on that. Could you just talk a little bit more about how
they promote strong and balanced protection and effective
enforcement rights abroad as well?
Mr. Iancu. Sure. The attaches in a variety of regions
around the world sometimes are the first point of contact for
American companies doing business overseas, and frankly, for
others; members of Congress, for example, traveling overseas
and other administration officials traveling overseas. One
thing that would help improve the functioning of the attaches
would be an elevation in diplomatic rank at their various
missions.
Ms. Demings. Okay. And also, you spoke a little bit about
the importance of being able to set or have an authority over
the fee schedule or the fees. Could you elaborate a little bit
about why that authority is so critical?
Mr. Iancu. Sure. As I have mentioned, we are funded
entirely by user fees, not taxpayer dollars, and we operate a
very large entity that is focused on delivering the highest
quality services to our users. To that end, we need to be able
to attract, retain, train the highest levels of professionals.
We obviously compete in the STEM world with private
entities out there. And overall, we need to be able to keep
pace so that we do have the highest qualified workforce, which,
as I have mentioned earlier, I think we do right now, and we
need to be able to efficiently manage that workforce. And in
addition, our fee setting authority allows us to drive and
improve certain interactions with our users. For example, we
can reduce fees in order to incentivize certain activities such
as electronic filing of applications.
Ms. Demings. And finally, you are having no challenges at
all with recruiting or retaining a qualified and well-trained
workforce?
Mr. Iancu. Well, I think we are doing a very good job at
that. I think we have currently the tools in place to allow us
to do a very good job at that, and I should mention that our
turnover rate, our attrition rate, is very low compared to
industry. The USPTO is a wonderful place to work, and I think
the processes we have in place help that. But our ability to
have access to our fees and to set them appropriately to
continue attracting and retaining the highest-level
professionals is critically important.
Ms. Demings. Thank you so much. Mr. Chair, I yield back.
Mr. King. The gentlelady returns her time. The chair now
recognizes the gentleman from Louisiana, Mr. Johnson.
Mr. Johnson of Louisiana. Thank you, Mr. Chairman. Mr.
Director, thank you for being here today. You mentioned in your
testimony that your Office is actively working to address the
current inventory of applications that are awaiting review, and
I think the number has been set at approximately 540,000. Can
you update the committee on what you are doing to ensure that
pending applications can be reviewed in a more expedited
timeframe?
Mr. Iancu. Sure. So, yes, the backlog is a bit over
500,000, approximately. So, we always have to balance the
backlog and the pendency times against the quality, obviously,
and the resources that we have in the office, and we watch that
very carefully. We want to make sure we have the appropriate
number of examiners on staff to be able to review in a timely
fashion, and they are appropriately trained to provide the
highest quality during that review.
We are currently engaged in an examination time analysis,
an analysis of the overall time given to each individual
examiner or groups of examiners to review patent applications.
And we are looking forward in the near term to making some
changes that would optimize that time allocation even further.
Mr. Johnson of Louisiana. You have stated that the Patent
and Trademark Office is looking for ways to simplify patent
eligibility determinations through the new examiner guidance,
and I know you may have covered this. We are coming in and out,
because we all have different meetings. But weeks ago, of
course, the PTO issued new examiner guidance focused on how
examiners are to document a finding that a claim is old or
conventional. And you may have covered some of this already:
but just briefly, what are the plans you have to change how the
PTO determines whether the invention is patent-eligible?
Mr. Iancu. The guidance we have provided a few weeks ago
deals with the second step, the conventionality part of the
analysis. They address how an examiner is to document it and
actually what it means. On a going-forward basis, we are also
trying to address through guidance what the other parts of the
Alice framework mean or how they should be applied by the
examiners, such as what is an abstract idea, for example, what
does directed to mean and things of that sort. It is not a
simple issue, and there are a lot of competing issues,
obviously, and we have to be very careful to have a balanced
approach.
Mr. Johnson of Louisiana. I appreciate that. You had a
dialogue with Congressman King a few moments ago; you were
talking about our place in the world, so to speak. And in your
testimony, you mention how the American Invents Act has taken
significant steps to harmonize the U.S. patent system with many
of our trading partners overseas, and you talked about how you
have been working with stakeholders across the industry and the
world to better harmonize patent law among all these countries.
