REMARKS OF
JONATHAN DUDAS,
UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL
PROPERTY AND DIRECTOR OF THE PATENT
AND TRADEMARK OFFICE

2004 AIPLA ANNUAL MEETING

Friday, October 15, 2004
 

MR. DUDAS: What I want to talk to you about today are the challenges that face our intellectual property system, the challenges that face the USPTO. And as we gather, in part, to honor USPTO and copyright officials for outstanding service, I also want to talk to you about some of the successes we've recently had at the USPTO. I want to tell you about the many challenges that still face our system and our agency and why you can, and why you should, be confident that the USPTO will meet these challenges.

I gave a great deal of thought to whether or not I could sum up all of the challenges facing our intellectual property system in one simple statement, but of course nothing is that simple. However, I believe if you take several steps back and you take a bird's eye view, you begin to realize that the source of the many different challenges is the need to resolve the vastly different perceptions that people have about intellectual property.

I'd like to give you a specific example of differing perceptions that I think may come close to home. It's something I deal with on a daily basis and it's something that USPTO deals with on a daily basis, especially as I'm translating and working between the intellectual property community, lawyers, participants, private sector and working with the government.

Many of you, as intellectual property lawyers, have questioned how do we view the world, how do we view intellectual property. And many of us at the USPTO, and many of you at AIPLA, as intellectual property lawyers, are comfortable perceiving our intellectual property system through analysis of volumes of statutes, judicial interpretations and law review articles, and thank God you are.

Many of us are quite comfortable perceiving our intellectual property system through passages like I hope shows up on the screen, but I will read for you. "The critical period for diligence for a first conceiver, but second reducer, begins not at the time of conception of the first conceiver, but just prior to the entry in the field of the party who is first reduced to practice and continues until the first conceiver reduces to practice," citing Hull v. Davenport, from Chapter 700 of our NPEP.

That is an appropriate and a learned way to view our intellectual property system. However, I want to take just a moment to contrast that with the many, many people, perhaps the vast majority of people who are not intellectual property owners and how they view our system of intellectual property. So, for that view, I'm going to turn to the sage words of J.J. Jamison, Peter Parker's boss in the movie, "Spiderman," as he had his eureka moment.

[Movie clip played.]

[Applause.]

MR. DUDAS: I laugh every time I see that with my children, and my wife calls me a patent geek.

[Laughter.]

MR. DUDAS: I'm honored to be called that.

Now, I know where I am. I'm standing before hundreds of the top intellectual property lawyers in the world. So those of you who perceive the intellectual property world as an excellent venue for litigation, before you consider the best jurisdiction to sue me for copyright infringement, please note that I do have the consent of Columbia TriStar to show you that clip.

[Laughter.]

MR. DUDAS: Certainly, you all need to question anybody, myself included, who tries to give you a dose of reality by showing you a clip of a fictional character from a fictional movie. And while this is intended to be a humorous contrast, it is very real in many respects. I believe that Challenge No. 1 for all of us and for all of you is conveying what you know and what we know at the USPTO about our system of intellectual property to policymakers, to government leaders and the general public who do not have the same background that you have, that the folks at the USPTO have.

You don't know too much, and many of those folks don't know too little, but the answer certainly is not to send more people to law school. I'm a lawyer too. I think that's much too much competition. But we, all of you at AIPLA and the USPTO, have a responsibility to solve this challenge. We need to communicate and we need to educate. This challenge of differing perspective goes well beyond the example I showed right there. We have a perception gap between developed nations and developing nations on the role of intellectual property and the development of our economy. We need to communicate, and we need to educate.

We have a perception gap between how our high school and college-age kids view theft of tangible property and how they view the theft of intellectual property. And, again, we need to communicate, and we need to educate. We have other perception gaps as well. And when I say we need to communicate and educate, I don't mean we need to do that out of the kindness of our heart. I say we need to do that because there is truly an attack on the intellectual property system in the United States and internationally, not just pendency and quality issues or the administration of the Patent and Trademark Office, but fundamentally what our intellectual property system is and has become.

