for as much as sixty percent of the total united states exports and millions of high paying jobs so without a doubt the role of the patent and trademark office long the longer term funding challenges there's been increasing discussion about that they have such a buffer against in the next budget coming up a number of us plan to bring this directly to is widely acknowledged our hearing this morning compliments other efforts to pass meaningful patent reform one hundred eleventh congress we are working hard with the senate to develop necessary changes to their bill that will improve patent quality and discourage frivolous law suits i am hopeful about that outcome that is one of the most important agencies of the federal government it's not often regarded as such it's work affects the productivity and economic growth of our nation as well as the standard of living for all americans for over two hundred years a p t o has been responsible for ensuring us patent and trademark the p t o also advises the secretary of commerce and the president on patent trademark and copyright protection as well as trade more than two point three billion dollars in the upcoming fiscal year two appropriations observers estimate that more than seven hundred million dollars have been diverted from p t o coffers since one nine hundred ninety one funds that could have been put to good use by the agency like you mr chairman i support ending this and i support the committee's efforts to provide the agency with more control over the scheduling related funding this doesn't mean we won't position as a first tier twenty first century agency but if congress does provide p t o with one hundred percent funding the agency will have a greater responsibility to explain any of its shortcomings and corrected specifically the committee and p t o must explore the patent application backlog the state of the agency's infrastructure hiring and retention of patent examiners the relationships between management and examiners and the amount of time examiners required to to the commanding officer that burning the hotel and all of its contents would serve no purpose in an impassioned speech the models were useful to all mankind not just to americans anyone who burned them would be everyone here understands the importance of the patent system to our knowledge based economy mr chairman i look forward to working with the committee and director kappos to make the p t o even stronger and more productive and responses to the needs of the inventor community and our country so we can enhance our international competitiveness and strengthen our economy thank you mr chairman thanks so much for the little known piece of american history  chairmanship to try to convince the appropriators that what they were doing was really hurting american product and i was unable to do that by myself and i had to enlist the leadership of the house of representatives one hundred sixty million dollars this is completely unacceptable because the economy gets better we're going to have more pap applications go ahead and take the money away the process those applications probably is thing that i think this is most important is that with the diversion the patent office can do what it needs to do in order to reduce the backlog and improve the quality and this committee is hamstrung either properly or improperly and we're stuck in the catch twenty two that we're so what i would like to say is we're in this together you need the additional money to be able to cut the commerce for intellectual property and director of the united states patent and trademark office put your distinguished by zero in the record here and what you've been doing with this new responsibility that is yours we met a few of us met  this particular patent bill that seems to be stalled somewhere between the house and the senate but we appreciate what you're doing and we invite you to make your statement before the committee well good morning mr chairman and i'll start by saying i am very glad to be here and i do hope to be  chairman conyers ranking member members of the committee thank you for the opportunity to appear here before you today and to discuss the united states trademark office operations and  various new programs and initiatives as you know the us currently faces a number of significant challenges and a difficult budgetary environment we've made process  improvement and we've made progress in recent months to address a number of these challenges which i detailed my written testimony reducing patent pending and improving patent quality are our top challenges and america's competitive advantage in the innovation economy depends in very large measure on our ability to meet these challenges mr chairman innovation is a principal driver of the u s economy it is an engine of economic growth and it's a creator of jobs promoting innovation stimulating economic growth creating high paying jobs are key priorities of the obama administ capital and bring their products and services to the marketplace yet today we face a huge backlog of patent applications long pendency rates and an outdated infrastructure our ability to effectively address these challenges is limited by our current budgetary constraints and we propose significant changes to our two thousand and eleven budget and our budget process we've developed our f y two thousand and eleven economy success we've had increasing production at the united states patent and trademark office we currently project that the u s will collect between one hundred forty six million and two hundred thirty two million more than its appropriation for two thousand and ten without access to these additional collections in f y two thousand and ten we will be unable to achieve our goal of reducing first action ten and ten months and fourteen and our goal of twenty month total pendency is now unlikely to be achieved until twenty two while our funding constraints are very real our new leadership team has developed and implemented a broad array of initiatives to improve the efficiency and quality of patent processing and improve the overall operations of the office we've taken steps to  process by encouraging more interaction between examiners applicants earlier in the process and employer of choice by offering workplace benefits including tele work opportunities provided enhanced training