So, can you give us just a quick update on how that is going
and what those efforts look like?
Mr. Iancu. Sure. So, the AIA provided one major step
towards harmonization with the first-to-file system. There are
other efforts, primarily driven by industry, regarding the
harmonization of prior art, for example, and other such issues.
So, we are meeting in international forums where both
various patent offices from various countries as well as
industry groups from various countries are meeting
independently and together to address some of those issues.
There is a meeting coming up, actually, of IP5 in Louisiana, in
New Orleans, just next month. That is the top five IP offices
in the world, and we will address harmonization there as well.
Mr. Johnson of Louisiana. We have a lot of intellectual
capital in Louisiana. I just want you to know and thank you for
coming. As a conservative--and many of us agree that we believe
that the protection of individual property rights and
intellectual property as well is essential to who we are as
Americans, so I appreciate your efforts in that regard.
And I hope as we harmonize this with other countries around
the world we can share this idea about inalienable rights and
why this is so important to who we are not only as Americans
but as human beings. So, I appreciate your efforts, and I will
yield back.
Mr. King. The gentleman returns his time, and the chair now
recognizes the gentleman from Idaho, Mr. Labrador.
Mr. Labrador. Thank you, Mr. Chairman. What is your Office
doing to improve patent examination searches so that the
quality of patents improves?
Mr. Iancu. As I mentioned a few minutes ago, that is
critically important. If we want to improve the quality of
patents, beginning at the very beginning is a good place to
begin, and that is with the initial search. Over the past
number of years, past decades, there has been an explosion in
the number of publications. There has also been an explosion in
the accessibility to a vast number of publications around the
world, yet examiners necessarily still look for one or two or
whatever, a limited number of key references, and the job
becomes increasingly more difficult, obviously, just by the
sheer numbers.
So, we have a taskforce to improve the technology
surrounding that. There is new technology that is being
released in the coming months. But also, we are looking at
potential use of artificial intelligence and how that can be
used to surface some of the key references.
Mr. Labrador. What can you do to prevent the Department of
Commerce from using PTO user fees to support the work of other
agencies?
Mr. Iancu. I am in close contact with the secretary and the
acting deputy secretary and the leadership of the Department of
Commerce on this and other issues relevant to our office, of
course. And I am keenly aware of the issue and very focused on
not having PTO user fees diverted for any other purpose. So, we
are continuously working on that, so, I am committed to that
issue, and I believe the secretary and the leadership of the
Department of Commerce are likewise committed.
Mr. Labrador. What do you view as the PTO's role in
protecting American companies from forced technology transfer
and other forms of theft of intellectual property imposed on
U.S. companies as a cost of doing business in a foreign
country?
Mr. Iancu. The theft of American intellectual property
overseas has been tremendously high, and the overall
administration is focused on lowering that. We fully support
the administration's role in that; I do from the PTO, and
Secretary Ross is from the Department of Commerce.
And from the PTO's perspective itself, we work with the
USPTR and other administration agencies to make sure that the
appropriate enforcement mechanisms, A, exist in our trade
agreements, and, B, American companies doing business overseas
know about them and have the tools necessary to make use of the
enforcement mechanisms.
So, those are just some examples of what we do, and we
provide technical assistance on the specifics of IP protections
and enforcement to our stakeholders and other government
agencies.
Mr. Labrador. Thank you. I yield the rest of my time to Mr.
Collins.
Mr. Collins. Thank you. I appreciate the gentleman. I have
got more questions that will come up later, but just following
up on some things that we have just stated, you stated that the
PTO is examining how and when the PTO institutes post-grant
proceedings and the standard employees during proceedings and
how the PTO conducts the overall proceedings. What specific
changes to AIA post-grant proceedings are you considering, and
why are these changes necessary? And also, again,
congratulations. Good to see you again.
