FY 2020 United States Patent and Trademark Office

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FY 2020 United States Patent and Trademark Office

Transcript Of FY 2020 United States Patent and Trademark Office

FY 2020
United States Patent and Trademark Office
PERFORMANCE AND ACCOUNTABILITY REPORT
Expanding American Innovation

(Dollars in Thousands) Fund Balance with Treasury

FINANCIAL AND RELATED HIGHLIGHTS

% Change 2020 over 2019

For the Year Ended September 30, 2020

11.9%

$ 2,739,700

For the Year Ended September 30, 2019
$ 2,448,264

Property, Plant, and Equipment, Net

(26.4%)

337,983

459,341

Other Assets

65.6%

58,089

35,075

Total Assets

6.6%

$

3,135,772

$

2,942,680

Deferred Revenue

4.9%

$

1,033,073

$

984,971

Accounts Payable

(1.3%)

105,256

106,665

Accrued Payroll, Benefits, and Leave

21.0%

340,524

281,532

Other Liabilities

18.6%

172,398

145,321

Total Liabilities

8.7%

$

1,651,251

$

1,518,489

Net Position

4.2%

1,484,521

1,424,191

Total Liabilities and Net Position

6.6%

$

3,135,772

$

2,942,680

Total Earned Revenue

7.9%

$

3,657,051

$

3,388,671

Total Program Cost

4.2%

(3,622,969)

(3,478,168)

Net Income/(Cost) from Operations

138.1%

$

34,082

$

(89,497)

Budgetary Resources Available for Spending

9.7%

$ 4,257,572

$

3,880,416

Total Collections, Net

235.0%

$

(265,205)

$

(79,169)

Federal Personnel

2.2%

12,928

12,652

On-Time Payments to Vendors

-% PERFORMANCE HIGHLIGHTS

Performance Measures

FY 2020 Target

Patent Average First Action Pendency (months)
Patent Average Total Pendency (months)
Trademark Average First Action Pendency (months)
Trademark Average Total Pendency (months)
Trademark First Action Compliance Rate
Trademark Final Compliance Rate
Exceptional Office Action
Trademark Applications Processed Electronically
“Percentage of prioritized countries for which intellectual property (IP) country teams have made progress on at least 3 of the 4 performance criteria: a. Institutional improvements of IP office administration for
advancing IP rights; b. Institutional improvements of IP enforcement entities; c. Improvements in IP laws and regulations; d. Establishment of government-to-government cooperative
mechanisms”
“Number of people, including Foreign Government Officials and U.S. Stakeholders, trained on best practices to protect and enforce IP”

15.0** 23.7 2.5-3.5 12 95.5% 97.0% 50.0% 88.0%
66%
5,000

99%
FY 2020 Actual 14.8 23.3 3.0 9.5 95.7% 98.1% 51.0% 88.7%
100%
10,688

99%
Performance Results* Met Met Met Met Met Met Met Met
Met
Met

* The performance result of a given measure is either met (100% or greater of target), or not met (below 95% of target). Time based goals are met when the results are less than the target.
**The USPTO continued striving toward a more aggressive target of less than 15 months versus the FY 2021 President’s Budget target of 16.1 months.

TABLE OF CONTENTS

MESSAGE

1

Message from the Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office ......................................................... 2

INTRODUCTION

9

About This Report ..................................................10 Your Guide to Using This Report ............................ 12

MANAGEMENT’S

DISCUSSION

AND ANALYSIS

13

Mission and Organization of the USPTO ...............14 Our Organization .............................................................. 14 Patent Organization ...........................................................16 Trademark Organization ...................................................16 Policy and International Affairs ......................................16 Our People ...........................................................................17 Significant Case Law Developments ......................18 Recent Decisions ...............................................................18 Performance Highlights .......................................... 19 Introduction to Performance ...........................................19 The USPTO Mission................................................. 19 The USPTO Vision ................................................... 19 Strategic Performance Framework ................................21 Summary of Strategic Goal Results ..............................23 Management Challenges and What’s Ahead......... 24 Stable and Sustainable Funding ....................................24

Reliance on Information Technology ...........................24 Legal Challenges ...............................................................25 Systems and Controls ............................................ 26 Management Assurances................................................26 Other Compliance with Laws and Regulations .......... 27 Other Systems and Control Considerations ...............29 Financial Discussion and Analysis ......................... 30 Financial Highlights ..........................................................30

