[House Hearing, 116 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 SIXTEENTH CONGRESS
FIRST SESSION
__________
MAY 9, 2019
__________
Serial No. 116-20
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://judiciary.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
42-619 WASHINGTON : 2021
COMMITTEE ON THE JUDICIARY
JERROLD NADLER, New York, Chairman
ZOE LOFGREN, California DOUG COLLINS, Georgia, Ranking
SHEILA JACKSON LEE, Texas Member
STEVE COHEN, Tennessee F. JAMES SENSENBRENNER, Jr.,
HENRY C. ``HANK'' JOHNSON, Jr., Wisconsin
Georgia STEVE CHABOT, Ohio
THEODORE E. DEUTCH, Florida LOUIE GOHMERT, Texas
KAREN BASS, California JIM JORDAN, Ohio
CEDRIC L. RICHMOND, Louisiana KEN BUCK, Colorado
HAKEEM S. JEFFRIES, New York JOHN RATCLIFFE, Texas
DAVID N. CICILLINE, Rhode Island MARTHA ROBY, Alabama
ERIC SWALWELL, California MATT GAETZ, Florida
TED LIEU, California MIKE JOHNSON, Louisiana
JAMIE RASKIN, Maryland ANDY BIGGS, Arizona
PRAMILA JAYAPAL, Washington TOM McCLINTOCK, California
VAL BUTLER DEMINGS, Florida DEBBIE LESKO, Arizona
J. LUIS CORREA, California GUY RESCHENTHALER, Pennsylvania
MARY GAY SCANLON, Pennsylvania, BEN CLINE, Virginia
Vice-Chair KELLY ARMSTRONG, North Dakota
SYLVIA R. GARCIA, Texas W. GREGORY STEUBE, Florida
JOE NEGUSE, Colorado
LUCY McBATH, Georgia
GREG STANTON, Arizona
MADELEINE DEAN, Pennsylvania
DEBBIE MUCARSEL-POWELL, Florida
VERONICA ESCOBAR, Texas
Perry Apelbaum, Majority Staff Director & Chief Counsel
Brendan Belair, Minority Staff Director & Chief Counsel
------
SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY, AND THE INTERNET
HENRY C. ``HANK'' JOHNSON, Jr., Georgia, Chair
LOU CORREA, California, Vice-Chair
THEODORE E. DEUTCH, Florida MARTHA ROBY, Alabama, Ranking
CEDRIC RICHMOND, Louisiana Member
HAKEEM JEFFRIES, New York STEVE CHABOT, Ohio
TED LIEU, California JIM JORDAN, Ohio
GREG STANTON, Arizona JOHN RATCLIFFE, Texas
ZOE LOFGREN, California MATT GAETZ, Florida
STEVE COHEN, Tennessee MIKE JOHNSON, Louisiana
KAREN BASS, California ANDY BIGGS, Arizona
ERIC SWALWELL, California GUY RESCHENTHALER, Pennsylvania
BEN CLINE, Virginia
Jamie Simpson, Chief Counsel
Thomas Stoll, Minority Chief Counsel
C O N T E N T S
----------
MAY 9, 2019
Page
OPENING STATEMENTS
The Honorable Henry C. Hank Johnson, Jr., a Representative in the
Congress from the State of Georgia, and Chairman, Subcommittee
on Courts, Intellectual Property, and the Internet............. 1
The Honorable Martha Roby, a Representative in the Congress from
the State of Alabama, and Ranking Member, Subcommittee on
Courts, Intellectual Property, and the Internet................ 3
The Honorable Jerrold Nadler, a Representative in the Congress
from the State of New York, Chairman, Committee on the
Judiciary...................................................... 4
The Honorable Doug Collins, a Representative in the Congress from
the State of Georgia, Ranking Member, Committee on the
Judiciary...................................................... 12
WITNESS
The Honorable Andrei Iancu, Under Secretary of Commerce for
Intellectual Property and Director, U.S. Patent and Trademark
Office
Oral Testimony............................................... 21
Prepared Statement........................................... 24
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
An article from the Wall Street Journal from the Honorable Andy
Biggs, a Representative in the Congress from Arizona, and
Member, Subcommittee on Courts, Intellectual Property, and the
Internet....................................................... 46
APPENDIX
Material Submitted for the Hearing Record
Questions to witnesses for the Record from the Honorable Henry C.
``Hank'' Johnson, Jr., a Representative in the Congress from
the State of Georgia, and Chairman, Subcommittee on Courts,
Intellectual Property, and the Internet........................ 62
Questions to witnesses for the Record from the Honorable Zoe
Lofgren, a Representative in the Congress from the State of
California, and Member, Subcommittee on the Courts,
Intellectual Property, and the Internet........................ 65
Questions to witnesses for the Record from the Honorable Sheila
Jackson Lee, a Representative in the Congress from the State of
Texas, and Member, Subcommittee on Courts, Intellectual
Property, and the Internet..................................... 68
Questions to witnesses for the Record from the Honorable Mike
Johnson, a Representative in the Congress from the State of
Louisiana, and Member, Subcommittee on Courts, Intellectual
Property, and the Internet..................................... 70
Questions to witnesses for the Record from the Honorable Andy
Biggs, a Representative in the Congress from the State of
Arizona, and Member, Subcommittee on Courts, Intellectual
Property, and the Internet..................................... 71
Questions to witnesses for the Record from the Honorable W.
Gregory Steube, a Representative in the Congress from the State
of Florida, and Member, Committee on the Judiciary............. 72
Response to questions for the Record from The Honorable Andrei
Iancu, Under Secretary of Commerce for Intellectual Property
and Director, U.S. Patent and Trademark Office................. 81
OVERSIGHT OF THE U.S. PATENT AND TRADEMARK OFFICE
----------
THURSDAY, MAY 9, 2019
House of Representatives
Subcommittee on Courts, Intellectual Property, and the Internet
Committee on the Judiciary
Washington, DC.
The subcommittee met, pursuant to call, at 2:10 p.m., in
Room 2141, Rayburn House Office Building, Hon. Henry C.
``Hank'' Johnson, Jr. [chairman of the subcommittee] presiding.
Present: Representatives Johnson, Nadler, Jeffries,
Stanton, Lofgren, Correa, Roby, Collins, Chabot, Jordan,
Ratcliffe, Johnson of Louisiana, Biggs, Cline, and
Reschenthaler.
Staff Present: David Greengrass, Senior Counsel; Madeline
Strasser, Chief Clerk; Moh Sharma, Member Services and Outreach
Advisor; Jamie Simpson, Chief Counsel, Courts, Intellectual
Property, and the Internet; Rosalind Jackson, Professional
Staff Member, Courts, Intellectual Property, and the Internet;
Thomas Stoll, Minority Chief Counsel; and Andrea Woodard,
Minority Professional Staff Member.
Mr. Johnson of Georgia. The Subcommittee will come to
order. Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
We welcome you to this afternoon's hearing on oversight of
the U.S. Patent and Trademark Office. I will now recognize
myself for an opening statement. Thank you.
Good afternoon, and welcome to the House Judiciary
Subcommittee on Courts, Intellectual Property, and the
Internet's hearing on oversight of the United States Patent and
Trademark Office.
I am pleased to welcome the Under Secretary of Commerce for
Intellectual Property and Director of the USPTO, Andrei Iancu.
This is his second appearance before the committee. He was
first before us on May 22, 2018, a few months after he was
confirmed on February 5.
Today's hearing will elicit critical information regarding
the state of the agency and in response to the questions that
we will ask.
Intellectual property is of vital importance to the U.S.
economy. For example, economists have studied the impact of the
award of a patent to small businesses, concluding that the
award of the first patent to a startup on average leads to 16
additional employees after 5 years and $10.6 million in
additional sales over 5 years.
But businesses of all size have also come to Congress
raising concerns about lawsuits based on patents they believe
should not have issued, causing them to spend money on lawsuits
instead of R&D.
This gets to the heart of the key question that drives
patent law policy: How to balance the many competing interests
to ensure that the patent system incentivizes and promotes
innovation to the greatest extent possible. This is the
discussion I hope to have here today.
A strong patent system starts with a country that creates
and encourages the next generation of innovators. This
subcommittee's first hearing examined research showing that we
are falling behind in this task because our patent system
demonstrates a lack of diversity in who is getting patents. The
USPTO recently issued a report showing that only 12 percent of
U.S. inventors are female.
Thanks to the passage of the SUCCESS Act last year, the
USPTO is following up on this report with further research on
underrepresentation of other groups, including racial
minorities and veterans, in fulfillment of the provisions of
the SUCCESS Act, a bill where I was the lead Democratic
cosponsor, along with Representative Steve Chabot.
This is important work. Fully understanding the contours of
underrepresentation is an important step in designing policy
that can ensure that as a Nation we are not leaving potential
inventors behind and groundbreaking innovations undiscovered.
A strong patent system requires clear rules which lead to
reliable patent grants that attract the investment needed to
turn a patentable invention or innovation into a marketable
product or service.