Mr. Iancu. Good to see you. So, there are a variety of
things we are looking at, and some of them include the
amendment process, as I have mentioned a bit earlier. The
amendment process is important. It is important to have an IPR
process that the result of which is not an all-or-nothing
proposition, and I think that is important for patent owners
and the public alike.
The ultimate goal of the goal really is to have good patent
claims out there, and if we can have a process during an AIA
trial that drives the towards improved claims, I think that
would be useful. So, we are looking at various alternatives to
how to include that in the process while giving both parties in
an IPR the opportunity to participate in that.
We are also looking at the hearing itself. Do we need to
give folks more time at the hearing? Do we need to include, for
example, more access to testimony at the hearing itself from
witnesses? And, again, there are pros and cons to this, and
just because we are looking at it does not mean we are going to
make a particular change. We are also looking at the
institution decision; how much of other activities--for
example, decisions from other tribunals, courts, examiners, and
the like--do we consider in that decision process as well?
These are some examples.
Mr. Collins. That is good. We have got some more, and I
will be on those in just a few minutes, but I yield back the
rest of that time.
Chairman Goodlatte. The chair thanks gentleman and
recognizes the gentleman from Colorado, Mr. Buck, for 5
minutes.
Mr. Buck. Thank you, Mr. Chairman. Sir, I want to talk a
little bit about the IPR system. What is the alternative to the
IPR system as it exists now?
Mr. Iancu. Well, district court litigation; ITC litigation.
Mr. Buck. Which is more efficient?
Mr. Iancu. It depends on a case by case, but overall, I
would say that the IPR process itself is statutorily mandated
to conclude in 12 months from inception.
Mr. Buck. I am going to give you a hypothetical. Say you
owned a small business, and you were looking at an army of
lawyers to go to district court or the opportunity to go
through the IPR process. Which would you choose?
Mr. Iancu. It is a case by case determination, Congressman.
There are reasons to go to district court and avail yourself of
the jury; there are reasons to come to the PTAB and avail
yourself of the 12-month process. I should say that, as it
turns out, over the past 5.5 years over 80 percent of the IPR
patents in IPR are involved in co-pending district court
litigation.
Mr. Buck. Okay. So, what can you do to ensure that the IPR
process runs more smoothly than it does right now?
Mr. Iancu. So, we are looking at that precise issue as we
speak. We want to make sure that all parties that come before
us have a fair hearing and have a fair process and that we
reduce the opportunities for gamesmanship.
And one of the reasons that we have mentioned for proposing
a rule change to the claim construction standards--one of the
various reasons--is to increase traditional efficiency and
reduce the ability to game the system as between the district
court and the PTAB process. And I do think that is one example
that would increase efficiency in the overall system and
perhaps reduce the litigation fees overall for a particular
party.
Mr. Buck. So, there are some claims out there that the IPR
system has hurt innovation. Do you agree with that?
Mr. Iancu. I am aware of those claims, and the fact is that
the IPR system, as implemented, has the opportunity for some
gamesmanship which could put an additional burden on the
innovation ecosystem, and we are looking at ways to correct
some of that and bring it back within the original intent of
the statute.
Mr. Buck. So, what are you looking at specifically?
Mr. Iancu. Well, again, an example is the claim
construction standard. If we harmonize with the district court,
I think it is increases the chances of the IPR to be that true
alternative to litigation and potentially reduce overall fees.
We are looking also at the institution decision, as I have
mentioned.
Mr. Buck. So, what I hear you saying is if the IPR system
is improved it would be a drastic benefit over the district
court litigation system. If what you are hoping to do with
these administrative improvements bears fruit--I mean, you
cannot do much on the district court side, but you can do a lot
on the IPR side. So, I am hearing you say that you can make the
system better by improving the IPR side of the equation.
Mr. Iancu. Yes, Congressman, I think those changes would
definitely improve the IPR system, but I should say that I
think they actually would improve the overall process as
between the district court and the----
Mr. Buck. Because more people would use the IPR system and
take some of the burden off the district court?
Mr. Iancu. That is one example, and you have judicial
efficiency as well.
Mr. Buck. Okay.