And for anyone who travels the world on an intellectual property mission, you'll find time and time again that this attack is valid, it's there, and we need to address it.

One thing I can pledge to all of you unequivocally is that in every instance I have mentioned, my charge is very clear, the charge of the USPTO is very clear. We are resolved to protect your intellectual property rights. Internationally, we are resolved to protect your rights in the treaties we debate, the enforcement measures that we promote, and the Free Trade Agreements that we negotiate. Domestically, we are resolved to protect your intellectual property rights through administration policy and, perhaps most importantly, by ensuring that you have the highest-quality patents and trademarks in the shortest time possible, in short, to give you the certainty and the quality that you need and deserve.

I want to focus a little bit on the perception gap that was facing our agency about three years ago. I'm certain most of you are aware of the tremendous scrutiny of the office and the tremendous doubts there were about the office in 2001--some of it potentially warranted, some of it reflecting a need for us to communicate and educate better.

In 2001, the Congress had given statements. They'd voted on reports that said they lacked confidence in the management of PTO. They lacked confidence in what was happening at the PTO. The administration that came in at the time, the Bush administration, certainly was very clear that we want to make certain that the USPTO is on the right track. And certainly AIPLA was a leader, and AIPLA recognized that there were problems and raised it in testimony in Congress.

But President Bush came into office determined to improve government not particularly focused on the USPTO, but improving government across the board. And he issued the President's Management Agenda, which served as the basis of our 21st Century Strategic Plan and served as the USPTO's guidance for how we would manage.

Secretary Evans entered office with his eye on improving specifically the USPTO and our entire intellectual property system. He made it clear to me, when he appointed me as deputy almost three years ago, that putting together a comprehensive strategic plan and managing the office was to be our number one priority. Under Secretary Rogan got to work, I got to work and, importantly, all of you at AIPLA got to work at well.

AIPLA has played a critical role in shaping the ideas that were to govern our office, that now govern our office. Your current president was critically important in that process. Your board of directors was critically important-- Mike Kirk, Vince Garlock, all important in this process. That plan is much more than a collection of good ideas that had the benefit of your input. That plan was a set of commitments. And if you read books on management or listen to gurus and speeches on management, one thing I've heard consistently is you need to make promises and you need to keep promises, and at the USPTO, we've done that.

We said that we would make quality our number one priority, and we have done that. We said that we would make our patent processing fully electronic by 2004, and we have done that. We promised that we would protect the U.S. IP system and your interests internationally, and we have. We said that we would reaffirm the agency's credibility in Washington, in Congress, and in the Executive Branch, and we have done that. And we said that we would work to end the practice of diversion in the President's budget. We have; first, by cutting the proposed diversion in half and then by completely eliminating it for the first time since that practice began.

I would like to talk a little bit about what these promises have meant and what they'll mean for the future. Our first promise is quality. The USPTO pledged to make quality our primary consideration, our number one consideration at every avenue and to use the resources of the fee modernization bill to implement new quality initiatives.

But even without the passage of the modernization bill, we have put in place a number of tremendous quality initiatives. Getting the right people is very important. It's one of the things we're most focused on. This is easier today at the USPTO because we have such a highly qualified applicant pool. We have over 2,500 qualified applicants. What we need is the fee modernization bill to be able to bring those folks in. And if we get that, we will hire 900 examiners next year.

We are also committed to a better process of training and updating our employee skills throughout their careers, not just at the beginning, not just at the time of becoming a primary examiner and getting signatory authority, but throughout their careers. We've improved the training, the testing, and the review of our patent examiners to ensure that they're able to provide the best quality possible.

We now review more work, but more importantly we review it in a smarter way. In some cases, we've tripled the number of reviews, but especially we're working more on in-process reviews. So we don't just look at an error rate--how many patents have issued that maybe perhaps should not have, but we're able to dissect issues and look throughout the process. We're able to identify if it is at particular tech centers where we need additional work.