I have concerns that a foundational section of the Patent
Act, 35 USC Section 101, which governs patent-eligible subject
matter, is not delivering this needed clarity due to a series
of recent Supreme Court cases. This poses a threat to
innovation in critical technologies, such as medical
diagnostics. We in Congress are considering whether we must
take action.
Meanwhile, the USPTO has recently tried to address this
problem at the agency level with new examiner guidance. I hope
we will be able to learn more about that initiative.
Director Iancu has also made a number of changes to the
post-grant procedures created by the Leahy-Smith America
Invents Act of 2011, including changes to the Trial Practice
Guide, the creation of two new standard operating procedures,
rulemakings on claim construction and claim amendments, and the
issuance of a significant number of binding agency opinions in
recent months.
I know that stakeholders have a range of opinions on these
proceedings, their fairness and effectiveness, and I look
forward to hearing why these recent changes were needed and the
impact that they have had.
Turning to trademarks, I am alarmed by reports of an
increase in fraudulent trademark applications, especially the
large number coming from China. This means that American
businesses might not be able to register marks they are
actually using, hurting their ability to establish their brand
and grow their businesses.
I am also concerned about reports that companies are
illicitly using the trademarks of reputable companies to sell
counterfeit goods. I would like to hear what the USPTO has done
to address this so far, what else it plans to do, and what role
Congress should play to ensure the smooth and fair
administration of intellectual property rights in this country.
Director Iancu, thank you for coming here today, and I look
forward to your testimony.
It is now my pleasure to recognize the Ranking Member of
the Subcommittee, the gentlewoman from Alabama, Mrs. Roby, for
her opening statement.
Mrs. Roby. Thank you, Chairman Johnson.
And thank you, Director Iancu, for testifying before the
subcommittee today.
America continues to lead the world in the development of
new technologies, from immunotherapies that save lives to the
apps that answer our questions with just a few swipes of our
phones, to novel inventions that make our lives better.
The patent system is key to the United States remaining on
top. A strong patent system helps to encourage robust
investment in the development of new technologies. If research
produces a valuable invention, companies know their patents
will safeguard that investment and the invention from bad
actors.
To eliminate fraudulent patent litigation, Congress and the
courts made several changes to patent litigation rules and
legal standards. There has been much debate in the patent
community as to whether these changes have been beneficial for
the patent system. For example, some have criticized the U.S.
Supreme Court's patent eligibility test as undermining the
reliability of patents in certain critical U.S. industries,
including medical diagnostics and data compression.
Today I hope to hear Director Iancu's views on the patent
eligibility test, whether the USPTO's guidance on the issue is
sufficient to address concerns, and if he thinks Congress
should act, his expert advice on a possible legislative fix
that would work for all interested stakeholders.
One of the most significant recent changes to the patent
system was made in 2011 when Congress passed the America
Invents Act. This legislation established the Patent Trial and
Appeal Board, commonly referred to as the PTAB, and inter
partes review proceedings, known as IPRs.
These new procedures authorize the USPTO to consider
challenges to patents and to withdraw improperly issued
patents. The process was intended to be a simpler, cheaper
alternative to district court litigation.
There has been much debate since establishment of the PTAB
and the IPR proceedings about whether these changes have been
good for the patent system. Opponents of the PTAB argue that
IPR proceedings make it too easy to invalidate a patent,
pointing to high invalidation rates for patents that the agency
agrees to review. They argue this casts a cloud of uncertainty
over all issued patents and that this uncertainty discourages
investment and contradicts the very purpose of the patent
system. One persistent concern has been the repetitive filing
of similar challenges to patents by the same or related
parties.
Proponents of the PTAB argue that changes to the patent
system were necessary due to poorly drafted and overbroad
patents that were being used in abusive litigation. They argue
that the PTAB has been successful in its original intent by
removing bad patents from the patent system.
The USPTO needs to ensure that challenges are not being
used to harass patent owners while still effectively weeding
out bad patents. But in considering any tweaks, we must ensure
that a proper balance is struck, protecting companies from
abusive legislation while ensuring patent owners' rights.
There are also two trademark issues that I would like to
explore with Director Iancu today.
First, the sale of counterfeits online appear to have
become a significant problem for trademark owners. The problem
is so pervasive that just over a month ago, the President
issued a memorandum ordering the Secretary of the Department of
Homeland Security to work with several other Cabinet members
and agencies to investigate and issue a report on the problems.
As the head of the agency that issues trademarks and
participates in anti-counterfeiting efforts, I would like to
hear Director Iancu's views of the problem and possible
administrative and legislative solutions that Congress and the
White House should consider.
Secondly, I want to hear from Director Iancu on steps the
agency is taking to address fraudulent trademark applications
filed from overseas and what, if anything, the agency is doing
to remove registrations that were improperly granted by USPTO.
I would like to again thank Director Iancu for his
participation in this hearing, and I very much look forward to
delving into these very important issues. Thank you.
Mr. Johnson of Georgia. Thank you, Congresswoman.
I am now pleased to recognize the chairman of the full
committee, the gentleman from New York, Mr. Nadler, for his
opening statement.
Chairman Nadler. Thank you, Mr. Chairman.
Mr. Chairman, today's hearing focuses on what has been a
time of great change to our innovation landscape. In 2011, we
passed the most significant changes to the patent system in a
generation with the America Invents Act, known as the AIA. As
patent stakeholders were still adjusting to that, the Supreme
Court issued a series of decisions on patent-eligible subject
matter, dramatically changing how the relevant statute, 35 USC
Section 101, impacted both patent examination and patent
litigation.
And these are only two of the biggest changes in a time
when the patent system's importance to American competitiveness
has arguably never been more crucial to our increasingly
knowledge-based economy.
When this subcommittee held its last USPTO oversight
hearing, almost exactly a year ago, Mr. Iancu had only recently
been confirmed as the USPTO Director. Now that he has been
Director for over a year, we have the opportunity to discuss
what new policies his office has implemented, where the patent
and trademark systems stand today, and what role Congress needs
to play to ensure that these systems are organized for our
Nation's innovators and entrepreneurs.
Turning first to the AIA, an important element of that
legislation was the creation of procedures to challenge a
patent's validity after issuance by the USPTO. The most used
procedure, the inter partes reviews, or IPRs, have proven
extremely popular and now handle around 1,500 cases a year.
Because IPRs are now such an important part of the patent
landscape, they have garnered much attention, and they have
both supporters and critics.
Congress intended IPRs to be a fast and more efficient way
to challenge patents. The question before us now is how well
these challenges are meeting that goal and what impact have
they had on the overall patent landscape.
To that end, Director Iancu, during his tenure, made a
series of changes to the Patent Trial and Appeal Board, or
PTAB, which hears these IPR challenges.
To me, these changes raise the question of whether Congress
delegated the right amount of rulemaking authority to the USPTO
to adjust these proceedings over time. I worry about an
adjudicatory process that changes too much with any change in
agency leadership. I look forward to the Director's thoughts on
how we can assure stability and predictability at the PTAB.
I also want to learn more about how IPRs have impacted the
overall patent landscape. I understand from many stakeholders
that they have succeeded in providing a less expensive way to
challenge patents that should not have been issued than
challenging in district court.
At the same time, some stakeholders are concerned about the
impact on some patent holders' ability to enforce their rights
now that they may need to go through an IPR proceeding before a
court will hear their infringement claim.
Additionally, as most IPRs have parallel litigation in
district courts, some ask whether the AIA lived up to its
promise of delivering more efficiency or if it has simply
fostered duplication.
Another topic on which Director Iancu has taken action is
on patent-eligible subject matter. He recently issued new
guidance to patent examiners that distilled the existing case
law into a streamlined test rather than have patent examiners,
most of whom are not lawyers--thank God--essentially apply a
case law approach when assessing this issue.
While this move is understandable given the need to provide
clear guidance to 8,000-plus patent examiners, USPTO does not
have rulemaking authority in this area. And so the question is,
is it improperly exercising what amounts to rulemaking
authority, or perhaps we should give it rulemaking authority. I
am curious, therefore, about the process used for distilling
the case law into guidance, especially given that some of the
case law seems to be in conflict.
Most importantly, I am interested in how the USPTO is
ensuring that the patents it issues deserve the presumption of
validity with respect to this issue if there ends up being a
clear divergence between the USPTO's guidance and the Federal
Circuit.
Without doubt, Director Iancu has the reins of this agency
at an important time. The United States is a world leader in
innovation, which is a key driver of economic growth. His
stewardship of the USPTO is vital to ensuring that the United
States remains in this position.
I look forward to his testimony, and I yield back the
balance of my time.
[The statement of Chairman Nadler follows:]
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Mr. Johnson of Georgia. I thank the gentleman.
And at this time, I recognize the distinguished ranking
member of the full committee, the gentleman from Georgia, Mr.
Collins, for his opening statement.
Mr. Collins. Thank you, Mr. Chairman. I appreciate that.
And, Director, thanks. It is good to see you. We see each
other quite often at events like this. Good to see you, though,
and thanks for testifying.
