Kappos 2.0: USPTO Funding, Board Hiring & Harmonization

In this installment, the third and final segment of my interview with David Kappos, Under Secretary of Commerce for Intellectual Property and the Director of the United States Patent and Trademark Office, we learn from Director Kappos that the USPTO budget is not a problem whatsoever.  While it is well known that the Office did not achieve a permanent end to fee diversion, less well known is the fact that Congress appropriated $2.7 billion for the USPTO for this fiscal year.  The USPTO is NOT operating under a Continuing Resolution (CR) as is the case with most of the rest of the federal government.  Furthermore, current projections have the USPTO collecting $2.5 billion in fees this fiscal year, so there will be a $200 million subsidizing of the USPTO by the General Treasury.

In this segment Kappos also says that the USPTO is looking to hire 80 more Judges for the Board of Patent Appeals.  “Tell your readers, if you’re an experienced patent attorney and you want to have a great career move, we give you a robe and a wig and a gavel and you get to be a judge,” Kappos said.  We also discuss the Detroit Satellite Office and Director Kappos’ thoughts on harmonization.

For more on this interview series see Kappos 2.o Part 1 and Kappos 2.0 Part 2. Both of my interviews with Director Kappos, as well as any future interview, can be found archived under Kappos Interview.

Without further ado, here is part 3 of my interview with Director David Kappos.

QUINN: I keep going back and forth with the sheer numbers of the people that you manage.  There has to be some kind of bright line rules despite with the Supreme Court thinks.  In our line of work there’s got to be some kind of bright line rules.  But I understand the need to let them run with what they’re doing.  And so I personally don’t have an answer, I don’t have a solution, I don’t know what the answer is. I haven’t been around through too awful many different regimes. My registration number is in the 40,000s.

KAPPOS: I was going to say mine’s in the low 3s, so, yes, yours is probably in the 4s.

QUINN: I suspect this has always been some kind of an issue of the training.  But how much do you think the physical campus not being able to accommodate all of the examiners has been a problem.  Does that get in the way of the training and the mentoring do you think?

KAPPOS: I think it’s a management navigational point. It’s something that we have to deal with.  I think it presents both new  challenges and opportunities that require technology and better, more nuanced leadership and management to deal with.  I actually don’t think the distributed workforce has disadvantaged us.  I think that we’ve been advantaged by it.  And the reason I say that is because if you look at the productivity of hotelling examiners; higher.  If you look at number of workdays versus sick days; higher.  If you look at the attrition; lower all across the board.  That’s not surprising, people love being able to have a well integrated balance of work and life and they can do that if they get to work at home.  And they love being able to have the flexibility to live wherever they want and still have a great career at the USPTO.  It is one of our aces in the hole and it produces value all across the board.  Now, do you have to do things differently?  Sure, you have to have virtual department meetings.  Examiners have to be able to conduct sensible interviews with applicants by video.  And that’s why we did the universal laptop.  Now we’ve almost got everyone in the entire agency on a single platform like that single laptop that you see over there, that’s the only computer I have.  I take that home with me at night and I bring it back in the morning.  Want to do a video interview, no problem, I did a video interview with an applicant on it a while ago.  And we’ve got examiners all over the place doing those things.  So if we’re smart about leveraging technology I see this distributed workforce as a huge opportunity for us to develop, have the most loyal, skilled, productive group of folks that we possibly can.  And I don’t see it as a rate-limiting step for us.  It requires careful management and development in order to deal with the fact that people aren’t right there across the table from you like they used to be.

QUINN: Let me ask you this.  Is there some kind of a threshold in terms of how much experience an examiner has to have before they qualify to be able to be a hotelling examiner?

