Upon taking over at Deputy Director Lee performed the functions and duties of the USPTO Director, a position that was and is currently vacant. The last Director of the USPTO was David Kappos. Kappos left the agency in January 2013. Therefore, it has been nearly two years since the USPTO has had a Director, which has often been criticized as being an excessively long time not to have an agency head.
This will be the first time that Lee has had a confirmation hearing. The timing suggests that the Obama Administration and Senator Reid think that they can get Lee confirmed prior to the end of this Congressional session, which may well be the case. Assuming that this hearing will be more than just a show, there are a number of difficult questions that should be asked of Lee. Below are 12 questions that need to be asked, and a list of others that could and probably should be asked as well.
1. Why is the Patent Office secretly subjecting applications to extraordinary scrutiny?
2. What statutory authority exists for USPTO to apply extraordinary, secret scrutiny?
Recently released documents requested under the Freedom of Information Act (FOIA) show that since 2006 the USPTO has had a systematic, secret process in place to subject certain applications to an unprecedented level of review.
The name of this program is the Sensitive Application Warning System or SAWS for short. Yahoo Tech News reports that an “application that is categorized in SAWS… is placed in a special type of patent purgatory. SAWS-marked patents must be approved by anywhere from three to nine people and can be delayed for years.”
Lee will almost certainly point to this program as evidence of good government, but Senators shouldn’t allow that answers to suffice. Lee has in the past explained that the USPTO is working hard to make sure that only valid patent claims issue, which is admirable, but that doesn’t justify a secret program that targets certain applications without even the applicants being aware that they are being targeted.
While the program seems largely aimed to catch applications that relate to trivial devices, as well as those that relate to software and genetics where there has been an upheaval in the law, the FOIA documents also clearly show that the business method patents are caught up in this review. This is problematic because the Supreme Court specifically ruled in Bilski v. Kappos that business methods are patent eligible, so why the additional scrutiny?
Also problematic is the fact that the USPTO is placing extraordinary scrutiny on applications with long pendencies, but long pendencies are frequently caused by lengthy administrative delay and unreasonable patent examiners. Further, it is downright inexplicable why pioneering innovations are subject to secret scrutiny when the patent system is supposed to be encouraging paradigm shifting innovation.
Finally, it is unforgivable for the USPTO to subject applications “reciting a process that PTO employees… use.” In other words, if the USPTO is using a particular technology you might as well not even apply for a patent because the agency will put up so much bureaucratic red tape and extra levels of review that getting a patent will be virtually impossible. To call this a conflict of interest doesn’t begin to scratch the surface.
Lee should be pressed hard to explain the statutory and/or regulatory authority that allows the USPTO to engage in never ending scrutiny of applications. The laws are written to presume the applicant is entitled to a patent unless the patent examiner can find a legitimate reason to reject. Shuffling files from one PTO employee to another in search of a reason to reject cannot be tolerated, is without legal basis and must be stopped.s
3. Why are the numbers of published patent applications diverted to SAWS privileged under FOIA?
The USPTO refused to provide the application numbers for published patent applications that were diverted into the SAWS program claiming privilege under FOIA exemption (b)(5), codified at 5 U.S.C. 552(b)(5), which protects an agency’s deliberative process and applies to advisory opinions, recommendations and deliberations by and through which government decisions and policies are formulated. See Letter 1 and Letter 2. Assuming that some of the information requested would fall within this exception, how is it possible that a patent application number qualifies as part of the agency’s deliberative process? The agency presumably went through some secret process to determine whether to divert one or more (potentially many) patent applications for extraordinary and heightened scrutiny. The outcome of that deliberative process cannot logically in and of itself be a deliberative process, but rather it is a conclusion.
Failure to provide the patent application numbers or otherwise alert applicants and the public is alarming to say the least. This type of secretive government behavior is unacceptable. Without any information on which applications have been secretly targeted for this exceptional and unprecedented scrutiny there is now way of determining whether there was targeting, favoritism or an arbitrary and capricious use of authority.
A lingering question remains: If the program is completely above board why did the USPTO refuse to identify published applications secretly caught up in the administrative purgatory that seems to be SAWS?
4. Do you support fee-shifting legislation to combat the perceived problem of “patent trolls”?
5. What is your definition of a “patent troll”?
During the October 2013 term the United States Supreme Court issued two important decisions in Octane Fitness, LLC v. ICON Health & Fitness, Inc. and Highmark, Inc. v. Allcare Health Management System, Inc., which granted district courts much broader latitude to award attorneys fees to a prevailing party in a patent infringement lawsuit. In fact, these two decisions largely derailed patent reform attempts in the Spring of 2014 because so much of the patent reform push was to accomplish what the Supreme Court allowed. Congressman Bob Goodlatte (R-VA) and Senator Orrin Hatch (R-UT) have already signaled that they will push hard for patent reform early in 2015. We can imagine that it will look much like the Innovation Bill that passed the House, also known as the Goodlatte patent reform bill, but why exactly fee-shifting legislation is necessary has not been answered. Still, mandatory fee shifting when a troll is involved, disclosure of investors in the funds supporting the assertion, and placement of a bond remain on the wish list of some. Such fee-shifting proposals are all thinly veiled attempts to attack securitization of patents as an asset, further chipping away at the notion that a patent provides a property right.