This is an important part. This is really, frankly, of all
the things that we do in this committee, is one of those areas
that I believe we find some of our common agreement and our
greatest gains if we just simply put our mind to it and say,
how can this affect?
This is also probably, although it is much less publicized
as many of the other things in our committee that we do and
doesn't get the press that it deserves, this is the thing that
actually drives and focuses our economy in ways that many of us
in this room could never imagine and have been talking about
for years.
Because I believe the very things that your office deals
with and the very things that our Patent and Trademark Office
continues to work with really determines where we are going to
be in the coming years, whether it be in technology that
already exists or the technology that we couldn't even think of
at this point.
So again, I just want to think about that. And when we
celebrated World IP Day, I think it all just emphasized really
those things that we all can come in agreement on.
I am hopeful, Mr. Chairman, as we work through these
things, this will be something that we focus on a great deal in
the future.
However, just like the chairman, there are some things that
I think we are discussing and want to continue to talk about,
and that is making sure that the patent litigation abuse
problem is something we continue to look at, but also make sure
that it is fair, not only to all patent holders, small, medium,
and large, but also make sure that there is an easier system in
which there is not just a constant what I will call circle of
litigation, circle of problems, in which there is never a
surety of that content or that patent owner actually having
something to be valuable.
One of the areas that I do want to talk about, and I know
we will talk about today, is the patent eligibility issue, and
of course that is the 101 discussion.
The Supreme Court has basically put us through, Director,
as you well know, a tortured exercise and called on the courts
and Congress to fix it. The way they have come about it,
especially with the opinions of the U.S. Court of Appeals on
the Federal Circuit, the highest patent court in the land next
to the Supreme Court, in which at least five of the expert
judges there complained that the test is flawed and must be
replaced. Okay.
We cannot sit back and continue to watch our mighty patent
system, a key driver of this innovation, continue its slide.
That is why myself and several of my colleagues in the House
and Senate, including my friend Chairman Johnson and numerous
stakeholders, have been investigating to develop a patent
eligibility test that works for all.
Another area of the patent system that requires our
attention is the USPTO's implementation of the inter partes or
IPR proceedings. It has been 8 years since we established those
proceedings, and they have both been heralded and vilified all
at the same time. I know that is not surprising to anybody on
this committee.
But many are happy to avoid the costly patent dispute in a
Federal court instead of rely on the PTAB to quickly and less
expensively invalidate an accuser's patent, but others argue
that the PTO has implemented countless rules skewed against
patent owners that result in good patents being struck down in
bad IPR decisions.
I have heard numerous reports that defendants in litigation
are filing multiple similar attacks on the same patent or are
using surrogates to skirt prohibitions to repeat attacks.
I have also learned that since, in instances where small
businesses also assert their patents in Federal court to stop
the theft of their valuable IP, those fees instead are forced
to defend themselves--from those fees, they are forced to
defend themselves and their patents before a PTAB, which issued
a questionable decision invalidating the patents.
Fortunately, some of these small innovative companies could
afford to appeal the PTAB's law decision and have their patents
restored by the Federal Circuit. But this demonstrates the PTAB
proceedings may be used by well-funded companies to harass
small businesses into submission.
The cost for appealing a bad PTAB decision may be too much
for small businesses to bear, resulting in the loss of their
patents, their innovations, their business, and at the hands of
an unscrupulous copycat.
Again, the very thing that we are trying to avoid, we are
actually seemingly incentivizing, and that is something that we
need to look at.
In this hearing, I want to hear about these concerns and
want to know about the patent eligibility test and how we
should craft it to promote investment in important technology
industries while avoiding a resurgence of patent litigation
abuse. No one wants to go back there. But we also can't have a
system that incentivizes an incessant going back and forth or
what I will just call a circular, never being sure is my patent
worth what my patent is supposed to be worth.
If we ever lose that in this country, if we ever get to the
point to where our patents and our copyrights, our trademarks,
the very thing that really has based our intellectual property
exercise on for well over 200 years, if we get to that point to
where that doesn't matter, then we will go backwards
economically, we will go backwards in the world, and we will
have our and see our brain drain, is what I will call it, that
hope drain, will go other places where it is protected.
The reason we have the greatest economic system, especially
involved in IP and all these other decisionmakers, is we
protect our IP. Strong intellectual property protection is not
a hindrance, it is the very catalyst to growth. It is the very
catalyst to our economic engines.
And with that, I look forward to this hearing. I thank you
for being here. It is always a pleasure to see you. And I
appreciate the work that you have been doing in this area to
find a solution and to not just simply wait and say, well,
whatever Congress does, I will work.
You have been able to take some of that initiative, that is
a good thing to see, because I think you have been taking all
the players into that role as we go forward.
With that, Mr. Chairman, again, thanks for calling this
hearing. This is, again, a good time for this committee, and I
appreciate you calling it. And I yield back.
[The statement of Mr. Collins follows:]
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Mr. Johnson of Georgia. Thank you, Representative Collins,
for your remarks.
I will now introduce today's witness. Andrei Iancu
currently serves as the Under Secretary of Commerce for
Intellectual Property and Director of the United States Patent
and Trademark Office. Andrei Iancu provides leadership and
oversight to more than 12,000 employees, with an annual budget
of over $3 billion. He is also the principal adviser to the
Secretary of Commerce on domestic and international
intellectual property policy matters.
Prior to joining the USPTO, Director Iancu was the managing
partner at Irell & Manella LLP, where his practice focused on
intellectual property litigation. He has also taught patent law
at the UCLA School of Law and earlier in his career was an
engineer at Hughes Aircraft Company.
Director Iancu holds a J.D. from the UCLA School of Law, an
M.S. in mechanical engineering, and a B.S. in aerospace
engineering, both from UCLA.
We welcome Director Iancu and thank him for participating
in today's hearing.
Before proceeding with testimony, I hereby remind the
witnesses that all of your written and oral statements made to
the Subcommittee in connection with this hearing are subject to
penalties of perjury pursuant to 18 USC Section 1001, which may
result in the imposition of a fine or imprisonment of up to 5
years or both.
Please note that your written statement will be entered
into the record in its entirety. Accordingly, I ask that you
summarize your testimony in 5 minutes. To help you stay within
that time, there is a timing light on your table. When the
light switches from green to yellow, you have 1 minute to
conclude your testimony. When the light turns red, it signals
that your 5 minutes have expired.
Director Iancu, you may begin.
STATEMENT OF THE HONORABLE ANDREI IANCU, UNDER SECRETARY FOR
INTELLECTUAL PROPERTY AND DIRECTOR OF THE U.S. PATENT AND
TRADEMARK OFFICE, U.S. PATENT AND TRADEMARK OFFICE
Mr. Iancu. Thank you, Chairman Johnson, Ranking Member
Roby, Chairman Nadler, Ranking Member Collins, 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 would like to highlight some issues of particular
interest.
First, we are pleased that Congress continues to provide
the USPTO with access to all anticipated fee collections, which
is critical to our ability to plan and provide certainty to
inventors and entrepreneurs.
Second, as part of the USPTO's efforts to reach all
potential inventors, in February we issued a new report which
found that, while there have been gains in female participation
in science and engineering occupations, those gains have not
led to comparable increases in female inventors awarded
patents.
The USPTO is committed to working with industry, academia,
other government agencies, and Congress to help broaden the
innovation ecosphere, demographically, geographically, and
economically. I would like to thank this subcommittee for
holding a hearing on this issue last month to highlight the
problem.
For our part, the USPTO has targeted programs to increase
participation in STEM and intellectual property for women and
other underrepresented groups. For example, as just one of many
programs, the USPTO will host on May 14 its annual Women's
Entrepreneurship Symposium in Alexandra.
The USPTO also recently updated our website to better serve
new inventors and entrepreneurs. Now, with one click, visitors
are directed to a U.S. map where they can find a multitude of
free resources in their area to better help them navigate the
patent and trademark system to protect their intellectual
property. We continue to update these materials.
Third, regarding patent operations, last year I testified
that we would improve the conduct of AIA trials by our Patent
Trials and Appeal Board. I indicated that we were studying,
among other things, claim construction, the amendment process,
the institution decision, the composition of judging panels,
and the variety of standard operating procedures. I am happy to
report that we have implemented successful improvements in all
of those areas.
I also testified that the USPTO would work to provide
guidance for examiners and the public regarding the issue of
patent eligibility pursuant to Section 101. I am happy to
report that we have done that. The new guidance synthesizes the
relevant case law, clarifies the eligibility analysis, and I
believe will lead to more consistent results.
By now, virtually all of our examiners and administrative
patent judges have been trained on this new guidance, and the
results to date have been excellent. And this is good news
because the status quo ante prior to our recent guidance is no
longer tenable.
If the United States is to maintain our technological edge
in an increasingly competitive global environment, the American
patent system must move beyond the confusion of the past
several years when it comes to this most fundamental question
in the patent system: What matter is eligible for patent, and
what matter is not?
I believe that the framework we laid out in our recent
guidance works well and goes a long way towards solving the
predicament we have found ourselves in.
