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USPTO Performance and Accountability Report FY 2017

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USPTO Performance and Accountability Report FY 2017 UNITED STATES PATENT AND TRADEMARK OFFICE PATENT UNITED STATES PERFORMANCE AND ACCOUNTABILITY REPORT AND ACCOUNTABILITY PERFORMANCE THE FUTURE United States Patent and Trademark Office PERFORMANCE & ACCOUNTABILITY REPORT FY 17 OF INNOVATION FINANCIAL AND RELATED HIGHLIGHTS % Change For the year ended For the year ended (Dollars In Thousands) 2017 over 2016 September 30, 2017 September 30, 2016 Fund Balance with Treasury (4.2%) $ 2,259,911 $ 2,358,227 Property, Plant, and Equipment, Net 3.9% 523,842 504,025 Other Assets 7.1% 33,421 31,212 Total Assets (2.6%) $ 2,817,174 $ 2,893,464 Deferred Revenue (2.5%) $ 936,854 $ 960,398 Accounts Payable 8.8% 101,703 93,461 Accrued Payroll, Benefits, and Leave 4.3% 251,427 241,147 Other Liabilities (0.9%) 149,638 150,936 Total Liabilities (0.4%) $ 1,439,622 $ 1 , 4 4 5 , 9 4 2 Net Position (4.8%) 1,377,552 1,447,522 Total Liabilities and Net Position (2.6%) $ 2,817,174 $ 2 , 8 9 3 , 4 6 4 Total Earned Revenue (0.9%) $ 3,105,346 $ 3,133,370 Total Program Cost 2.4% (3,193,411) (3,119,584) Net (Cost)/Income from Operations (738.8%) $ (88,065) $ 13,786 Budgetary Resources Available for Spending (0.8%) $ 3,577,570 $ 3,607,845 Net Outlays (22.6%) $ 94,625 $ 122,253 Federal Personnel (1.1%) 12,588 12,725 On-Time Payments to Vendors -% 99% 99% PERFORMANCE HIGHLIGHTS Performance Measures FY 2017 Target FY 2017 Actual Performance Results* Patent Average First Action Pendency (months) 14.8 16.3 Not Met Patent Average Total Pendency (months) 24.8 24.2 Met Trademark Average First Action Pendency (months) 2.5–3.5 2.7 Met Trademark Average Total Pendency (months) 12.0 9.5 Met Trademark First Action Compliance Rate 95.5% 97.3% Met Trademark Final Compliance Rate 97.0% 98.3% Met Exceptional Office Action 40.0% 45.0% Met Trademark Applications Processed Electronically 82.0% 86.5% Met Percentage of prioritized countries for which country teams have made progress on at least 75% of action steps in the country-spe- cific action plans along the following dimensions: • Institutional improvements of intellectual property (IP) 75% 100% Met office administration for advancing IP rights, • Institutional improvements of IP enforcement entities, Improvements in IP laws and regulations, and • Establishment of government-to-government cooperative mechanisms. Number of Foreign Government Officials Trained on 5,000 4,134 Not Met Best Practices to Protect and Enforce IP * The performance result of a given measure is either met (100% or greater of target), slightly below (95–99% of the target), or not met (below 95% of target). TABLE OF CONTENTS MESSAGE From the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office 2 INTRODUCTION 4 About This Report 5 Your Guide to Using This Report 6 MANAGEMENT’S DISCUSSION AND ANALYSIS 7 Mission and Organization of the USPTO 8 Our Organization 8 Patent Organization 9 Trademark Organization 10 Policy and International Affairs 10 Our People 10 Significant Case Law Developments 12 Recent Decisions 12 Performance Highlights 13 Introduction to Performance 13 Strategic Performance Framework 13 Summary of Strategic Goal Results 16 Management Challenges and What’s Ahead 18 Sustainable Funding 18 Administering AIA Patent Dispute Resolution Provisions 18 Reliance on Information Technology 19 Legal Challenges 19 Systems and Controls 20 Management Assurances 20 Other Compliance with Laws and Regulations 21 Other Systems and Control Considerations 23 Financial Discussion and Analysis 24 Financial Highlights 24 PERFORMANCE INFORMATION 42 Introduction to the USPTO’s Performance Goals and Results 43 Performance Audits and Evaluations 43 Performance Data Verification and Validation 44 Commissioners’ Performance for FY 2017 45 Patents: Strategic Goal I 46 Strategic Goal I: Optimize Patent Quality and Timeliness 48 Trademarks: Strategic Goal II 59 Strategic Goal II: Optimize Trademark Quality and Timeliness 61 Intellectual Property: Strategic Goal III 72 Strategic Goal III: Provide Domestic and Global Leadership to Improve Intellectual Property Policy, Protection, and Enforcement Worldwide 74 Management Goal 86 Management Goal: Achieve Organizational Excellence 87 i FINANCIAL SECTION 106 Message From the Chief Financial Officer 107 Principal Financial Statements and Related Notes 109 Required Supplementary Information 142 Independent Auditors’ Report 143 OTHER INFORMATION 150 Summary of Financial Statement Audit and Management Assurances 151 Inspector General’s Top Management Challenges Facing the USPTO 152 Payment Integrity 154 Fraud Reduction Report 158 Reduce the Footprint 160 Civil Monetary Penalty Adjustment for Inflation 160 Biennial Review of User