[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
PATENT HARMONIZATION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS, THE INTERNET,
AND INTELLECTUAL PROPERTY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
APRIL 27, 2006
__________
Serial No. 109-100
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
_____
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WASHINGTON: 2006
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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
------
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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APRIL 27, 2006
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
WITNESSES
Mr. Q. Todd Dickinson, Vice President and Chief Intellectual
Property Counsel, General Electric Company
Oral Testimony................................................. 4
Prepared Statement............................................. 6
Mr. Robert A. Armitage, Senior Vice President and General
Counsel, Eli Lilly and Company
Oral Testimony................................................. 11
Prepared Statement............................................. 14
Mr. Gary Mueller, President and Chief Executive Officer, Digital
Now, Inc.
Oral Testimony................................................. 35
Prepared Statement............................................. 38
Mr. Pat Choate, Political Economist and Author of ``Hot Property:
The Stealing of Ideas in an Age of Globalization''
Oral Testimony................................................. 53
Prepared Statement............................................. 55
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
Copy of the Coalition Bill from Q. Todd Dickinson, Vice President
and Chief Intellectual Property Counsel, General Electric
Company........................................................ 74
PATENT HARMONIZATION
----------
THURSDAY, APRIL 27, 2006
House of Representatives,
Subcommittee on Courts, the Internet,
and Intellectual Property,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 9:09 a.m., in
Room 2141, Rayburn House Office Building, the Honorable Lamar
Smith (Chairman of the Subcommittee) presiding.
Mr. Smith. The Subcommittee on Courts, the Internet, and
Intellectual Property will come to order.
Good morning to you all. Appreciate the interest in such an
important subject.
And let me explain that we're going to proceed. The Ranking
Member, Howard Berman of California, is at a mandatory party
meeting and will be here, he hopes, in time for questions. And
other friends to my left will be here about approximately the
same time.
But I think it will be good to get our testimony on the
record and go on and get off to a timely start.
I'm going to recognize myself for an opening statement. And
then we'll, as I say, swear in the witnesses and begin the
testimony.
Also let me say that I appreciate the gentleman from
Tennessee, Mr. Jenkins, being here this morning and helping us
get off to this good start. We need two Members here at least.
And so, Mr. Jenkins is the indispensable Member this morning.
Today, the Subcommittee conducts its sixth hearing in the
109th Congress on patent reform. We're going to explore the
merits of promoting global harmonization within the patent
system. Inventors and the public are better served when patent
systems world wide share the same basic components or
framework.
For example, a harmonized patent system reduces legal fees
associated with filing and prosecuting the applications in
several countries. Harmonization also inhibits forum shopping
across national boundaries during patent disputes involving
scope, viability, and ownership. Perhaps most importantly, a
harmonized system creates greater certainty regarding patent
rights internationally, which enhances the value of those
rights for the affected owners world wide.
As our previous hearings on patent reform have
demonstrated, it is imperative that we improve the quality of
issued patents that circulate in the economy here and overseas.
Patents of acceptable integrity attract investors who
commercialize inventions. This leads to the creation of wealth,
new jobs, and enhanced living standards for patent owners and
their employees.
Better still, it means the public derives enormous health
and lifestyle benefits that flow from the development of new
products that incorporate patented inventions. This is why
harmonization was one of the principles that animated the
Subcommittee's work on patent reform this Congress.
In terms of the hearing scope, harmonization is a large
thematic umbrella. It potentially invites discussion, of
course, of many other issues. That said, certain issues that
are incorporated in H.R. 2795 and related substitute drafts are
fair game for consideration, including the following topics.
For starters, H.R. 2795 changes the U.S. system from one
that protects an individual who invents first--who invents
first to one that protects an individual who invents and files
first. The current U.S. system leads to uncertain and expensive
patent disputes and is at odds with the international first to
file standard.
Most of the witnesses who testified at our previous
hearings support a first to file system, although we may
encounter opposition from some independent inventors.