Mr. Iancu. I could go in more detail if----
Mr. Buck. Well, I am concerned about a U.S. Chamber piece
that was done. And I have always thought that America was
number one in everything and certainly in innovation, and I am
concerned about some of their findings and wanted to get your
opinion on those findings also with the improvements in the IPR
system. It seems like between first and 12th--while the numbers
appear big--there is a very small measuring difference there,
and I wanted to get your thoughts on that piece and what the
impact of the revisions that you are talking about will have on
that.
Mr. Iancu. I am also concerned with the decline of the
American patent system in the world. The American patent system
has been a crown jewel for this country; it has been at the
crux of our economic growth, our historical and cultural
development, and we should not cede one inch in this area.
I do believe that the changes we are considering right now
will make a significant difference and help us rise back in the
ranks and once again lead the world. We have always been the
gold standard in this area, as well as many other areas, and
other countries look up to us as to how to conduct their patent
system.
Mr. Buck. They continue to?
Mr. Iancu. Well, they have in the past, and we need to
return to that position at this point.
Mr. Buck. Great. I yield back. Thank you, Mr. Chairman.
Chairman Goodlatte. Thank you. The chair recognizes the
gentleman from Florida, Mr. Rutherford, for 5 minutes.
Mr. Rutherford. Thank you, Mr. Chairman. Director, thank
you for being here today. I am going to go a little tangential
on you here with my topic. You know, the right to own property
is basic to our American way of life. And so, when the Castro
regime took power in Cuba, not only did they seize real
property like the property from the Garcia family who now
resides in Florida. And in fact, the United States government,
I am told, is actually paying rent in their home, a property
that they once owned. And the State Department is now paying
rent for that property that was seized by the Castro regime.
But there are also companies like McCarty, who not only was
a real property seized but their trademark was confiscated as
well. And so, in 2016, the USPTO renewed the Cuban government's
request for that trademark, and in response to that, you may
remember that the U.S. Congress moved in the omnibus
appropriations bill in 1998, created section 211, which would
stop the Cuban government from being able to affect trademark
within America that had been seized as confiscated property.
Now, because it specifically at that time outlined the
Cuban government, the World Trade Organization had some issues
with that. They said that it violated the national treatment of
most favored nation principles under the TRIPS agreement,
because section 211, on its face, only applies to Cuban
nationals and their successors.
Mr. Issa on this committee has introduced H.R. 1450, which
will make it clear that section 211 applies to all parties
claiming U.S. rights in confiscated Cuban trademarks regardless
of their nationality. And I am curious: Has the USPTO taken a
position on this legislation? Are you aware of it?
Mr. Iancu. I am not aware of that specific position or a
position on that specific piece of legislation. I am aware that
the issue was at the PTO with respect to these particular
trademarks. As you may know, Congressman, we have stayed all
proceedings at the PTO pending current litigation in the court
system. This is a very complex, long-running dispute that is
cross-disciplinary, so we are awaiting court decisions.
Mr. Rutherford. But you know, when your office understands
how basic the right of property ownership and trademark
ownership is, I would be surprised if the USPTO would not
support a change in section 211 that will actually meet the
WTO's requirement that it not be so specific to Cuba, and it
opens it up to any nationality that might confiscate an
American trademark. So, I guess what I am asking you is, what
do you think of that? And I understand that there is litigation
going on, but I would like to know where you would stand on
that.
Mr. Iancu. Well, I would be very happy to review the
legislation and come back to you and the committee as
appropriate.
Mr. Rutherford. Thank you. I would greatly appreciate that,
and I see my time is running out. But some of these issues with
confiscation by foreign nationals of property and trademarks--
you know, the real property--the fact that the United States
government is actually making payments to the Castro regime for
property that was seized from an American citizen. I know that
is another issue not for your office, but it does go to the
basics of, you know, property ownership and trademark
ownership. So, I would appreciate an answer on that if you
could send me something in writing and let me know where the
USPTO stands on that.
Mr. Iancu. Will do.
Mr. Rutherford. Thank you.
Chairman Goodlatte. The chair thanks the gentleman. We will
return now to the gentleman from Georgia, Mr. Collins, for his
5 minutes.
Mr. Collins. Thank you, Mr. Chairman. I appreciate that.