I hope that other authorities will join us as we continue
our efforts to bring clarity to this critically important part
of our patent system. I commend the congressional working group
for its efforts on this issue, and the PTO stands ready to help
with the legislative process as needed.
Fourth, on the trademarks front, we published a notice of
proposed rulemaking in February that would require U.S.-
licensed counsel for foreign-domiciled applicants. This should
help reduce the number of potentially bad faith trademark
applications from overseas filers. We are also studying other
options for decluttering our register and may also consult with
Congress regarding possible legislative tools.
Finally, on the operations side, we have recently hired an
experienced chief information officer, and we continue to work
to improve our technology infrastructure.
Mr. Chairman, the USPTO is a remarkable agency with a
dedicated nationwide workforce. I am proud to be part of it.
Thank you again for the opportunity to testify today, and I
look forward to your questions.
[The statement of Mr. Iancu follows:]
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Mr. Johnson of Georgia. Thank you, Director Iancu.
I will now recognize myself for questions for 5 minutes.
Director, I am concerned about the lack of consistency and
predictability in the case law applying 35 USC Section 101.
What is your view on how the case law is impacting American
innovation?
Mr. Iancu. So as has have been mentioned by yourself and
other members already and in my opening statement, court
decisions have created uncertainty. There is no workable
framework or workable test provided by the case law, for
example.
So this has created confusion for our 8,500 examiners who
have to apply the law in the cases every single day and for our
applicants and members of the public. And that situation
simply, as I said, is not tenable. So the PTO has synthesized
the case law and has created framework that I have mentioned,
and I can go into more details if you would like.
Mr. Johnson of Georgia. Well, yeah, if you would.
Mr. Iancu. Yeah. So the framework that we have created is a
synthesis of existing law, and it is really working great at
the Patent Office because it provides guidelines for the
examiners to apply in a consistent manner and it provides a
system that is understandable by our applicants and other
members of the public. And the fact of the matter is that we
have received lots of comments on this across the spectrum.
As a general principle, with very few exceptions, people
across the technological spectrum agree with the framework.
Some folks might disagree whether some particular type of
technology should be in or out of the eligibility system or
not, but generally speaking, the framework, which is the most
important thing, folks seem to agree with.
Now, the bottom line is courts are independent, and they
don't have to follow our guidance, obviously, and our
framework. I hope they would, frankly, because it is correct, I
believe, and there is broad-based support, as I said. It goes a
long way towards solving the problem. But they have not yet
provided clarity. So the bottom line is, if Congress desires to
create more certainty, legislation is needed.
Mr. Johnson of Georgia. Thank you.
I am also concerned about the rise of fraudulent trademark
applications. While I think the USPTO's recent proposal to
require U.S. counsel for foreign registrants should help as we
move forward, this will not help the thousands of fraudulent
marks already on the register that are blocking legitimate
companies. What is your plan for addressing this problem?
Mr. Iancu. So this is--you have identified a significant
problem. It is an increasing problem. It is, a lot of it,
caused by foreign applicants. Not all of it, though, to be
clear. Not all of the entirety of the problem is foreign. Some
of it comes from here. But we have done a number of things and
can do more.
For example, first and foremost, we are having increased
training of our examiners to be able to look for and spot
troublesome applications. We have advanced training, for
example, set for this June coming up on spotting and handling
possible fake specimens. We have increased the proof of use
audit program. We have piloted an expedited cancellation
process. We are piloting software that can help detect
photoshopped images.
And as I have mentioned in my opening, very importantly, we
issued a U.S. counsel proposed rule which would require foreign
applicants to use U.S.-licensed counsel for their trademark
applications. Hopefully, U.S.-licensed lawyers would be more
reluctant to put in fraudulent applications, and if they do, at
least we have an address to pursue.
As I said, there is more than that that we could do. We are
looking at all of it. We have a task force. There are new rules
and processes that we can deploy. We can, for example, address
a specimen definition. We are working on that. We can work with
Congress on potential legislation, for example, legislation for
lowering the threshold for cancellation of false claims of use
to negligence.
These are preliminary ideas, by the way. We are still
working on them. And we would be happy to consult with Congress
when the time comes.
Mr. Johnson of Georgia. Thank you.
My time has expired, so I will yield back and recognize the
gentleman from Louisiana, Mr. Johnson, for his questions.
Mr. Johnson of Louisiana. This is the law firm of Johnson
and Johnson today.
Mr. Iancu. It is easier for me to remember.
Mr. Johnson of Louisiana. That is right. You can't mess
this up.
Director, we really appreciate you being here today, and
thank you for that summary of what you have presented and all
you have been able to accomplish. You have a gigantic task at
hand, we recognize that, and we are thankful for you and your
stuff. I know you have a lot of folks with you and watching
today.
Just a few questions. Look, I regard your office and your
work to be among the most important in the government because I
believe that property rights are fundamental. It is a natural
right that we have to own property and to protect it. And so
what you do is so critically important to our entire system,
our free market, and everything that we are about as Americans.
So thank you.
A couple of questions. Based on comments you provided in
your written testimony, you highlighted the USPTO's involvement
with the Patent Prosecution Highway, PPH, which facilitates
patent approval amongst trading partners. I represent a
district located in Louisiana, the sixth-largest export State
by value in the Nation, and I am encouraged by PPH
participation with nations like Brazil and others because they
are essential to my State's export economy.
So the question is, has the USPTO undertaken any steps to
expand cooperation through PPH? And if so, what countries have
you targeted to include in that?
Mr. Iancu. The answer is yes. We continuously look to,
first, strengthen our relationships with IP offices across the
world, including the ones we already have agreements with on
IP, and we are looking to expand the list. Unfortunately, I
don't have off the top of my head right now who else we are
talking with, but happy to provide that in writing.
There is always an effort to expand PPH and our
collaboration with various offices. I personally meet with my
counterparts from across the world regularly and will continue
to do so.
Mr. Johnson of Louisiana. We appreciate that. I know they
do as well.
In your capacity providing technical support to the
Department of Commerce and the U.S. Trade Representative on
proposed and ongoing trade agreements, could you speak briefly
as to what recommendations you have made in agreements like the
USMCA and what you would like to see included in IP chapters
going forward?
Mr. Iancu. So we do provide technical advice to various
agencies across the government when it comes to intellectual
property. We do get involved if we are asked to advise the
Secretary of Commerce and others at the Department and also the
USTR. We did provide technical assistance to the USTR during
the USMCA and other trade negotiations.
As a general principle, we want to see strong intellectual
property systems, obviously in the United States first and
foremost. We do want to see strong intellectual property
systems with our trading partners.
The main reason for that is because it helps American
businesses doing business overseas. They can engage overseas
and sell their wares more confidently if they have a robust
system to do so. So we advocate on behalf of American
companies, and we advocate for robust and clear IP rights.
I want to mention that also the PTO has attaches across the
world. Just for example, in China we have three. We have a spot
in Mexico, since you mentioned it, one in Brazil as well, by
the way, Europe, and so on. And those attaches provide a great
deal of information to American stakeholders doing business
overseas, they are very helpful, among other duties as well.
Mr. Johnson of Louisiana. Very good. I am glad you brought
up China. It is a big concern, as we all know.
I noticed that you cited benchmarks for reducing patent
pendency in your statement. Considering the virtual full court
press by China and other competing nations to expedite their
patent approvals, what steps is USPTO specifically taking to
reduce the pendency period here? And what recommendations do
you have for legislation to address this in order to maintain
American dominance in the IP space?
Mr. Iancu. It is a very, very good question, Congressman.
It is a broad question.
Mr. Johnson of Louisiana. Sorry.
Mr. Iancu. It is quite all right, but it is a very
important topic.
So a critical goal for us is to reduce pendency, both
overall pendency of a patent application which is beginning to
end to issuance, and also first office pendency and along the
way. And we have specific targets, and we are hoping to get
below 24 months for the overall period on average and below 15
months for the first office in the very near term--first office
action in the very near term.
We want to make sure we hire the appropriate number of
examiners to be able to accomplish that. We want to make sure
that the time allocation to each examiner per application is
appropriately allocated so that they can do a good job, a high
quality job, but also as expeditiously as possible.
Just recently, we reached agreement with the examiner union
with respect to a new appraisal plan, and it includes, among
many other things, special routing, more advanced routing of
applications to the correct examiner, and more advanced ways to
allocate time dynamically to each examiner per case depending
on factors such as the examiner's qualifications and
experience, the type of case, the difficulty of a case, and
many other things as well.
Mr. Johnson of Louisiana. The pendency of your answer time
is up now, so we have got to move on.
I yield back. Thank you. I apologize.
Mr. Johnson of Georgia. At this time, I will recognize the
gentleman from New York for his questions.
Mr. Jeffries. I thank the chair.
And, Director Iancu, thank you for your presence, and thank
you for your testimony and your service to the country.
It is my understanding that trademark filings have
increased significantly over the last several years. Is that
right?
Mr. Iancu. That is correct.