We are developing specialized training for examiners based on the results we get from these in-process reviews.

Lastly, as an enhanced quality measure, we established an expansion of a second pair of eyes review in certain technology areas. We know that quality means more certainty, and we know that this is one of the most important elements in our system for many of you. Three years ago, these were concepts that were not even on paper. Two years ago, they were proposals that we hoped to initiate, but today they are part of the USPTO. I don't mean to suggest in any way that's the end, that this is an accomplishment and it's done beyond that. I mean to suggest that we need to do more for the future. But what we can do in the future is better identify and solve quality concerns and better evaluate our processes. So the next step, is using this information, analyzing it better and showing you the improvement in quality.

When we promised that we'd make the office fully electronic in just over two years, many people scoffed. Some people inside the office scoffed, some people outside the office scoffed. Many suggested that to make a promise like this was simply ridiculous. After all, it was a pledge the office had been making since the 1970s, probably at a time when it wasn't even possible to do. But we have done that, and we did it in the two years that we said we would. We now have over 130 million pages in our system. If you take this paper and put it end-to-end around the world, it would go around the equator. It will, in time, go around the equator twice.

We have trained more than 6,000 people on IFW--all of our examiners, all of the technical support staff. In savings of storage costs alone, we will save $15 million a year.

But as a further measure to increase public confidence in our office, the office dedicated itself to provide transparency of USPTO operations. So, while implementing electronic tools to assist employees of the USPTO in doing their jobs, as we implemented IFW, the office also implemented PAIR, the Patent Application Information Retrieval, system to assist and benefit the public, to assist and benefit all of you.

There are two sides to PAIR--private and public. Private PAIR allows applicants access to their entire file history of applications in the IFW database. PAIR was expanded at the end of July, when we released the new public PAIR system. This allows anyone access to the entire file history of an application, including access to images of every paper, of every record for every published application in our IFW database. These systems are truly milestones of achievement for the agency.

And what does this mean for the future? In September of this year, the office held a one-day patent electronic filing forum at the new Alexandria headquarters for the USPTO to listen to your e-filing concerns. Electronic filing is going to be critical to the success of our office and our intellectual property system in the future.

In attendance, were 39 external customers representing major corporations, major law firms and intellectual property organizations from throughout the country. The purpose of the forum was to allow our stakeholders to give input and help formulate a strategic plan to increase electronic filing by our customers. We heard you tell us three things: make it simple, make it safe, and make it happen.

You told us to make it simple by developing a fast and secure web-based portal system for e-filing that requires no client software, allows for PDF file formats and e-filing of document types, other than just applications. You told us to make it safe by providing a certificate of e-filing rule change similar to the current certificate of mailing practice, and you told us to make it happen by partnering with our patent and trademark stakeholders to develop an e-filing strategic plan and to maintain the relationship after a new system is in place so future modifications can be made to meet your changing needs.

The USPTO is working to make it happen right now by scheduling, this month, initial discussion towards the development of a common USPTO web-based portal for patent e-filing with a number of important and potential contractors.

With your thoughts, suggestions and ideas, the USPTO will gain the insight we need to make e-filing safe, efficient, widely used and make it a system that you want that you will use.

I mentioned earlier the guidance that the President gave us, and the map he laid out with the President's management agenda, but President Bush got much more specific than that with respect to the USPTO by proposing a budget for the current fiscal year that ends diversion and fully funds the USPTO.

Last year, was the first year that a President proposed a budget that provides the USPTO with access to all fees that it collected since the practice of presidential budget diversion began more than a decade ago. These are real numbers. Every year, the President presents a budget nearly a year before the final bills pass, and the President shows his cards and the President's budget must add up, regardless of the administration.

What does this all mean? It means that we're making promises, and we're keeping the promises. It means that you can have the confidence in the USPTO as it faces the challenges we have ahead, and there are many challenges that we face in the next few weeks. There are many challenges that we face in the next few months, and there are certainly several challenges that we face over the next several years. Remember our strategic plan is a five-year plan.

