Since she was appointed Deputy Director of the USPTO (and the acting head) and then confirmed as the Director in March this year, Michelle Lee has been in charge during a period of profound change in the US patent system. Patent reform has remained on the agenda throughout her time in charge, the popularity of inter partes reviews has grown dramatically and the Supreme Court has issued a string of opinions that have overhauled key areas of US case law. At the PTO itself Lee has focused on improving patent quality and has had to deal with the fallout from a teleworking scandal.
Last week I spoke with Lee in her first-ever interview with IAM about the challenges she has faced. The discussion will run in two parts and today focuses on patent quality, patent reform and the US government’s close ties to certain parts of the tech community. Part two will follow tomorrow.
Why don’t we start with patent quality? I’ve heard you speak many times as director over the past year and one of the things you always focus on is quality. Why have you focused so much of your efforts there?
Well, first of all, it’s one of the issues that I think in a lot of discussion about abuse of patent litigation, all three branches of the government have a role to play. In the courts we have seen developments in the case law and, as you know, legislation is being considered on the Hill. But the USPTO also has a role to play that is strictly within our authority where we can make a difference and so in light of the changing patent landscape I think it’s even more incumbent upon us to really focus on patent quality in an enhanced and concerted manner. And that’s not to say the PTO hasn’t focused on patent quality in the past, because it certainly has; but also in the past, when a backlog of newly-filed applications was going nothing but monotonically up, the primary goal was to get that down and we’ve been getting that backlog down by anywhere from 20%-25% since the all-time high of January 2009. So the backlog is coming down and we’ll drive it down further. We’re not done but we’re in a good position and ultimately we have a little bit more control over our fees. And so the confluence of the combination of all those events, I would say, Richard, is the main reason why I think we should be focusing on patent quality and our stakeholders have told us, look, that’s absolutely the right thing to be focused on. So it’s an important issue.
Do you think that in hindsight the PTO perhaps has issued too many patents in the last say 20 years?
I wouldn’t say too many. I think we’re very fortunate we live in a society that is very innovative and the rate of innovation has been changing very quickly and that’s a good problem. I mean, that’s a good issue for the USPTO to have, which is a lot of great inventions being filed, and our job is to make sure that we issue claims and patents on inventions that should issue and not to issue claims that should not issue. As I think you may have heard me say, in the Enhanced Patent Quality Initiative, we must make sure that we issue patents that have clear boundaries so that businesses can make informed business decisions about how to avoid infringing, how to design around, when do they need to settle, when they should litigate cases and also so that patent owners have a clarity and certainty on the scope of their rights.
There was a slight drop in applications and grants for fiscal year 2015. With the focus on quality do you think that that could become -- that drop -- actually part of a sustained fall in the short to medium term in applications and grants?
I mean, we’re not looking to issue fewer patents. We’re looking to issue patents or claims that should issue and not issue claims that should not. So as you know in any application as the inventor or the applicant defines their rights they provide multiple claims and in some instances perhaps some of them that are submitted with the application are too broad in light of prior art. Those are the ones that we should not be issuing. But to the extent that they are more specific and they define more precisely the innovative aspect of an application, those should be issuing. So I don’t envision a decrease in grants. I think -- what I would hope is that really we’re focusing on issuing patents and claims on novel and useful innovations. So not a decrease in numbers, just clearer and more accurate issuances.
Moving on to patent reform. Why do you think legislative action is needed here?
Well, I think we’ve all seen a lot of changes in the patent ecosystem and achieving balance in meaningful legislation to change the patent system is something that we should always be looking to do. There’s a lot that’s been written about abusive patent litigation and it’s important to curtail that but I think equally importantly we need to be able to allow holders of legitimate patent rights to appropriately enforce their rights when needed. So changes are occurring in the courts and at the PTO but there are certain things that only Congress can do and that’s why you see Congress and so many of our stakeholders looking at reform. And it’s also a priority for the President to achieve this balance in meaningful legislative reform. There are certain things that really only Congress can do, you know, separate from our Enhanced Patent Quality Initiative, separate from our PTAB proceedings and separate from the changes that are occurring in the courts.
So what areas do you think Congress can step in? As you said, there are many changes that are happening in the courts, on your own initiative and also what we’re going to see from December 1st with heightened pleading requirements which obviously have been part of some reform proposals. What do you think specifically Congress is, therefore, best suited to step in on?
Well, if you look at the case law on shifting of attorney’s fees the statute does provide that it is within the district courts’ discretion, for example, and so if folks want to change that then that would require legislation. There are certain changes that we are contemplating to the Patent Trial & Appeal Board proceedings that were enacted pursuant to the AIA. We can do some of it via rule-making but some of it, including some of the standards, would require legislative changes because they are statutorily mandated. And in the area of heightened pleadings legislation could accelerate the clarification of what needs to be pled in a patent case. It could develop over case law. But legislation could clarify that and accelerate some of the changes so that businesses have greater clarity sooner rather than later. But that part of it could happen via case law development.
There are some predictions that patent reform won’t be passed in this Congress. But as legislation I think will remain on the radar, how damaging is it for the system as a whole if this spectre of legislation, proposed reform, continues to hang over it for several years to?