KAPPOS: Yeah, there is.  And right now it’s in my view we need to do some work.  We actually are working on it with the union.  If I remember correctly you have to be at a certain level of experience, in terms of your grade, and you have to be at the USPTO at least two years with the USPTO.  And of course you have to be rated in terms of the rating that you get.  Your performance evaluation at a high enough level to be able to quality, because we don’t want folks who are struggling to then send them home and potentially have them struggling even more.  We want to help them get to where they’re doing great work and then you can launch them off and go home.   So there are a number of requirements.  Honestly, Gene, I think that particularly the two year requirement has become anachronistic and we shouldn’t necessarily be requiring it.  We’re hiring a lot of experienced examiners now, people in many cases who’ve got many years of practice experience.  They’re patent attorneys, they’ve prosecuted a lot of cases in front of the agency.  Some of them have worked for the USPTO before and were primary examiners.  And then they come back after years, they could go work anywhere very quickly.  And so we’re working right now on taking a fresh look at that multi year requirement.  And as I told these examiners that I met with this morning, I’ll take a fresh look at anything, obviously compliant with all the laws and regulations if it makes sense because the one thing I don’t want is a rigid set of rules that impedes people from being successful.  I mean, one guy’s telling me that an IP experienced guy we hired is working 135% production level but he’s still being told he can’t take his laptop home for some reason.  I mean, yeah, you look at that and go how did that happen?  Well, it’s the rule.  Well, you look back in time and back in the 1990s there was some reason why you had that rule, but it doesn’t make sense any more.  So we’re looking at everything in order to try an enable people to be more flexible and productive.

QUINN: I know we are running long here, and I could go on and on, but maybe now is a good time to ask whether there anything that you want to specifically talk about that I haven’t asked about?

KAPPOS: Well, yes, probably one or two things that are worth—

QUINN: Because I know you are continuing to keep your foot on the accelerator.

KAPPOS: Yes, we’re pedal to the metal as they say.

QUINN: And that’s not gonna be letting up?

KAPPOS: No, absolutely not.

QUINN: Well, actually one thing before you get into the things that want to talk about, how are you going to be able to do all of the stuff that Congress is telling you to do and work within the framework of the budget that you have?

KAPPOS: Well, our budget is actually doing pretty well.  As you know, Gene, while we didn’t get a permanent solution of diversion, Congress did come through for us, appropriated $2.7 billion to us this year.  We’re currently projecting our collections just short of $2.5 billion.  So we actually have head room right now, meaning we will clearly get to use all the money we collect.

QUINN: Is that even under the CRs, right?

KAPPOS: Yeah, well, USPTO is not under a CR.  We were part of the mini bus that passed.  So we’ve got our year budget.

QUINN: Interesting.  I did not know that.

KAPPOS: Yeah, we’re golden.

QUINN: And I don’t know that that’s a well reported story in the industry, maybe it’s not.

KAPPOS: Well, you can report it.  Yeah, we’re golden for this year so we’re steaming ahead.  We got overtime on full.  We’re running Copa 2.0.  We’re going to take another 265,000 old cases and get them out and examined.  So that’s all to be very, very healthy.  Now, what we are concerned about relative to keeping all of these programs going and implementing the AIA is the timelines are actually very, very tight.  There is no free play.  There is no room for error in them.  So we’re on the bubble right now.  I’ve signed four of the NPRMs.  We’re going to get them out early actually.  You should tell your readers we promised to get them out in mid-January, we’re going to have them out in early January.  I think it’s four of them.

QUINN: You’re killing me.

KAPPOS: Yes, this is going to be fun.  We have I want to say something like seven more.  We finished them here.  I personally edited 750 pages of NPRMs as did many other people in the agency a couple of weekends ago.  We got them done, we got them out, and they’re over at O & B being reviewed.  We’re on track to get them out in mid January.  So far we’re on the bubble. I got right over on my desk you see that pile of paper?

QUINN: Yeah.

KAPPOS: That’s the prior user study that we’re required to send to Congress in mid January.  I am literally line editing that thing today.  Providing extensive comments to the team.  Other people are editing it.  We’re gonna get that done.  We got another study that’s one of the other studies on foreign patenting, I think.

QUINN: Do you care to say thumbs up on prior user rights, thumbs down, neutral?