Second, H.R. 2795 deletes the best mode requirement from
section 112 of the patent act that sets forth the requirements
for the contents of a patent application. The National Academy
of Sciences report recommended the deletion of the best mode
requirement, which requires the description of the best mode
the inventor contemplated for carrying out the invention at the
time the application is filed as one of the subjective elements
in the patent law that adds unnecessarily to the cost of patent
litigation.
Other industrialized nations have not adopted a best mode
requirement, and I believe we are better served without it as
well.
Third, H.R. 2795 and subsequent drafts require all U.S.
filed applications to be published within 18 months of filing.
The last comprehensive patent law that Congress passed adopted
this standard, but with a major exception. The provision does
not apply to applications that are not filed in a third country
that also requires publication.
Publishing an application after 18 months places a company
on notice that a patent relevant to its business may issue,
which allows the company greater opportunity to revise its
operations and rethink investment strategies. The bill
eliminates the existing loophole and extends the 18-month
publication feature to all applications.
And fourth, H.R. 2795 creates a new post grant opposition
system that allows patent disputes to be resolved in a less
expensive administrative forum compared to District Court
litigation. This permits any member of the public to request
that the PTO review the scope and validity of a patent within 9
months from the date of its issuance, a time limit intended to
encourage early weeding out of questionable patents and to
prevent harassment.
The system provides full rights of appeal to the Federal
circuit by an opposer of any adverse decision in the
proceeding.
While these subjects are fair game for discussion today, I
encourage the witnesses and Members to broach other
harmonization issues as well. For example, what are the major
impediments overseas to harmonizing the world's patent systems?
Does harmonization serve the interest of independent inventors
as well as big businesses?
We have a good panel of witnesses who can speak to these
matters, and I look forward to their testimony. That concludes
my opening statement. Without objection, all Members' opening
statements will be made a part of the record.
Mr. Smith. At this point, I'd like to ask the witnesses to
stand to be sworn in.
[Witnesses sworn.]
Mr. Smith. I thank you. Please be seated.
Our first witness--oh, excuse me. I wanted to recognize
Adam Schiff to my left, the gentleman from California, and I
didn't look to my left.
Do you have an opening statement or any comments to make?
Mr. Schiff. No, Mr. Chairman. I'm just glad to join you. I
look forward to hearing the testimony of the witnesses.
Mr. Smith. Thank you, Mr. Schiff.
Our first witness is Todd Dickinson, vice president and
chief intellectual property counsel for General Electric. Mr.
Dickinson previously served as the under secretary of commerce
for intellectual property and the director of the U.S. Patent
and Trademark Office. He is a graduate of Allegheny College and
the University of Pittsburgh School of Law.
Our next witness is Robert Armitage, senior vice president
and general counsel for Eli Lilly and Company. He also serves
as a member of Lilly's policy and strategy committee. Mr.
Armitage received a bachelor's degree in physics and
mathematics from Albion College and a master's degree in
physics from the University of Michigan and a law degree from
the Michigan law school as well.
The next witness, Mr. Mueller, is president and CEO of
Digital Now. His company develops digital imaging technology
for the photo processing industry and other consumer software
products. He earned his bachelor and master of science degrees
from the Rochester Institute of Technology and his MBA from
Marymount University.
Our final witness is Pat Choate, a political economist who
served as Ross Perot's vice presidential running mate on the
Reform Party ticket in 1996. Dr. Choate is also a policy
analyst, public speaker, and the author of six books, including
most recently ``Hot Property: The Stealing of Ideas in an Age
of Globalization.''
He teaches advanced issues management at George Washington
University and serves as the director of the Manufacturing
Policy Project in Washington. Dr. Choate performed his
undergraduate work at the University of Texas at Austin--
institution I represent--and earned his doctorate at the
University of Oklahoma. We won't talk about the OU-University
of Texas games. [Laughter.]
Mr. Smith. Welcome to you all. Again, we have your complete
statements, which will be made a part of the record, and please
limit your testimony to 5 minutes.
Mr. Dickinson, we'll begin with you.