PERFORMANCE

INFORMATION

55

Introduction to the USPTO’S Performance Goals and Results ............................ 56
CARES Act Response .......................................................56
Performance Audits and Evaluations ...........................56
Performance Data Verification and Validation...........58
Commissioners’ Performance for FY 2019 .................58
Patents: Strategic Goal l......................................... 59
Strategic Goal I: Optimize Patent Quality and Timeliness................................................................... 60
Trademarks: Strategic Goal ll..................................73
Strategic Goal II: Optimize Trademark Quality and Timeliness..................................................... 75
Intellectual Property: Strategic Goal lll ................. 88
Strategic Goal lll: Provide Domestic and Global Leadership to Improve Intellectual Property Policy, Enforcement, and Protection Worldwide ...................89
Mission Support Goal ............................................ 101
Mission Support Goal: Deliver Organizational Excellence ............................................. 102

FINANCIAL SECTION

124

Message from the Chief Financial Officer.....................................................125
Notes to Financial Statements .............................. 131
Required Supplementary Information ..................158

INDEPENDENT

AUDITORS’ REPORT

160

OTHER INFORMATION 166
Summary of Financial Statement Audit and Management Assurances..................... 167 Other Administrative Updates.............................. 172 Payment Integrity.................................................. 175 Fraud Reduction Report.........................................178 Real Property .........................................................179 Civil Monetary Penalty Adjustment for Inflation ............................................................179 Biennial Review of User Fees ............................... 180 The Nature of the Training Provided to USPTO Examiners and Attorneys ................... 180 Patent Examiner Training ............................................... 181 Trademark Examining Attorney Training ................... 186 FY 2020 USPTO Workload Tables ....................187

GLOSSARY OF ACRONYMS AND ABBREVIATIONS 233

INDEX OF URLS

237

PERFORMANCE AND ACCOUNTABILITY REPORT 2020
MESSAGE
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MESSAGE
MESSAGE FROM THE UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE U.S. PATENT AND TRADEMARK OFFICE

Andrei Iancu

Dr. Martin Luther King Jr. once said, “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge.” The past year has presented its share of challenges for all of us, as a nation and as an agency. I am proud to say that, through it all, our diverse and talented nationwide workforce has stood strong—determined to carry on our historic mission, which examiners have performed since 1790—without pause and without fail.
Our thoughts are with all those affected by the global COVID-19 pandemic. While continuity of operations remained a key priority for the agency in 2020, there was no greater priority than the health and safety of our employees and the public who interacts with us. On March 23, in response to the pandemic, the USPTO quickly and seamlessly transitioned to mandatory telework. Even now, the vast majority of our employees continue to work from home. At the same time, we set up several new programs and initiatives, including temporary relief for Patent and Trademark applicants affected by the pandemic, and actually improved the quality and efficiency of our Patent and Trademark examination, thanks, in large part, to the incredible dedication of our nearly 13,000 employees.
In advance of the shift to telework, the USPTO mandated telework training for all employees who were not previously telework-ready to make sure everyone could telework full time. This included employees who had been with the agency for decades but who had until now worked in the office full-time as well as employees still in training, and even externs. The USPTO also made sure everyone had the equipment and support they needed to telework efficiently: The agency deployed some 1,000 SOHO (small office and home office) routers, 2,000 monitors, and 3,000 printers to its employees. Additionally, to accommodate the more than two-fold increase in the number of virtual meetings, staff in the Office of the Chief Information Officer (OCIO) dramatically increased the capacity of USPTO teleworking and virtual-meeting software and bandwidth. This excellent work allowed the USPTO to continue operations with essentially no decrease in productivity because of COVID-19. Applicants might not have even noticed the shift to telework. The two USPTO Boards—the Patent Trial and Appeal Board (PTAB) and