of examiners and supervisors to ensure consistency and examination promoted work sharing efforts with foreign patent offices to better manage our common workload and develop customer friendly initiatives including our ombudsman program project exchange and our green tech pilot initiative and the positive results we've seen today are described in more detail in my written statement mr chairman progress toward our strategic goals is dependent on a number of important elements among them are providing the agency with authority to set appropriate authorizing an interim adjustment on patents and creating an operating reserve to ensure adequate reserves to address your budget plan as you know mr chairman pending patent reform legislation contains a number of provisions that will  result related to the intellectual property system have been addressed by the court i personally witnessed the house much of the discussion around the proposals being considered now in senate five fifteen as far back as the thousand the us administration support your efforts and those of your colleagues in the senate to enact a fair and balanced bill this congress and we will continue to support your efforts going forward we appreciate your continued support of the us and we look forward to working closely with you and members of this committee the challenges before us thank you to do with the patent office professional association has been on the executive committee this is the lawyer organization and we know that you have comfortable about all these people practicing with a license before you have you heard about that yes i have gemma conyers thank you for that question and as mr johnson pointed out we're looking into that now was first raised in fact by trademark office examiners until we're working with the path to look into that issue now and and and do the fact that we need in order to determine chairman that we can get this legislation but if you're wrong you're not a legislator mr conyers has been here a number of decades and i've learned to respect and admire his  great elements of america's free enterprise and someone launching out to do something that they think can not only serve their fellow human beings but also serve themselves and their families and i want you know as it happens i'm a patent hold and so i understand that that dream and i believe that there is a tremendous advantage to our system in that if there's anything that seems to be the product then the outcome of our system i innovation and i think it's almost impossible to overemphasize the importance of innovation in every area of human endeavor it seems like it is a really big deal and so i  like all of you want to do everything that we can to to maintain and protect that process and it seems like one of great challenges director cap ocean and this is not a criticism just an observation is that it takes the time that a person has to spend gaining the patent through the process application and then of course the pending application is one of the big challenges it's one of the big backlog and i would think that in a sense that could spell an equation where government is standing in the way of innovation and that's you know a significant impact on our economy or jobs and a great deal of things it seems to me to be or should be one of our number one priority is to get rid of the backlog  but there's a concern i have about that legislation pending in the house is h r twelve sixteen it seems to me like it could worsen that issue rather than improve it could make the process more complex and more cumbersome in fact the manufacturing alliance for patent policy released a study by dr scott shane of western university and dr shane found that house patent bill according to you know this is his opinion his conclusions would result in a reduction in u s patent value of around eighty five billion dollars again we have to see how time underscores his conclusion we also concluded that a reduction in value of u public companies would buy as much as two hundred twenty five billion dollars a reduction in r and d of up to sixty six billion dollars and as many as nearly three hundred thousand manufacturing jobs would be put at risk i guess my question to you doctor director cap how do you respond to these findings what your conclusions and what specific problems do you have with the house version of the patent reform as it is at this moment ok well thank you for that question congressman frank so  faces the agency and every one of those seven hundred thousand plus applications that sitting in our agency is potentially tens hundreds even thousands probably in some of jobs that are being created products and services that aren't going on  marketplace and so fixing the backlog if you will addressing the backlog is clearly job one i believe that if we can take the backlog from where it is over seven hundred thousand applications to its optimal level which is somewhere a little bit over three hundred thousand applications which produces a steady work flow through the agency we will unleash many new innovations into the u s economy we will improve the u s trade balance because there so many innovations that come from america and we will help put americans to work will help make americans more healthy will help save american lives there is all upside and i see absolutely no risk of doing damage to our economy in very different than the current vision in the senate compromise bill five one five in fact as i understand it the differences are so profound that some former opponents of the patent reform bill have now been able to embrace differences and do you prefer the version now being put forward by senators leahy and sessions over the one that's before the house ok thank you very much for that question about postgrad so yes there are some differences between  on the judiciary committee to to work with their counterparts in the senate in order to bridge those gaps in make the compromises that are needed in order to address the issues of parts of the unique essences of america i think is vitally important to our society and i don't ever want to diminish calculable complexity of the job the director have to deal with and i'm hoping that there will be an effort to pull everyone together on this thing because while i've emphasized the importance of protecting the integrity and the