2016 USPTO Performance and Accountability Report
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FINANCIAL AND RELATED HIGHLIGHTS (Dollars In Thousands) % Change For the year ended For the year ended 2016 over 2015 September 30, 2016 September 30, 2015 Fund Balance with Treasury (5.5%) $ 2,358,227 $ 2,494,267 Property, Plant, and Equipment, Net 24.2% 504,025 405,740 Other Assets 30.5% 31,212 23,916 Total Assets (1.0%) $ 2,893,464 $ 2,923,923 Deferred Revenue (6.5%) $ 960,398 $ 1,027,460 Accounts Payable (19.6%) 93,461 116,211 Accrued Payroll, Benefits, and Leave 10.8% 241,147 217,666 Other Liabilities (6.5%) 150,936 161,429 Total Liabilities (5.0%) $ 1,445,942 $ 1,522,766 Net Position 3.3% 1,447,522 1,401,157 Total Liabilities and Net Position (1.0%) $ 2,893,464 $ 2,923,923 Total Earned Revenue 1.9% $ 3,133,370 $ 3,074,001 Total Program Cost 3.5% (3,119,584) (3,012,833) Net Income from Operations (77.5%) $ 13,786 $ 61,168 Budgetary Resources Available for Spending (2.0%) $ 3,607,845 $ 3,680,438 Net Outlays 428.3% $ 122,253 $ 23,140 Federal Personnel 0.5% 12,725 12,667 On-Time Payments to Vendors 2.1% 99% 97% PERFORMANCE HIGHLIGHTS Performance Measures FY 2016 Target FY 2016 Actual Performance Results* Patent Average First Action Pendency (months) 14.8 16.2 Not Met Patent Average Total Pendency (months) 25.4 25.3 Met Trademark Average First Action Pendency (months) 2.5–3.5 3.1 Met Trademark Average Total Pendency (months) 12.0 9.8 Met Trademark First Action Compliance Rate 95.5% 97.1% Met Trademark Final Compliance Rate 97.0% 97.8% Met Exceptional Office Action 40.0% 45.4% Met Trademark Applications Processed Electronically 82.0% 84.8% Met Percentage of prioritized countries for which country teams have made progress on at least 75% of action steps in the country-specific 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 Best 5,000 4,975 Slightly Below 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 1 From the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office INTRODUCTION 9 About This Report 10 Your Guide to Using This Report 11 MANAGEMENT’S DISCUSSION AND ANALYSIS 12 Mission and Organization of the USPTO 13 Our Organization 13 Patent Organization 14 Trademark Organization 15 Policy and International Affairs 15 Our People 15 Regional Office Updates 17 Open Data and Big Data 18 Significant Case Law Developments 20 Recent Decisions 20 Performance Highlights 22 Introduction to Performance 22 Strategic Performance Framework 22 Summary of Strategic Goal Results 25 Management Challenges and What’s Ahead 27 Sustainable Funding 27 Enhanced Patent Quality Initiative 27 Administering AIA Patent Dispute Resolution Provisions 28 Reliance on Information Technology 28 Legal Challenges 28 Systems and Controls 30 Management Assurances 30 Other Compliance with Laws and Regulations 31 Other Systems and Control Considerations 33 Financial Discussion and Analysis 34 Financial Highlights 34 PERFORMANCE INFORMATION 52 Introduction to the USPTO’s Performance Goals and Results 53 Performance Audits and Evaluations 54 Performance Data Verification and Validation 56 Commissioners’ Performance for FY 2016 57 www.uspto.gov i Patents: Strategic Goal I 58 Strategic Goal I: Optimize Patent Quality and Timeliness 60 Trademarks: Strategic Goal II 73 Strategic Goal II: Optimize Trademark Quality and Timeliness 75 Intellectual Property: Strategic Goal III 84 Strategic Goal III: Provide Domestic and Global Leadership to Improve Intellectual Property Policy, Protection, and Enforcement Worldwide 86 Management Goal 97 Management Goal: Achieve Organizational Excellence 98 FINANCIAL SECTION 117 Message 118 From the Chief Financial Officer Principal Financial Statements and Related Notes 120 Required Supplementary Information 152 Independent Auditors' Report 153 OTHER INFORMATION 160 Combined Schedule of Spending 161 Inspector General’s Top Management Challenges Facing the USPTO 162 Summary of Financial Statement Audit & Management Assurances 164 Improper Payments Information Act (IPIA) of 2002, as Amended 165 Freeze the Footprint 168 Federal Civil Penalties Inflation Adjustment Act of 1990 (formerly known as the Civil Monetary Penalties Act) 169 FY 2016 Other Administrative Updates 170 The Nature of the Training Provided to USPTO Examiners 172 FY 2016 USPTO Workload Tables 177 GLOSSARY OF ACRONYMS AND ABBREVIATIONS 207 INDEX OF URLs 211 II PERFORMANCE AND ACCOUNTABILITY REPORT MESSAGE MESSAGE FROM THE UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE This past fiscal year at the United States Patent and Trademark Office (USPTO) provided several unique opportunities to reflect on the history and impact of our