KAPPOS: Well, I don’t want to get into the details of the study, but we’re trying to do a good job as stewards of considering all the comments and reporting accurately on what we learn.  So anyway, in terms of the process, though, so far we’re on the bubble.  We’ve had to work a lot of people very hard to do that and it’ll continue because there’s just no free play.  So any time anything goes wrong we’ve got to absorb it somehow internally.  But so far we’re doing well.  I think we can get it done.  It will require this kind of continued very strong focus on execution and day by day, you know, and I give a lot of credit to Janet Gongola, you should talk to her, in fact.  She’s the czar who leads it, she sits right down the hall here.  Janet and I talk multiple times every day.  I pledge to deal with her issues literally in real time when she’s got something we wipe the calendar clean and we deal with it immediately because that’s the most important thing that we’re working on.

The other thing is, we’re having to be relentless in some cases I’m having to be very relentless with our colleagues in the Administration to say, “Look, you know, you cancel a briefing that we’ve set up to brief you on this, we are not stopping this train, we’ll catch you up to the train, but we are not stopping it.”  So it really does require kind of a brutal business like focus.  It’s just like executing a P&L, a profit and loss in the corporate world.  You cannot let up, you cannot stop for anything or you will fail.  And that’s the way we’re running AIA implementation.

Now, the things I wanted to cover, Gene, so we talked about the backlog.  That’s clearly going in the right direction.

QUINN: Where are we at today?  Because I checked the dashboard the other day and it was still October numbers.  Do you have any updated?

KAPPOS: As of the last time I saw the number, which has not been the last few days, it was actually all the way down to 662.  It might be in the 650s now, I don’t know for sure.  We just finished the final biweek or the year, and usually that—the final biweek of the quarter and the final biweek of the year, and usually you see it dip then because of examiners picking up a lot of cases.  So we’re either in the low 660s or the high 650s now.  Our model says that the backlog is going to wind up at the end of this fiscal year at about 620 or something like that.  But our model is hopelessly broken now, it can’t predict any more because of all the changes we made.  I think we might even see the first significant digit of five by the end of this financial year.  It’ll be close, but it’s quite possible.  So clearly we’re making progress on that.

On the other side of the ledger, of course, that RCE backlog has crept up.  And I worry about that.  We talked about that a lot before.  I think that’s going to level off this year because as you know with regard to the RCE backlog, once there’s enough cases in and cases start coming out at the same rate they’re going in and since slightly fewer RCEs are being filed now, there’s every reason to believe that backlog will stabilize and the other one will keep going down.   So I don’t worry about.

But I wanted to talk about the board a little bit.

QUINN: Oh, right, yes

KAPPOS: I worry a lot about that backlog.

QUINN: Yeah, I do, too.  Because I worry whether or not those cases are the most important technologies.

KAPPOS: They are.

QUINN: And people are willing to fight for seven, eight years to get them, they must be important.

KAPPOS: Yes, they are.  So we’re looking for a lot of ways to improve that situation.  James Smith is doing an outstanding job.  He’s brought in about 20 new hired judges that I have signed off on already.  And you’re talking unbelievably qualified people.  People who clerked on the federal circuit, they’re partners in law firms.  So our board is looking really good in terms of we’ve got a great board, we’re adding more great people to it.  I told James, go double the size of the board this year if you can.  Take it from 100 to 200.  So 20 down, 80 to go, tell your readers, you know, if you’re an experienced patent attorney and you want to have a great career move, we give you a robe and a wig and a gavel and you get to be a judge.  It’s fun.  And these guys have a tremendous spirit, our board.

QUINN: Do you know what their starting salary is?

KAPPOS: That I don’t.

QUINN: We can maybe get that and insert that here sort of.  And I suspect there’s probably a range depending on…

KAPPOS: Yeah, experience and all that.

QUINN: But depending upon what that number is you may get more.

