[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
IMPROVING FEDERAL COURT ADJUDICATION
OF PATENT CASES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS, THE INTERNET,
AND INTELLECTUAL PROPERTY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
OCTOBER 6, 2005
__________
Serial No. 109-59
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
______
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COMMITTEE ON THE JUDICIARY
F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina HOWARD L. BERMAN, California
LAMAR SMITH, Texas RICK BOUCHER, Virginia
ELTON GALLEGLY, California JERROLD NADLER, New York
BOB GOODLATTE, Virginia ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio MELVIN L. WATT, North Carolina
DANIEL E. LUNGREN, California ZOE LOFGREN, California
WILLIAM L. JENKINS, Tennessee SHEILA JACKSON LEE, Texas
CHRIS CANNON, Utah MAXINE WATERS, California
SPENCER BACHUS, Alabama MARTIN T. MEEHAN, Massachusetts
BOB INGLIS, South Carolina WILLIAM D. DELAHUNT, Massachusetts
JOHN N. HOSTETTLER, Indiana ROBERT WEXLER, Florida
MARK GREEN, Wisconsin ANTHONY D. WEINER, New York
RIC KELLER, Florida ADAM B. SCHIFF, California
DARRELL ISSA, California LINDA T. SANCHEZ, California
JEFF FLAKE, Arizona CHRIS VAN HOLLEN, Maryland
MIKE PENCE, Indiana DEBBIE WASSERMAN SCHULTZ, Florida
J. RANDY FORBES, Virginia
STEVE KING, Iowa
TOM FEENEY, Florida
TRENT FRANKS, Arizona
LOUIE GOHMERT, Texas
Philip G. Kiko, General Counsel-Chief of Staff
Perry H. Apelbaum, Minority Chief Counsel
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Subcommittee on Courts, the Internet, and Intellectual Property
LAMAR SMITH, Texas, Chairman
HENRY J. HYDE, Illinois HOWARD L. BERMAN, California
ELTON GALLEGLY, California JOHN CONYERS, Jr., Michigan
BOB GOODLATTE, Virginia RICK BOUCHER, Virginia
WILLIAM L. JENKINS, Tennessee ZOE LOFGREN, California
SPENCER BACHUS, Alabama MAXINE WATERS, California
BOB INGLIS, South Carolina MARTIN T. MEEHAN, Massachusetts
RIC KELLER, Florida ROBERT WEXLER, Florida
DARRELL ISSA, California ANTHONY D. WEINER, New York
CHRIS CANNON, Utah ADAM B. SCHIFF, California
MIKE PENCE, Indiana LINDA T. SANCHEZ, California
J. RANDY FORBES, Virginia
Blaine Merritt, Chief Counsel
David Whitney, Counsel
Joe Keeley, Counsel
Ryan Visco, Counsel
Shanna Winters, Minority Counsel
C O N T E N T S
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OCTOBER 6, 2005
OPENING STATEMENT
Page
The Honorable Lamar Smith, a Representative in Congress from the
State of Texas, and Chairman, Subcommittee on Courts, the
Internet, and Intellectual Property............................ 1
The Honorable Howard L. Berman, a Representative in Congress from
the State of California, and Ranking Member, Subcommittee on
Courts, the Internet, and Intellectual Property................ 2
The Honorable Darrell Issa, a Representative in Congress from the
State of California, and Member, Subcommittee on Courts, the
Internet, and Intellectual Property............................ 3
WITNESSES
Ms. Kimberly A. Moore, Professor of Law, George Mason University
School of Law
Oral Testimony................................................. 6
Prepared Statement............................................. 8
Mr. John B. Pegram, Senior Counsel, New York Office, Fish &
Richardson, P.C.
Oral Testimony................................................. 11
Prepared Statement............................................. 13
Mr. Chris J. Katopis, Counsel, Drinker, Biddle & Reath, LLP
Oral Testimony................................................. 26
Prepared Statement............................................. 28
The Honorable T.S. Ellis, III, United States District Judge,
Eastern District of Virginia
Oral Testimony................................................. 49
Summary of the Prepared Statement.............................. 52
APPENDIX
Material Submitted for the Hearing Record
Prepared Statement of the Honorable Howard L. Berman, a
Representative in Congress from the State of California, and
Ranking Member, Subcommittee on Courts, the Internet, and
Intellectual Property.......................................... 73
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, and
Member, Subcommittee on Courts, the Internet, and Intellectual
Property....................................................... 74
Article submitted by Kimberly A. Moore, Professor of Law, George
Mason University School of Law, entitled ``MARKMAN EIGHT YEARS
LATER: IS CLAIM CONSTRUCTION MORE PREDICTABLE?''............... 75
Article submitted by Kimberly A. Moore, Professor of Law, George
Mason University School of Law, entitled ``FORUM SHOPPING IN
PATENT CASES: DOES GEOGRAPHIC CHOICE AFFECT INNOVATION?''...... 92
Article submitted by Kimberly A. Moore, Professor of Law, George
Mason University School of Law, entitled ``Are District Court
Judges Equipped to Resolve Patent Cases?''..................... 139
Article submitted by John B. Pegram, Senior Counsel, New York
Office, Fish & Richardson, P.C., entitled ``Should There Be a
U.S. Trial Court With a Specialization in Patent Litigation?''. 176
Letter from the Honorable T.S. Ellis, III, United States District
Judge, Eastern District of Virginia to the Honorable Lamar
Smith, a Representative in Congress from the State of Texas,
and Chairman, Subcommittee on Courts, the Internet, and
Intellectual Property.......................................... 208
Article submitted by the Honorable T.S. Ellis, III, United States
District Judge, Eastern District of Virginia entitled
``Presentation: Distortion of Patent Economics by Litigation
Costs''........................................................ 213
Article submitted by the Honorable T.S. Ellis, III, United States
District Judge, Eastern District of Virginia entitled
``Presentation: Quicker and Less Expensive Enforcement of
Patents: United States Courts''................................ 218
Charts prepared by the Intellectual Property Owners Association
(IPO) on IP Litigation Commenced in the U.S. District Courts,
1993-2004, and IP Suits Filed in U.S. District Courts, 1995-
2005........................................................... 229
IMPROVING FEDERAL COURT ADJUDICATION OF PATENT CASES
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THURSDAY, OCTOBER 6, 2005
House of Representatives,
Subcommittee on Courts, the Internet,
and Intellectual Property,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 4:34 p.m., in
Room 2141, Rayburn House Office Building, the Honorable Lamar
Smith (Chair of the Subcommittee) presiding.
Mr. Smith. The Subcommittee on Courts, the Internet, and
Intellectual Property will come to order.
I'm going to have an opening statement. Then the Ranking
Member will have an opening statement. And then Congressman
Issa of California will have an opening statement, as well. Let
me recognize myself for mine.
Today, our Subcommittee will begin an examination of the
state of patent adjudication in the Federal judiciary. In 1992,
the Advisory Commission on Patent Law Reform stated, in a
report to the Secretary of Commerce, ``One of the most
significant problems facing the United States patent system is
the spiraling cost and complexity associated with the
enforcement of patent rights.''
Since that report, there has been an explosion in the cost,
volume of cases, and complexities associated with enforcing
patent rights. Though the number of patent cases filed in U.S.
district courts has almost doubled in the last decade, the
reality is that patent cases make up a small fraction--
typically, less than 1 percent--of total cases filed in a given
court.
Nevertheless, this small percentage of cases accounts for
nearly 1 in 10 complex cases, which require 20 or more days of
trial and demand disproportionate resources from district
courts and attention from trial judges.
The basic statutory structure of the Federal judicial
system, which is responsible for adjudicating patent cases has
been largely untouched by Congress for more than 20 years. In
the last significant structural change, Congress created the
Court of Appeals for the Federal Circuit in 1982, as part of
the Federal Courts Improvements Act.
In establishing the Federal Circuit, Congress eliminated
the traditional ability of regional courts of appeals to hear
patent cases, in the interest of promoting greater stability in
the patent law, increasing uniformity of decisions, and
restricting forum shopping.
Nevertheless, there is a growing awareness that the U.S.
patent adjudication system remains beset with inefficiencies,
inconsistencies, and opportunities for forum shopping.
Two of our witnesses today will provide the Subcommittee
with considerable anecdotal and statistical evidence that
suggest the patent adjudication system is not functioning in an
efficient, cost-effective, and predictable manner.
While acknowledging deficiencies, our remaining witnesses
will articulate the view that there is insubstantial evidence
that the system is broken, and postulate that none of the
proposed solutions are guaranteed to work.
Still, there is a widespread and a well deserved perception
that patent litigation is too expensive, too time consuming,
and too unpredictable. In a knowledge-based economy that is
intended to reward innovation, the cost and effects of
unnecessary delays and uncertainty are not incidental or
academic.
A patent claim that is construed too broadly deprives
potential competitors and consumers of new products. One
construed too narrowly deprives patent holders of the full
benefit of their innovation.
As the Subcommittee with jurisdiction over both the
administrative functions of the United States Patent and
Trademark Office and the Federal judiciary, we should begin to
address these issues.
And I want to acknowledge here the role of Representative
Issa, who suggested that we begin this inquiry. As one of the
few Members of Congress who has actually held patents, he
brings a practical perspective to our work on the Committee.
And after I finish asking my questions today, I'm going to turn
the gavel over to Representative Issa.
That concludes my opening remarks. And the gentleman from
California, the Ranking Member, Mr. Berman, is recognized for
his.
Mr. Berman. Well, thank you very much, Mr. Chairman, for
scheduling this oversight hearing. This hearing about the
courts that handle patent litigation is an interesting
intersection of two separate issues within the Subcommittee's
jurisdiction. Patents are the cornerstone of the economy. They
provide incentive for innovation. Therefore, the effect
litigation of patents has on the preservation of patent rights
is all the more important to continually assess.
The combination of the complex science and technology, the
unique patent procedures and laws, the historical right to jury
trials, the equitable division of labor and administration of
the courts and their dockets, and the multiple methods
available for dealing with the issues raised by patent
litigation makes improvement of the patent adjudication system
a uniquely complicated and difficult task.
Many say the system works well. Yet at the same time, some
say the high costs of litigating and the reversal rate at the
district court level reveal otherwise. These complexities
appear to have distorted patent markets and patent economics.
The increasing costs of litigating patent infringement and
validity issues now frequently gives weak, untested, and
presumptively valid patents the same kind of protection that
was previously only granted to or reserved for strong or
judicially tested patents.
Patent quality has been a long-time priority of mine and,
with the introduction of the Patent Reform Bill, we are trying
as a Subcommittee to ensure the quality of patents. Even so,
despite the many efforts made so far, there are still many
legal scholars, patent owners, and members of the judiciary and
patent bar who believe changes to the patent litigation process
in the courts are also necessary to improve the quality of
patents.
The creation of the Court of Appeals for the Federal
Circuit alleviated the inconsistencies at the regional circuit
court level. However, some continue to raise concerns about
forum shopping at the trial court level.
The Court of Appeals for the Federal Circuit has placed the
job of construing patent claims in the hands of our Federal
district judges, and kept other complex issues, such as non-
obviousness and equitable conduct and novelty, in the hands of
the jury. Concerns have been expressed about whether a judge or
jury can truly learn the intricacies of some of the science and
technology placed before them during the length of a typical
patent trial.
Hopefully, if the post-grant opposition procedures in the
Patent Reform Bill are enacted, this will address many of these
complex issues before resort to district court litigation
occurs.
Recent accounts demonstrate that as time passes and the
district court Federal judges are becoming more proficient at
application of the claim construction rules spelled out by the
Court of Appeals for the Federal Circuit in Markman, that that
reversal rate is coming down. However, evidence suggests that
our Federal district courts still spend a much greater ratio of
time on patent cases than any other types of cases that come
into their courts.
There are many proposals for change in the patent
adjudication system. Before implementing changes, we must first
be able to fully understand the issues confronting the system,
the many options that may be available to remedy issues in the
patent litigation system that have been raised, and the effects
of those proposed solutions.
Thank you, Mr. Chairman.
Mr. Smith. Thank you, Mr. Berman.
The gentleman from California, Mr. Issa, is recognized for
his opening statement.
Mr. Issa. Thank you, Mr. Chairman. I greatly appreciate
your holding this important hearing, a hearing that closely
parallels the patent reform effort that you have spearheaded. I
must say that I have never seen such interest generated about
patents than you have generated in this last year.