Mr. Jeffries. Am I correct that since 2014 they are up
overall from about 300,000 to approaching a half a million per
year. Is that right?
Mr. Iancu. It is correct on the second part. We are
approaching half a million per year. I don't have the figure
from 2014 in front of me, but I will defer to your figure. It
has increased dramatically.
Mr. Jeffries. And, of course, the USPTO maintains a
commitment to issuing quality trademarks. So given this
increase in volume, has there been an increase in the number of
examiners, or how is that process being managed?
Mr. Iancu. Yes. Most definitely we have increased the
number of examiners, and we have done a number of other things
as well.
Mr. Jeffries. One question about the impact of the
shutdown. It is my understanding that USPTO was able to stay
open for a period of time, if not throughout the entire
duration, because of the reserve that you have as a fully fee-
funded agency. Is that right?
Mr. Iancu. Correct. We were able to stay open during the
entirety of the lapse in funding.
Mr. Jeffries. And at what point would that reserve have run
out?
Mr. Iancu. So it differs between the patent operations and
the trademark operations. We were approximately a couple of
weeks away on the patent side, and I would say approximately,
with an emphasis on approximately, a couple of months away on
the trademark side.
Mr. Jeffries. And at a certain point it would have resulted
in trademark examiners and/or patent examiners being furloughed
during the duration had the reserve fund run out. Is that
right?
Mr. Iancu. Yeah, probably. If we ran out of funds, we
probably would have had to furlough examiners, as I said,
patent examiners first, trademark examiners later.
Mr. Jeffries. And what would have been the impact, in your
view, on inventors, on the innovation economy, on the ability
for entrepreneurs to bring their creativity to life?
Mr. Iancu. It would have certainly been disruptive to the
IP, to the patent system in the patent case and the trademark
system in the trademark case.
Mr. Jeffries. Now, in the event that there is another
government shutdown--hopefully, there will not be--is there an
avenue available for you to access the funding stream that is
available based on the fact that you are a fee-funded agency,
or is that, as I understand it, prohibited under law?
Mr. Iancu. Right. Correct. Right now it is prohibited under
the law. We are not able to spend fees collected during a lapse
in funding. Even though we collect the fees, we can't spend
them. But what we can do is what we have done in the past,
which is we can spend fees in our operating reserve.
Mr. Jeffries. In your view, is this an avenue for
exploration in terms of a congressional fix, since, in fact,
you are currently accepting fees even in the midst of a
government shutdown but prohibited from being able to spend
those fees to maintain your operations?
Mr. Iancu. Well, obviously access to our collected fees
would provide more certainty for continued operations. And
should Congress direct such changes as you indicate or provide
additional authorities, we will of course incorporate those
changes and authorities into our contingency planning.
Mr. Jeffries. In the brief moment that I have, turning to a
different topic, it is my understanding that current law,
specifically Section 2 of the Lanham Act, local governments,
towns, municipalities, cities are not permitted to obtain a
Federal trademark registration on things like their flag seals
and insignias. Is that right?
Mr. Iancu. Correct.
Mr. Jeffries. Now, if the government seals and insignias
are federally registered--and we are working on bipartisan
legislation in that regard--what are some of the protections or
enforcement mechanisms that would be afforded for cities or
towns or municipalities to protect things like the police
department badge, the fire department badge, the State flag, or
things of that nature?
Mr. Iancu. Presumably, depending on the content of the
proposed legislation, presumably the same remedies available to
other mark registrants and owners, including the ability to
prevent others from duplicating that particular insignia or
flag and the like.
Mr. Jeffries. Thank you, Mr. Director.
And with that, I yield back.
Mr. Johnson of Georgia. Thank you.
I now recognize the gentleman from the State of Arizona,
Mr. Biggs, Representative Biggs, for 5 minutes.
Mr. Biggs. Thank you, Mr. Chairman.
Thanks, Director, for being here today.
Trademark applications from China have grown more than
twelvefold since 2013, and for fiscal year 2017 totaled
thousands more than the combined filings from Canada, Germany,
and the U.K. China's provincial governments are paying citizens
hundreds of dollars in Chinese currency for each trademark
registered to the United States, likely helping lead to the
uptick.
To qualify for a Federal trademark registration, a product
or service must be used in commerce, among other requirements,
but little evidence is required to back up the in-use claim.
USPTO has issued guidance encouraging lawyers to report
suspicious specimens for pending applications.
So my first question for you is, since you began
encouraging lawyers to report suspicious applications, how many
reports have you received?
Mr. Iancu. We have received reports. Unfortunately, I don't
have the number, the specific number. I can follow up with
that. But we have received a number of them.
Mr. Biggs. Are they--okay. So I am not trying to pin you
down because I know you don't have them. I suspected you
wouldn't have them. But are we talking a few reports or a
plethora of reports? Are we talking more than 100, less than
100? That type of thing.
Mr. Iancu. I am going to get back to you soon.
Here we are. Apparently, we have received approximately 60.
Mr. Biggs. Sixty. Okay. Of those, how many applications
have been halted or registrations revoked? Any? About 20?
Mr. Iancu. I am told about 20.
Mr. Biggs. Okay. I am sorry to put you on the spot like
that.
Mr. Iancu. That is quite all right.
Mr. Biggs. What direction has been given to examiners as
the applications from China have continued to increase?
Mr. Iancu. Well, so we are very much aware of this issue,
so what we really want to do is to make sure that our examiners
are paying increased attention to suspicious specimens.
And it is not just China. It is a significant number from
China. But any fraudulent applications, we want our examiners
to pay increased attention to that.
As I have mentioned, we have advanced training coming up
just next month. We are providing them with advanced tools,
including photoshop software that can try to detect some of
these.
I want to emphasize, folks are getting good at
photoshopping.
Mr. Biggs. Right.
Mr. Iancu. And it is getting increasingly difficult to
detect.
Mr. Biggs. So, Director, I will say that I met recently
with a retailer that has a household name, and one of the
things they do is they create in-house brands and trademarks.
And they showed me a number of images of successful trademark
registrations from people and entities from China. That is
where they were focusing. They were clearly sloppily
photoshopped.
And, you know, I looked at it, and I said, ``Wow.'' I mean,
I am just a low tech Member of Congress and I could tell that
those had been photoshopped in. They didn't even make sense.
So I guess my question is, how are they getting through?
And you have just said you have got more training coming that
is going to help. But how are these things getting through? Are
they receiving additional scrutiny? Or what is going on?
Mr. Iancu. I probably have met with the same group of folks
you have and I am aware of some of these. The bottom line is
that most of them are very difficult to detect.
Now, obviously some of them should be detected on a cursory
view and some mistakes are made. What we want to make sure we
do is, A, we reduce the number of mistakes, obviously, and that
is what the training is for, and that is what the advanced
software is for. And we want to look for ways to be able to
detect even those that are currently difficult to detect.
So we are attacking the problem from all angles.
Mr. Biggs. I appreciate that, and I wish you well and
encourage you. And if Congress needs to do something, I hope
that your team will let us know what we can do legislatively to
support that.
And I am running out of time to ask this question, so
before I ask it I am going to ask that--I have an article from
May 5, 2018, from The Wall Street Journal. I ask that it be
admitted into the record.
Mr. Johnson of Georgia. Without objection.
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Mr. Biggs. Thank you, sir.
How do you plan to address the thousands of trademarks that
are already registered that are good for 10 years that may have
problems that really are not in use in commerce?
Mr. Iancu. So we want to expand. We have expanded our audit
program, so where we go in and we audit existing registrations,
as you have just mentioned, and we have just recently expanded
that. And we have directed our examiners to increase the number
of maintenance filings audited. We have new attorneys
specifically attending to this issue. We have recently piloted
an expedited cancellation program, for example.
In the interest of time, there are lots of things, more
things that we can do. And, as I have mentioned in my opening,
this is an area where we probably could use some legislative
help for additional tools, and we will come see you all about
that.
Mr. Biggs. Very good. Thank you.
Thanks, Mr. Chairman.
Mr. Johnson of Georgia. Thank you.
I now recognize the gentleman from Arizona, Representative
Stanton.
Mr. Stanton. Thank you very much, Mr. Chairman, for putting
together this important oversight hearing for this committee.
And I want to thank the witness for doing an outstanding job.
It has been very educational. My friend from Arizona who just
spoke, it sounds like we are on the same exact page. And maybe
we will work together on the legislation that we will work with
this office because you are going to hear from me very similar
things that you heard from Representative Biggs, the importance
of dealing with this issue of the flood of trademark filings
from foreign entities, particularly from China.
The information I have been given is that, in 2014, the
number of trademark applications from China was just over
6,000. In 2018, that had gone all the way up to almost 58,000
applications. And I hear you in terms of the difficulty of
managing that, but I just want you to hear us that, I think in
a bipartisan way, want to be as supportive as possible to make
sure that our American companies and inventors and
entrepreneurs aren't being put in any kind of a disadvantage.
Have you considered issuing formal--have you considered
formally issuing examiner guidance that requires additional
supporting documents for pending applications to further
elevate the issue that we are talking about?