But all of this begs an essential question, which is who is a patent troll in the first place? One is labeled a “patent troll” whenever they are a patent owner who enforces a patent through licensing or litigation, but are Universities, independent inventors and R&D companies really patent trolls? Railing against patent trolls, whoever they are, makes for a wonderful sound bite, but legislation will need to define who is a patent troll to have any chance of addressing whatever perceived abuse is deemed unworthy.
Of course, there is an 800 pound gorilla in the room that really needs to be addressed because all of this talk about patent trolls amounts to nothing more than the most obnoxious political grandstanding. Case in point, just last week the outgoing Attorney General for the State of Nebraska was ordered to pay $725,000 in attorneys fees because of a cease and desist letter he sent ordering patent owners and their attorneys not to enforce patents in Nebraska. To call this an overreach doesn’t begin to properly characterize the abuse of power exhibited. How a State AG could think that a State can unilaterally prohibit enforcement of federal rights is nearly incomprehensible. The rush of State AGs to fight patent trolls is almost certainly symptomatic of companies going to State AGs in order to nationalize an issue in order to apply pressure on federal authorities to act. The entire push to punish so-called patent trolls should be carefully reevaluated.
6. Would a thoughtful approach to immigration reform benefit the high-tech sector, as well as the USPTO?
The USPTO has been trying to hire 1,000 to 1,500 patent examiners for many years, but the number of patent examiners the USPTO employs has risen only modestly. For example, in October 2012 there were 7,789 patent examiners and in October 2014 there were 8,411. The inability of the Patent Office to grow the number of patent examiners sufficiently to address application demand is worrisome, particularly in light of the fact that the unexamined patent backlog at the USPTO has remained unchanged for several years. Some of the problem can possibly be attributed to the misapplication of resources to serially and secretly review applications over and over again in the SAWS program. But another explanation could be that the USPTO is simply unable to hire enough scientifically trained examiners.
The high tech community has been pushing for immigration reform for years, explaining to Congress the need for an immigration policy that allows highly educated and scientifically trained individuals to come to America legally. While so much of the immigration debate is on low skilled workers who cross the Southern border, there is a crisis at every level in the technology community. America does not produce the requisite number of scientists and engineers to fuel the demand of our high-tech sector. It is hardly surprising that the USPTO, who is in competition for examiners with the same skill set, would also find it difficult to hire enough technically trained individuals.
With this in mind, Lee should be asked about the benefit to the economy generally, and to the USPTO specifically, if immigration reform were to first focus on allowing a larger number of highly skilled and highly educated workers with scientific and engineering backgrounds to lawfully come to America.
7. Can you please define the term “abstract idea” and explain how patent examiners apply the definition used by the USPTO to evaluate patent claims drawn to computer implemented methods and related systems (i.e., software patent claims)?
8. Does Congress need to step in and amend 35 U.S.C 101 to provide a more clear definition of what is patent eligible?
The law of patent eligibility has become a mess. The USPTO still has not come out with guidelines for examination in the wake of the Supreme Court’s patent eligibility decisions over the past few years. Specifically, the industry has been waiting for many months for the guidance relative to Mayo, Myriad and Alice, which continues to be on hold. Thus, it is critical to understand how the USPTO defines the critical term “abstract idea,” how patent examiners distinguish between what is merely an abstract idea and a patent eligible innovation.
Despite the Supreme Court’s best efforts to provide a decisional framework on the topic of patent eligibility, a workable test for when a computer-implemented invention is a patent-ineligible abstract idea has not emerged. In fact, the Supreme Court has consistently refused to define the term “abstract idea,” which has led many commentators to characterize the current law as being the patent law equivalent to obscenity — I know it when I see it. Such a subjective test defies a systematic, objective, even-handed and consistent application of the law and leads to inconsistent decisions.
Many in the industry think it is time for Congress to step in and provide clarity. Lee should be directly asked whether she thinks Congress should address patentable subject matter. If she says no she should be pushes to articulate a coherent test for patent eligibility that takes into account all Supreme Court precedent dating back to at least Gottschalk v. Benson.
9. Can you explain why big banks such as Bank of America and JPMorgan Chase are able to get software patent claims drawn to computer implemented methods in the wake of the Supreme Court’s Alice decision while so many other innovators are having their applications summarily rejected even though their claims are structured virtually identically?
Along the same lines as above, it has recently come to light that since the Supreme Court’s decision in Alice big banks have still been getting software patent claims and do not seem to be experiencing the same Alice patent eligibility rejections that many in other software fields face. While this could be explained by the lack of a coherent test that can be evenly applied to achieve consistent outcomes, it is ironic that big banks are able to get software patents explicitly directed to computer implemented methods when others are unable to satisfy examiners with similarly structured claims and language.