Your patent reform, to a great extent, is changing the
product of the patent. This hearing today, hopefully, will
begin the process of talking about the delivery system, or the
evaluation system post-patent, beyond the Patent and Trademark
Office.
I believe that the axiom that ``justice delayed is justice
denied,'' which is often used in the case of misdemeanors and
felonies, is just as applicable in the business world, and
certainly has proven to reduce the value of a patent until
justice is finally delivered.
As many of you know, I have a background in the electronics
business. The company that I founded vigorously protected its
staple of intellectual property, as did some of my competitors.
This resulted in my involvement in numerous patent suits before
the district courts, the ITC, and the fed circuit.
When I was in business, I had to accept the cards that were
dealt to me; but now I am in Congress, and have the unique and
pleasurable opportunity to look into reforming this system so
that others would not have to endure many of the examples that
I found when in the private sector.
I approach this effort with one key guiding principle:
Business must have confidence in its intellectual property,
confidence that derives from predictability of court decisions.
This certainty allows a company to plan which products it will
invest and develop, which it will market, and also fosters
confidence from the investment community.
District court patent holdings are currently reversed at
least 35 percent of the time. And as my colleague from
California said, although that is coming down, I believe it is
coming down very slowly, and will not come down much further
without affirmative action by this body.
Judges have often commented that this makes them feel like
their time and effort are considered by the fed circuit to be
something of a rough draft. Such high reversal rates encourage
entities to enter into more appeals, rather than less, on
patent issues than would otherwise occur; dragging out
litigation for years longer than is necessary. Obviously, this
does not foster certainty.
We need to find mechanisms for improving the track record
of the district courts. I think there is no one that would
disagree with that. And that is why we are here today.
I have circulated one proposal, to conduct a pilot program
within the district courts to encourage patent specialization
among the district judges. Unlike many drafts you'll see, where
the author believes that they have created the perfect
document, this is a deliberately imperfect document.
I'm looking forward to each of you responding as to the
flaws you saw. Hopefully, many of those flaws will be common
flaws. Certainly, the length of the study is open to debate, as
are many of the other hurdles that we have to get past in this
study; not the least of which is that everybody at the
appellate level and at the district level is concerned that
somehow any change will affect their lives adversely.
I must add to this that we're also looking--or at least,
that I'm hoping to encourage the Chairman and the Committee to
look into several other possible reforms; including, as part of
this pilot, the moving up, or the encouraging of moving up, of
the Markman process to the earliest point, as far before a
potential trial as possible; and also, formally opening up the
interlocutory appeals process to the fed circuit on claims
construction, since that is where the majority of the appeals
are, and in any study our goal would be to accelerate the
process of learning of whether we're doing better or worse by
this specialization.
I appreciate the witnesses joining us today. And I have had
an opportunity to review your written testimony, but I look
forward to a lively discussion afterwards. And I yield back,
Mr. Chairman.
Mr. Smith. Thank you, Mr. Issa. Before I introduce our
witnesses, would you all please stand and be sworn in.
[Witnesses sworn.]
Mr. Smith. Thank you, and please be seated. Let me say, for
the benefit of those in the audience today, that this is the
first day Congress has been in session this week, and we don't
have any votes until 6:30 tonight. Despite that, this is a very
good turnout of Members, and I appreciate their being here, as
well as the people in the audience being here to hear what the
witnesses have to say.
Our first witness is Kimberly A. Moore, who is a professor
of intellectual property law at George Mason University School
of Law. Professor Moore is a co-author of the textbook entitled
``Patent Litigation and Strategy.'' She has conducted extensive
empirical research on intellectual property topics, and has
written numerous articles on patent case adjudication and
patent litigation in general.
Professor Moore earned her juris doctorate from the
Georgetown University Law Center. She received a bachelor of
science in electrical engineering and a master of science from
MIT.
Our second witness is John B. Pegram, who is senior counsel
to the New York office of Fish and Richardson, where he
specializes in patent litigation.
Am I pronouncing that right, ``Pegram''?
Mr. Pegram. You are, sir. Yes, you are.
Mr. Smith. Thank you. Thank you. Mr. Pegram is a past
president of the New York Intellectual Property Law
Association, and a past director of the American Intellectual
Property Law Association, where he twice served as chair of the
patent litigation committee.
Mr. Pegram received his law degree from New York
University, and earned an undergraduate degree in physics from
Columbia University.
Our next witness is Chris Katopis, who is a counsel with
the intellectual property practice group of Drinker, Biddle and
Reath. Mr. Katopis previously served as director of
congressional relations for the U.S. Patent and Trademark
Office. In that capacity, he was responsible for legislative
policy within the Office of Legislative and International
Affairs, which included patents, trademarks, copyrights
enforcement, and other domestic and international intellectual
property matters.
Mr. Katopis is also an adjunct professor at the Catholic
University. He attended the University of Pennsylvania, where
he was awarded a bachelor of science degree in biomedical
engineering. He received his JD from Temple University.
Our final witness is the Honorable T.S. Ellis, III, who
serves as U.S. District Judge in the Eastern District of
Virginia. Judge Ellis was nominated by President Ronald Reagan
on July 1, 1987, and confirmed by the U.S. Senate on August 5,
1987. Often referred to as the ``rocket docket'' by members of
the legal profession, the Eastern District of Virginia has for
years been among the top 25 districts in adjudicating patent
cases.
Judge Ellis received his JD from Harvard University, where
he graduated magna cum laude. He earned his bachelor of science
from Princeton.
Now, welcome to you all. And we have your written
statements which, without objection, will be made a part of the
record. And please limit your testimony, as you already know,
to 5 minutes.
Judge Ellis, I'm tempted to look at the quick time it took
you to be confirmed in 1987. I bet anybody now being considered
would be jealous of those few days that it took back then.
Our first witness and first person to testify today is
Professor Moore, if you will begin.
TESTIMONY OF KIMBERLY A. MOORE, PROFESSOR OF LAW, GEORGE MASON
UNIVERSITY SCHOOL OF LAW
Ms. Moore. Chairman Smith, Ranking Member Berman, and
Members of the Subcommittee, thank you for this opportunity to
testify on this very important topic of Federal court
adjudication of patent cases. I plan to focus my testimony
today on two problems that I perceive confronting the patent
litigation system.
The first: Let me assure you, forum shopping is alive and
well in patent cases in the district courts. If you look at my
studies--one from the 5-year period, 2000-2004--you find that
47 percent of all patent cases are consolidated in just the top
ten districts. Well, that might suggest that: Why do we need
anything specialized? We have great consolidation already. The
problem is, when I compare that to my data from the five
previous years, there were only 44 percent consolidated.
I'm making a bit of a joke here. The real problem is, it's
not the same ten districts. So you have consolidation among ten
districts 5 years ago; you have the same amount of
consolidation now, but it's not the same ten districts.
Obviously, there's some overlap, but there also are some
changes and some differences.
I'm articulating these statistics in the study in more
detail in a paper that I have forthcoming. I've titled it
``Patent Lemmings,'' like the birds.
Okay. So what I wanted to address in particular, in the way
of a solution, would be the change to the patent venue statute.
Lucky for me, Congress beat me to it. In H.R.2795, in the
amendment in the way of a substitute, Congress has introduced a
limitation to the venue statute, which I find very compelling
and favor strongly.
You would limit venue to the defendant's principal place of
business, or where the defendant has committed acts of
infringement and has a regular and established place of
business. This is a very important limitation. Currently,
patentees have the ability to sue in any of the 94 district
courts--virtually unfettered ability.
My only two very minor suggestions with regard to the
pending legislation would be to expand the idea of corporate
residence to include State of incorporation. I think that it
would be fair that a corporation could be sued in the State in
which it incorporated. I would also suggest that you create an
exception to the venue rule that permits patentee plaintiffs to
consolidate their actions pursuant to an MDL agreement--
pursuant to the MDL procedures, without a venue obstacle. So
you would create an exception to the venue statute for MDL
consolidated cases.
The Coalition has made a recommendation to this Committee
in the way of, instead of changing the venue statute,
introducing a transfer of venue statute that is much more
vibrant than the currently existing one. I prefer Congress' way
of doing it.
In short, the transfer of venue statute will not level the
playing field, and it just adds another layer to what is
already extensive, complex patent litigation. If you recognize
there is a problem existing in forum shopping, the way to solve
that problem is ex ante, with the venue statute, not ex post,
with a motion to transfer. So I think that it's in everyone's
best interest that Congress continue to pursue the venue
statute in H.R. 2795 exactly the way it has been currently
articulated.
This brings me to my second proposal: the idea of
designating specialized district court judges to hear patent
cases. Patent cases are complex, difficult, time consuming, and
expensive. Despite the nature of these cases, they are
litigated before generalist judges and lay juries.
The United States is unique in this respect. No other
country allows lay juries to decide patent cases. In fact, many
countries have created specialized patent trial courts.
We have nearly a thousand district court judges capable of
currently hearing patent cases; 680 active judges, and another
290 senior judges. There are only about 3,000 patent cases a
year filed, and only 3 percent go to trial.
As you can see, the result is that district court judges
simply do not get sufficient exposure to patent cases to
develop the kind of expertise that would assist them in
adjudicating these very complicated cases. Certainly, a few
notable patent jurists have arisen from the mass of district
court judges who hear patent cases, and they truly are
exceptional patent jurists.
This is why my proposal is not to create a specialized
court. I actually don't think that's the way to go. And it
would be problematic, in light of the fact that we already have
a specialized appellate court. But instead, to designate
individual judges--the number to be decided according to the
docket--in each district, that would hear all of the patent
cases in that district.
Why do we need this? Well, we need it because of the forum
shopping. But we also need it because of the high reversal rate
that currently exists among the district court judges.
It is not for lack of trying. Our district court judges are
unbelievably dedicated and hard-working. They have ever-
increasing dockets that they continually face. Despite this,
they try very hard to construe patent claims. Yet the reversal
rate continues to be about 35 percent.
One thing I want to point out to the Committee in
particular: The reversal rate is actually rising; not going
down. In my study, which I produced to the Committee as one of
the published papers, the reversal rate has actually increased
over the course of the last 10 years. The Federal Circuit has
been reviewing the district courts' claim construction for
about 10 years since Markman, and the reversal rate is in fact
climbing.
So my proposal with regard to specialized district court
judges would include allowing those judges to continue to hear
the regular cases that district court judges hear. They should
have a general docket. They should remain generalist judges.
In the short term, I am very favorably inclined toward
Congressman Issa's proposal for the pilot program. I have just
a few very modest, humble suggestions. The first is, 1 year is
not enough time.
Mr. Smith. Professor Moore, your time has expired.
Ms. Moore. Oh, thank you, Chairman. I'm very sorry.
Mr. Smith. And maybe we could get those minor suggestions
in the question-and-answer period.
Ms. Moore. Thank you, Chairman.
[The prepared statement of Ms. Moore follows:]
Prepared Statement of Kimberly A. Moore
Chairman Smith, Ranking Member Berman and members of the
Subcommittee, thank you for the opportunity to testify today on the
topic of improving federal court adjudication of patent cases. Patent
litigation is critically important to the functioning of our patent
system. Without a credible, predictable means of enforcing patent
rights, the rights themselves would cease to function effectively to
spur innovation.
I plan to speak today about two problems confronting the patent
litigation system.
Patent Venue Statute: The first is the virtually unfettered ability
of patentee plaintiffs to file a patent suit in any of the 94 different
district courts. The patent venue statute, 35 U.S.C. Sec. 1391, allows
a corporation to be sued anywhere that personal jurisdiction exists
which is any judicial district in any state where products are sold.
This was not a problem when commerce was limited geographically, but in
this day of national and, in fact, global commerce, this venue statute
is no longer workable. The Amendment to H.R. 2795 addresses this
problem by limiting venue to the judicial district where the defendant
resides or the judicial district where the defendant has committed acts
of infringement and has a regular and established place of business.
The Amendment defines corporate residence as the district where the
corporation has its principle place of business. I support this change
to the venue statute.
I have two minor suggestions to make. First, expand the definition
of corporate residence to include state of incorporation. Venue is
appropriate in either the judicial district where the principle place
of business is located or the judicial districts in the corporation's
state of incorporation. When a corporation selects a state in which to
incorporate and thus avails themselves of the corporate laws of that
state, it seems reasonable to permit them to be sued there.