TESTIMONY OF Q. TODD DICKINSON, VICE PRESIDENT AND CHIEF
INTELLECTUAL PROPERTY COUNSEL, GENERAL ELECTRIC COMPANY
Mr. Dickinson. Thank you, Mr. Chairman, Ranking Member
Berman who was here a bit ago, and other Members of the
Subcommittee.
As the Chairman indicated, my name is Todd Dickinson. I'm
honored to be here today. I presently serve as the corporate
vice president and chief counsel for intellectual property for
GE and was formerly the under secretary of commerce for IP.
In that role, I enjoyed particularly working with this
Committee on the American Inventors Protection Act, which was a
successful opportunity to move a number of these issues
forward, though there is still some more work to be done.
At GE, I am fortunate to manage one of the largest IP
portfolios in the world with one of the broadest ranges of
technologies and issues. We have content-based issues in our
film and television business, NBCU. We have genomics and
proteomics issues in our biosciences group. We have aircraft
engine technology and lighting technology, plastics technology.
We like to say we may be the only company that's won both a
Nobel Prize and an Academy Award.
Because of the breadth of those issues and perhaps the past
experiences, it gives us, I think--it gives me an opportunity
to comment broadly, but also to focus in particular on some
consensus approaches, which I think might be helpful to this
Committee on a number of the patent reform issues that we've
talked about.
As the Chairman alluded to, both the Federal Trade
Commission and the National Academies of Sciences dealt very in
depth with a number of these issues, produced very extensive
and important reports and recommendations, and a number of
those recommendations have found their way into 2795 and other
legislation and I think have served as the primary impetus for
that.
But also as a part of that process, Mr. Chairman, you asked
that a number of members of the intellectual property
community--trade associations, companies, and others--come
together and try to have a consensus approach to this--to this
extremely important topic. We worked very hard last summer, and
a group that came from that, named the--called ``the
coalition''--and I think my colleague Mr. Armitage may refer to
it as well--developed a so-called ``coalition text,'' which I
think the Committee may be familiar with, which of--includes a
number of the issues in an actual text of a bill.
And I'd request, if it was possible, to have that text
entered into the record. I'm not here representing the
coalition today.
Mr. Smith. Let me interrupt you. Without objection, that
text will be made a part of the record.
[The information referred to follows in the Appendix]
Mr. Dickinson. Thank you.
Patent harmonization, as you've alluded to, is probably one
of the most important issues facing both the patent system
today and, frankly, the global economy today. The fact that we
have territorially based administration and maintenance and
enforcement regimes for patents around the world make--foster
extraordinary redundancies in cost and in time and in
resources.
GE spends something like $32 million a year on patent
prosecution and maintenance of our foreign portfolio. And a
significant portion of that is a function of this multiplicity
of systems.
We're trying--we're working very hard, for example, to see
if we can get Europe to pass--to ratify the London agreement,
which would simply allow for English language prosecution in
many countries in Europe. That would save us over a million and
a half dollars a year alone.
So patent reform around the world, not only here in the
United States, is extremely, extremely important.
Let me touch on a couple--I've been a participant in WIPO,
the World Intellectual Property Organization, on a number of
these issues. That process, candidly, Mr. Chairman, is stalled,
and that's unfortunate.
I represent the American Bar Association at the Standing
Committee on Patents. And for a variety of reasons, issues in
developing countries around genetic resources and the so-called
development agenda, issues around patentable subject matter,
that effort is, frankly, just sitting dead in the water at the
moment, and that's unfortunate.
The current Administration chose to develop a group of
countries, brought a group of countries together recently at
the Patent and Trademark Office, the so-called Alexandria
Group, which has been a good attempt--a very good attempt, and
we should applaud them for that--to try to deal with
harmonization among just one set of countries, developed
countries who have, I think, the bulk of the interest in this
regard and whose--and may be able to multilaterally and outside
of the WIPO framework develop a program which will get us
further down the road. So I would hope that this Committee
would look into that and applaud those efforts.
As far as the best practices that this bill contains, and I
think one of the goals of global harmonization in WIPO and in
the Alexandria Group has been to identify best practices. A
number of them have found their way into 2795, and I'd like to
comment briefly on those best practices.