Mr. Iancu. Yes. So this is a specific issue that we are
focused on. So we want to and we have directed our examiners
already--there is already regulation on this issue. So we have
directed examiners to more actively use the authority they have
to require further proof of actual use of the mark where the
submitted specimen raises concerns.
And the further training will further emphasize that. It is
an important tool that we have and can use more of. There are
other things we can do. And what we want to be careful, though,
is that we have an appropriate balance here, right? Because
very often, when you take steps to prevent bad actors, you can
sweep in with that, make life much more difficult and,
therefore, costly to the good actor.
So we want to have the right balance. I mean, I will give
you an example. We could right now--so right now we primarily
rely on an affidavit of use, people just swearing that it is in
use. Now, as it turns out, some folks are not fully honest.
Shocking, but that is the case.
We could, theoretically, require upfront everybody to
submit additional proof, not just an affidavit. I don't know,
to be frank, whether that is the right approach. It would help
reduce the bad actors, but it might impose a heightened burden
on all the good actors. So we are considering that, talking to
stakeholders and a whole host of other options.
Mr. Stanton. All right. I appreciate that. And, obviously,
the idea about being in balance, out of balance is important.
My impression is, is that maybe on this particular issue when
it comes to filings from China, we may be out of balance right
now, and I want to give you all the support we can, as
Congress, to fix that issue to better protect our American
businesses.
Let's switch gears a moment, just talk about patents.
Obviously, you mentioned there are concerns about the Supreme
Court's jurisprudence and how it may be hurting innovation,
particularly in medical diagnostics, an area where I know we
can agree that we should see more rather than less innovation
and a particularly important topic to my State of Arizona,
where there are several large biotech companies.
Is there a way, in your opinion, to legislatively fix this
problem alone through a change to section 101, or do you think
legislation is needed at this point to ensure that those who
discover new innovative diagnostics can get adequate patent
protection to support the research and development needed to
turn that invention into a test that can help patients?
Mr. Iancu. So I believe this is the most important
substantive issue of patent law right now, and I believe all
branches of government need to work on this. We have done our
guidance at the PTO. We are continuing to work on it. But yes,
I think a legislative approach is possible.
Look, it took a long time to get here, frankly. The statute
has basically not been amended since Thomas Jefferson and James
Madison wrote it in 1793. So it has been around for a long
time. The problems from the court decisions in recent years
have also taken a decade or so to get us where we are. So it is
going to take some time to get it right as we move on.
We have to move on and get it right. We want to make sure
that--I mean, it is a complex issue. So we want to make sure
that we study it carefully and speak with our stakeholders,
consider all points of view. There is certainly a path forward,
and our guidance illustrates a particular path. There is a
legislative path as well and we just have to make sure we are
deliberate and careful about it.
Mr. Stanton. All right. Well, if we can improve upon
Jefferson and Madison, I guess we will give it our best shot.
Thank you very much, Mr. Iancu, and I will yield back.
Mr. Johnson of Georgia. As I recognize Mr. Jordan, I will
just comment on the fact that insofar as fraudulent trademark
applications are concerned, we are working on legislation to
address that problem, and I will be looking forward to working
with all members of the subcommittee to make sure that the
legislation that is crafted is suitable.
And, with that, I will yield now to the gentleman from
Ohio, Mr. Jordan, for 5 minutes.
Mr. Jordan. Thank you, Chairman.
Director, I got two questions. One is one that I want to
ask. The second one comes from a colleague, Congressman Massie,
who is not a member of the Judiciary Committee. It is
unfortunate the rules of our committee don't allow nonmembers
to ask questions, particularly in this case, where Mr. Massie
is the holder of like 30 different patents.
So let me start with mine. I will read it, and then we will
jump to--and it deals with the IPR process and PTAB and some of
the things that were part of, obviously, the America Invents
Act.
One of the major changes brought about by the America
Invents Act was the creation of IPR. We created this process in
an attempt to help guard the patent ecosystem against patent
trolls and to prevent them from disrupting innovation and
devaluing inventions.
Based on the data released by the PTO in March, it seems
that the IPR system is largely working. Of course, some patents
are struck down in the IPR process, but, you know, courts also
strike down certain patents. The IPR system appears to provide
a more cost-effective way and expedient way to deal with this
issue.
Over the last year, you guys have made some changes to this
process, which include changing the claim construction
standard, changing the process for claim amendments, and
issuing multiple precendential decisions on why IPRs shouldn't
be instituted. I am curious as to why you felt those changes
were necessary, but maybe let me hone it down even a little bit
more.
The Trump administration has made it a high priority to
tackle the rising price of prescription drugs. Obviously,
patents are a cornerstone of the incentive to make life-saving
drugs, but everyone can agree that this grant should not be
abused, which is why we have checks and balances in the overall
patent system.
The bio and pharmaceutical industries have made no secret
about the fact that they do not like the IPR process. In fact,
they have sought a carve-out, which causes me a little concern,
because if you are going to do it for one industry and not
others, I think there is some concern there.
Question: Do you have any suggestions for Congress with
respect to things we should do to make sure that patents in the
pharmaceutical space correctly balance the rights of the
inventor, the incentive to invent, and the rights of
competitors to enter the market? And, secondly, can you please
tell us the status of your changes to this process and any
effects they may have?
Mr. Iancu. Excellent. All in 2 minutes and 38 seconds. Very
good.
Mr. Jordan. You got to do it quicker because I got another
question from Mr. Massie, and he is sitting in the audience and
he wants me to get to it.
Mr. Iancu. Well, where to begin?
Mr. Jordan. I will take it in writing. Let's do this: Let
me ask Mr. Massie's question, and then I also want to submit a
couple others to you to look at from Mr. Massie, and then you
can say what you can in 5 minutes, and then you can give the
rest of it to me in writing. Will that work?
Mr. Iancu. Very good.
Mr. Jordan. Mr. Massie's question deals specifically with
PTAB. He says this: The PTAB was supposed to provide experts to
review patents that were mistakenly issued. Why are so many
patent claims invalidated by the PTAB if, in fact, the Patent
Office is issuing valid claims?
I think he gave me a number of like 84 percent, which seems
really high. I don't know if that is accurate, but that is what
Mr. Massie conveyed to me on the number that are invalidated.
Mr. Iancu. Okay, very good. So, just quickly, on this
point. So there are two major steps in an IPR process. One is
the institution decision. So, once a petition is filed, we need
to decide whether to institute the proceeding or not. So a good
number of petitions do not get instituted. So those drop out.
We don't cancel them. We don't change them. They are not in the
process at all. So the patent remains valid as far as the PTO
is concerned.
Once it is instituted, the number overall is approximately
80 percent--Mr. Massie is right--of, on balance, overall, on
average I mean, once the proceeding is instituted. When you
combine those two numbers, the percentage of patents
invalidated is significantly lower.
Mr. Jordan. What is that number?
Mr. Iancu. It's around in the 30, 40 percent range, and I
will get to it in a second as I keep talking. But the fact of
the matter is the patent process is never perfect. Obviously,
courts--we are dealing with words here and concepts and so on.
So courts themselves invalidate 35 percent of the patents,
give or take. So it should not be surprising that with the
lower standard of proof which we have, that the PTO
legislatively provided, so lower standard of proof to
invalidate the patent compared to courts, it is not surprising
that we would invalidate at least at the rate the courts do.
Mr. Jordan. Which is what you said, 30 to 40. You said you
are about 40?
Mr. Iancu. Yes. So we are overall----
Mr. Jordan. Once that initial--once that threshold----
Mr. Iancu. Correct, when you combine the two.
Mr. Jordan. Right.
Mr. Iancu. Okay. So just to go back to--okay.
Mr. Johnson of Georgia. The gentlemen's time has expired.
Mr. Jordan. If you get it to me in writing. If I can, we
will get you the other questions from my colleague Mr. Massie
as well.
Mr. Johnson of Georgia. I do anticipate a second round,
however.
And, with that, I will now move to the gentlelady from
California, Congresswoman Lofgren, for 5 minutes.
Ms. Lofgren. Thank you very much, Mr. Chairman.
It is good to see you again, Director. The last time we saw
each other, I had a terrible cold, and I hope you didn't catch
it from me.
Mr. Iancu. Well, we will have a separate discussion about
that.
Ms. Lofgren. Sorry. I wanted to talk about FRAND. The
Department of Justice in December indicated that they were
withdrawing from the 2013 policy statement on remedies for
standard essential patents subject to voluntary FRAND
commitments. And it has been reported, but I don't know if it
is accurately reported so it is a question to you, that the
Department of Justice wrote a letter to the USPTO asking the
Patent Office to withdraw from the policy statement. Is that
true?
Mr. Iancu. I have not seen such a letter from the--we have
received letters from the public and stakeholders, but I
haven't seen a letter from the Department of Justice.
Ms. Lofgren. Okay. Well, that is good news because I think
that would be highly inappropriate, honestly, but I don't
always necessarily believe, you know, press reports. I wanted
to see. I do think--and I assume that you agree or you will
tell me if you don't--that fair, reasonable, and
nondiscriminatory licensing obligations are really critical to
encouraging the adoption of cutting-edge technology,
interoperability, and giving consumers choices.