My second minor suggestion is to consider creating an exception to
the venue rule that permits patentee plaintiffs to consolidate actions
against defendants pursuant to the MDL procedures. If a patentee would
like to simultaneously sue multiple defendants for the same or similar
acts of infringement, it is more efficient to have these cases
consolidated in a single forum and venue ought not to be an obstacle to
that consolidation.
I have also read the Coalition's recommendation for venue reform
which instead suggests a more vibrant transfer of venue statute. I
favor the Amendment to H.R. 2795. It is more effective and efficient to
fix a problem ex ante than ex post. Transfer of venue motions will
delay resolution and divert resources unnecessarily. Moreover, the
Coalition draft language which allows the action to go forward anywhere
there is ``substantial evidence or witnesses'' is sufficiently vague
and likely to cause additional unnecessary litigation.
The Coalition draft also suggests that venue ought to be
appropriate in any judicial district where the patentee resides or
maintains its principle place of business. The suggestion being that it
should not be fair to make the patentee bear the expensive of
litigating away from home. First, let me note that this merely shifts
the burden of litigating away from home from the plaintiff to the
defendant. Second, patent litigation now costs on average two to four
million dollars per side, the marginal cost to the patentee of
conducting the litigation in a district other than its home turf is not
likely to inhibit anyone who can already afford this expense. Moreover,
there are always contingent fee options and patent infringement
insurance which aid patentees in enforcing their rights. Finally, the
patentee who files suit gets to select the judicial district and the
Amendment to H.R. 2795 gives her several districts from which to
choose. Giving the patentee the option of choosing its own district
would allow patent trolls to game the system more than they already do.
They would simply locate themselves where they believe the laws and
procedures to be most favorable and then litigate all their cases
there.
Amending the venue statute as proposed in H.R. 2795 with the modest
changes suggested above will significantly reduce forum shopping by
plaintiffs and some of the unpredictability which plagues the patent
litigation system.
Forum Shopping in Patent Cases: To the extent that there is any
doubt about the existence and pervasiveness of forum shopping in patent
cases, let me offer some empirical evidence. See Kimberly A. Moore,
Forum Shopping in Patent Cases: Does Geographic Choice Affect
Innovation, 79 N.C. L. Rev. 934 (2001). Patent cases are not evenly
distributed among the 94 district courts. Comparing the data on patent
litigations from the five year period 1995-1999 (9542 patent cases) and
2000-2004 (12,768 patent cases) provides insight into the changing
landscape of patent litigation. In the last five years, the top ten
district courts have 47% of all patent cases. Comparing this to the
data from 1995-1999, where the top ten jurisdictions had 44%, it seems
at first blush like patent cases are even more heavily consolidated now
in just a few key jurisdictions than they were five years ago. The
problem is that it is not the same key jurisdictions. The data show,
however, that plaintiffs in patent cases are moving en mass away from
some judicial districts and towards others. I have titled the draft
paper where I present these empirical results--Patent Lemmings.
For example, the Eastern District of Virginia, affectionately know
as the Rocket Docket, used to be a hub for patent cases. In 1997, 3.2%
of all patent cases were resolved there. In 2004, the percentage
dropped to 1.6% (a 50% decrease)--dropping in the rankings from seventh
to twenty-third. The Eastern District of Texas, on the other hand had
0.3% of all patent cases in 1997 and in 2004, it had 1.9% (a 633%
increase)--going from tied for fifty-eighth to seventeenth. These
changes are not due to a major relocation of large sectors of
industry--they reflect forum shopping on the part of opportunistic
plaintiffs who perceive a benefit to filing in the Eastern District of
Texas and who have grown disenchanted with the Eastern District of
Virginia. I am not suggesting that the cases that are filed in Texas
belong more properly in Virginia, in fact, the Eastern District of
Virginia was not the appropriate venue for many of the patent cases
that had been filed there--a fact reflected in their 16% transfer rate
in 1997.
I have also found that the percentage of patent cases in a given
district is not always linked to the percentage of civil cases filed
there or the percentage of patents acquired by the residents of the
district. For example, the District of Delaware, had 4.8% of all patent
cases resolved in the last five years, but only 0.4% of all civil cases
generally. Delaware's high percentage of patent cases is not correlated
with patenting by local industry either--Delaware only has 0.41% of
U.S. patents issued to U.S. inventors. Some practitioners claim that
Delaware is selected by patentees because it is a pro-patentee forum.
Empirical evidence demonstrates that Delaware judges do not grant
summary judgment as frequently as judges in other courts and that
summary judgment is more often a win for the infringer. The failure to
grant summary judgment means that Delaware allows a much higher than
average number of cases to go to trial--generally a trial by jury.
Given the perception that juries are pro-patentee (which is supported
by empirical evidence), patentees may prefer Delaware for this reason.
My conclusion from this empirical analysis is that plaintiffs, who
are patentees in 85% of the patent suits, forum shop and their
preferences change over time which undermines any expertise judges in a
given district do develop in patent cases. I have also found
considerable variation in the manner of patent case adjudication by the
different district courts and significant differences in win rate. In
short, patentees are gaining an unfair advantage in litigation by forum
shopping. The Amendment to H.R. 2795 would significantly curtail this
gamesmanship and level the playing field.
This brings me to my second, related proposal.
Designating Specialized District Court Judges: Patent cases are
complex, difficult, time consuming and expensive. Despite the nature of
these cases, they are litigated before generalist judges and lay
juries. The United States is unique in this respect. No other country
allows lay juries to decide patent cases. In fact, many countries no
longer have patent cases decided by generalist judges and have instead
created specialized patent trial courts such as Germany, China, Japan,
the United Kingdom, Australia, New Zealand, Singapore, Zimbabwe,
Jamaica, Kenya, Thailand, Korea and Turkey.
In the United States, there are 680 active district court judges in
the 94 districts (and 290 additional senior judges). With 2800 patent
cases per year and only 3% going to trial, district court judges have
little exposure to patent cases. If patent cases were consistently
being consolidated in the same jurisdictions, then the market would
itself be creating specialization and there would be no real need for a
specialized trial court. However, as the empirical evidence
demonstrates, the distribution of patent cases among the judicial
districts fluctuates with patentee preferences. Although a few notable
patent jurists have arisen from the mass of district court judges who
hear patent cases, forum shopping combined with the small number of
cases has inhibited judges from developing expertise.
If all patent cases in a given district were consolidated in one or
more designated trial court judges, they would have a better chance to
develop expertise in this area. The high claim construction reversal
rate of district court judges supports the need for such
specialization. Claim construction is the most important part of any
patent dispute. The Supreme Court ruled that claim construction ought
to be performed by district court judges rather than juries because
they would be better at it. The Federal Circuit held that claim
construction is a matter of law which results in de novo review of all
district court claim construction decisions. In an empirical study of
all claim construction decisions appealed to the Federal Circuit from
1996 through 2003, I found that district court claim constructions were
reversed 35% of the time. Worse yet, the reversal rate is still going
up ten years after district court judges were charged with the task of
construing patent claims indicating that district court judges are not
getting better at construing patent claims. See Kimberly A. Moore,
Markman Eight Years Later: Is Claim Construction More Predictable?, 9
Lewis & Clark L. Rev. 231 (2005). See also Kimberly A. Moore, Are
District Court Judges Equipped to Resolve Patent Cases?, 15 Harv. J. L.
& Tech. 1 (2001). Given that claim construction is the starting point
for any infringement or validity analysis, the high reversal rate of
district court determinations results in considerable uncertainty until
the Federal Circuit review process is over. Since the Federal Circuit
has declined to review any claim construction decisions on
interlocutory appeal, the parties and the district court are forced to
adjudicate the entire patent case on what ends up being a faulty claim
construction more than one third of the time. The inefficiencies and
frustrations are obvious.
The high reversal rate undermines confidence in district court
decision-making and the integrity of our legal system. It also results
in considerable frustration for the district court judges. This brings
me to my proposed solution to these serious and pervasive problems--
designating a limited number of district court judges in each judicial
district to adjudicate patent disputes. The number of designated judges
would, of course, have to be correlated with the size of the court
generally. Clearly one district court judge would not be able to handle
all the patent cases brought in the Northern District of California for
example.
Although there would certainly be advantages to a single
specialized patent trial court, in my opinion, designating trial court
judges in each judicial district is a better approach. If a specialized
trial court were created, it would have to be given exclusive
jurisdiction rather than concurrent jurisdiction with the district
courts. Concurrent jurisdiction would merely provide yet another forum
shopping alternative.
A specialized trial court would eliminate forum shopping,
inconsistency and unpredictability which would decrease patent
litigation overall. The judges on a specialized trial court would
develop greater expertise in patent law due to increased exposure.
Moreover, creation of a specialized patent trial court would help
reduce the crowded dockets of the district courts.
There are, however, drawbacks to a specialized patent trial court.
First, specialized courts are potentially subject to capture by the
bar--in this case the patent bar. Second, having only one trial court
for all patent cases would eliminate the percolation that currently
occurs among the various district courts. Having numerous courts
simultaneously considering similar issues permits the law to evolve and
often aids in flushing out the best legal rules. Unlike other
countries, the United States already has a specialized appellate court
which resolves all patent cases--the United States Court of Appeals for
the Federal Circuit. Given the single appellate court for all patent
cases, adding a single specialized patent trial court would in my
opinion be too much specialization.
Instead, I propose that a single judge or a small number of judges
in each judicial district be designated to adjudicate all the patent
cases filed there. To the extent possible, the docket of the designated
judge should not be limited to patent cases. Ideally, the judge who is
appointed to this role would be technically educated or trained and/or
have a patent background. This proposal would considerably limit the
number of potential judges who would preside over patent cases and
increase predictability without loosing the percolation and considered
development of the law. Through experience these judges would develop
more expertise at resolving patent cases. It would, of course, be
important, that the designated judge remain the designated judge. In
short, this position should not be rotated among the judges or the
benefits of experience and predictability would be entirely
eviscerated. Limiting the number of judges who adjudicate patent cases
will decrease forum shopping and with experience these judges will
develop greater expertise.
Let me caveat this proposal by saying that I am not meaning to
criticize the existing district court judges. They are charged with a
difficult job and an ever increasing workload. District court judges
work hard to resolve patent cases. In fact, many excellent patent
jurists have evolved from this group. Yet, even some of these judges
have raised concerns about adjudicating patent cases and one has
publicly advocated for a specialized trial court to adjudicate patent
cases. See Judge James F. Holderman, Judicial Patent Specialization: A
View From the Trial Bench, 2002 U. Ill. J.L. Tech. & Pol'y 425 (2002).
Let me also explain that I am not proposing that the specialized
trial court eliminate the role of the American jury in patent
litigation. Under current interpretations of the Seventh Amendment, it
seems unlikely that the jury could ever be entirely removed from patent
litigation. To the extent though that there is concern about juror
comprehension or bias, a specialist district court judge would be in a
better position to preside over patent cases to ensure more informed,
accurate decision-making by the jury. The specialist judge, by virtue
of his knowledge and experience, would also be better able to resolve
issues as appropriate on summary judgment, eliminating unnecessary jury
trials.
In conclusion, empirical evidence substantiates forum shopping by
patentee plaintiffs which is inefficient and reflects inequity in our
legal system. By amending the patent venue statute, the Amendment to
H.R. 2795 will significantly level the playing field for plaintiffs and
defendants in patent cases. While changing the venue statute might
result in a greater dispersion of patent cases among the judicial
districts, designating specialized judges in each judicial district
would consolidated patent cases among a smaller number of judges. The
experience and expertise gained through this consolidation will
increase predictability, reduce litigation, improve patent case
adjudication and enhance the integrity of the legal process.
[Additional material submitted by Ms. Moore is located in
the Appendix.]
Mr. Smith. Thank you. Mr. Pegram.
TESTIMONY OF JOHN B. PEGRAM, SENIOR COUNSEL,
NEW YORK OFFICE, FISH & RICHARDSON, P.C.
Mr. Pegram. Mr. Chairman, Ranking Member Berman, and
Committee Members, thank you for all of the attention you're
giving to the improvement of the patent system. Thank you also
for the opportunity to testify today.
I'm testifying as an individual who has studied this
subject of adjudication of patent cases for many years. I
support the study of this subject by the Subcommittee. The
problems are widely recognized. There have been many proposed
solutions. There's been little detailed study, to date. In
particular, today I will be suggesting the designation of the
U.S. Court of International Trade as an alternative or parallel
jurisdiction patent trial court.