value of patents because of all the reasons i've just stated i have to believe that they're somehow way for industry to come together on this one and it's vital that we do rather enough thank you congresswoman lofgren so without speculating about the supreme court's decision in the bills i think it's quite possible that it could be very helpful to clarifying standards too for the first time in many years providing direction to the u s and to the entire federal court system under the supreme court that will enable us to put new strong clear guidelines in place for our examiners to do a really solid job of examining patent applications relative to a subject matter in the courts to give us guidance and to take a lot of tension out of beach volleyball better stunning views and a lower cost of living and of course telecom gold in san diego so do what you want were united on movement west but after west  southwest and made a gentle lady give it my regards to our colleagues now on to less serious matters luck getting a west coast operative for us to get the best of the brightest to help with our side of the problem to me is essential if you're in telecom if you're in some of the new health sciences or if you're back particularly if they're in a senior status if they end up commuting and i see them on the aircraft coming back working the week in washington and heading back or telecommuting but either way it's less than it would be if we could have that office and i think certainly for professionals if there's a choice between being forced to work out of one's home only or be in washington that doesn't really give him the opportunity to work in a collaborative fashion and this committee is held numerous hearings on the idea of tele work and i would say to mr verdant you already have a problem of people who are seldom in washington that you over their well being and they do come on our video screens and show us that they're in their flip flops and they seem quite comfortable with their basements so we think we can do that i have a couple of questions that are only sort of ten gently on task for today but  kept us we don't get you very often so i'm going to take full advantage for three really in the fourth congress i've been trying to get patent pilot as we call it the patent reform education act if you will through it left the house repeatedly in the senate with no opposition finally found opposition which apparently it costs money to have judges and clerks be better at prosecuting patents even though it's only a few million dollars i want to approach one thing for the if the training element of providing judges who decide to specialize or who in fact your market that you were able to collect against either new patents or exams or all of your other renewals would that be acceptable to you and i ask this because as you know i've been out to your facility i realize you have foreign dignitaries coming through all the time for various trainings and i found it in congress that we train people from outside the country but not our own judges would that be something that you'd be interested if the funds were provided with thank you for that question congressman i answered second start by saying as a california native who was in both san diego and the bay area as well as los angeles you know the desirability of  officials we think we can play a valuable role we do not think that it's extraordinarily expensive you know the space is already there and it's already completely outfitted and without talking about details or dollars from  a principal base level i would have no issue with working out a mechanism for funding that kind of training i think it's absolutely the right thing to do for our country it's absolutely the right thing to do for our federal judges magistrates in all others who are involved in in the intellectual property system excellent the second one is one near and dear to my heart which is a new problem we have  as you know coming out of what is not a final decision but a three judge panel of the circuit we have a broad decision that everyone has standing to claim that a patent is either marking because it doesn't apply to the product it's on or that it's expired and deceptive and hundreds and hundreds of cases been brought strictly on that one part i think approaching a hundred test in the chairman's area of michigan you have a you have a specialist in your area mr chairman those are those those cases obviously have a cost hundreds of cases have a cost to the court and yet we have a an oddity and i'd like you to comment on it that is that the revenue that might be received by the federal government as a portion of marking claims is calculated as a loss if we eliminate those cases even though it's not yet a final decision but the rev but the cost to the court for having one hundred cases is not counted can you reconcile how we would we would bring that just knowing what patent cases are like in the courts and i know it's outside your jurisdiction a little bit but maybe knowing how the industry works first of all there is a cottage industry that is rapidly developed around false markings on the last i knew there were well over one hundred filed all in of course federal district courts to my knowledge anyway and the costs related to those in terms of the administration of justice on the court system is going to be high you're talking about you know federal lawsuits the cost to the litigants on on both sides but especially the parties who are being sued on this you know sort of brand new area of the law frankly windfall area of the law that could be expected to be very high if it costs at least in the hundreds of thousands of dollars if not into the millions of dollars to defend patent related to and given the possible damages i would expect that those who are sued would would have to mount pretty significant defenses so  doesn't and the other thing that to me is very speculative right now is the veil of billeted award because there's been very little jurisprudence developed in this area sensually one case that sort of caused this cottage industry to well scored that there could be four to twelve million dollars of revenue to the federal government could be kind of a guess but they defend that as well they should that they were asked to guess one hundred cases defended let's say fifty of them defended bigger