Mr. Iancu. I agree with that.
Ms. Lofgren. Very, very reassuring.
I wanted to talk about patentability. We have touched on
some of the section 112 written description. Your review, as I
understand it--and you will correct me if my understanding is
wrong--that the section 112 guidance you gave focused on
software inventions, but not the life sciences. Is that
correct?
Mr. Iancu. In the section 101 or 112?
Ms. Lofgren. 112.
Mr. Iancu. So, in section 112, in the guidance we issued--
so we issued two pieces of guidance in January at the same
time. One is on 101. The same day, we also issued on 112. In
the 112 guidance that we issued that day, it was focused on
computer-implemented inventions.
Ms. Lofgren. Okay. Because it seems to me that the life
sciences needs as much attention. Theranos, the blood testing
company whose founder is being investigated for fraud, was
granted nearly 100 patents, based on an invention that didn't
work. And it concerns me that a patent application for an
invention that doesn't work gets approved.
Professor Grimmelmann--I am sure you have heard this--of
Cornell Law said this: That the USPTO is an armory handing out
legal howitzers on the honor system. What could possibly go
wrong? And I think the Theranos situation is a good example of
that.
So I guess one of the questions is, how do we enable--well,
the underlying question is, what percentage of time do
examiners actually spend on 112 analysis? How do we make sure--
I mean, one has to be skilled in the art to practice the
invention. How would we demonstrate that the applicant actually
invented what is claimed in a situation like the Theranos case
or others?
Mr. Iancu. Right. So I don't have off the top of my head
the percentage of time in each one, but of the statutes,
examiners examine for compliance with all the statutes, 101,
102, 103 and 112. And we want to make sure that the examiners
hold applicants accountable on all of them. So, for life
sciences, 112 is important. Frankly, 103 is at least as
important there as well because we want to make sure we don't
give patents on innovation--or on applications that are mere
obvious variations. And sometimes that is difficult to detect.
So we want to make sure the examiners are well-trained on that.
We are providing training all the time on these issues and
now increased training, especially in the Tech Center that has
to do with life and pharmaceuticals and biotech inventions. In
June of this year, for example, examiners will have received
updated training in Tech Center 1600, which is exactly on these
types of patent applications. So we are very focused on this
issue.
Ms. Lofgren. Okay. I would like to follow up a little bit
more later, if we could, on this issue, because, you know, I am
just about--I am out of time. But I do thank you for being here
and thank you very much for your restatement of commitment to
the 2013 policy statement. I think that is very important.
I think it is a mistake for the Department of Justice to
have done what it did, leaving us just with the FTC and the
International Trade Commission, but there we are. I don't
always agree with what the DOJ is doing these days.
Mr. Iancu. If I can respond briefly to that last point.
Okay. So, just briefly, DOJ did withdraw from the 2013 policy
statement. The PTO has not yet made a statement on that. We are
studying the issue now that the DOJ has withdrawn, and we hope
to have a view on that soon.
Ms. Lofgren. Mr. Chairman, could I ask--I will forego my
second round if I can--because I thought I heard you say that
you felt or believed that the FRAND was important to
innovation. Was I incorrect on that?
Mr. Iancu. No, no. I fully believe that FRAND is important.
And we, especially in FRAND-encumbered standard-essential
patents, we want to make sure that we encourage good faith
negotiations between the parties, between the licensees and the
licensors and the like, good faith negotiations to reach a
FRAND decision is critically important for innovation and
implementation and the like.
I agree with you on that. My only point was that, as with
respect to the 2013 statement, PTO has not yet taken a position
on that particular statement, in light of the DOJ's withdrawal.
Ms. Lofgren. Thank you, Mr. Chairman.
Mr. Johnson of Georgia. Thank you.
I now recognize the gentlewoman and ranking member of this
subcommittee, Alabama Representative Martha Roby, for her 5
minutes.
Mrs. Roby. Thank you, Chairman.
And, Director Iancu, thank you for your grace as I had to
exit to go take a vote in appropriations. But I want to talk
about counterfeiting. It has been an increasing problem, so
much so that the President issued a memorandum last month
instructing several departments to provide a report on the
issue and recommend actions to combat the problem.
As the head of the agency responsible for registering
trademarks and an agency participating in the administration's
efforts to combat counterfeiting, what insights can you provide
on the state of counterfeiting online specifically, and what
can the administration and Congress do to address the increase
of sales of counterfeits online?
Mr. Iancu. I thank you for the question because it is a
critically important area. The short of it is that the state of
counterfeiting online is not good. There is a huge, shall we
say, tax on American businesses as a result. I should say that
approximately 85 percent of the counterfeiting comes from China
and Hong Kong, but overall all counterfeiting is a huge
problem.
The administration is paying very close attention to this.
You have mentioned the Presidential memorandum on this exact
issue. The Department of Commerce is tasked, in conjunction
with the Department of Homeland Security, to work with the
Department of Homeland Security on this issue. The PTO is
heavily involved in it. So, at the PTO, we have a lot of
knowledge on this, a lot of experience and expertise, and we
have done and continue to do a lot on it. We take a lot of
action on it to the extent we can.
So, for example, coming up just in a few days, on June 6th,
we are going to have an all-day public forum at the PTO
headquarters entitled Brand Protection and Anti-Counterfeiting
Strategies Conference with experts and the like. We just
recently conducted a video contest for public service
announcements called Consumers Combat Counterfeits, where
children at different grade levels and the like created very,
very creative public service announcements and submitted them.
There was a contest and we announced winners I think last
month.
We work with the National Associations of Attorneys General
across the United States for training workshops and capacity
building and the like. In conjunction with the Department of
Commerce, we have a stopfakes.gov effort. We work with many
other agencies, the IP Enforcement Coordinator, the National IP
Rights Center, the Border Patrol, the USTR and others, to
address this issue. We take steps internationally. We advocate.
When we travel internationally, we advocate strongly on this
issue on behalf of American companies and our interests.
Anyway, I will stop there, but we do a lot.
Mrs. Roby. Well, I would just say--and I understand what
you are doing. In my short time on this Committee, I have
become aware of how serious this issue is. And so I would just
ask that the chairman and--that we can continue to work with
you and figure out if there are ways that Congress can be more
proactive, think outside the box, have real conversations with
all the stakeholders. And I look forward to continuing to work
with you on that.
Mr. Iancu. And just briefly, the Presidential memorandum
requires a report that we are working on across government in a
few months, part of which would be legislative recommendations
as well.
Mrs. Roby. Perfect. Thank you. And at our last hearing on
patenting about women and minorities, the witnesses testified
that it was very difficult for inexperienced or pro se
inventors to find the availability of several free patent
assistance programs administered by the PTO.
So I am going to give you this opportunity to tell us,
because I know there have been things that have been done to
help inventors locate the sources of assistance to help them
navigate this very complicated patent system.
Mr. Iancu. Thank you. And we have, among other things, just
recently revamped our website. It is a much more user-friendly
and modern-looking website right now. But a key component is
right at the top, very prominently displayed is a section for
those new to IP patents/trademarks. And then there is a button
you can click on to get help in your area. You click that. It
goes to a map of the United States, and you can click on your
State and specific resources in your State.
For example, across many, many States, we have resource
centers, Patent and Trademark Resource Centers, located in
libraries, usually on a university campus. And they are
heavily--they are specifically for individuals who want
assistance. So they can go there. They can find out where it
is.
We have a patent pro bono program, for example, that is
heavily used across the country by folks without the
appropriate resources. I happen to have some statistics here
that says that 60 percent of those who applied for pro bono
assistance in 2018--this is a study conducted by Georgia
PATENTS, by the way. Sixty percent who applied were women; 58
percent who applied were minorities. There is obviously overlap
and the like. So there are quite a few resources available.
Mrs. Roby. Thank you.
And, Mr. Chairman, I would say that is a pretty positive
outcome from the hearing that we had, and we appreciate your
attention to it. So thank you.
Mr. Johnson of Georgia. Thank you.
Next, we will turn to the gentleman from California, Mr.
Correa, for 5 minutes, questions.
Mr. Correa. Thank you, Mr. Chairman, and thank you for
holding this most important hearing.
And I want to thank our Director Andrei Iancu for being
here today.
I wanted to follow up on some of Mrs. Roby's questions
regarding the fraudulent trademark applications, primarily--
your words--85 percent from China and Hong Kong. What are the
repercussions? So you file something that is fraudulent. Are
the Chinese Government folks from Hong Kong working with us to
reduce this, or is this just something that happens in the U.S.
and we have to live with it?
Mr. Iancu. The 85 percent number that I mentioned to Mrs.
Roby's question was with respect to counterfeiting and pirated
goods entering the United States. I think your question goes
toward the fraudulent trademark applications.
Mr. Correa. Yes, that is correct.