The serious problems in the patent trial court system today
are revealed in several ways. First is correctness. A high
percentage of appealed cases are reversed, so the courts are
not getting it correct as frequently as they do in other areas
of the law. Predictability is low, and so the result is more
litigation and more extended litigation. Efficiency: Cases are
often slow, and there is a huge cost.
Some of the causes are the limited patent experience of
most judges. I would be happy if the witness to my right, with
his biomedical degree, could clone Judge Ellis, and we could
have him many times over. And that would certainly be one cure,
but one that perhaps is not available yet.
The judges have limited time. I want to emphasize the lack
of standardized procedures. The Federal Circuit now defers to
the regional circuits on issues that they conclude are not
specific to patent law; which means, therefore, that the
damages are calculated in different ways, depending on which
regional circuit is involved.
In my view, there is an excessive diversity of courts and
judges. There is a lot of gaming of the system, the forum
shopping that Professor Moore referred to.
Today there are over 600 regular, and almost 300 senior,
district judges. These are generalists. They have, on average,
too little exposure to patent litigation. The average judge
gets four to five new patent cases a year. There are only a
hundred patent trials per year--a fairly steady number for many
years. So that means the average judge gets a patent trial
every 7 years.
Judicial management is a big issue. The judges have limited
time, because of their large dockets, and also because of the
priority that is given to criminal cases. Also, it is difficult
for a judge with limited patent experience to effectively
manage the litigation. The litigants' costs are higher, due to
lack of standardized procedures.
In the past, there's been an aversion in the United States
to specialized courts. The Court of Appeals for the Federal
Circuit was intentionally made not just a patent appeals court,
for that reason. However, if we benchmark, we find that the
foreign courts are going to patent specialization; that the
U.S. courts very successfully in other areas, such as business
and commercial courts, have been moving toward greater
specialization.
And I would suggest a medical analogy: When you have
cancer, do you want to go to the City of Hope Hospital, or just
let your general practitioner take care of it?
The Court of Appeals for the Federal--excuse me. The Court
of International Trade is a court within the Federal Circuit,
already. That would permit development of procedural law and
simplified procedures under the Federal Circuit's supervision.
There would be substantially no cost to adopting my
proposal. There are existing under-utilized judges; there's an
existing courthouse and offices. These judges have no criminal
dockets which would delay their proceedings. As I mentioned,
they have available time; although I would say that they're not
sitting on their hands. They're being effectively used by
designation in district courts, where they have experience.
They have existing jury trial competence; both when they sit in
their own court in certain types of cases, and also when they
sit by designation in the district courts. And they have
uniquely an existing authority to conduct trials anywhere in
the United States.
There are many more details and legislative suggestions in
my articles.
So if this proposal helps, hurray. If not, nothing would be
lost. I look forward to the other witnesses' testimony and the
question period. Thank you very much.
[The prepared statement of Mr. Pegram follows:]
Prepared Statement of John B. Pegram
[Additional material submitted by Mr. Pegram is located in
the Appendix.]
Mr. Smith. Thank you, Mr. Pegram.
Mr. Katopis.
TESTIMONY OF CHRIS J. KATOPIS, COUNSEL,
DRINKER, BIDDLE & REATH, LLP
Mr. Katopis. Thank you very much, Chairman Smith, Ranking
Member Berman, Members of the Subcommittee, for the privilege
of testifying today. My name is Chris Katopis. I'm a patent
attorney with the law firm of Drinker Biddle; although the
views I'm espousing are my own, and should not be ascribed to
any of our clients.
I am testifying today not as a litigator, but as someone
who has had a decade of experience in Government, with the
House and the PTO, working on patent and judiciary issues.
I'm sorry to tell Mr. Pegram that my Republican brethren
generally frown on cloning, even in the case of esteemed
judges. So I hope to focus your attention on some other
alternatives that may prove useful.
Certainly, this Subcommittee ``gets it,'' for continually,
again and again, acknowledging the importance of the patent
system for institutions like universities, investors,
entrepreneurs, small business. You are to be commended for
that. You are also to be commended for elevating patent issues
to an unprecedented level, with a record number of hearings
this year. I just wanted to acknowledge that.
But patent litigation is notoriously known as ``bet the
company litigation.'' The stakes are high; the verdicts are
often huge, multi-million-dollar. And the fierce nature of our
system, which is winner-take-all, I think, amplifies the sound
of the crisis.
But unfortunately, I don't think the frustration, the
statistics, the anecdotes that we're hearing, justify
suggesting that the system is flawed. And I also think it's
premature to suggest structural alternatives to the Federal
judiciary and expanding some of the processes that will be
discussed today, like expanding interlocutory appeals.
In focusing your attention on issues to look at, I think
you must start with the USPTO. As the Subcommittee heard at
last month's oversight hearing, the USPTO is engaged in a
number of productivity initiatives. And if you have confidence
in the PTO management, you will believe that they will be
successful and this will lead to a dramatic increase in the
number of patents issued over the next 5 years, as well as
patents with increased complexity.
And you can quibble. You know, we saw the graph last month,
and there was some quibbling over how much the rate of increase
would occur. But it is certain that the number of patents that
will be entering the marketplace will increase, along with
their complexity. And this will guarantee that the number of
patents in litigation, as well as the percentage that goes to
trial, will dramatically increase over the next 5 years.
So this hearing is very timely for Congress to sort of
assess and ask whether the system can adequately handle the
enhanced caseload and the complexity of these cases. I call
this the bulge in the snake moving.
One of the issues which we're going to talk about today is
the Federal Circuit and the high reversal rate regarding
interlocutory appeals. Even though there's a big number
attached to the statistic, for me, it doesn't have meaning
without more unraveling of the layers of the onion.
It could be one of three things. It could be that the
Federal Circuit is not putting enough deference to the lower
court--the ``run amok'' argument. The lower courts may be
lacking some capabilities. Or it may be that these cases are
the tough cases; they're too close to call and, in a winner-
take-all system, the appeals are necessary, you know, to
justify your inventive rights.
So I think there's some mix of issues at stake. And
certainly, if you favor certainty, then it's worth looking at
ways of giving increased deference to the district court. And I
outline a suggestion in my testimony.
Further, I think we can still enhance the--even though we
increase the certainty, increase the accuracy of the district
courts. In my written statement, I justify a number of ways of
adding capabilities to the district courts, in terms of
education, resources, tools, expanding the use of special
masters.
It struck me in the course of researching and preparing for
this hearing that--I talked to a special master, where the
judge found him by doing a Google search. There is not a good
resource for judges to find neutral court-appointed experts. I
think this is lacking.
So I think Congress needs to take a deep breath, and assess
where we are with the system, what's coming down the pike; do
an in-depth study; conduct pilots; increase the capabilities of
the district court; and open a dialogue between the courts and
Congress.
Today's hearing is a great start, and I think that the
sooner the better. There are initiatives that you can begin
before Congress adjourns, sine die, the sooner the better.
America's entrepreneurs, inventors, and small businesses
deserve nothing less.
So thank you, and I'm happy to entertain any questions.
[The prepared statement of Mr. Katopis follows:]
Prepared Statement of Chris J. Katopis
Mr. Smith. Thank you, Mr. Katopis.
Judge Ellis.
TESTIMONY OF THE HONORABLE T.S. ELLIS, III, UNITED STATES
DISTRICT JUDGE, EASTERN DISTRICT OF VIRGINIA
Judge Ellis. Thank you, Chairman Smith, Ranking Member
Berman, and the other Members. I'm delighted to be here today,
and I appreciate very much the opportunity to express my views
on these various proposals.
I'm here today, of course, speaking only for myself. But my
views, of course, are informed by my life experiences, which I
think are, in the circumstances, worth elaborating on very
briefly. I've spent about 35 years, or 36 years, in the law.
I've spent about 18 years as a partner in a large law firm,
where I litigated the widest variety of cases: business cases
of all kinds, everything from nuclear licensing to motorcycle
accidents, medical malpractice. Almost anything you can think
of, I've tried, and lost, and won a few.
Then, as noted, I was appointed to the bench in 1987. And I
might note, since the Chairman noted it, that I was appointed
by Ronald Reagan, so I should point out that this is as close
as any Federal judge should get to law-making.
Now, having said that, I should also point out that I
appreciate the kind words by Mr. Pegram, but I'm sure that
there are many litigants who have appeared before me--and my
wife--who would have strong, cautionary words to say about
trying to clone me. [Laughter.]
In any event, going on, over the time that I've served as a
district judge, again, I've tried the widest variety of cases.
The Eastern District of Virginia has a very rich docket;
everything from espionage cases, which I'm involved in almost
all the time, to patent infringement cases, to product
liability cases, environmental toxic tort cases, nude bathing
in the Potomac--I can't imagine being able to tell you how
broad the range of litigation is.
And I do suggest to you that the notion that patent
infringement cases are the most complex or the most difficult
or the most time-consuming is not true. Sure, they're time
consuming, they're labor intensive. And sure, they are complex.
And I'll get to the range of those cases that I've tried. But
to conclude that they're the only complex cases is a mistake.
And they're also not the only ``bet the company case.'' I
can assure you of that, as well. Most cases these days--when I
first began practicing law, a $30,000 case was a big case. Soon
after that, everything became ``third world war,'' practically.
In any event, based on that experience, it is my view that
the current system is working. It is working to produce fair
and generally correct results that are consistent with fairness
and with the overall goals of the patent laws; which of course,
as we know from the Constitution, is to promote the progress of
the useful arts.
But I agree with the Chairman that it is far too costly. I
think the discovery process for all cases is a black hole into
which we throw enormous resources and it gives off very little
light in return.
How do we deal with that? Judges need to deal with that. In
the Eastern District of Virginia, we deal with it by having
every case go to trial within about six or 8 months, regardless
of nature or dimension; with only the rarest of exceptions.
That includes patent cases. This is a fairly rigorous time
schedule. It imposes severe discipline on judges and litigants.
But it is appropriate. It does keep costs down.
Now, there are other ways to keep costs down. We need to
explore those. Although I have a strong caution about Congress
getting into the job of micro-managing the adjudicatory
process. I think that's a mistake. But I do think it is
important for judges to be more conscious of the enormous costs
of litigation. And the fact is, I think one of the articles I
submitted is an article I wrote on how litigation costs distort
patent economics. I believe that's available.
But in any event, let me address what I think is the major
impetus for the proposals. And that is the Markman decision and
the reversal rate related to Markman. There's no question that
Markman, of course, was a landmark, a watershed event in patent
infringement litigation. I tried lots of cases before which
were non-Markman, before Markman came along, and many since
then; and I know the difference.
And it is--it does make it more labor intensive. The
principal result is that judges must engage the technology.
They must engage it, and they must write opinions about their
Markman decisions. And judges are now becoming aware of that.
My view is that the first year there was about a 40-percent
reversal rate, according to the figures I had from the Federal
Circuit. And my view of that is that it took a while for
district judges to get the message. And it's still a message
that is being propagated by the Federal judicial center and
many of us. That is, to engage the technology, write opinions,
and demonstrate that you have thought about it carefully.
Then the reversal rate went way down, into the 20's, by
1998. Then it crept up again. And it is now, as Professor Moore
pointed out, I think about 35 percent. But that figure is
flawed. It's not flawed because of Professor Moore. She's an
exceptional researcher and an exceptional academic, and I bow
to her.
But she is limited by the way in which the data exists. She
can't, for example, tell you how many cases were not appealed,
where the people were satisfied with the Markman determinations
and accepted them. She cannot tell you how many cases where the
Court of Appeals of the Federal Circuit reversed a Markman
determination, but affirmed five or six others.
I had a case in which I had 24 patents involved in
electronics, transistor circuitry; patents in which I made
dozens of Markman determinations. Now, that case never went to
appeal. I think the parties might--they settled ultimately. I
can tell an interesting story of how that went, because we used
independent experts, which was not a good idea. And I can come
back to that.
But the fact of the matter is that there are many cases
where numerous patent Markman determinations are made that are
affirmed, in effect, by the Federal Circuit, and those aren't
accounted for in the 35 percent.
But the bottom line is this. The normal reversal rate for
cases is roughly 20 percent. But that includes both clearly
erroneous or factual determinations, and de novo
determinations, matters of law, about which there is a higher
percentage rate. No one knows what that figure is exactly, so
far as I'm aware; but it's estimated to be about 24, 25, to 26
percent.
Markman is up at 34, at the last I heard. I believe that
will decline. I think it is stable now. I do not believe it's
rising. I believe it is stable and it will continue to decline.