First and foremost is the one which you mentioned, which is
the first inventor to file. We are alone in the world among
countries having--retaining the so-called first to invent
system. It's a costly system. With all due respect to my good
friends in the independent inventor community--and as director
and commissioner, I don't think anyone else was closer to that
independent inventor community--the first to invent system is a
failed promise.
The way we resolve the disputes in that area is through a
process I think you know called interference. It can cost
hundreds of thousands of dollars to resolve that. A study that
was done by my good friend and colleague former commissioner
Mossinghoff shows that even when the small inventors enter that
system, they are disadvantaged by that system
disproportionately, and it's a system that's crying out for
change.
The change would be to move to the first inventor to file
system, which is captured in the bill as it currently stands.
And I would hope that any version of that bill that comes forth
from this Committee would include first inventor to file.
Several other things, you did mention particularly the
elimination of the best mode. That always seems like a good
idea because it seems to foster the idea of greater disclosure.
What is the best mode of your invention?
What happens and has happened in reality and in practice is
that it's become a trap for the unwary. In litigation, it's a
defense that gets interposed on occasion, and it's kind of a
``gotcha'' in litigation and does not really satisfy the goal,
I think, for which it was originally intended.
Eighteen-month publication, complete 18-month publication.
Again, an excellent goal. One of the disappointments of the
AIPA was that we did not have full and universal 18-month
publication. It has proved successful.
The folks who opposed it, primarily again, and our
independent inventor community have disproportionately not used
the opt-out provision. It's used by some particularly important
technologies, frankly, in my opinion, to try to game the system
a little bit, to buy a little more time, to keep their
disclosures from being made. And it undermines, I think,
confidence in the system as a whole.
You mentioned externally around the world where there needs
to be other reforms and the grace period. I think in terms of
best practices, the U.S. grace period is, indeed, a global best
practice. And we need to make sure that we bring the grace
period to other countries around the world, and I'm pleased
that those discussions are underway.
I think one additional topic, which I think may get touched
on and is in the current draft of the legislation--and my good
friend Mr. Armitage will probably touch on it as well--is what
is the definition of prior art?
We should eliminate secret prior art, which is currently
available around the world, to undermine I think the value and
virtue of a number of the patents in the United States. We
should also make sure that we--and I think it's appropriate to
redefine the availability--redefine prior art as that which is
reasonably accessible. Given the global nature of our
information systems now, reasonable accessibility is an
appropriate standard.
And finally, I wouldn't be--I would be remiss, Mr.
Chairman, if I didn't touch on what is for many of us in the
community, and certainly as a former director, maybe the most
important recommendation in both of the reports that we
mentioned, and that's continuing to end the diversion of patent
office fees to other governmental purposes.
Mr. Smith. Mr. Dickinson, you know I agree with you on
that. But I think we need to move on.
Mr. Dickinson. I thank you very much, Mr. Chairman.
[The prepared statement of Mr. Dickinson follows:]
Prepared Statement of Q. Todd Dickinson
introduction
Chairman Smith, Ranking Member Berman, and Members of the
Subcommittee:
My name is Todd Dickinson and I am honored to appear before the
Subcommittee on an issue that critical to our Nation's economic growth
and prosperity: patent reform. I presently serve as the Corporate Vice
President for Intellectual Property of the General Electric Company,
and was formerly Under Secretary of Commerce for Intellectual Property
and Director of the United States Patent and Trademark Office. I hope
that these experiences may offer a valuable perspective on some of the
issues facing us in this area, in particular the impact of patent
reform legislation on issues of international harmonization.
As Director, I enjoyed working on the cause of adapting our patent
system to the needs of the 21st Century. I was particularly proud that
the Congress passed and President Clinton signed the American
Inventor's Protection Act of 1999, during the time I lead the USPTO,
and that we had the opportunity to work together on the implementation
of that Act, leading to many vital and important changes in how the
USPTO operated and was organized.
