Michelle Lee confirmation hearing brings questions on fee shifting, post-grant proceedings

Michelle Lee, the current Deputy Director of the United States Patent and Trademark Office, was once again in front of a Senate Judiciary Committee panel yesterday, answering questions during her confirmation hearing. Lee, who would take over the vacant position of Director of the USPTO if confirmed, had already been subject to one confirmation hearing in December 2014. With little time before the end of the 113th Congress, then Ranking Member Senator Charles Grassley (R-IA), informed Lee and the Senate panel that no vote would be taken in the 113th Congress and new members of the Judiciary Committee would be given the opportunity to ask questions prior to a vote in Committee during the 114th Congress, which started January 6, 2015. Newly elected Senators Thom Tillis (R-NC) and David Perdue (R-GA) did take the opportunity to ask questions.

Lee’s confirmation hearing was cut short due to a series of seven votes on the floor of the U.S. Senate. Nevertheless, each committee member took the time to ask Lee questions. The hearing did not produce a lot of new information on what Lee would accomplish or even address as USPTO Director, if confirmed.

Perhaps the lack of specifics could be in some way attributable to the fact that Lee has been serving as Deputy Director of the USPTO for a little over a year now. Although her role would change with confirmation, she has been leading the agency for some time and used aspects of that tenure, especially stakeholder outreach activities conducted by the USPTO, as proof of her commitment to excellence in the patent system. At points, however, it seemed as if Lee’s responses to some questions didn’t provide the answers that were being sought.

Senator John Cornyn (R-TX) opened the hearing with a clear statement on the importance of intellectual property to the country’s overall strength, calling IP a “critical part of our national economy.” He also took a moment to note innovation centers at Houston and Austin in his state and boasted that Texas added jobs in the technology sector at the fastest rate for any state during 2014. “Texans are leading the way, we like to think, in intellectual property,” Cornyn said. Senator Chris Coons (D-DE) provided a wider, more national statement regarding the importance of innovation in America, stating that 27 million jobs in our country could be directly attributed to companies holding intellectual property. “If we fail to uphold and strengthen our strong tradition of intellectual property in this country,” Coons said, “the benefits will flow out to our competitors.”

Cornyn led off the questioning during the hearing and his first question focused on whether Congressional action in the form of legislation was necessary for patent reform. Lee stated that she supported President Barack Obama’s October 2014 statements that Congress should enact patent reforms to curtail the activities of patent trolls. “I believe there can and should be additional improvements to the patent system through legislation,” Lee said. Aside from enhancing the quality of patents issued by the USPTO, she didn’t offer specifics on what those bills should entail, but did state that they should “strike balanced and meaningful improvements.”

In his questions, Senator Orrin Hatch (R-UT) focused specifically on Section 285 of the U.S. Patent Code, which covers fee shifting rules for prevailing parties in patent litigation suits. Hatch asked Lee if she agreed Section 285 had failed to curtail abusive litigation and Lee proffered that the regulation was “probably not enough.” Hatch further asked her if it should be amended and Lee said that, although there were considerations to amend Section 285, the decision should first be discussed with various stakeholders.

Lee also decided to tread lightly on the subject of recent Supreme Court decisions affecting the state of the U.S. patent system. Senator Al Franken (D-MN) asked Lee whether she thought that a slowdown in patenting activities cited by the Senator is responsive to court decisions such as the one in Alice Corp. v CLS Bank International. Lee responded that the PTO was in the process of evaluating the effects of that court decision and noted that macroeconomic concerns related to market trends could also produce such a slowdown effect. Franken asked her if she had no opinion on the effect of those court decisions to which Lee reiterated her previous thoughts. Franken further tried to question Lee’s position on patent trolls but Lee stuck to a previously held position that a focus on negative behavior related to patents is more important than defining what a patent troll is.

The international market for intellectual properties was another topic that came up in questions asked of both Lee and Daniel Marti, the President’s nomination for Intellectual Property Enforcement Coordinator (IPEC). Senator Tillis inquired what assurances Lee could provide that the country could improve efforts to support patent rights in problematic jurisdictions. “Companies that are looking to get intellectual property overseas must be able to do so cost-effectively and without a lot of duplication,” Lee said, noting that different countries each have their own rules and filing agreements. “We recognize that few American companies make a product or service and only market that here,” Lee said. She said that this would be an emphasis moving forward, if confirmed, calling working on international harmonizations to the patent system a “low-hanging fruit.” In comments in response to Senator Cornyn, Marti focused on international threats posed by cyber attacks sponsored by foreign governments. Protecting American trade secrets, he said, would require a multi-faceted approach that could include bilateral and multilateral treaties, federal legislation and pushing the administration for stronger IP protections in trade agreements.

Time and attendance issues for USPTO employees as well as criticisms of post-grant proceedings were also broached by members of the Senate Judiciary Committee. Responding to a question posed by Senator Hatch on how to properly supervise employees working from home, Lee mentioned that curbing this abuse had been taken seriously by her office. She cited examiner training on time and attendance rules as well as cross-bureau business unit programs designed to intervene early in preventing abuse. Review of USPTO employee discipline processes was also likely, she said. Senator Cornyn asked Lee about criticisms on post-grant proceedings, touted as a cost-effective measure for determining patent validity but which has prompted concerns from stakeholders in the patent system. In perhaps her most concrete response, Lee discussed the eight-city nationwide tour conducted by members of the USPTO in April and May of last year to gauge feedback to various trial proceedings enabled by the America Invents Act. She mentioned that the tour elicited a lot of feedback and that a total of 37 written comments on the subject were filed by bar associations, companies and other stakeholders, although no specifics on those comments were given during the hearing.

The tenor of this hearing was perhaps less tense than Lee’s first hearing in December, where she was harangued by Senator Sheldon Whitehouse (D-RI) for her inability to describe the ability of Google, where Lee formerly served as counsel, to weed out search results including websites that offer patent infringing products. It could have been the Senate vote interrupting the proceedings altering the mood but it didn’t seem as though any of the Senate Judiciary Committee members had serious concerns about confirming the nomination of either Lee or Marti.


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