Important question about cronyism must at least be asked, particularly in the wake of how big banks and more generally Wall Street firms so consistently manage to get preferential treatment from the government. Senator Elizabeth Warren (D-MA) has continually fought against oversized Wall Street influence in government, but she is not on the Senate Judiciary Committee. Senator Sheldon Whitehouse (D-RI) is on the committee, so perhaps he will step up to the plate to inquire.
10. If confirmed you will be yet another former Google executive in the Obama Administration. What assurances do we have that Google will not have outsized influence on America’s innovation policy at a time when other U.S. innovators have split with the Google philosophy?
It is hardly a secret that the Obama Administration has hired numerous former Google executives. Google is known to be one of the primary advocates of watering down, if not outright destroying, the U.S. patent system. To a large extent Apple, Microsoft and many other Silicon Valley innovators went along with the anti-patent rhetoric perfected by the Google machine because they were facing what they called a “patent troll problem.” This caused even innovation based leaders to throw in with Google and others in an attempt to vilify innovators and a patent system run amok.
With the tide overwhelmingly flowing in an anti-patent direction, many of the most identifiable companies in Silicon Valley innovators have finally split with Google and are now coming out strong for patents and American innovation. A case in point is the Partnership for American Innovation (PAI). Recently the Partnership for American Innovation (PAI), which is comprised of Apple, DuPont, Ford, GE, IBM, Microsoft and Pfizer, submitted comments responsive to a request for public information published in the Federal Register back on July 29, 2014, titled Strategy for American Innovation. The PAI has come out to explain the critical role innovation plays in the U.S. economy. Time will tell whether this pro-innovation, pro-patent organization will be able to turn public sentiment, and more importantly influence Congress.
Given Google’s influence already within he Obama Administration there are many who are concerned that a former Google executive running the Patent Office will be a little like bringing on a fox to guard a hen house.
11. If confirmed will you have any decision-making authority with respect to policy and/or practice?
As is the case in so many other places in government, the White House is in complete control of the Patent Office, micromanaging its daily activities in a way that is unprecedented. It is an open secret in Washington that many individuals have been approached to see whether they would be interested in the position of Director, but the A-list candidates have shown no interest in the position because it is well known that the next Director of the USPTO will not have much, if any, influence on patent policy and day-to-day activities. Furthermore, it has been believed by many within the industry that the next Director will need to promote the anti-patent philosophies of Google, who has become so embedded in the Obama Administration that it is hard to know exactly where lobbying ends and government begins.
Therefore, it is critically important for the Committee to understand who will be running the Patent Office during the last two years of the Obama Administration. Based on how the Obama Administration runs other agencies it seems virtually certain that an unconfirmed Presidential advisor in the White House (i.e., a Czar) will be responsible for running the USPTO and implementing America’s innovation policy. Exactly who that person is and what, if any, influence or impact the next Director of the USPTO will have needs exploration.
12. Do you support expansion of Covered Business Method review? If so, why?
It is widely known that one A-list candidate that did step up and indicate a willingness to be the next Director of the USPTO was Phil Johnson. Rumors of an imminent Johnson appointment were celebrated within the community. A small but politically well connected group protested, claiming that Johnson was not supportive of the President’s patent reform agenda. Nothing could be further from the truth, but facts did not matter. Johnson was unceremoniously blocked by Senator Chuck Schumer (D-NY) because of a single issue; Johnson was not in favor of expanding covered business method (CBM) review. The expansion of CBM is an issue of great importance to the banks that donate heavily to Schumer’s political campaigns, which is ironic given that big banks are accumulating the very financial service software patents that Schumer has so frequently railed against for years.
Presumably, Lee must be supportive of expansion of CBM in order to have made her nomination acceptable to Senator Schumer. Therefore, the Committee should spend time exploring this issue to determine if Lee does support expanding CBM, and if so why she supports such expansion.
12 Bonus questions
Confirmation hearings are to some extent political theater. The time to ask questions is limited, but there are no shortage of questions that could and should be asked. Therefore, if I were on the Committee, in addition to the above questions I would submit the follow questions to Lee to be answered in writing prior to a vote of the Committee.
- What steps will you be taking to address issues of time abuse and telework abuse cited by the IG?
- Many members of the public are concerned over the rise in filings and backlog of RCEs. What will you do to correct this problem?
- Many members of the public are concerned over the rise pendency and backlog of ex parte appeals. What will you do reduce the backlog of appeals that has grown to some 25,000 applications?
- When and how will the recent patent law harmonization discussions reach fruition such that we can expect a diplomatic conference to negotiate a treaty?
- If confirmed by the Senate how quickly can we expect a new Deputy Director to be named?
- When do you expect that the USPTO will achieve its patent pendency goals?
- Has the USPTO solved the problem as to how it will ensure that it will always get access to all its collected user fees?
- What is the time table for the USPTO to replace its legacy IT systems with new ones?
- What will be the greatest challenges for the USPTO in 2015 and 2016?
- What new initiatives can we expect from the USPTO if you are confirmed as the new Director?
- What USPTO personnel changes, if any, are you contemplating if confirmed?
- When will the USPTO publish its much anticipated guidance on patent eligibility, the so-called Mayo-Myriad-Alice guidance?