So I’d like to think it just doesn’t hang in a steady state. I’d like to think that stakeholders and members of Congress continue to have productive conversations and try to work towards the balanced and meaningful consensus legislation that would be what’s needed in order to pass. So I know stakeholders are currently speaking and continue to have conversations with members of Congress. We continue to help with that conversation. But, Richard, these are still issues that are very, very important to businesses so I don’t view it as sort of hanging over us, I view it as courts make changes, as the PTO makes improvements, as the patent ecosystem is still very dynamic, everybody should be looking at what are the changes we need, what are the changes that are helpful to help make the system even stronger. So you know, the USPTO is not waiting for legislation. We’re doing all of our initiatives and the courts continue to make their case rulings on a case-by-case basis but it’s a pretty dynamic environment and I don’t -- I wouldn’t characterise it as standing still. I would characterise it as a lot of people trying to work very hard to make our patent system as strong as it can be.
Do you worry though that it feeds into a narrative of uncertainty for patent owners who may not know should we invest in X technology or, you know, apply for a patent in X technology because ultimately we don’t know if it’s -- it may not be eligible further down the line?
Well, I come from the business world and I filed for inventions that I thought were important to my company and my industry and if you’re making second guesses about whether you think the patent system might change and laws where it might change, I mean, I think you file for the stuff and if it turns out later on that it’s, you know, some case law changes that’s our process, right? The case law is constantly changing. For example, what is eligible patent subject matter? I think you might be a little bit more careful in your strategy and how you draft your claims but I don’t think it means that you’re not innovating and you’re not protecting your innovations and intellectual property.
Staying on the topic of patent eligible subject matter, Section 101 is in much discussion on the conference circuit and people are concerned that there’s a lack of clarity there. Do you think Congress should act with respect to 101 to perhaps clear up some of the uncertainty?
I guess we should all be open to everything and I’ve heard some of the discussions that are occurring. I’ve heard people are thinking about legislative proposals but I think we should be open to any and all changes that would help strengthen our patent system, provide clarity and provide certainty.
You have called for balanced reform. Do you see more balance in the House’s Innovation Act or the Senate’s Patent Act? And I picked those two as really the two leading pieces of legislation that we’ve seen in motion in the last year.
I think it depends on the issue because each one has several of them so…
So, for example, on fee shifting would you see more balance in the House or more balance in the Senate?
I mean, I testified on the House bill and then the Senate bill -- the Senate bill also made a number of accommodations so I think there -- I mean, the Senate bill gets closer to the balance that needs to be struck on the fee shifting issue.
One of the complicated areas at the moment regards IPR reform where there have been calls for a carve-out for the pharmaceutical sector. Would you support that if it meant that legislation could be passed?
I guess we have a number of concerns with the proposal to exempt certain bio and pharma patents from our post-grant reviews. I don’t think it’s sound policy to allow potentially invalid patents in any particular technology, whether it be biopharma, software, mechanical to stand unchallenged. And it’s my understanding that the Congressional Budget Office has pegged the cost of a drug bio exemption at more than $1 billion based on increased drug costs for Medicare and Medicaid resulting from delayed entry of generics. The offer of some quid quo pro for the cost, for example, perhaps the prohibition of reverse payments, doesn’t override the policy concern and also I don’t think that we want to run afoul of our international obligations which do require us to apply patent law in a non-discriminatory manner regardless of the subject matter of the technology. So certainly I’m open to considering anything but, you know, as you asked the question those were some of the questions that I would have.
This administration has obviously thrown its support behind patent reform. There are some who would say that this administration is perhaps too closely associated with the tech community, it has a number of senior Google alumni and you’re obviously one of them, and, therefore, there’s a sense that the administration has a bias towards what some would see as overly broad patent reform. What would you say to those claims?
Well, I appreciate that question, Richard, very squarely, and let me just say that we all come from somewhere, we’ve all worked for somebody in the past but I view my job as to represent and do what’s in the best interest of the American public across all technology areas, across all industries, across all regions of the United States. I mean, we all are trained somewhere, we all come from someplace but that is my one and only one goal, which is to do what’s right for the American people at this time via our intellectual property system.
What have you taken though both from your experience in-house with Google and in private practice, of course, that particularly sort of resonates with you now as you do the job as director?
Well, I will say that I think my private sector experience helps me do my job. I mean, keep in mind I worked for many different companies -- I worked on behalf of many different companies in a wide range of technologies who were on both sides of the V in patent disputes and intellectual property disputes. I mean, I’ve written patents on behalf of clients, I’ve represented plaintiffs in patent infringement cases, I’ve represented defendants in patent infringement cases, I’ve represented licensees and licensors. I bought and sold patents for very large sums of money. So I would say my past experience coming from the business community has given me a firsthand understanding of how important intellectual property rights are to the success of innovative companies. And how these intellectual property assets are used and can be used. So I find that invaluable in terms of being able to do what I need to do in my current job.
In Part Two of the interview: the US patent system’s position in the world; whether there is still romm for the David v Goliath fight in the US system; and IP relations with China.