Fees 161 The Nature of the Training Provided to USPTO Examiners and Attorneys 162 FY 2017 USPTO Workload Tables 167 GLOSSARY OF ACRONYMS AND ABBREVIATIONS 197 INDEX OF URLs 201 THE FUTURE OF INNOVATION As part of the agency’s strategic goals, the USPTO supports government-wide efforts to promote Science, Technology, Engineering, and Mathematics (STEM) education initiatives for students of all ages. This year’s cover features images from three programs, which directly support that goal. (Photos: Jay Premack, USPTO) CAMP INVENTION Students conduct experiments while attending Camp Invention in Hyattsville, Maryland. Camp Invention holds one-week sessions at over 1,400 schools nationwide each summer. Fun, engaging programs are developed with the collaboration of National Inventors Hall of Fame inductees to challenge children’s creativity, innovation, and problem-solving skills. Attendees also learn about the importance of protecting their intellectual property. NATIONAL SUMMER TEACHER INSTITUTE Idaho teacher Delise Denham works on her team Innovation Challenge project at the National Summer Teacher Institute in Denver. Each year the USPTO gathers a select group of K-12 educators for workshops designed to help them teach invention, innovation, and the importance of intellectual property. COLLEGIATE INVENTORS COMPETITION The Collegiate Inventors Competition showcases and rewards the cutting-edge research and innovation of some of the nation’s top young minds. Competitors’ inventions are designed to solve a wide range of scientific, medical, engineering, and humanitarian challenges. Finalists are not only judged by, but receive feedback, brainstorming, and encouragement from experts, including National Inventors Hall of Fame inductees. Pictured are finalists Ameer Shakeel and Payam Pourtaheri of the University of Virginia, who won the 2016 undergradu- ate category for their invention of AgroSpheres, a solution to remove pesticide residue from crops before harvest. ii PERFORMANCE AND ACCOUNTABILITY REPORT 2017 MESSAGE MESSAGE FROM THE UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE I am pleased to present the United States Patent and Trademark Office’s (USPTO) Performance and Accountability Report for Fiscal Year 2017. This report describes how we managed our resources and administered our programs, and provides an assessment of the USPTO’s detailed financial information. We continued making tremendous progress on the strategic goals set out in our 2014-2018 Strategic Plan. Joe Matal PATENTS MISSION-FOCUSED In 2017, USPTO patent examiners continued to reduce total patent application pendency, STRATEGIC GOALS although first action pendency rose slightly. First action pendency increased by 0.1 months GOAL I: and total pendency dropped by 1.1 months. While we achieved our total pendency target, Optimize Patent Quality we narrowly missed our first action pendency target by less than one month and are and Timeliness working hard to address challenges. We remain committed to achieving our pendency goals. GOAL II: Optimize Trademark As part of the new administration’s efforts to encourage innovation, we expanded our Quality and Timeliness activities to help applicants and their representatives navigate the patent prosecution GOAL III: process. One highlight is our work with pro se inventors—those applying for patents Provide Domestic and without an attorney—through the USPTO Pro Se Assistance Program. This program Global Leadership to provides dedicated educational resources to these applicants, in-person assistance, and Improve intellectual centralizes examination of the applications. Property Policy, Protection, and The Patent Trial and Appeal Board (PTAB) has successfully implemented the patent Enforcement Worldwide dispute resolution portions of the America Invents Act (AIA) and has continued to meet MANAGEMENT GOAL: all AIA statutory deadlines. Despite high workload levels, PTAB remains committed to Achieve Organizational evaluating workload and resources to meet these deadlines. Excellence TRADEMARKS Trademark filings increased by 12 percent in FY 2017. Nevertheless, our trademark attorneys exceeded pendency and quality targets for the 12th consecutive fiscal year. In addition, thanks in part to new fee increases in paper filing that went into effect in January 2017, fully electronic processing of trademark applications rose to 86.5 percent of applications in FY 2017. Electronic filing benefits our users, workflow processes, data collection, and file management. It also supports our objective of end-to-end electronic processing of trademark applications. We will continue to engage with the public to identify ways to streamline processes, lessen the financial burden on applicants, and efficiently process trademark applications. The
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