At General Electric, I am fortunate to help manage the intellectual
property assets of one of the world's largest corporations. GE's IP
holdings and concerns are extraordinarily broad, ranging from content-
based copyright issues in our film and television organization, NBC
Universal, to genomics and proteomics patenting in GE Healthcare, with
everything else in between from aircraft engines to engineered
polymers. We may be the only company that has won both a Nobel Prize
and an Academy Award(r).
Because of that breadth of IP issues and concerns, we are uniquely
positioned to participate in this debate about patent reform. With such
an extraordinary investment in technology, the need to protect that
investment and the shareholder value it represents, makes the U.S
patent system and its global analogues, more important than ever to us
at GE. While our system is one of the greatest and most productive in
the world, as with all systems, evolving needs require a regular review
and reform in order to ensure the promise of the system is fully
realized.
In my previous role as USPTO Director and now at GE, I have
followed with keen interest the two studies of the U.S. patent system
undertaken by the Federal Trade Commission/Department of Justice and
the National Research Council of the National Academy of Sciences and
the resulting reports. I was a witness several times before both bodies
and was a reviewer of the NAS report. In general, both reports were
thorough, well-thought out, and made recommendations the majority of
which were highly appropriate to advancing the cause of patent reform
in positive ways. I am heartened that the reports have served as a
motivation for the cause of patent reform, and congratulate this
Committee for its hearings on this topic.
Towards that end, and in the interest of attempting to find a
consensus position on a number of the important patent reform issues
currently under consideration, GE has also actively participated in a
coalition of some 30 of the most recognized and well-respected
companies in the world, representing a wide array of our most important
technologies, including Eli Lilly, whose General Counsel, Robert
Armitage is testifying here today as well. This Coalition, which also
includes the American Intellectual Property Law Association and the
Intellectual Property Owners Association, has worked hard to find
common ground and our proposals represent some of industries best
thinking on how to deal with the specifics of the patent reform agenda.
We do not undertake this effort lightly, however. As one of the
leading academic economists recently noted with some concern in his
extensive review of these issues:
``Social progress in our technological age is intimately bound
up with the creation and protection of intellectual property.''
. . . ``[But j]ust when intellectual property (IP) has made its
greatest contributions to this nation's technological growth,
many critics on all sides of the political spectrum have
assailed the soundness of the underlying legal structures.''
\1\
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\1\ ``Intellectual Property for the Technological Age'', R.A.
Epstein, University of Chicago, April 2006, Executive Summary and p. 7.
As stewards of this system, and the benefits it brings the world,
we must resolve to make sure that whatever reforms or changes come
forth are ones which serve the public's interest, and encourage the
economic development which that public deserves.
patent harmonization
One of the most critical issues facing the patent system today,
globally, is the need for harmonization of patent laws and procedures.
With their territorially-based administration, maintenance, and
enforcement regimes, the current systems foster extraordinary
redundancies in cost, time, and resources. These inefficiencies inhibit
the ability of inventors, large and small, to obtain and maintain the
protection they deserve, and encourage the innovation so vital to
global economic development. GE innovation has resulted in an active
global portfolio that comprises over 38,000 patents and this number
includes over 5,700 global patent applications in 2005. We also filed
over 2700 U.S. patent applications in 2005. The cost to obtain and
maintain this portfolio is not trivial. In 2005, GE spent in excess of
$32,000,000 on the patent prosecution and maintenance of the foreign
portfolio, a significant portion of which is a function of the
multiplicity of world systems.
Efforts at greater harmonization have been debated for years, with
only modest success. As a negotiator of intellectual property issues on
behalf of the U.S. government, and now as a delegate to the World
Intellectual Property Organization, I have witnessed the frustrations
in this area first hand. While we have succeeded in negotiating new
treaties in many other areas of intellectual property over the last
decade to deal with rapidly evolving changes in the technology and
content worlds, substantive patent harmonization has proven difficult
and challenging for a variety of reasons. I would like to first address
the current state of play on international harmonization and some of
the concerns we have on that current status.
standing committee on the law of patents
Substantive patent law harmonization has been a topic of discussion
in the World Intellectual Property Organization (WIPO) since at least
the mid-1980s in response to increasing calls for harmonization of
national and regional patent laws.