The single most important challenge currently facing the office, I believe, is to get the appropriate resources for our agency. AIPLA has been a partner. AIPLA has been a leader in that. This is an issue for the next several weeks because it's essential, in my opinion, to pass the modernization bill this year, this Congress.

One area that is absent from any list of accomplishments that you'll hear me talk about or any list of accomplishments about the USPTO because we simply cannot improve without appropriate funding is pendency. Whether hiring, competitive sourcing or accommodation is the answer, better funding is essential. Fortunately, our applicants agree. From small businesses to AIPLA, we hear applicants say they want a fee increase without diversion if it means higher quality and quicker processing and if those funds are used at the USPTO.

Most all of you are aware of the pendency crisis facing the office. However, I'm not certain if you all know how critical it is to get the fee modernization bill this year. I want to show you a chart that maps out the difference between a world with a fee bill and without the fee bill.

What you see in that chart right there, this is historic pendency, and what you see is a chart that will show you on the dotted line where our pendency will go without a fee bill, if we hire attritions, if we don't hire any additional patent examiners, but if we stay at the number of examiners we have right now--roughly, 3,600--and if we allow for overtime. That's the world we live in, and have lived in, for the last three years. What you see, the chart where it's curving downward, is with the fee bill.

So, as you can see, we're very up front about what will happen. What's most important is we need to turn the pendency chart around, and that's the critical difference, what you see in that chart, is the difference between an office that's going up and is destabilized versus an office that's turned it around and is stable.

Some people believe that we will pick up where we left off if there is no bill this year. My opinion is that's simply not the case. That theory completely ignores the process of the U.S. Congress and the progress that has occurred this year, the progress that AIPLA has helped bring about.

We've been through many steps with this Congress. We've been through subcommittee hearings, subcommittee markup, full committee markup, a deal with House authorizers, appropriators and leadership on the House, a vote on the House floor that literally came down to the last 10 minutes before the vote came up or before the bill came up, but a strong vote for the USPTO, a strong vote for the intellectual property system of 379 to 28. It's gone through the Senate Judiciary Committee. It's gone through an appropriations process, and a version has been included in an appropriations bill, and it's been discussed by the Senate leadership and across the aisle.

The reason I give you that long litany is to let you know we are 95-percent of the way through a tremendously complex 2-year procedure. Next year, we start over, and we start over with potentially a whole new cast of characters.

AIPLA has a critical role to play and has been a responsible participant. AIPLA has very clearly been a part of the solution, a critical part of the solution, but there is much more to play out in Washington this year, and many believe the process will not even truly begin until after the election in November. There are even discussions underway now about a continuing resolution, and this issue could be put off until January.

But as you participate in the process, stick to your principles, of course. Always, always stick to your principles, but please keep your minds open. Do not let the perfect be the enemy of the good. Remember that as recently as two years go, and going back more than a decade before that, every political body, from the presidential budgets that were produced to both Houses of Congress, everyone believed that diversion was a good idea and openly embraced it. There was no shame.

Then, the President opposed it in his two budgets and now everyone has a solution, which is good. Everyone is talking about it. At the USPTO, our goal is to get the curve on the graph I showed you to reverse course. We need the office to stabilize rather than continue on an upward pendency path. This creates a sense of urgency for me as the Director of the Patent and Trademark Office. And I note again maybe a particular solution does not go far enough or maybe a solution goes farther than you'd like to see at AIPLA. Where the AIPLA ends up is a decision for all of you, but please consider the cost to our intellectual property system.

I want to talk to you a little bit about the international environment, and I've come back just over a week ago from Geneva. The challenges in the international arena are also incredible, both in the immediate future and in the long term. I mentioned earlier that there's a growing anti-IP sentiment internationally, and we see it as well in domestic circles, especially in the academic community, Internet bloggers and even among some government entities.