Why was there a blip going up? I think because the Federal
Circuit was in the process of getting organized about its rules
of construction. We all know about the dictionary disputes, and
how that went back and forth for some period of time and caused
some confusion. But that will stabilize, and that will come
down.
So I do not believe that there is any need for any
specialty courts or specialty trial judges. And then, think of
the problems that that would create.
Mr. Smith. Judge Ellis, I hate to say that you're out of
time; I hate to do that to any judge. But maybe there'll be
some time during the question-and-answer period.
Judge Ellis. This is your court, sir. [Laughter.]
Mr. Smith. Okay.
[The summary of the prepared statement of Judge Ellis
follows:]
Summary of the Prepared Statement of the Honorable T.S. Ellis, III
[Additional material submitted by Judge Ellis is located in
the Appendix.]
Mr. Smith. Professor Moore, let me direct my first question
to you. But at the outset, let me say that, at least from my
perspective, it seems to me that we do have a legitimate
problem, both in the increase in the number of patent cases,
their complexity, and perhaps or at least in the amount of
reversals that we see; all of which have been documented by
you.
Judge Ellis called you a respected professor and researcher
whom he admires, but he said your data was flawed. And I wanted
to know if you wanted to respond to that.
Ms. Moore. Thank you, Chairman Smith. Well, the data is not
flawed, and I'm happy to make it freely available to anyone who
is interested in reviewing it. I do actually, contrary to Judge
Ellis' suggestion--the data includes every single claim term
that was appealed. So if he had a case where 24 were appealed,
and 23 were affirmed, those are all counted as 23 separate
affirmances in my data and one reversal.
Despite that, there's a 35-percent reversal rate. The 35
percent reversal rate is the cumulative rate over the 8 years
of the study from Markman to last year. The 35-percent reversal
rate is for all 8 years. If you do look at the graph, there is
a continuing rise over the time period. So the most recent year
is higher than 35 percent. It's the mean of all the years.
Mr. Smith. Okay. Professor Moore, what do you think of Mr.
Pegram's idea; that is, giving the Court of International Trade
patent jurisdiction?
Ms. Moore. Well, I am not--I don't support the idea. If we
were to give them concurrent jurisdiction with the district
courts, it just creates another avenue for forum shopping by
plaintiffs.
Beyond that, if we give them exclusive jurisdiction--I'll
tell you, once I actually wrote an article advocating the
consideration of a specialized trial court. I'd like to retract
it here formally. You know, I'll chalk it up to youth.
But in any event, the reason that I oppose the idea now is
simply because, with the creation of the Federal Circuit, I
believe we have enough of a specialized court situation, and we
would lose all the percolation that comes from having many
district courts be able to weigh in on the law and then have
the Federal Circuit look at all of those different
interpretations and come up with the right one.
Mr. Smith. I understand. Mr. Pegram, in regard to your
idea, you clearly, by saying that the Court of International
Trade should have patent jurisdiction, are willing to designate
a particular court and give that jurisdiction to a court other
than the courts that now have it. So what's wrong with
Professor Moore's idea about designating a judge within each
district and having that judge become an expert in patent law?
Mr. Pegram. Ninety patent courts is too many. And I think
that there is a big difference between having a collegial court
that are all under the same rules of procedure, which I think
we should try as an experiment with the CIT, and having 90
different judges that the only thing that is assured is that
each one's in a different district and that they're under all
the different regional courts of appeal.
Mr. Smith. All right. Thank you. Mr. Katopis, I'm going to
read from your testimony, page 10. You say that, ``all of the
available evidence suggests that the number and complexity of
patent disputes will climb dramatically in a few short years.''
And then you say further on that one of the underlying reasons
that the Federal Circuit reversal rate is so high is that the
district court lacks certain capabilities.
Isn't this the whole point of what Professor Moore is
saying? And yet, your response is to suggest another study and
another commission. If the problem is as severe as you describe
it--and I believe that it is--why not have a specialty judge,
so to speak?
Mr. Katopis. I think that there may be merits in that,
specialty judges. However, I think Congress really needs to
take a deep breath, and assess what's going on. I would be
interested in knowing, in terms of the reversal rate, what's
really going on? Are these all electrical engineering cases,
for example? Is there some problem with the electrical
engineering patents that are coming out of the PTO? Is that
something that we need to look at?
So I think it's important to--I would like to know, are
special masters or magistrates being used in these cases? I'd
like to understand why that number is so large, before Congress
takes action, especially radical action.
Mr. Smith. Do you have a quick response, Professor Moore,
to that?
Ms. Moore. Well, my quick response would be that, with
regard to the 35 percent number, that 35 percent number has
nothing to do with the PTO issuing good or bad patents, because
it's claim construction. Whether it's a good or a bad patent,
somebody's got to construe the claims. And that's,
unfortunately, not getting done correctly 35 percent of the
time.
Mr. Smith. Okay. Mr. Katopis, you don't think that there
might be at least just a little bit of institutional resistance
here to a change in the status quo or the loss of jurisdiction
on the part of some members of the judiciary? Which is totally
understandable and totally natural. Members of Congress don't
want to give up any jurisdiction. Those of us on the Judiciary
Committee don't want to lose any of it to any other Committee,
and so forth. But it strikes me that that might be a partial
explanation for the resistance to something that might be
needed in our society today.
Mr. Katopis. Well, Mr. Chairman, maybe I'm just really
conservative and leery of change. So perhaps that----
Mr. Smith. Well, usually conservatives--at least, I don't
think it's a Republican idea to suggest more studies and
commissions, but maybe it is. I guess it depends on which side
of the desk you're on.
And Judge Ellis, you wanted to respond, real quickly. And
my time is up after your response.
Judge Ellis. Well, I agree that we don't know the precise
reasons for the high reversal rate, but I think I have a clue.
And if you'll give me some time, I'll tell you.
Mr. Smith. Okay. Without objection, I'll yield myself
another 2 minutes.
Judge Ellis. All right.
Mr. Smith. And please proceed.
Judge Ellis. If I reflect on the kinds of Markman
determinations that I've been required to make, we're talking
about the vagaries of language. And it's no respecter of
technical area. You will find dicey Markman determinations in
swimming pool toys, as I had recently, or in transistor
circuitry, or in air disc brakes, or indeed anywhere.
Because it is the goal of every person seeking a patent to
get the broadest possible patent they can. And how do you do
that? You use broad, vague claim language. And once you have
that broad claim language, you can argue in a patent
infringement case that it covers something you maybe hadn't
anticipated, but you can still argue it. And then, a district
judge has to decide whether it's that broad or not. And then,
the court of appeals has to decide.
I suppose everyone here knows, of course, that the Court of
Appeals for the Federal Circuit has 12 judges, only six of whom
have technical backgrounds. And what do you do? Do you then
have--there is a chemical PhD on the Federal Circuit, but there
are no procedures in the Federal Circuit to ensure that Judge
Newman hears all chemical patents. In fact, they have
explicitly rejected such a procedure.
Generalist people can do this, and can understand it. The
ablest judges--or the ablest lawyers who have appeared before
me in patent infringement cases have often had AB degrees in
English.
But the reason for the high reversal rate, I think, is the
expansive, broad language, and the changing definitions, and
district judges need to engage.
Mr. Smith. And not a lack of expertise; or so you would
argue.
Judge Ellis. Not a lack of expertise.
Mr. Smith. Okay.
Judge Ellis. I think if you had an expert set of courts,
you'd have disagreements again. And if you put appeals there,
you'd have disagreements among experts up there.
Mr. Smith. Professor Moore, any response?
Ms. Moore. Well, the only response I would have to Judge
Ellis' comment is that you have to consider the position he's
coming from. He is, without question, one of the most esteemed
of all the patent jurists in the country. He--I don't know, but
probably--has a lower reversal rate than other judges. I could
look at my study and figure that out.
So maybe what is easier for some judges, given the
experience he has with the high number of patent cases, may not
be quite so easy for other judges who have very, very few
patent cases.
Mr. Smith. I thank you all for your responses.
The gentleman from California, Mr. Berman, is recognized
for his questions.
Mr. Berman. Thank you very much, Mr. Chairman.
If a group of schlubs like us can decide whether or not the
patent law should be amended--I mean, I am a believer in a
generalist being able to sort of learn enough--just enough to
be dangerous. In other words, I mean, I wonder if you lose
something by having somebody who is so tied up and so involved
by background and training and everything else in patent law.
Sometimes, the benefit of a fresh look at something is useful
in these situations.
The issue of reversal rates, there are people around who
like to say, ``Oh, the Ninth Circuit is reversed more than any
other circuit.'' And I say, ``Well, let's see, what does that
measure? The number of times the court granted cert and then
reversed the Ninth Circuit? Or was it the number of decisions
the Ninth Circuit made? Or the number of decisions where
someone sought cert and it was not granted? Is that factored
into it?''
I mean, you can create a lot of different conclusions based
on where you decide to draw the line in determining the
reversal rate.
But I guess you indicate, Professor, you don't want a
specialized patent court. You want what, judges, one or more
judges, in each of the districts to handle all the patent cases
in that district? Is that your suggestion?
Ms. Moore. I think that would be a better proposal, yes,
Mr. Berman.
Mr. Berman. Done based on volunteering for it? Or the chief
judge having the authority to say, ``You're the new guy here,
you're stuck with this''?
Voice. That's how they do it now.
Mr. Berman. ``Here's your reward.'' No, that isn't how they
do it now. Now they have a random method of selecting judges;
notwithstanding the Judiciary Committee's investigation into
how judges get cases. It's a random determination, by and
large, isn't it, in almost every district?
Judge Ellis. Well, it is in the Eastern District of
Virginia, but it wasn't until relatively recently. But
relatively recently, for reasons we all understand now, it has
now become random everywhere.
Mr. Berman. The chief judge used to decide who would get
the case?
Judge Ellis. Yes. But the chief judge didn't do it. It was
often--I can remember times in the '80's when someone would
come in and say, ``You know, I'm not really up to trying this
case. I haven't been feeling well. Who here wants to try it?''
There were lots of different ways in which it happened, and
that was wrong. They all ought to be randomly assigned, without
regard.
Now, I don't know how you would appoint somebody, or
designate somebody. If you designated, for example, somebody
with an electrical engineering background, and somebody came to
that person with a life sciences case, what good is that
electrical engineering background going to do?
Mr. Berman. And are patent cases the only kind of really
complicated cases?
Judge Ellis. Absolutely not. I can attest that there are
many other kinds of complicated cases that are--I'm not saying
patent cases are not time consuming. They're very labor
intensive for judges. I cannot tell you how many hours I poured
over transistor circuitry diagrams, struggling to understand
it.
But I have also had espionage cases that have been terribly
difficult and time consuming; securities fraud cases; toxic
tort environmental cases that involve very complicated
questions of statistical methodology.
Mr. Berman. How did you get Federal jurisdiction over a
nude bathing case?
Judge Ellis. The Potomac.
Mr. Berman. What, they bathe across State lines?
Judge Ellis. State park--national park.
Mr. Berman. I see. Okay. So it wasn't the original package
doctrine.
Judge Ellis. No.
Mr. Berman. Okay. [Laughter.]
Judge Ellis. It was really a very uninteresting case.
[Laughter.]
Mr. Berman. All right. The issue of claims construction,
Professor, you divorced it from the issue of the quality of the
patent. And I don't quite understand why it would be divorced.
If the Patent Office is granting a patent to a broad and vague
claim, isn't that, by definition, a critique of the quality of
that patent?
And how a claim is construed, if it's construed in one way,
it very well could be a poor quality patent, because there was
prior art that wasn't novel, or it was obvious. Construed that
way, it was a poor-quality patent; construed another way, it
might--Why aren't they totally interrelated, the issue of
quality of patents and how claims are construed?
Ms. Moore. I guess, Mr. Berman, I don't see that as
contributing to the complexity, making it more difficult for
the district court judge to accurately figure out which way it
should be construed. If it's construed so broadly as it reads
on the prior art, as you correctly pointed out, the patent is
going to be invalid, and his job is actually quite easy. If
it's construed narrowly, then maybe you won't have
infringement.
But I guess that I don't see the quality of the job the
Patent Office does as really having any very big impact on the
likelihood a district court's claim construction is going to be
right or wrong, or get reversed or be affirmed.
Mr. Issa. [Presiding.] One more minute, by unanimous
consent.
Mr. Berman. Okay. Thank you.