Following the last major, but unsuccessful, effort to advance
substantive harmonization in 1991 at the WIPO, and the completion of
the Patent Law Treaty of 2000, dealing with procedural matters, renewed
discussions on a draft Substantive Patent Law Treaty (SPLT) began again
in earnest in May 2001 in the Standing Committee on Patent Law. Only
limited progress has been made in WIPO, the discussions, especially
those over the past few years, having been marked by attempts on the
part of a coalition of developing countries to inject a number of
highly sensitive political issues into the discussions and to introduce
other proposals that seek to undermine the goals of patent law
harmonization or generally weaken patent rights. These have primarily
involved issues regarding patent application disclosures of the source
of origin of genetic resources/traditional knowledge and exceptions to
patentability or patentable subject matter.
As a way of moving forward, the U.S. delegation has actively
supported a compromise proposal to limit the scope of work of the
Standing Committee on the Law of Patents (SCP) to discussions regarding
a limited number of issues, the so-called ``mini-basket'', which
includes the issues of the definition of prior art, priority of
invention to be awarded to the first inventor to file the patent
application, a grace period for filing after the public disclosure of
the invention, and issues relating to novelty and inventive step.
Unfortunately, efforts to reach a specific work plan for the SCP
thus far have been unsuccessful. In fact, the most recent attempt to
define the work plan, the informal meeting of the SCP held from April
10-12, 2006, failed to reach agreement on such a plan for harmonization
talks.
group b+ consultations
While in the past efforts focused around the original work plan of
the SCP in WIPO, it is becoming increasingly apparent that success in
the near term at WIPO is not likely. For this reason, new avenues and
strategies for attaining progress on substantive patent law
harmonization have been explored.
In February of 2005, the USPTO was instrumental in setting up the
``Alexandria'' group or ``Group B+'' comprised of members of like-
minded countries interested in harmonization. The inaugural meeting was
attended by 20 nations, the European Union, and the European Patent
Office and resulted in the unanimous decision to establish a technical
working group for the express purpose of discussing certain areas of
patent law harmonization.
Since its inception, the Group B+ , or ``Alexandria Group'', has
been meeting biannually and been working toward harmonization on this a
limited number of issues. While significant progress has been made,
certain sensitive issues remain, however, such as first-to-file, grace
period, and secret prior art treatment and effect. Also, some of the
European delegations have expressed reservations over proceeding with
harmonization discussions outside of WIPO, if WIPO will not be the
forum where an agreement is ultimately reached. The USPTO and the Bush
Administration should be congratulated for taking the initiative on
this effort to establish the Alexandria Group and to move its agenda
forward, and we look forward to additional engagement and progress in
the future.
best practices and patent harmonization
High among the principals underlying the work of the SCOP and of
the Alexandria Group's efforts has been a desire for so-called ``deep
harmonization'' resulting from an understanding of what are the best
practices among the world's patent systems. This identification of best
practices also underlay in many ways the study and reports of both the
Federal Trade Commission/Department of Justice and the National
Academies studies and reports. In particular, it is important to note
that the comprehensive National Academies of Science report, among its
recommendations for patent reform, addresses broadly the importance of
reducing the redundancies and inconsistencies among national patent
systems. They specifically recommend reconciling application priority,
i.e. first-inventor-to-file, elimination of the best mode requirement
and universal publication of all patent applications.\2\
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\2\ ``A Patent System for the 21st Century, National Research
Council of the National Academies, June 2004, pp. 11-12.
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I have been asked to comment specifically on certain issues in H.R.