This sentiment has poured into WIPO in some instances. Even the simplest of harmonization efforts have been met with obstruction and procedural tactics. In my time at the USPTO, I've always held the belief that we should work hard to achieve a consensus at the World Intellectual Property Organization. Ideally, we should have every nation agree on the intellectual property reforms that we'd like to see go forward, but we simply cannot, we must not have a few nations obstructing the process for the rest of the world. This is especially true when you ponder the fact that about 85 percent of the world's patents come through three offices: the USPTO, the JPO and the European Patent Office.

It's also especially true when you consider that nearly half of the funding for WIPO comes from only three nations: the U.S., Japan and Germany. Being outnumbered means only that we have to work harder. But one area where we've been successful is protecting your pocketbooks internationally. The U.S. staunchly opposed a recent proposal to increase PCT fees at WIPO. In fact, it was the U.S. that stopped a provision last year that would have raised fees more. This saved U.S. applicants a year ago, all of you, more than $20 million. I want to point out to all of you that at WIPO, less than $1 out of every $3 you pay goes to the Office of PCT.

For those of you who truly believe that diversion of fees is absolutely unacceptable in any form, I direct your attention to what happens when the money goes to WIPO. We had this fight on our hands two weeks ago. We had a deal, there was a deal at the International Bureau to propose PCT fee increases another 12.7 percent. I'm happy to report that we were successful in stopping the proposed PCT fee increase. But I want to have everyone keep in mind what we face.

The U.S. and a handful of nations are net givers at the World Intellectual Property Organization, and that's fine. We shoulder that responsibility. But the rest of the 174 nations are net receivers; that is, they are the beneficiaries of the fees that you pay for PCT that does not go to PCT operations.

Even worse, there were proposals on the table to fundamentally change the WIPO charter and philosophy from one that promotes intellectual property and its protection to a more amorphous charter of "balancing" intellectual property. We have no quarrels with balance. In fact, we believe our current system and international norms are properly balanced. But simply put, this new balancing act is a strategy to water down intellectual property protection, and the U.S. will fight this as well, and I am certain that we will do so.

I began at this lunch by telling you I wanted to share successes, and I recognize that that's looking at what has been done. That's looking at the past. And more importantly, I recognize there are a number of challenges facing the USPTO and our intellectual property system, but I think it's a sneak preview of what's to come. The future holds new challenges, and it holds new opportunities.

As you all know, post-grant review is a part of our strategic plan, and AIPLA has been particularly interested in this and particularly strong in this. We look forward to working with the Hill on post-grant review during the 109th Congress.

We look forward to working with the new leadership in the Senate, as current Senate Judiciary Committee Chairman Hatch steps down due to term limits. And we know we'll have the same excellent relationship with Senator Specter or Senator Leahy or whoever else may head the committee, and have the same results, the same commitments that we have had and the same relationship that we've had with Senator Hatch. Certainly, both Senator Specter and Senator Leahy have shown great leadership on matters relating to the USPTO, in particular, and on IP issues in general.

So, when I'm asked what my vision is for the office, I can give you a relatively clear and simple answer. I can get more complex and tell you all that we want to do, but I want to be at the helm of a constantly improving agency. I want to build upon the successes that we've had. I not only want the USPTO to be the best overall office in the world, and by all measures we are, but to be the clear leader and the trendsetter in every aspect of intellectual property protection. From how we address pendency and quality issues to how we set standards for the world in battling piracy and counterfeiting, I want the USPTO to lead.

I intend to continue this mentality in everything we do. I know you've all heard the adage, "Lead, follow or get out of the way." The U.S. and the USPTO have led the world on intellectual property rights and running an intellectual property office, and I intend for us to continue to do just that. I intend for the USPTO to lead by example. And it's clear to me that you at AIPLA intend to do the same.

Thank you for your attention and have an excellent afternoon.

[Applause.]

KEY: =online business system =fees =forms=help =laws/regulations =definition (glossary)

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