Judge Ellis. May I respectfully dissent? I do think that
the way in which the patent claim is written can affect the
validity of it. And the vagueness of it can affect the validity
of it. And it's often a battle in construing a claim to
construe a claim to preserve its validity; is one of the
cardinal rules. And as I said earlier----
Mr. Berman. You mean like construing a statute to preserve
its constitutionality?
Judge Ellis. That's right. So while I agree in essence with
Professor Moore that basically the validity of the patent isn't
inextricably intertwined with it, it can be related to it. And
if you take a looking, I think it would be worth studying a
range of the kinds of Markman determinations.
You know, if you get a patent that says in a method,
``heated to 500 degrees approximately,'' or ``more or less,''
and then a district judge has to decide, well, is 490 degrees
``more or less''; is 491 degrees ``more or less''? Experts are
going to disagree about that. I had experts testifying in this
transistor circuitry case, and even they couldn't agree on the
definition of a term.
Mr. Berman. Could I just--this is really going to be sort
of a ``yes'' or ``no'' answer, if I could.
Mr. Issa. Without objection, an additional half-minute.
Mr. Berman. Assuming that claim construction is essential
to properly determining both issues of infringement and
validity, and many cases would be settled earlier with
reasonable claim constructions, would you recommend, would any
of you recommend, establishing a procedure that would make
interlocutory review of claim construction to the Federal
Circuit available to litigants? I guess, under the theory that
if you send that judge decision up for appeal on an
interlocutory basis, and that's resolved, you might in many
cases get a settlement and do away with a lengthy jury trial
and all of the other stuff that goes with it.
Ms. Moore. Yes, I would favor that. But there are some
concerns you need to be wary of; which is the volume of cases
that would put in the laps of the Federal Circuit judges. And
you know, while you would remove a lot of the inefficiency from
the district court, you may over-burden the court with very
complicated cases.
Mr. Pegram. For that reason, I'm not ready to adopt that
proposal. But I'm willing to see what comes up in further
discussion of this subject.
Mr. Katopis. Well, I'm not a litigator, so I'm going to
embarrass myself, probably. But I'll say the earlier in the
process you have----
Mr. Berman. You worked here. You can't be more embarrassed
than that.
Mr. Katopis. Well, talk to Mr. Merrit. [Laughter.]
The earlier in the process you have the appeal, the more
half-baked the record is. So you probably won't have enough
really to give a meaningful appeal. So I think there's a little
bit of a ``Catch-22.'' But the judge can speak to that more
fully.
Judge Ellis. I have not thoroughly thought that out, but I
would be preliminarily opposed to it; the reason being that the
record wouldn't be sufficiently developed. But more than that,
I have on many occasions--I always hold Markman hearings as
early as possible--early as possible. It's one of the first
things I do, to get a sense of that. And I make rulings as
early as I can.
Oftentimes, I'm not able to make rulings, because I'm not
confident that I fully understand the case. So I tell the
lawyers, ``Make alternative assumptions, and put those
alternative assumptions to your infringement experts to see
whether there is infringement.''
I have even had occasion in the course of a trial to change
my mind about a Markman determination and change my definition
in front of the jury because a bright light went on in a dark
recess of my mind that hadn't gone on when it should have much
earlier. So I'm not sure interlocutory appeal is the fix that
it might appear to be.
Mr. Issa. Thank you. And the Chair recognizes the gentleman
from Virginia, Mr. Goodlatte, for his round of questioning.
Mr. Goodlatte. Well, thank you, Mr. Chairman. I appreciate
your yielding me this time. I was very interested in the last
question asked by the gentleman from California, Mr. Berman,
and I'd like to follow up on it.
It seems like the majority of you are skeptical about the
idea of an interlocutory appeal. I'm still concerned about the
estimate that you've given us, Professor Moore, that perhaps as
many as a third of district court claim constructions are
improper. Others have said that it could be as high as 47
percent.
And so I'll ask you. But since you were somewhat supportive
of the idea of interlocutory appeal, I also want to hear the
three dissenters' ideas of how we get away from that problem if
we don't use the interlocutory appeal.
Are there other things that we can do before it gets to the
district court? Are there things we can do to improve the
quality of the district court decisions? Or do you disagree
that the quality is that low? Because being wrong a third of
the time is awfully high for any district court. They wouldn't
want to be reversed a third of the time on appeals in most
other areas of the law. So we'll start with you, and work our
way back.
Ms. Moore. Thank you. Certainly, Congressman, I agree with
you that the reversal rate is cause for concern. As far as
interlocutory appeal goes, I am extremely receptive to the
idea. I would very much like to see the Federal Circuit taking
cases under interlocutory appeal. They've had many such
appeals. They've rejected all of them; which is their matter of
right. So maybe there would be a way that we could encourage
them to take some. And that would probably be a very good
thing.
Mr. Goodlatte. We could do that. Let me ask you to respond
to Mr. Katopis' observation that if you allow the appeal
earlier in the process the record on which the appeal is based
is skimpier.
Ms. Moore. That's not a concern in claim construction, sir.
In claim construction, you're supposed to construe the claims
in light of the intrinsic record. It's like construing a
statute in light of the legislative history. Once it's there,
it's there.
Really, district court judges are discouraged from looking
outside of the patent documents itself to determine what the
claim terms mean. So there really isn't the need to develop
this extremely extensive record for part of claim construction.
Mr. Goodlatte. Thank you. Mr. Pegram?
Mr. Pegram. In the practical world, however, I agree with
the views expressed by Judge Ellis, that sometimes the light
does dawn later, either in the minds of counsel or in the minds
[sic] of the judge. We are talking about something----
Mr. Goodlatte. But obviously, if the rate of determination
of improper constructions is between 33 percent and 47 percent,
a lot of the time, the light never goes on. What do we do to
get the light to go on?
Mr. Pegram. Well, if you'll bear with me, sir, I agree with
Judge Ellis that the problem isn't quite as bad as the
statistics look, because there are so many cases in which the
claim construction is never appealed: the parties have settled;
there is an adjudication by summary judgment. Only 3.6 percent
of the cases go to trial. So there are many, many cases in
which the district court has reached a Markman decision of some
sort, that may go unrecorded and unreported, that I think may
not appear in the statistics.
I, personally, don't feel that the driving reason for
making an improvement in the adjudication system is this issue
of reversals on the Markman hearing. And I would tend to agree
that we should encourage, as Judge Ellis said, a preliminary
determination.
But this is a matter of law. And as a matter of law, it's
subject right up to the end of the trial to be changed, and to
be changed in the Federal Circuit. And that's just the way it
is in our system, if it's going to be a matter of law.
So there are going to be changes to occur. And I don't
think that the numbers are so outrageous, when you look at it
in the context of over 3,000 patent cases a year.
Mr. Goodlatte. How many of those are appealed?
Ms. Moore. Four hundred and fifty a year.
Mr. Goodlatte. Out of 3,000 are appealed. And so we're
seeing somewhere between 150 and over 200 of those
constructions determined to be improper. Judge Ellis?
Judge Ellis. Well, the reversals could be for other
reasons, not having to do with Markman. So you can't attribute
the full 30----
Ms. Moore. No, the 35 percent are solely claim construction
reversals.
Judge Ellis. All right. Well, my view is that the
interlocutory appeal is not a good idea, especially in our
docket. Everything is over in 8 months.
Mr. Goodlatte. Okay. I heard that. What I'd like to know,
with due respect to all of you, what do you do instead to
reduce that number?
Mr. Katopis. Congressman, if I may, I still don't
understand what underlies that number. Is it, as I suggested,
the Federal Circuit running amok; a deficiency in the district
courts; these are just tough cases, they imply issues of patent
quality? I think there needs to be more information, and
perhaps the Professor has that. And I have only been thinking
about these issues for several months.
The ``water cooler talk'' at the USPTO is pretty boring,
actually. And this comes up----
Mr. Goodlatte. I can imagine.
Mr. Katopis. And one of the things that we discussed
internally--and I probably shouldn't talk about this too much--
is that, where you have this problem, can you give greater
deference to the district court by looking at what the legacy
of Markman is?
It was suggested that Markman took the issue away from the
juries, gave it to the judges, but maybe didn't make it a pure
question of law; and maybe there's a way Congress can revise
the standard as de novo, based on a question of fact, or
something to clamp down on the appellate review.
This may limit an inventor's rights. This may not be a good
thing. I guess the goal for Congress is to decide what is an
adequate number. Is it 33 percent, 20 percent, 10 percent? You
know, what is the goal? Or is it just because of this sound of
the cries of frustration that you keep hearing?
Mr. Goodlatte. Well, let's ask Judge Ellis. Is there
something that should be done in the process, before it reaches
the district court, that would make district court judges
better able to handle this? Or do you just not agree that
they're not handling it well to begin with?
Judge Ellis. Well, I don't agree that they're, en masse,
not handling them right. There are always going to be district
judges who don't do their job as well as they should; just as
there's a bell curve in every profession, including lawmakers.
Mr. Goodlatte. Sure. Well, there's no question about that.
[Laughter.]
Judge Ellis. But in the main, I think we are a
conscientious group, dedicated to doing the job in all cases.
Now, what can be done in advance? Well, certainly there has
been a process. We've only been at Markman for 10 years, and
there has been a long, tedious process of getting correct, or
getting straight, getting clear the rules of construction--from
Vitronics through today--and that process is still going on, to
some extent.
In fact, I recall one case--and Professor Moore doesn't
have to look for it--I was reversed on a Markman construction,
where I wasn't reversed in other cases. But there was a
dissent. So here is an expert court, two-to-one, and the person
who dissented was the person with the technical background.
What can be done? My view is that we can do better about
requiring more specific language in patent claims, perhaps. You
would be astonished, I think, and it would be instructive to
look at the range of patent Markman decisions. What kind of
language are judges being asked to determine?
``Approximately,'' ``more or less,'' ``nearly,'' that kind of
thing. Some are technical terms, to be sure; but those are the
easy ones.
Mr. Goodlatte. Mr. Chairman, I wonder if I might slide in
one more question?
Mr. Issa. Without objection, the gentleman is granted an
additional minute.
Mr. Goodlatte. I thank the Chairman. Mr. Pegram, since
related State claims are often tried in Federal district court,
what do you anticipate the effect on the parties would be if we
permitted patent cases to be tried at the CIT, as you propose?
Mr. Pegram. I don't see that there would be any particular
difficulty with that. The district judges have to take up the
law of the particular state today, and under those
circumstances the CIT judges would have to consider the law of
the State. But the fact of the matter is that that rarely
occurs and is really significant in, I would guess, less than 5
percent of the cases.
Mr. Goodlatte. Would this have any relation to these
determinations made in district court? Is this court in any way
better able to make these determinations than some of the other
courts involved?
Mr. Pegram. As to State claims?
Mr. Goodlatte. Yes.
Mr. Pegram. Well, I don't think that--you know, I think
that, certainly, a district court sitting in a State would have
the most knowledge about the laws of that State, and it
therefore would be--the CIT would be less of an expert court in
the law of the State.
Mr. Goodlatte. So it's not going to improve the results.
Mr. Pegram. But in the 95 percent of the cases which were
only patent issues, they'd be much more up to speed. And I
would suggest, in answer to your prior question, that the way
to have better dealing from the court's point of view with
Markman situations is to use more experienced judges. I think
Judge Holderman, in his paper that I've submitted along with my
materials, also alludes to that.
The other thing, I do agree with what Judge Ellis has said;
and that is that some of these patents are very poorly written
claims, the ones that filter up. But what I can't grasp is
that, even if the U.S. Patent Office improved 90 percent of the
patents issued, we would still be getting several thousand
cases a year in which there were badly written claims that
would be in the courts. And so I don't really think that we'd
have the problem.
Where the claims are clear, we frequently don't even have a
dispute, we don't even have a litigation.
Mr. Goodlatte. Thank you, Mr. Chairman.
Mr. Issa. Well, thank you. And one nice thing about being
the last to question, not only will I have, let's just say, a
greater flexibility on my time, but so many good questions have
already been answered.
Picking up where the gentleman from Virginia left off, Mr.
Pegram, I would be the first to say that I would like this
Committee to deal with the ITC and ITC reform, and perhaps
enhancement. I have the luxury of being somebody who won a case
as a defendant at the ITC. That's the good news.
The bad news is, I also understand that it denies the
normal rights; not the least of which is, your accuser throws a
Molotov cocktail and then runs away and lets a Federal judge
and a Federal prosecutor double-team you.