asli what would you guess that is to the court not not the litigants but to the court would it be more than four to twelve million dollars on balance well  capability and and in the long run i actually think that we should transition to that but what if this committee had the legislation and the and the inclination to allow you to build a true line any reason that you can't you could find that that wouldn't be the most logical since the press we lose money on the applicant and we make money down the road wouldn't that be the more law and just i'm leaving you but wouldn't mean more logical thing for us to do is to allow you to essentially have a line of credit against revenue that is historically predictable ok so thank you for that question and it really goes to  having financial tools available for the u s p t o to run its operations in a more businesslike and sustainable and while we haven't asked for a line of credit it certainly would be something that we'd be happy to work with and i use because one thing we don't have a problem with that the u s right now is collecting revenues were actually as i point out collecting much more than we have the authorization the appropriation to use this year and so if we could have access to those collection one of the things that we would be doing is forming a reserve which is sort of the flip side of the line of credit electing real right to be able to use  money that we're collecting this year in the future and build up a buffer so that we can operate the u s in a more businesslike fashion ok i want to thank you for that answer because mr chairman i do believe that in the years that we've worked together  the diversion we really haven't done the second part which is the fee retention or the anticipation and i do believe that around the appropriators it is within our jurisdiction to do those two recognizing that they may still feel that to use it require but to use it versus to have it seem to be two different things and if we can make sure that they have it then i suspect your probe readers will always of its forms we are indeed trying to recruit new examiners and we're trying to do that with an eye toward diversity one way to get to universities that that that have  high proportion of diverse students is simply to go there and speak there which i have personally done and personally spent time with students trying to encourage them to come and apply for opportunities at the u s  relative to the leadership corps i agree with you that the leadership core of the u s can be more diverse and needs to be more diverse and the way you get a leadership corps to be more diverse is pipeline you've got to go into the people who are being considered for promotion and being developed into the leadership corps and that's exactly what we're doing at the u s to try and develop a more diverse pipeline for future promotion  leadership at the peak of the last thing i'd mention is that we actually have a terrific in general the agencies got a terrific track record including being officially recognized  one of the best agencies in the federal government relative to diversity and and actually inaugurating i'm as many as five new affinity groups during f y two thousand and both of those the quarter more i get for new cases in the quarter finals have made the difference between sink or swim the two more hours has also been extremely helpful in writing quality office action so this is a person who's writing an email not to talk about salary or awards or bonuses or any of that stuff but talk about doing a good job really really important driver to morale it's a key driver to attention  so a number of components to how we think that they would need to be adjusted one is short term and that's the fifteen percent surcharge and we gave consideration before making that recommendation we gave consideration to whether it might be better to recommend an interim or short term adjustment of different levels to different and we decided in the end that it was probably better to make a simple adjustment to all of fifteen percent that would enable us to to to collect money that we need in order to get going on reducing the backlog so my questions were all a bit more specific than that as far as what how much and would they reduce the backlog and achieve your goal right ok so that's the second part of the answer right that's been issued a fifty percent surcharge for short term longer how long the short term short term is between a year and eighteen months and the reason for that is that even if we had setting authority today we have to go to comment process notice and comment rule making etc etc takes at least a year to get that done ok so that's why fifty percent individuals who are teleworking i've never heard as a perception survey before doesn't sound to me like it's particularly credible when you ask individuals if they enjoy working from home you can probably guess the response that you're going to get my question is  are there any metrics vailable showing whether or not those individuals who tell or work from their homes or elsewhere actually approve as many patents as those who don't work is there any kind of an evaluation that has been made whether those individuals are as productive or possibly more productive or less productive individuals who don't telework ok well thank you for that question ranking member smith the answer is there are some factual indications and i'll tell you about the i'll give you a couple of examples one is that we tracked to six regarding sick and statistically over at least two years individuals who have more experience than the more junior members i would expect them to be more productive and i'm just looking for any kind of a study or evaluation that's been done during comparing work productivity with work versus those who don't tell or were a part of that might well be more days taken is not what i'm still looking for the overused word bottom line as far as productivity goes one way to measure that it seems to me would be by the number of patents that are approved i don't know if that's a legitimate metric or not but that strikes me as possibly being one but have any studies or evaluations been conducted getting at that answer invite for just informal discussion about some of the issues that have been made and time and comments have been very valuable and with