intellectual property (IP) system, including two recent celebrations: one marking the 70th anniversary of the Lanham Act and the other marking the 5th anniversary of the America Invents Act (AIA). Michelle K. Lee President Truman signed the Lanham Act into law on July 6, 1946, which served as a visionary, far-reaching piece of legislation that established the modern trademark system as we know it. President Truman also signed into law the Patent Act of 1952, one of the most ambitious overhauls to our nation’s patent system until President Barack Obama signed the AIA on September 16, 2011. The AIA went considerably further than did the previous patent acts. Among other major changes, it harmonized U.S. patent law with the rest of the world’s by switching to a first-inventor-to-file regime; created a new Patent Trial and Appeal Board (PTAB) with new post-grant proceedings, providing quicker and less expensive alternatives to district court litigation; and granted the USPTO fee-setting authority. It also called on the USPTO, for the first time in the agency’s history, to establish regional offices in every continental time zone and pro bono patent assistance in every state. Through tremendous work by our talented employees and our dedicated partners in the private and public sectors, we succeeded in meeting or exceeding every one of the AIA’s goals—including the creation of four new regional offices with full-time directors and staff—in the heart of our nation’s most innovative ecosystems. These offices in Dallas, Denver, Detroit, and the Silicon Valley powerfully expand our ability to educate regional innovators about intellectual property. They also help inventors and businesses of all sizes directly access a wider range of services offered by the USPTO—including PTAB trials and public patent quality events like those we have planned for November and December of the new fiscal year. Having had the opportunity to stand up and help define the vision of these offices, I am very proud of their work and the ways they will benefit our IP system for generations to come. I've always said that one day when my daughter is old enough, I can point to the Silicon Valley Regional Office in our hometown and say, "Your mom had a hand in opening that office." These noteworthy accomplishments could not be more timely, as they come into effect at a time when intellectual property is key to our economy. According to our new Intellectual Property and the U.S. Economy: 2016 Update, co-authored with the Economics & Statistics Administration: • IP-intensive industries directly and indirectly supported 45.5 million jobs in 2014, nearly one-third of all U.S. employment. • The share of total U.S. gross domestic product (GDP) attributable to IP-intensive industries increased from 34.8 percent in 2010 to 38.2 percent in 2014. • In 2014, workers in IP-intensive industries earned an average weekly wage of $1,312, 46 percent higher than the $896 average weekly wages in non-IP-intensive industries in the private sector. 2 PERFORMANCE AND ACCOUNTABILITY REPORT Altogether, the findings in the report strongly suggest that the IP initiatives of the Obama The USPTO Mission administration—building on those of the Truman administration and others—have benefited not only our nation’s innovators and entrepreneurs, but also the American public and Fostering innovation, economy at large. IP today touches every aspect of our lives, from the increasingly “smart” competitiveness and devices we use and the vehicles we drive to the clothes we wear and the entertainment we economic growth, enjoy. It is also critical to the breathtaking advances in science and medicine that save lives domestically and abroad and improve our standard of living on a wide variety of fronts. by delivering (1) high quality and timely examination Making smart investments in our IP system to foster more game-changing innovations of patent and trademark and economic growth has been my top priority as head of America’s Innovation Agency applications, (2) guiding since day one. That effort continued at full speed in fiscal year (FY) 2016, thanks in large domestic and international part to the fee-setting authority granted by the AIA, a responsible operating reserve intellectual property collected through those fees, and an expanding and highly talented nationwide workforce policy, and (3) delivering now totaling nearly 13,000. intellectual property We are confident that the USPTO’s financial and performance data are complete, reliable, information and education accurate, and consistent as we improve our ability to measure progress toward our worldwide, with a highly- performance goals.