Remarks by Director Michelle K. Lee at Technology Policy Institute Aspen Forum

Technology Policy Institute Aspen Forum

Director of the U.S. Patent and Trademark Office Michelle K. Lee

Luncheon Remarks

August 17, 2015

12:30 p.m.

St. Regis Hotel, Aspen, Colorado

Before we dive into what I’m sure will be a great discussion, I want to set up a few matters of great importance to me:  the innovation economy and how intellectual property helps drive economic growth; the importance of a balanced IP system; and how, through our Data Initiative, we are gathering, using and sharing USPTO data to ensure that all of us can make more informed decisions to further advance our innovation economy.

It wasn’t so long ago that intellectual property law was a niche topic, and the most valuable assets of companies were often tangible—their plants, warehouses, and inventory. But today, the most valuable assets of our leading companies are intangible, such as their inventions, algorithms, processes, designs, and brands—what we call intellectual property, or IP. 25 years ago, a young University of Chicago economist named Paul Romer published a paper that described this development, by mathematically modeling the emergence of what we now call the innovation economy. In a way that no one had before, Romer documented how economic growth was now driven by creative ideas and the goods resulting from those ideas. And we’ve seen the economic impact of creative ideas like: A Beatles recording. The design of a new computer chip. The molecular structure of a new drug—and the secrets of its efficient manufacture. Even a “Baby on Board” sign in a car window.

Those of us who work in IP law have seen this change up close over the last few decades. According to a 2012 Department of Commerce study, the entire U.S. economy today relies on some form of IP; IP-intensive industries support at least 40 million jobs, or more than a quarter of all U.S. jobs; they also contribute more than 5 trillion dollars, or more than a third, of our gross domestic product; And growth in copyright, patent and trademark-intensive industries outpace gains in non-IP-intensive industries. In short, the innovation economy whose emergence Paul Romer noted 25 years ago is now a full-blown reality—with far-reaching implications for our nation and the world.

One of the most immediate implications is that because intangible assets can be more easily copied, the system we use to protect and enforce IP rights is more important than ever. The exclusivity offered by patents, for example, has the additional advantage of making it easier to secure investment and to commercialize new inventions. And the public disclosure of how the invention works allows other innovators to begin working on improvements, which could require licenses or workarounds. Over the years our nation’s legal framework has been shaped by Congressional revisions to IP law; my agency’s implementation of those laws; and courts’ interpretations of those laws. That legal framework succeeds when all parties focus on the balance between (1) incentivizing innovation and (2) allowing others to make improvements to existing technologies. IP protections that are too strong can disincentivize innovation just as easily as IP protections that are too weak. Finding the right balance on these issues requires work. That’s why all of us share the responsibility of striking that balance, particularly the three branches of government. We’re doing our part at the USPTO—an agency of the executive branch. Last fall, I launched a comprehensive Enhanced Patent Quality Initiative to make sure the USPTO is issuing the very best quality patents possible. We are also faithfully and diligently implementing the America Invents Act’s post-grant review proceedings that provide a faster and lower cost way to check the quality of patents in our system.  And now, through our Data Initiatives, we are gathering, using and sharing more USPTO data to ensure that future decisions—yours and ours—are better informed. 

On this last point regarding data, you might be interested to know that I was a computer scientist, engineer, attorney, and executive in the corporate world long before I was a government official. In every setting where I worked in the private sector, I used data to drive my decision making. I apply that same data-driven approach now at the USPTO. Which is why I keep my chief economist very busy, analyzing both the IP data that resides within our agency, and the work of other researchers studying larger economic trends. And we use the results of these analyses as we balance competing interests in order to make policy decisions that promote innovation. One of the things the data tells us—for example—is that small companies, and especially young companies, make the largest contributions to employment growth. And among small and young companies, those holding patents are responsible for adding disproportionally more new jobs than those companies without patents. The bottom line is that the research, both here in the U.S. and abroad, strongly supports the need for small companies to fully participate and compete in our innovation economy. I worked for a company that started out small and became very big in a short period of time. Now I’m the Under Secretary of Commerce for Intellectual Property, and based on the data before me, it’s clear my focus should be on further lowering barriers to entry for young companies to enter the innovation economy. We need to keep having new ideas enter the pipeline. One way the USPTO does that is through our small-entity and micro-entity discounts that can reduce the cost of applying for a patent by up to 75%. That can make a big difference for a young startup. In effect, we made a policy decision to subsidize these modest-sized applicants’ costs with the hope that IP resulting from their efforts will lead them to become major players, employing more Americans and spurring further economic growth. And we hope that—over time—these companies will grow to become firms that are paying full, non-discounted fees for USPTO services, subsidizing further generations of inventors. Also, even the patent application fee we charge non-small entity companies does not cover the full cost of processing the application. To recover the full cost of handling the application, we charge fees to maintain the patent after it has issued that increase over time (at the 3.5, 5.5 and 7.5 year marks after issuance), after the market has had the opportunity to clarify the value of the invention for the patent holder. Keep in mind the patent owner always has the choice to abandon the patent if he/she determines that it is not worth payment of the maintenance fee. This is another example of the policy decision we made, based upon the data, to lower the barriers to entry of new inventions into our innovation economy. Finally, another way we help innovative companies—large and small—is by making more of our own data about patents and trademarks available to the public. Greater access to data helps companies decide, as I mentioned earlier, whether they should take a license to needed IP or design around it, as well as where to invest their limited research and development funds.

So now I hope you have a better idea of why I’m here with you today, at a conference not usually including the Under Secretary of Commerce for Intellectual Property. I’m here because everyone in this room is part of that innovation economy that Paul Romer wrote about 25 years ago. Fueling that economy (through IP rights) is my Agency’s mission. American businesses must continue to maintain their positions as leading innovators in today’s increasingly competitive global marketplace.

The President knows it. Commerce Secretary Pritzker knows it. And I know it. It’s why we’re working hard to find that right balance in our IP laws, and to ensure we’re doing all we can for the benefit of our innovators. It’s something I’m very passionate about, and fully committed to, as I head our nation’s “Innovation Agency.” With that, let me say thank you, and I look forward to continuing the conversation with John, Danny and all of you in our panel discussion! 

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