Let's continue into the conversation where we were at. And as
we are dealing with really some of the decisional post-grants,
there is something you had mentioned. You were talking about,
you know, better review of the appeals process, which is coming
in to this process, the question will become, does the board
have expertise and resources to examine amended claims? And if
not, how can we ensure that the board can competently review
amended claims, especially as we get more complicated in this
process?
Mr. Iancu. So, there are several issues that are important
with respect to that process. First of all, there is a
timeliness question. We have to do it within the 12 months
provided by the statute. Second of all, it is important to the
office and to the system that whatever claim issues from the
office should be examined. The PTO should not issue claims, in
my view, that have not been examined, for the good of the
patent owner and the public alike.
So, we are looking at exactly how we can accomplish both of
those things efficiently--so, within the 12 months and, in
addition, give the parties in the IPR the opportunity to
participate fully. There are a variety of options we can
employ; an example would be to use an examiner from the Corps,
for example, or from a resentment nation unit. Those are
examples that can assist the board and provide advice on those
amended claims. That is one option. There are other options as
well.
Mr. Collins. Okay. Let's switch gears, because that is
something we could talk about for a while. The European Union
and their so-called incentive review has resulted in some calls
by stakeholders to basically reduce IP protection. Most
notably, to introduce a manufacturing exception to
supplementary protection certificates, or SPCs, critical to the
ability of U.S. rights holders to protect pharmaceutical
innovation and deliver new therapies to patients. Can you
explain how you are meeting these challenges in talking about
this issue with our partners in Europe? You know, briefly talk
about that as how we are dealing with that.
Mr. Iancu. So, the patent system needs to be balanced so
that we provide appropriate opportunities for the innovative
ecosystem to apply for and obtain rights, and obviously, first
of all, to incentivize them to innovate in the first place.
At the same time American companies are doing business
overseas, they have to have similar types of protections and
enforcement mechanisms. So, we do work with our stakeholders,
and we work with our foreign PTO colleagues in foreign offices
to make sure that they have similar protections as we do for
American companies doing business in their jurisdictions.
Mr. Collins. And I think that is something, and for anybody
who has heard me talk about this, you know, look, we can talk
about the Chamber ratings; we are talking about everything.
But, look, our standards are the standards the rest of the
world should emulate, and those are the things we are going to
be pushing forward on, because I believe the best protection is
the best source of innovation, and when we have the best
protection, we have the innovation that is incentivized to do
that.
So, I think this is going to come up in many other areas,
especially the trade transfers, the secret transfers with China
that is just demanding if a company comes in--we will deal with
those as we go along. Just know that is something that is
important to me; it is important to the Hill as well. But let's
go back to some things that have been issued. You talk about
the uncertainty issues of patentability, so let's go back to
Myriad and Alice. Sounds like a great TV show.
These two decisions have increased uncertainty about the
patent on subject matter eligibility. Now, as someone who has
dabbled a little bit in subject matter eligibility, it can be
amazing what comes out when you start dealing with this issue.
In the matters of life sciences and [indiscernible] in
particular, how significant do you believe this problem is? We
have talked about this. What plans do you have about it? And
also, I am going to add a third party in here. What do you
think exceeds your authority to actually deal with it, and if
so, what should we be dealing with up here?
Mr. Iancu. The issue is very significant. It is significant
to the office, to our applicants, and it is significant to the
entire industry. In some areas of technology, it is unclear
what is patentable and what is not, and that can depress
innovation in those particular areas.
Our plan at the PTO is to work within Supreme Court
jurisprudence to try to provide better guidelines; what we
think is in and what we think is out. We are trying to work on
forward-looking guidance that helps examiners and the public
understand what, at least from the PTO's point of view, we
think is right.
Section 101; the code itself has not been amended since
1952. In fact, the language is by and large written by Thomas
Jefferson in the early 1790s, with very little amendment ever
since then. Obviously, we have developed some new technologies
since then. So, if this committee, or Congress in general, is
interested in tackling section 101, we would be very happy to
work with the committee on those issues. In the meantime, the
PTO is going to do what we must do, which is help our
examination process.
