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Congressman Nadler Statement on Oversight of the U.S. Patent and Trademark Office

Today, Congressman Jerrold Nadler (D-NY), senior member of the House Judiciary Committee and Ranking Member of the Subcommittee on Courts, Intellectual Property and the Internet, delivered the following prepared remarks as part of the Committee’s Oversight Hearing of the U.S. Patent and Trademark Office.

"Mr. Chairman, a strong patent system fosters innovation, and can spur tremendous economic growth by enabling inventors to protect and exploit their creations.  Today, we are holding an oversight hearing on the U.S. Patent and Trademark Office, which is responsible for administering this vital system.

"It is appropriate that we hold an oversight hearing this week, since this Friday marks the five-year anniversary of the Leahy-Smith America Invents Act, the most significant overhaul of the patent system in a generation.  I look forward to hearing from our witness, Michelle Lee, the Director of the USPTO, about how the patent system has adjusted to the post-AIA world, and what further reforms may be necessary.

"One issue that has been left unresolved in recent years is the problem of abusive patent litigation, which stifles innovation by using the litigation system to extort settlements from innocent defendants.  I was a cosponsor of H.R. 9, the “Innovation Act,” which attempted to address this problem, and I was pleased that it was reported out of the Judiciary Committee on a strong, bipartisan vote.  However, this legislation has been unsuccessful in reaching the House Floor and similar legislation has failed to advance in the Senate as well.  I am interested in hearing the Director’s thoughts on the appropriate path forward for reforms to the patent litigation system so that we may address this continuing problem.

"In addition to considering the many important policy matters facing the USPTO today, we also have the opportunity to examine the management of the office itself.  Much attention has been given, in recent weeks, to a Department of Commerce Inspector General report that alleged abuse of the USPTO time and attendance policies by the agency’s employees.  In particular, the IG reported that patent examiners claimed to have worked a significant number of hours that the IG could not document ever having been worked.

"The IG report grabbed headlines with raw data that sounds quite troubling—hundreds of thousands of unsupported hours, which could have been used to process thousands of applications, costing the agency millions of dollars in salary for work that hadn’t been completed.

"However, it is not clear that these claims of systemic abuse can withstand scrutiny.  Certainly, in an organization with 8,400 patent examiners, there are bound to be a few bad apples.  But a closer look at the IG report reveals a very different story.

"To begin with, even if everything the IG alleges is true, it would amount to less than 2% of all the hours worked over the 15-month period that the IG investigated this issue.  In fact, the IG acknowledges that after the USPTO instituted certain reforms to its telework policy, six months into the study, the percentage of unsupported hours dropped to just 1.6%, an efficiency rate that most employers would boast about.  But, the IG buried this fact in a footnote deep in the report.

"Critics of the report have also questioned its methodology, which is unlikely to have identified all the hours that patent examiners worked.  The IG constructed a “digital footprint” for each examiner including ID badge swipes into the building, in-office workstation records, records for when teleworkers logged in to the system remotely, and the USPTO’s internal system for tracking patent applications.  These records were then matched with the hours that examiners claimed to have worked.

"Relying purely on this digital footprint, however, cannot account for hours that an examiner may have worked offline.  The agency also does not track when employees leave the building, only when they enter, since ID badge data is used for security purposes, not time and attendance.  It is also possible that some employees reported the correct number of hours that they worked, but they reported having worked them on a different day.  This may have been a violation of the USPTO’s time and attendance policies, but it hardly amounts to fraud.

"To be sure, if any employees are misreporting their time and attendance, the USPTO must address that problem immediately.  I hope Director Lee will tell us what controls are already in place to combat such abuse, and what steps the USPTO is taking to respond to the IG report.

"But I also hope that this report does not lose sight of the bigger picture.  Over the last five years, the backlog of unexamined applications has shrunk significantly, and patent quality has been steadily increasing, though challenges certainly remain on both of those fronts.  Whatever hours the patent examiners have been putting in have clearly yielded strong results.

"I look forward to hearing from our witness about all of these issues and what Congress can do to help continue to move the USPTO and our patent system forward.

"Thank you.  I yield back the balance of my time."

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