MISSION-FOCUSED STRATEGIC GOALS
GOAL I: Optimize Patent Quality and Timeliness GOAL II: Optimize Trademark Quality and Timeliness GOAL III: Provide Domestic and Global Leadership to Improve Intellectual Property Policy, Enforcement, and Protection Worldwide MISSION SUPPORT GOAL: Deliver Organizational Excellence
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PERFORMANCE AND ACCOUNTABILITY REPORT 2020
the Trademark Trial and Appeal Board (TTAB)—were also forced to move to remote hearings, and they have done so with remarkable efficiency. Since the agency’s shift to mandatory telework, the Boards have conducted more than 300 remote hearings.
At the same time, the USPTO—along with its international counterparts—worked to mitigate COVID-19’s effect on the innovation community. The USPTO and European Patent Office pledged that “at a time when the dissemination of knowledge is crucial, we will persevere in developing the tools that can help scientists all over the world.” Through various programs, the USPTO has done precisely that. With the authority provided by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the USPTO temporarily extended deadlines for filing many Patent and Trademark documents and paying certain fees. The USPTO also instituted a number of initiatives to promote research related to COVID-19. The COVID-19 Prioritized Examination Program lets small and micro entities accelerate prosecution, at no charge, for inventions that are subject to FDA approval for use in treating COVID-19. For applications in this program, the USPTO hopes to issue final decisions within six months of filing so long as applicants are prompt in responding to office actions. To support research related to COVID-19, the USPTO also launched the Patents 4 Partnerships website, which provides a repository of patents and applications related to COVID-19 and creates a platform for connecting patentees and potential licensees. We hope these programs will help the world develop a vaccine or find a cure more quickly.
During the year, the USPTO also launched one of its most important initiatives, aimed at expanding invention and entrepreneurship in the United States: the National Council for Expanding American Innovation (NCEAI). The NCEAI is composed of high-level leaders from the federal government, industry, academia, and professional and nonprofit organizations, as well as venture capitalists and independent inventors, who are committed to increasing the opportunities for all Americans to participate in innovation. A top priority of the NCEAI is to help the USPTO develop a long-term, comprehensive national strategy to build a more diverse and inclusive innovation ecosystem by increasing participation demographically, geographically, and economically.
THE USPTO MISSION
Fostering innovation, competitiveness, and job growth in the United States by conducting high-quality and timely Patent and Trademark examination and review proceedings in order to produce reliable and predictable intellectual property rights, guiding intellectual property policy and improving intellectual property rights protection, and delivering intellectual property information and education worldwide.
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MESSAGE

Patents
Trademarks
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Since the founding of this great nation, innovation has been the driving force of our economy and our most defining trait as a people. America’s continued economic prosperity and technological leadership depend on a strong and inclusive innovation ecosystem. The USPTO is committed to ensuring that all Americans have the opportunity to innovate, start new companies, succeed in established companies, and ultimately achieve the American Dream.
Patents continued our focus on improving the quality of patent examination, and reduced its time for patent examination. Under the leadership of Andrew Hirshfeld, who was reappointed as Commissioner for Patents in July 2020, the USPTO is now issuing final decisions—either allowing a patent or issuing a final rejection—on average within 23.3 months—faster than last year’s 23.8 months and significantly faster than in recent years. While some of this increase in productivity is due to USPTO employees taking less vacation as a result of COVID-19, our examiners’ exceptional resilience and diligence have been the most critical factors.
To enhance patent quality, Patents has started introducing a new patent search system that provides examiners with increased access to prior art. The search system can also integrate with an artificial intelligence-based tool to help examiners find more relevant prior art. Patents took additional steps to support the quality of patent examination through a number of programs that help train examiners. Patents is preparing to implement an updated performance appraisal plan for examiners that provides a roadmap for enhanced patent quality, including an increased focus on search and the clarity of the written prosecution record. FY 2020 marked the beginning of updates that more closely align the time allotted for the examination of patent applications with the technology described in the application and its specific attributes. The implementation of these updates will be finalized in FY 2021, along with a new process for assigning applications to examiners that better matches their expertise with the technologies disclosed in the patent application.
Finally, the USPTO is collaborating with dozens of intellectual property (IP) offices around the world to accelerate the prosecution of patent applications that are cross-filed in multiple countries.
Under the leadership of the new Commissioner for Trademarks, David Gooder, who joined the agency in February 2020, the Trademarks organization also had an impressive year with several new milestones, despite the challenges of a global pandemic. Entirely electronic processing of trademark applications rose to 88.7%, and is leading to more efficient processing, fewer errors, and more cost-effective transactions for USPTO customers. The gains made in efficiency throughout the application cycle enabled Trademarks to successfully exceed pendency and quality