So having succeeded, I would say that, at this time, to
include the ITC in anything that I'm going to suggest to the
Chairman may not be yet appropriate. But I'll give you,
certainly, a chance to respond. I'd feel inappropriate
otherwise.
Mr. Pegram. We have the wonderful situation in the United
States of several confusing designations. I am referring not to
the International Trade Commission, or ITC, which does have a
peculiar, to say the best, procedure. I am referring to what
used to be the Customs Court, the Court of International Trade.
This is an article 3 court, and it has judges who are fully
equivalent to Federal district judges. Although it has its own
rules of practice and procedure, they are almost identical to
the Federal rules of civil procedure. But it has the benefit
that if we wanted to try some experimentation, those rules
could be revised for patent cases.
And so I think that if you look at the Court of
International Trade, who I think is a highly regarded court,
that you might not have the reservations that you would have
about the International Trade Commission.
Mr. Issa. Okay. But one of the proposals, I believe, that
was out there was the ITC expanding beyond just injunctive
relief, to have damages as something they could grant; which
they presently can't. Am I misunderstanding that?
Mr. Pegram. It's not my proposal.
Mr. Issa. It's not your proposal.
Mr. Pegram. I have heard people propose----
Mr. Issa. Okay.
Mr. Pegram. --expanding ITC. And there may have been some
confusion with my proposal as a result of that.
Mr. Issa. Good. I've got this.
Mr. Pegram. But I do not support that.
Mr. Issa. It's in there. Chris? Or Mr. Katopis?
Mr. Katopis. Congressman, if I may share one observation?
And I don't mean to be so sour about the CIT, but I think
there's a lot of concern about reversal rates. I invite your
attention to the AOC's website. The CIT has had traditionally
about a 20 percent reversal rate by the Federal Circuit. For
2005, it's 35 percent. So if you're thinking about adding
jurisdiction to the CIT, I just hope that, you know, it
satisfies the goals that you're trying to achieve.
Mr. Issa. Okay. To the core of the proposal of
specialization within the court, first, let me make a comment.
What I think I heard all of you say is you don't want to take
this and make it a separate, truly specialized court at this
point, in spite of other countries' actions that do in fact in
many cases have a specialized court, without juries, etcetera.
Is that generally a nod, that you're all in various ways
concerned about that?
Okay. And the reason is, I'm concerned. The Federal judges
I've talked to believe, as you do, Judge Ellis, that the
generalist, given the right tools, can do better.
To that extent, I'm going to ask a rhetorical question, as
someone who's, obviously, never been a judge--except one time
in a contest, and it did not involve any of that Potomac
activity of yours. [Laughter.]
But Your Honor, you have a chief judge in your district.
That chief has scheduling and other rights, and probably checks
to make sure that, you know, the electric bill is being paid--a
series of administrative responsibilities.
Judge Ellis. Yes.
Mr. Issa. And it's usually done on a rotation basis?
Judge Ellis. No.
Mr. Issa. Okay. In San Diego, it's a rotation, the way it
works.
Judge Ellis. It is rotation in the sense that the most
senior judge, provided he's under 62 or something like that----
Mr. Issa. Until he gets senior status, has it.
Judge Ellis. Well, he has it until he's 62. You cannot take
senior status into your 90's. But you must be, I think it's 62,
before you are the most senior to take it. And then you may
only hold it for 7 years.
Mr. Issa. So it's a limited period of time.
Judge Ellis. Yes.
Mr. Issa. Additional facilities and additional staff come
with it?
Judge Ellis. Yes, I think it's one secretary.
Mr. Issa. Okay. And that's because it takes more people to
do that job right.
Judge Ellis. Yes, sir.
Mr. Issa. Why would we not apply a similar concept to
finding ways to deal with patent cases? And I know you're
smiling because--I'm not trying to trap you.
Judge Ellis. No, I think you're going right down where I
want to go.
Mr. Issa. Okay. [Laughter.]
It's not a question of whether the judge is better or
worse. It's not a question of whether they have a degree in
chemical engineering. Because I really appreciate how you
focused on it's not a matter of getting the right engineering
degree for every patent case, and I think you're right on.
However, frequency--not exclusivity, but frequency of
dealing with patent cases; the appropriate staff to help in
that process, whether those are permanent staff or they're
staff loaned when you have a case, or in fact special
assistants or masters, brought to you, instead of the plaintiff
and defendant bringing you their experts and trying to spin
your head around like ``The Exorcist''--is that what you're
saying would make your body work better?
I know the gentleman next to you talked in terms of
resources as one of the solutions. Is that what you're trying
to achieve to do your job better?
Judge Ellis. I think that's a fascinating and interesting
suggestion, and I think I like it. I haven't thought it
through.
Mr. Issa. I didn't want you to. I wanted to get right to
it.
Judge Ellis. If what you're suggesting is that judges who
get patent cases, or a lot of them, should have an extra law
clerk with expertise? Absolutely. I wouldn't disagree with that
for a moment. That would be helpful. But I think it's very
important for all district judges not to appoint experts or
magistrates. You can't delegate what you've sworn to do. You're
the decision-maker. You've got to engage the technology and do
it.
Now, I do agree that you ought to have help in doing it.
And, sure, if I had another--I have a pretty full docket, but
if I had another 20 or 30 patent cases, rest assured, I would
be asking you, ``Please let me have one or two more law
clerks.'' And I would certainly select them with some technical
expertise; which might be in electrical engineering, but a
person technically trained could think about life sciences,
chemistry, and other things.
Mr. Issa. Well, to that extent--and I'm going to ask you a
follow-up, because it is unique for me to--I mean, actually, a
lot of what we've come up with has come from meetings with
other Federal judges. It's unique to have somebody in front of
you, on the record, to help make the record.
If in your court the rotation pattern, instead of being the
next case, the next case, the next case, if it was, for the
next year, every case that comes in that's a patent case goes
to you; and you're supplemented with these people; but before
people can figure out that they want to cheat the system and
shop, you're into another one; and then maybe they're back to
you, or maybe they're on to a third--would that still meet the
requirement that you'd have other cases, you'd still be a
generalist, but that we could help to not have what usually
happens in San Diego historically?
And I'm speaking for a moment from experience in San Diego.
Every time a magistrate became a Federal judge or a district
judge, or somebody from outside came in, and you had to
redivide, guess what got redivided? Every patent case. In
Michigan, the exact opposite. Judge Cohn reached out and took
cases.
Now, I have the good fortune that I had a case that I
prevailed on in front of a magistrate elevated and then given
my case by somebody who wanted to dump it quickly. And then, I
also was in Michigan, where Judge Cohn reached out and grabbed
a case and, oddly enough, a case that had been mismanaged and
gone to the fed circuit and come back.
I've seen the difference of time, expertise--exactly what
you're talking about, as somebody who probably does have a
lower reversal rating, who does move the ``rocket docket.''
Is the goal reasonable, if we can keep from promoting burn-
out, keep from artificially creating venue shopping, and if
these generalists can be better at what they do, while still
having other cases? Are those elements that you would say would
work, while still potentially not having every patent case
equally divided into 14 judges?
Judge Ellis. Yes.
Mr. Issa. Excellent. Is there anyone that followed that,
and agrees? [Laughter.]
Ms. Moore. I agree.
Mr. Pegram. I agree, in principle, in the courts that have
a sufficient number of judges to do that. But I think that
there are other issues, as addressed in my testimony earlier;
such as the coordination of procedures across the country and
issues such as--I still believe, for example, that 94 district
courts, each with a specialist judge, is too many.
Mr. Issa. Your Honor?
Judge Ellis. We've talked a little bit. I think Professor
Moore mentioned narrowing the venue choices. I don't have a
view one way or the other, but that would certainly help in
this regard.
Right now, we allow people to select venues. And I
believe--although Professor Moore can correct me--guess what?
They go to the Northern District of California, they go to the
Southern District of New York----
Mr. Issa. Eastern District of Texas.
Judge Ellis. Eastern--well, that's a new one. But you're
right. And the District of Delaware. The reason they go to the
District of Delaware is there's a marvelous hotel right across
from the courthouse and good restaurants nearby.
Mr. Issa. Finally, a valid reason.
Judge Ellis. Yes. [Laughter.]
But you're always going to have some forum shopping; which
is perfectly appropriate, if the venue statute allows it. If
you have a venue statute that says you can go to ``A,'' ``B,''
or ``C,'' then that's legitimate. And if you want to narrow it,
go ahead and narrow it.
But I understand what you're suggesting is: Look, let us
have a system where a designated number of Federal judges in
various districts get the patent cases for some period of time,
and we give them some more resources to do it, and let them do
all the other cases in addition.
I think there would be some district judges who would
oppose that, because they want to do them and they wouldn't be
designated to do them. In other words, if you had a district of
nine judges, as we do, there might only be two that would be
designated. There might be another three or four who would want
to do it.
By the way, there are many kinds of cases. Those aren't the
only. There are a lot of district judges who, once they take
senior status, say, ``No more patent cases, no more capital
cases, no more securities fraud cases, no more habeas cases.''
So there are lots of those.
Mr. Issa. Or just the opposite.
Judge Ellis. Or just the opposite.
Mr. Issa. They choose to take----
Judge Ellis. Exactly.
Mr. Issa. --certain cases, because they're cerebrally
beneficial.
Judge Ellis. I agree. I agree. But my own concern is that I
don't want district judges, and I don't want, to reach out and
take a case, because that impairs your impartiality. I think
there ought to be a system that does it randomly; you get what
you get, and you do what you are given to do.
Mr. Issa. Let me ask another question of the panel, because
this is a suggestion that came up with a number of judges in
the Southern District of California. For purposes of the pilot,
the study, if we limited this to only double opt-in, meaning
that although there would be a judge who was supplemented and
relieved of sufficient other duties so that they would be able
to rocket these cases, as appropriate--in other words, their
criminal docket might be reduced--however, if there was this
test, and there's a judge in the Southern District and there's
a judge in your district or wherever, however, in order to get
a case outside of the rotation, that both the plaintiff and
defendant would have to agree, would that alleviate most of
your concerns that somehow it was forum shopping? Or it would
still be the same thing, except you'd have both sides agreeing
to it? Yes, Professor Moore?
Ms. Moore. I think that would be disastrous. Because you're
never going to get agreement by them. And as a result, it's
always going to go back into the random selection process. I
mean, very seldom are you ever going to get them to agree.
Everyone's going to have an idea of who's better for them and
who's worse for them.
Most of the time, the litigators are so smart, they can
figure it out and get it right. So if it's better for me, it's
worse for the other side, you know, and the other side is going
to oppose the idea.
Mr. Issa. You know, every once in a while--and I'm not
opposing your statement. You certainly have more qualification.
But the only way you get a judge--a bench trial is if both the
plaintiff and defendant do not demand a jury; which means both
sides want justice, rather than the luck of the draw. And yet--
well, I'm sorry--if you want justice, you get a judge; if you
want your outcome, you hope for the jury.
I wish I could disagree with that, but everyone who ever
had a poor case but was hoping for the best, that I ever saw,
asked for a jury. In patent cases. I'm being more narrow than
general.
That happens because both sides know that a bench trial is
a lot faster. So to the extent that both sides agree to it
because they're assured that things will go quicker, etcetera,
and they have high confidence, to the extent that that happens,
why wouldn't it happen that people would say, ``Look, we've got
a high-level dispute, it's complicated, but we'd like a pro and
we'd like it fast, and we're willing to take the chances that
we're wrong''? You don't think that would ever happen?
Ms. Moore. To the extent they're willing to do that, they
already agree to binding arbitration and do it. Proctor and
Gamble had a wonderful history of this. There are many
companies that have engaged in binding arbitration. It avoids
the litigation altogether. So to the extent that they want to
sort of roll the dice, as you said----
Mr. Issa. Roll the dice, but not roll the dice on the
appeal. Your Honor?
Judge Ellis. I think I agree with Professor Moore. I think
it would be rare that it would happen. I've only had--without
browbeating the lawyers, I've only had one instance that I can
remember where they freely chose to have a bench trial.
And the other interesting thing in this technical aspect, I
can't tell you how many times I've had a technical case, and
then had both lawyers strike every member of the jury with any
technical expertise at all. We're all familiar with that
phenomenon.
Mr. Issa. I'm a witness to it. As a matter of fact, in my
case, which was based on relay technology, one time, amazingly,
the elevator repairman was specifically excluded, because,
basically, that's what elevators are, is relay circuits and
relay logic at some point.