KAPPOS: Yeah.  So James [Smith, Chief Judge] is offering new incentives to the judges to increase productivity.  We’re doing IT work to provide them with better tools to help with productivity.  Of course, we need a lot more judges.  We’re working on a variety of programs between the board and the core to try and find ways to take cases that are on appeal.  For instance, we’ve got a bolus of cases on appeal where there was an attempt to make an amendment after final.  And the examiner gave an advisory action and didn’t enter the amendment after final and the case went up to appeal.  So we’re looking at those as a bolus and looking at a way to offer applicants a sort of a no fault option.  “We’ll leave your case on appeal, we’ll leave it right where it is in the queue, but if you want we’ll also take a look and talk to you about whether if that amendment had been entered after final we would be able to get it out of the appeal queue.”  So we’re going to look at it again like a no fault optional way to see if we can relieve some of the pressure thorough that mechanism.  There’s another category of cases that went to appeal and never did that pre appeal brief conference thing.  So we’re looking at offering again no fault, you can leave your case in the appeal queue where it is, but at the same time in parallel we’ll conduct that meeting.  You might call it mediation or interview and see if we can clear the case up that way.  We are finally I think getting close to being able to have applicants present for at least part of that pre appeal brief interview.  Remember applicants have been concerned because you can’t actually be present at that.  So we’re working on a whole range of initiatives that will relieve some of the tension in the incoming pipeline on the board, the case flow coming in at the same time we’re getting more bandwidths and more capabilities, more efficiencies for the board to be able to overcome that big in building backlog.  We’re hoping we’ll actually be able to turn an inflection point on it this year.  And I feel like we really need to do that because we’re going to need to get ready for the new processes coming in in September of 2012.  So I wanted to mention the board.  I worry a lot about that.  We’ve got a great leadership over there.  Terri Rea, you’ll talk to her.  Deputy is specifically focusing a lot of her attention on helping James over on the board and we’re clearly making progress, but we’ve got a lot to do.  And as you say, Gene, those are really important cases so if we’re going to spend our attention fixing anything it would be the board.  So I wanted to mention that.

You didn’t ask about satellite offices, but I’ll just mention, you were being polite…

QUINN: I didn’t on purpose.  I was being polite because I know that that is a hot button political issue.  I mean, as I understand people are lining up submitting applications almost as if you’re handing out the Olympic Games.

KAPPOS: Yeah.  Well, it is a little bit like that, but that is a nice problem to have.  We are proceeding with Detroit.  We’ve announced that we’re going to get that office open in the second half of 2012.  I will tell you that I told the team when I hear the word second half of 2012 to me that means July, it does not mean December, it means July.  So we’re targeted to get that office open this coming summer, the summer of 2012.  We have completed site selection, although I can not tell you yet what the site is, but it’ll be great.

QUINN: For the other two or for the one?

KAPPOS: No, no, just for the Detroit one.  The specific site we are working on with GSA.  So we’re very excited.

QUINN: We could probably figure it out if we looked at the records.  People are hypothesizing where it would make sense.

KAPPOS: We’re getting ready to start working on vacancy notices and hiring and we already have run a pilot to train people remotely so we know how to do that.  So we’re good to go on Detroit and we’re very much looking forward to that.

The other thing I’ll mention is that we didn’t originally plan to empanel any board panels in Detroit.  But given the need to grow our board and the fact that there are only so many people in the Washington D.C. area we’re actually looking at hiring board judges there, too.

QUINN: Oh, really, interesting.

KAPPOS: And paneling board panels in Detroit.  So that’s good.

QUINN: Do you have any other thoughts on what other satellite offices?

KAPPOS: I can’t comment on that at this time.

QUINN: I mean, more than just what was in the federal register?  I mean, I’m not asking you to say it’s going to go here or there.

KAPPOS: The only thing I can say is we’re trying to run a very objective process.  So we’re trying hard to look at the facts of the things that are important; how many patent applications are getting filed in the region, how many practitioners are in the region, how many universities that produce both patent applications and potential new hires are in the region, the unemployment rate, the cost of living, access to transportation hubs, all of the things that would tend to tell you that this is a good place to have a branch office or not.

QUINN: Yeah, I did my top ten list.  Have you see that?

KAPPOS: Yes.  Yes.

QUINN: And it was interesting for me.  I guess I didn’t realize going into that there was only a couple places in the country that had more than one federal lab nearby.  And I was surprised to some extent that New Mexico was one of those places.  And that’s not a place that a lot of people might think of as sort of a hub of innovation, but I guess it really is.