PERFORMANCE AND ACCOUNTABILITY REPORT 2020

Patent Trial and Appeal Board

targets for the 15th consecutive year—this as trademark applications increased by 9.6% and as COVID-19 forced a dramatic shift in agency operations.
Trademarks also advanced a number of initiatives to mitigate suspicious filings, fraudulent filings and specimens, and counterfeit products. The Trademark organization launched a joint anti-counterfeiting campaign with the National Crime Prevention Council (NCPC) focused on educating consumers and stakeholders throughout the IP community about the threats of non-genuine products; it continued efforts to improve the integrity of the register through post-registration audits to validate marks in use and it implemented a new U.S. counsel rule that requires U.S.-based representation for applicants, registrants, or parties to a trademark proceeding before the USPTO. The rule took effect in August 2019, and analysis this fiscal year shows that it has already positively impacted the filing behavior of foreign applicants, registrants, and parties before the Trademark Trial and Appeal Board (TTAB).
While adapting to the pandemic, the PTAB not only continued to meet all statutory due-date requirements of the America Invents Act (AIA), it also reduced the pendency of ex parte appeals so that they are now decided, on average, within 13.4 months of docketing. Only five years ago, such appeals took about 36 months to decide.
The PTAB is taking many steps to strengthen its information technology (IT) infrastructure by moving to a single integrated IT system, known as PTAB Center. This will provide employees with a single unified interface for managing cases and decisions across all of the PTAB’s jurisdictions, and it will provide external customers with a simple user interface to file petitions and papers. The PTAB is also in the process of increasing the accessibility of its hearings that are held in the USPTO’s Regional Offices.
During FY 2020, the PTAB also implemented a number of processes to improve the transparency and predictability of its proceedings. These included a new pilot program for addressing motions to amend in AIA trials. It proposed rulemaking to ensure a more consistent approach to questions relating to the institution of AIA trials and proposed rulemaking to allocate the burdens of persuasion for motions to amend. It initiated a Fast-Track Appeals Pilot Program that allows applicants to expedite ex parte appeals for a minimal fee. It launched the Legal Experience and Advancement Program (LEAP), which fosters development of the next generation of IP practitioners by incentivizing law firms and the companies they represent to give new attorneys argument time. And the PTAB continues to assess and develop plans to address the impact of the Arthrex, Inc. v. Smith & Nephew, Inc. decision, which is now before the Supreme Court.

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MESSAGE

Trademark Trial and Appeal Board
Policy and International Affairs

The TTAB began the fiscal year with a large inventory of resource-intensive trial cases that were awaiting decision. Despite the complications created by mandatory/ maximum telework, the TTAB reduced the average time to issuance of decisions in appeals and trial cases, and it has halved the number of trial cases awaiting decisions.
The TTAB remains committed to the USPTO strategic plan’s goal of streamlining processes and procedures where appropriate and developing with stakeholders more efficient trial processes that will avoid over-litigation of issues and ensure the integrity of the trademark register. In FY 2020, it concluded a two-year expedited cancellation proceeding pilot program, which focused on encouraging more efficient approaches for resolving cancellation cases asserting claims that registered marks were never used or had been abandoned. To encourage early settlement discussions and use of the Board’s Accelerated Case Resolution (ACR) processes, the TTAB attorneys and judges engaged in active case management and conferencing with parties involved in such cancellation cases. The TTAB successfully identified 205 cancellation cases as eligible for the pilot. Of these, 134 were resolved without need of a final decision on the merits. In addition, the TTAB began developing a new pre-trial conference pilot program for both opposition and cancellation cases that will focus on encouraging parties to engage in more efficient trial processes, in particular the broader use of stipulations, more extensive pre-trial disclosures, and narrowing issues for trial.
The TTAB also continued its long-running commitment to issuance of precedential decisions, which provide guidance to the trademark bar. In FY 2020, it issued 43 decisions on procedural and substantive matters and completed its annual update of the TTAB Manual of Procedure in a timely fashion.
The Office of Policy and International Affairs (OPIA) continued to streamline and enhance the efficiency of the global patent system. Worksharing arrangements with foreign IP offices continued to be an effective tool for this system. The USPTO and Mexico’s IP office extended their bilateral Patent Prosecution Highway (PPH) agreement and, in January 2020, they signed a memorandum of understanding laying the groundwork for a next-generation worksharing framework and furthering commitments made in the United States-Mexico-Canada Agreement (USMCA). Based on the success of a bilateral PPH with the USPTO, the Chilean IP office became the third Latin American office to join the Global PPH in July 2020.
The USPTO also continued to develop and provide domestic and international in-person and virtual programs to improve IP systems in countries around the world. Participants included U.S. and foreign officials with IP-related responsibilities, including judges, prosecutors, Patent and Trademark examiners, and IP office administrators, as well as U.S. stakeholders. In all, the USPTO worked with over 4,800 foreign government officials representing 121 countries and

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