The term of a study--now, let's be presumptive, since I saw
the right amount of nods that a pilot in a study seemed to be
something everybody could agree would give us some potentially
good information. Would 4 years be long enough? Would 5 years
be too long? Can you give me your opinion of how long you think
it would take to have this relatively small group that are
proposed here? Let's just say two districts in which this
occurs--two circuits, and within that only a district in each.
How long would you think we'd need to go through the
process, learning, the additional funding, for trial failure
and modification? Judge Moore?
Ms. Moore. No, not ``Judge Moore''----
Mr. Issa. Oh, I'm sorry. Professor Moore. I'll get to the
judge in a moment.
Ms. Moore. If you have the power to do that, I'm all for
it. No, I think that, at minimum----
Mr. Issa. I'll take you over to the other side of the
rotunda. [Laughter.]
Ms. Moore. I think a minimum of 3 years, preferably five,
would really be ideal; because just a couple of quick stats:
Patent litigation takes on average 1.1 years, but that's for
all cases, even the ones that settle. For a case to get to
trial, there's an average over the last 20 years of 3.4 years.
That's abominable. But 3.4 years. So if we want to see if
judges can develop expertise, we've got to give them enough
time to have enough cases, and also have those cases get up to
appeal and back down.
Mr. Issa. Excellent. Mr. Pegram?
Mr. Pegram. I agree.
Mr. Issa. Chris?
Mr. Katopis. I agree. And I'd also add, it may be possible,
with all due respect to the stats we've seen, to have maybe
another study looking back at 10 years of the results, the
legacy of Markman; and try to figure out this granular
information that keeps me up at night, apparently, about
whether it's electrical engineering cases, whether these cases
relied on court-appointed experts in the adjudications. So, at
least 3 years looking ahead, and then maybe you could also do
something concurrently, looking back.
Mr. Issa. Your Honor?
Judge Ellis. Yes. Although my competency doesn't really
extend to knowing how long it would take to study something, I
would think three to five--three would be minimal.
Mr. Issa. Okay. And I'm going to close in just a second.
Because as much as I'd like to make the record very, very full,
you certainly have all been generous with your time. But I do
want to ask a question, because I think we have the right
group.
When we talked about claim construction, we talked about
some of the challenges of reversal rates, I didn't hear anyone
talk about the changing interpretation of doctrine of
equivalence. You've all been in practice during this period of
time. How do you think that the long-term results on that are
going to be?
Because, obviously, claim construction at one time included
the ``what if,'' you know. And we certainly--it's not just the
102 and 103 that you deal with now. But it was also, you know,
``How could we interpret somebody's product to be somehow the
equivalent of?'' which often kept a case going for longer. Do
you see that as changing these statistics, even if we did
nothing? Professor Moore?
Ms. Moore. Thank you. The doctrine of equivalence is
definitely being asserted in every, single patent litigation
now. And it's a complicated, difficult assessment. Most of the
time, it's left to the jury. However, the district court judge
has the ability, through a number of avenues--like prosecution
history estoppel and other mechanisms--to really impact the
decision-making on whether or not it's going to even reach the
jury on equivalence.
This is where I think specialized judges would also be an
enormous value. Specialized judges, in the way we've been
discussing them--via frequency, having the expertise and doing
this over and over again--would allow them to interpret the
prosecution history more easily and, hopefully, more
accurately. So I think it would be beneficial there, as well.
Mr. Issa. Thank you. Mr. Pegram?
Mr. Pegram. I agree completely. The cost of educating a
judge who has not had the experience of a patent trial or the
experience of a summary judgment motion in the area of the
doctrine of equivalence, it's an immense cost to educate that
judge for the first time.
Mr. Katopis. Congressman, with all due respect, I'm going
to pass, because I've only been in private practice for a short
time. And as you reminded me before the hearing, I spent the
better half of the last number of years raising patent fees,
so----
Mr. Issa. And trying to raise them even further.
Mr. Katopis. So I will not contribute to this.
Mr. Issa. Your Honor?
Judge Ellis. I agree with Professor Moore's comments. I
think I dissent from Mr. Pegram's. You're always going to
educate the judge. And I don't know what's different about a
patent case from any other case, in terms of educating them.
There are judges who get maybe one espionage or national
security case, one classified information case, every 5 years.
They have to be educated in that.
I really think we've got to focus back on why are we
concerned. It's this reversal rate that has everyone concerned.
And I'm happy to have a further study of that. I think it's
important for us to remember that reversal rate for all issues
of law is not much lower than 35 percent.
Mr. Issa. Well, and I'm going to close with a very, very
quick statement and a conclusion that's been written for me.
[Laughter.]
But this particular Member, I'm as concerned about the
remaining 90 percent that don't get to appeal and are never
reversed, or not reversed; that the concept of specialization
was the belief that if you lowered from 800-plus--over 1,000,
actually, including everyone on senior status--down to 90--
which Mr. Pegram objected to in some ways--that what we're
doing is we're increasing from four a year, on the average, to
maybe 40 a year that people would be dealing with.
Even if it was only for a 2-year, 3-year period, 1-year
period, the idea is that the intense focus--and Your Honor, you
spoke about it, and I picked up on it. Judges need to focus
more on this. The concept that we're hoping to find through the
study is: How do we get focused?
And perhaps, like a sabbatical, somebody concentrating in
this area within their district for a couple of years; and
then, ``Been there, done that, I'll give you advice, but Joe
down the hall now has the majority of these cases,'' might
allow for a ``have your cake and eat it too.''
It is a concern of mine; not, though, about the ones that
get reversed, alone; it's not just about that. It's about--Your
Honor, you did a great job of telling us how the ``rocket
docket'' works. The ``rocket docket'' isn't working everywhere.
The hope is that all these cases would move better through
some process. And if it's not this one, Your Honor, I look
forward to learning as much as I can about other ways to
provide good results quicker.
Anyone have any closing, before I close?
[No response.]
Mr. Issa. With that, I'd like to thank the witnesses for
their testimony. The Subcommittee is very appreciative of your
contribution, and particularly the extended time you granted
us.
This concludes the oversight hearing on ``Improving Federal
Court Adjudication of Patent Cases.'' The record will remain
open for 1 week. I would like to ask, are all of you willing to
take any additional questions that come from Members not able
to be here?
Then, we will also include that. Thank you for your
cooperation. The Subcommittee stands adjourned.
[Whereupon, at 6:05 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Prepared Statement of the Honorable Howard L. Berman, a Representative
in Congress from the State of California, and Ranking Member,
Subcommittee on Courts, the Internet, and Intellectual Property
Mr. Chairman, thank you for scheduling this oversight hearing on
improving federal court adjudication of patent cases. This hearing
about the courts that handle patent litigation will be an interesting
intersection of two separate issues within the subcommittee's
jurisdiction.
Patents are the cornerstone of the economy, and provide incentive
for innovation. Therefore, the effect litigation of patents has on the
preservation of patent rights is all the more important to continually
assess.
The combination of the complex science and technology, the unique
patent procedures and laws, the historical right to jury trials, the
equitable division of labor and administration of the courts and their
dockets, and the multiple methods available for dealing with the issues
raised by patent litigation makes improvement of the patent
adjudication system a uniquely complicated and difficult task. Many say
the system works well, yet at the same time, some say the high costs of
litigating and the reversal rate at the district court level reveal
otherwise.
These complexities appear to have distorted patent markets and
patent economics. The increasing cost of litigating patent infringement
and validity issues now frequently gives weak, untested and
``presumptively valid'' patents the same kind of protection that was
previously only granted to or reserved for strong or judicially tested
patents.
Patent quality has been a long-time priority of mine, and with the
introduction of the Patent Reform Bill, we are trying to ensure the
quality of patents. Even so, despite the many efforts made so far,
there are still many legal scholars, patent owners, and members of the
judiciary and patent bar who believe changes to the patent litigation
process in the courts are also necessary to improve the quality of
patents. The creation of the Court of Appeals for the Federal Circuit
alleviated the inconsistencies at the regional circuit court level.
However, some continue to raise concerns about forum shopping at the
trial court level.
The Court of Appeals for the Federal Circuit has placed the job of
construing patent claims in the hands of our federal district court
judges (Markman), and kept other complex issues, such as
nonobviousness, inequitable conduct, and novelty in the hands of the
jury. Concerns have been expressed about whether a judge or jury can
truly learn the intricacies of some of the science and technology
placed before them during the length of a typical patent trial.
Hopefully, if the post-grant opposition procedures in the Patent Reform
Bill are enacted, this will address many of these complex issues before
resort to district court litigation occurs. In addition, recent
accounts demonstrate that as time passes, and the District Court
federal judges are becoming more proficient at application of the claim
construction rules spelled out by the Court of Appeals for the Federal
Circuit, that the reversal rate is coming down. However, evidence
suggests that our federal district courts still spend a much greater
ratio of time on patent cases than any other types of cases that come
into their courts.
There are many proposals for change in the patent adjudication
system. However, before implementing changes, we must first be able to
fully understand the issues confronting the system, the many options
that may be available to remedy issues in the patent litigation system
that have been raised, and the effects of these proposed solutions.
Thank you Mr. Chairman. I yield back the balance of my time.
Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, and Member, Subcommittee on
Courts, the Internet, and Intellectual Property
I have numerous concerns with the idea that Congress should
establish a separate judicial system for patent cases. While I
recognize that hyper-technical issues arise in patent lawsuits, every
area of the law presents complex issues and circumstances. We should
not go down the path of having isolated judiciaries or juries for every
legal issue.
During today's hearing of possible reforms to adjudication of
patent cases, some seek to remedy what they view as an inefficient and
expensive system. They argue that the inefficiency is due to the
inexperience of the judges, litigants, and lay juries on patent law as
well as the technologies behind the cases. Although the increased
expertise provided in these reforms, such as having only technical
experts as judges or jurors, are an attempt to improve the system, I
believe they may be misguided.
The idea of designating certain judges as ``experts'' to hear those
cases is problematic. For instance, how would we determine who gets the
classification of ``expert?'' Furthermore, who would assign ``special
masters'' to apply their technical proficiency and construe patent
claims? And how would we be certain that these special masters would
not have financial or personal conflicts? The replacement of a lay jury
with a ``blue-ribbon'' jury in these cases invokes similar questions of
classifications.
More generally, if the Committee seeks to make these changes for
patent litigation, an argument can be made that we should apply the
same arguments of inefficiency to all other types of cases and permit
only experts to hear them as well. A civil rights lawsuit would have
only civil rights lawyers as a judge and jurors. A personal injury
lawsuit stemming from an escalator accident would have only escalator
engineers as jurors.
For these reasons, I cannot immediately support any of the proposed
reforms to the adjudication process for patent litigation.
Article submitted by Kimberly A. Moore, Professor of Law, George Mason
University School of Law, entitled ``MARKMAN EIGHT YEARS LATER: IS
CLAIM CONSTRUCTION MORE PREDICTABLE?''
Article submitted by Kimberly A. Moore, Professor of Law, George Mason
University School of Law, entitled ``FORUM SHOPPING IN PATENT CASES:
DOES GEOGRAPHIC CHOICE AFFECT INNOVATION?''
Article submitted by Kimberly A. Moore, Professor of Law, George Mason
University School of Law, entitled ``Are District Court Judges Equipped
to Resolve Patent Cases?''
Article submitted by John B. Pegram, Senior Counsel, New York Office,
Fish & Richardson, P.C., entitled ``Should There Be a U.S. Trial Court
With a Specialization in Patent Litigation?''
Letter from the Honorable T.S. Ellis, III, United States District
Judge, Eastern District of Virginia to the Honorable Lamar Smith, a
Representative in Congress from the State of Texas, and Chairman,
Subcommittee on Courts, the Internet, and Intellectual Property
Article submitted by the Honorable T.S. Ellis, III, United States
District Judge, Eastern District of Virginia entitled ``Presentation:
Distortion of Patent Economics by Litigation Costs''
Article submitted by the Honorable T.S. Ellis, III, United States
District Judge, Eastern District of Virginia entitled ``Presentation:
Quicker and Less Expensive Enforcement of Patents: United States
Courts''
Charts prepared by the Intellectual Property Owners Association (IPO)
on IP Litigation Commenced in the U.S. District Courts, 1993-2004, and
IP Suits Filed in U.S. District Courts, 1995-2005