Mr. Collins. Well, my time is running out, and I am going
to yield back, but I do think it would be good from your Office
to tell us what you believe exceeds your authority, because
there are some things you said--working with the Supreme Court;
that is fine, working with innate jurisprudence. But what
exceeds your authority that Congress probably would have to at
least take a look at? Whether it is changed or not, Congress
would have to look at it. If you could get that to us, I would
appreciate it. Mr. Chairman, I yield back.
Chairman Goodlatte. The chair thanks the gentleman and
recognizes the gentlewoman from Georgia, Mrs. Handel, for 5
minutes.
Mrs. Handel. Thank you Mr. Chairman. And, Director, I
apologize for not hearing your testimony, but know that I did
read it prior to, so thank you for that.
I wanted to go back to intellectual property theft. Do you
agree that any new trade agreement that we would embark on as
the United States should have sufficient IP protections in it
to prevent trading partners from benefiting from the theft of
American innovation and creativity?
Mr. Iancu. Yes, it is important for our trade agreements to
have very good intellectual property provisions.
Mrs. Handel. And what do you see as PTO's role in
protecting American companies from forced technology transfers
and other forms of theft of intellectual property?
Mr. Iancu. We have several roles to play in this area. We
work with the U.S. Trade Representative as well as other
government agencies to make sure that our various agreements
have the appropriate provisions, both protection and
enforcement mechanisms, in them. We have an education role with
our stakeholders to help them understand their rights in
foreign jurisdictions, and we have a role to help American
companies doing business overseas navigate the intellectual
property landscapes in those various jurisdictions.
Mrs. Handel. Great, thank you. I want to turn now to online
platform responsibility. I know that you sit on the Internet
Policy Task Force, and you did make some encouraging comments
when you were testifying before the Senate Judiciary Oversight.
To me, the debate is about a whole lot more than just
Facebook or Cambridge Analytica and privacy. It is really about
the broader issue of how these internet platforms are being
used for reprehensible and illegal activities like human
trafficking, illicit sale of drugs, cyberespionage, IP theft,
fraud.
We really do need to have a broader conversation around
this and what we can do to curb misuses. We ask that of any
other business out there, that if they have illegal activities
coming through we hold them responsible for attempting to deal
with that. Can you elaborate a little bit more on how we can
foster greater online platform responsibility?
Mr. Iancu. Well, I think, first of all, engagement of
stakeholders is critically important. I think there have to be
good communication channels between governments agencies and
stakeholders in this field. And this is a multidisciplinary
issue; multiple government agencies have input on a variety of
issues. That is why we do participate on the Internet Policy
Task Force.
We do provide our points of view and guidance and the views
of our stakeholders when it comes to intellectual property and
how those issues would apply to the internet, online platforms,
and the like.
Mrs. Handel. Do you see any specific steps/measures that we
can take? Is there something that Congress needs to do?
Mr. Iancu. This is an issue that I would have to get back
to Congress on. I do not know that specific legislation is
something that our office has been advocating for----
Mrs. Handel. It may not be.
Mr. Iancu [continuing]. In this area.
Mrs. Handel. Okay. All right, thank you. Mr. Chairman, I
yield back.
Chairman Goodlatte. Thank you very much. Director, I thank
you very much for your participation today. This has been an
important hearing, and members have had the opportunity to ask
some close questions about the plans at PTO. I want to say,
personally, I am encouraged that the effort is being made here
to assure that the quality of patents is strong, but the
process is also fair.
So, we will continue to communicate with you about this,
and as Mr. Collins suggested, we will watch closely to make
sure that what you do is related to authority you have under
the law, and if we think it exceeds it, then we want you to
come here and discuss those aspects of it with us. So, again,
thank you for your very helpful testimony today. I want to
thank you for participating.
And without objection, all members will have 5 legislative
days to submit additional written questions for the witness or
additional material for the record.
And, Director, if we submit questions we hope you will
answer them promptly so that we can have the benefit of that
insight on matters that the committee is interested.
So, with that, the hearing is adjourned.
[Whereupon, at 11:48 a.m., the committee was adjourned.]