Mr. Iancu. And, you know, I don't know if the Chinese
Government is cracking down on this. Frankly----
Mr. Correa. Would this be part of the trade negotiations
that are going on right now?
Mr. Iancu. IP in general and the abuse of the IP rights of
American companies certainly is a significant component of the
trade negotiations.
Mr. Correa. Would trademark be part of that or just----
Mr. Iancu. Well, I don't know if it rises to the level, but
it is a very important--it is an important issue. So,
hopefully, that is----
Mr. Correa. It is for this committee, I think, and for your
office as well.
Mr. Iancu. Yes.
Mr. Correa. So what do we do to elevate this to a level
that maybe people pay attention to this?
Mr. Iancu. Well, we speak about it all the time, and I
speak about it all the time. I advise----
Mr. Correa. I understand that. So how do we get it to the
level that people listen to us that are involved in these
negotiations?
Mr. Iancu. So the people involved in the negotiations do
notice.
Mr. Correa. Write a letter to Mr. Lighthizer and explain to
him that this is an issue that is important?
Mr. Iancu. Ambassador Lighthizer----
Mr. Correa. You have called it an indirect tax--and I think
you are absolutely right--on Americans.
Mr. Iancu. Yes, Ambassador Lighthizer knows about this
issue.
Mr. Correa. Okay. Following up, also, we talked about the
complicated patent system that you have. Are you implementing
the technology in a way to simplify this so folks can better
navigate through the system online, or is that even a
possibility?
Mr. Iancu. It certainly is a possibility. So, as I have
mentioned, we just recently revamped the website to make it a
bit easier. Having said that, the----
Mr. Correa. Easier or a whole lot easier?
Mr. Iancu. You know, it is a complex system.
Mr. Correa. Is it complex because of the technical or just
the legal aspects?
Mr. Iancu. Yeah, the legal aspects are very complex. I say
sometimes that there is a statute someplace in the codes, like
101.5, that seems to say that patent law shall be complex
somehow. But we try to do the best we can to simplify it for
folks.
And I want to emphasize that for individuals, folks who
cannot afford lawyers and the like, we have a pro bono program.
In addition to that, we have a pro se dedicated workforce at
the PTO itself. So, if you appear pro se without a lawyer and
you need help to navigate, we have dedicated examiners who will
answer the phone and guide you through the system. And I think
that sort of personal connection is probably the most helpful.
Mr. Correa. I know we are planning to have some events in
my district to highlight the good work you do and how you can
help the local economy by helping local entrepreneurs. I am
hoping we can have a segment where you touch upon these kinds
of services that you provide to our local constituents when you
are there.
Mr. Iancu. Hopefully. And I look forward to that, by the
way.
Mr. Correa. Thank you very much.
Mr. Chair, I yield the remainder of my time.
Mr. Johnson of Georgia. Thank you.
And next we will recognize the gentleman from Virginia, Mr.
Cline, for 5 minutes.
Mr. Cline. Thank you, Mr. Chairman.
Director Iancu, thank you for being here today.
I want to return to the issue of drug patents. My
constituents are very concerned about high drug prices, and
many critics of high drug prices would argue that one of the
problems is drug companies filing and being awarded multiple
patents at different times, some representing very minor
improvements. And they argue that the practice of filing
countless patent applications covering a single drug
contributes to patent thickets and leads to a process called
evergreening.
Do you believe that follow-on patents should be granted for
trivial and obvious modifications to the original drug patent,
and in what circumstances might that be appropriate?
Mr. Iancu. It is never appropriate to issue patents on
obvious variations of prior inventions. So 35 U.S.C. Section
103 says that you cannot get a patent if it is an obvious
variation. And the key obviously is the implementation and
application of that. Our examiners are trained on that issue.
And specifically for pharmaceuticals, we are about, just next
month, to provide yet again advanced training in that specific
tech center on the obviousness question, because it is a
critically important issue.
We want to achieve the right balance when it comes to
patents on pharmaceuticals. Innovation in the pharmaceutical
space is critically important, obviously. It creates products
that saves lives, improves the quality of people's lives and
the like. At the same time, we want to make sure that the
patents that we issue comply with all the statutory bases and
critically important that they are new and innovative and that
they are not near-obvious variations.
Mr. Cline. I am glad to hear that you are introducing
additional training for examiners, and that will help keep
track of all the related applications that are filed.
I understand that while patents can be granted to the drug
product, a better method of making a known drug, a new way of
administering a known drug, and using a known drug to treat a
new disease, do all of those different forms of inventions
justify granting 75, 100, or even more patents?
Mr. Iancu. It certainly depends on the drug. And if there
are innovations on all those areas, there can be multiple
innovations in each one of the areas that you have mentioned
and others. For example, there can be innovations on the use of
a particular formulation. So new use of old drugs, that can be
very innovative and usually requires significant investment and
research and development.
I will give you just one of many examples. The well-known
drug AZT, which was more or less a failed cancer drug, after
additional innovation, it was discovered that it is a very good
drug for the treatment of AIDS or HIV. And that was based on
further innovation. So there are examples like that, and it
really depends on the particular drug and application.
What is critically important, though, is that for each
application that we see, we have a rigorous process that we go
through and we make sure that the application in front of the
examiner actually presents novel and nonobvious innovation for
claiming vis-a-vis what has come beforehand.
Mr. Cline. I understand you have to achieve a balance, but
I will give you an example on the flip side, and you tell me
whether this is a problem beyond this example. One report
indicates 95 percent of all the patent applications on the
diabetes treatment Lantus, an insulin analog, were filed after
the drug was first approved and on the market in 2000. It is
argued that together, the patents result in a 37-year period of
exclusivity.
Can you explain why the PTO would allow one pharmaceutical
company to obtain so many patents and potentially double the
exclusivity permitted in the Patent Act, which does limit
patent terms to 20 years from filing, but allow for short
extensions for FDA delays?
Mr. Iancu. So I am not familiar with the specific product
you mentioned and the patents on it. Again, it really depends
on what they have filed and the innovations that are
appropriate there. The 20-year exclusivity period is from the
time of invention to expiration of a particular patent. It is
entirely possible for any product, whether it is in the
pharmaceutical area or the cell phone area or anything else,
that innovation occurs later.
So, obviously, you have a particular drug that has been out
for a number of years, a lot of new information comes about.
And new innovations--I am hypothesizing now, again, not
specifically to the one example you gave, because I don't know.
But it is entirely possible that, based on the information that
was collected during the time the pharmaceutical was being
administered, new developments were made with respect to the
dosage or the delivery mechanisms that make the drug more
potent or has less toxicity, for example. Those could be
critical innovations that improve the quality of life of the
patient at issue, and it could be innovative. It could be novel
and unobvious compared to the prior innovations, and those
could happen later. So it depends on the particular
application.
Mr. Cline. And my time has expired, but I think we also
have an interest in ensuring that a greater number of people
have access to generics and the availability of drugs, so we
have to maintain that balance as well. So thank you.
I yield back.
Mr. Johnson of Georgia. Thank you. I will now recognize
myself for a second round of questions.
Mr. Iancu, I have heard concerns about repetitive
challenges to the same patent at the PTAB. On the other hand, I
have heard the concern that if multiple entities are accused of
infringing the same patent, each one should be able to petition
the PTAB to reconsider whether the patent should have been
granted.
Which of these two groups has the better argument, and how
is the USPTO currently balancing these concerns?
Mr. Iancu. So the balance is the key. We want to make sure
that petitioners have a fair opportunity to challenge a patent
pursuant to the AIA, given the statutory mandate. But at the
same time, we want to make sure that patent owners are not
harassed. So we want to make sure that we have a flexible
approach that can be deployed in each case, based on the facts
and circumstances of that case, but in a consistent and
predictable manner.
So what have we done? We have developed a set of factors
that addresses follow-on petitions. It came out in a case
called General Plastic, so we call them the General Plastic
factors, for lack of a better term. And if we see a follow-on
petition, a petition filed after the first one, we go through
the factors and see whether it makes sense for the system
overall to have yet another petition on the same patent.
We are also looking right now at not necessarily what is
called serial petitions, but the multiple petitions that are
being filed at the same time. There are situations--85 percent
of patents have only one challenge, only one petition that we
see at NIPR. But for the other 15 percent of patents that get
challenged, we see multiple petitions, sometimes at the same
time. So we are looking under what circumstances that makes
sense, and we want to make sure, again, that we achieve the
proper balance.
Mr. Johnson of Georgia. Thank you.
I will now yield to Mr. Cline if you have any other
questions.
Mr. Cline. Mr. Chairman, thank you. I have exhausted my
list of questions.
Mr. Johnson of Georgia. Thank you.
Mr. Correa.
Mr. Correa. Sir, I finished my questions.
Mr. Johnson of Georgia. Well, with that, I think we can
conclude this hearing. I want to thank the gentleman, Director
Iancu, for your appearance today.
Without objection, all members will have 5 legislative days
to submit additional written questions for the witness or
additional materials for the record.
And, with that, the hearing is adjourned.
[Whereupon, at 3:40 p.m., the subcommittee was adjourned.]
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