QUINN: And I won’t ask you to make any particular comments.  But you can’t blame me for trying.

KAPPOS: Yes, well, thanks for trying, but no comment.

And then the last thing I would mention that’s really important is this whole area of working with offices overseas.  I don’t know if you’ve been following it closely, but we are really productively engaged with the EPO on this cooperative patent classification project.  It’s very complicated and big, big, big stuff, a lot of people here working on it and in the EPO.  But we are making progress on this.

QUINN: How exactly is that going to streamline things?

KAPPOS: Well, let me count the ways, right?  First of all, when an examiner searches they’re now going to be searching against deeply well organized and classified classes and subclasses.  Not this thing you get right now where you got some classes that are totally unwieldy.  They have ten thousand references in them.  I mean, you can’t use that sensibly to conduct a search.  So we’re going to have well maintained, up-to-date classifications that will enable examiners to leverage the classification system like they used to when we were kids.  I mean, I used to do classification searching and you could find great art that way in the old days.  Now you can hardly use it any more.  So that’ll be the first thing.

The second thing is that we will be able to find with one classification search all the U.S. art, all the European art, the Japanese art, the Chinese art, to have one classification system that covers all of the sources of patent literature.  That’s very cool to be able to conduct one search and not have to go, well, let’s see, the USPC is this, now I gotta go figure out what the code is, then I gotta go figure out the F term for Japan and then I gotta go figure out the IPC code.  One set of codes for everyone to conduct essentially a global patent literature search.  I think that’s going to be very, very helpful to examiners.  And then we’ll be able to leverage the investment that other countries are making in classifying on an ongoing basis.  So we’ll make more investment than we’ve been making but we get to leverage other people’s investment.  It’s like the open source movement, right?  You put an investment into creating some code but you get to leverage the investment everyone is bringing in.  It’s just 1st Century approach to classification.  So I’m very excited about the CPA.

We’re also really moving forward on harmonization now.  Particularly working with the JPO, working with the European folks, to try and leverage the AIA and the major accomplishments and advances in having a really collaboration friendly patent system that we’ve gotten under the AIA and encouraging our trading partners to move their patent systems into the 21st Century, too.  So that’s another major initiative for us.  We are talking to them a lot.  Putting together kind of a compendium of the places that our laws may differ and issues like grace period come up, of course.  And other areas that need to be improved and then we can start talking about how different are we really and how can we get to be closer together and how can we have a kind of a global best practices patent system rather than this kind of balkanized system we have now.  Well, you know, the Chinese do it this way and we do it that way and we really don’t know which way is better, it’s just the way we do it.

QUINN: What do you say to the folks in the patent bar?  And I’ll admit that I’m one of them.    When I hear “harmonization” I hear “U.S. do it our way.”  You know, it’s not really a discussion about best practices, it always has seemed to me as much as it you guys are different, you need to do it the European way, for example.


QUINN: Because I think we do a lot of things pretty well.  As you were talking about before, I like the choices that we’ve made particularly on patent bold subject matter, on 101.  I do not like the choices that Europe has made.

KAPPOS: Yes, I agree with you.  I think that’s right.  And that’s why I emphasize best practices.  I have absolutely no inclination of moving patentable subject matter.  I think the new U.S. grace period is the world standard for grace periods.  It aligns the patent system with the practicalities of the way the real world works where great inventions are created.  You must go see capital, you must publish, whatever is going on. A grace period is the answer to that tension.  I mean, the Europeans have a tremendous problem.  It’s been well documented in academic studies there that, you know, you’re in a Hobson ’s choice.  You’re a great university, you know, Max Plank, whatever you’ve created some wonderful invention, your priority is to publish.  All right, forget it, that’s it.  Publish or patent but not both.  And when you have that happen what you’re actually hurting in the end is tech transfer, lab to marketplace, product introductions, creativity, competitiveness, and ultimately job creation.  The modern 21st Century grace period solves all of those problems.  We have the gold standard; we’re going to be talking from that basis, and not from any other basis.  So I don’t see harmonization as do it their way.  I see it as do it the best way.  Figure out what the best way is and do it that way.


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