2795 and various other draft bills which have discussed, which relate
in particular to harmonization such as those identified above, and am
pleased to do so.
resource allocation and the uspto: permanently end diversion
Before delving into the patent reform issues, however, I want to
briefly address another issue that probably most significantly affects
the successful functioning of our patent system. As both the NAS and
FTC reports highlighted, the USPTO must have sufficient resources to
perform its critical role in administering the patent system. For
years, the USPTO was denied these resources as patent and trademark
fees, paid to the USPTO in return for specific services, were diverted
to unrelated government agencies and activities. As a former Director,
I have seen and had to manage first-hand the problems this denial of
funds causes in the USPTO. While Congress and the current
Administration are to be commended for fully funding the USPTO during
the current fiscal year, fee diversion from prior years has left the
USPTO with a tremendous work backlog, obsolete systems, and an
inability to restructure. As contemplated in H.R. 2791, recently
introduced here in the House, the USPTO would be given authority to
raise its fees, but also gives statutory assurance that those fees will
not be diverted to unrelated programs.
Too often we regard this issue as ``Mom and Apple Pie'' in the mix
of patent reform issues. It would be tragic to have it be overlooked in
the debate over more procedural reforms, and remains probably the
single most important reform to our system this Congress could and
should make. This Subcommittee, and you Mr. Chairman, should be
commended for the support they are giving, and have consistently given,
over the years to a permanent solution to the diversion problem.
In the event that additional resources are provided, we would
submit that attention should be focused on using those funds to provide
additional examination time for examiners, continuing to increase the
searching resources and databases available to examiners, and training
and other means to continue to develop the technical and legal
expertise of our examining corps.
first-inventor-to-file
One of the major obstacles to global harmonization has
traditionally been resolution of the basic question of who is entitled
to priority of invention. Alone now among the world's countries, the
U.S. has maintained a system awarding priority of inventorship to the
so-called ``first inventor''. This seemingly innocent characterization
has become fraught with difficulties of definition, proof and cost. The
rest of the world awards priority to the first inventor to file their
patent application. While this debate has been ongoing for decades, the
time appears to be at hand for the U.S. to join the rest of the world
in implementing this simpler, fairer and less burdensome means for
awarding priority.
As the groundbreaking study by my colleague and friend, former PTO
Commissioner Gerry Mossinghoff, has shown, the very individuals who in
recent tradition have been most concerned about this change, the
individual or small inventors, have actually been disadvantaged by our
current system.\3\ The primary means for determining inventorship when
there is a contest is a process in the USPTO known as interference.
Costly,\4\ rule-bound, and time-consuming, the interference process is
a failed promise for individual inventors, as well as small and medium
size enterprises, universities and non-profit organizations, who also
have sometimes opposed such a change.
---------------------------------------------------------------------------
\3\ Interestingly, it should also be noted that, in testimony
before this Subcommittee's predecessor, a representative of small
inventors once stated, ``[W]e endorse a first-to-file rule.'' Statement
of Burke E. Wilford, National Director, the American Society of
Inventors, Exhibit D, Hearings before the Subcommittee on Patents,
Copyrights and Trademarks of the Committee on the Judiciary, United
States Senate, 90th Congress, May 17-18, 1967, p.291.
\4\ It is often estimated that the cost of an interference from
declaration to resolution is routinely in the hundreds of thousands of
dollars.
---------------------------------------------------------------------------
Moreover, since this was last seriously debated at the
international level, during the first Bush Administration, many other
structural and systemic changes have helped level the playing field
relative to concerns previously expressed. The adoption of provisional
applications, the availability of technical and legal resources on the
internet, and electronic searching and filing capabilities on-line have
made the application process more accessible and timely to all
Americans.
This past year, both the NAS report and the American Bar
Association's House of Delegates urged the U.S. to change to a ``first-
inventor-to-file'' (FITF) system as a best practice.\5\ While it has
sometimes been suggested that the U.S. should not unilaterally move to
this FITF system, and should only consider it as part of an overall
package of international harmonization treaty obligations, the
advantages of this system in terms of simplicity, cost, and a serious
reduction in uncertainty about priority, argue strongly in favor of
making such a change now. It may also be that such a good faith move on
the part of the U.S. will reinvigorate the stalled negotiations at the
WIPO, an important and valuable goal in itself, and will help
facilitate possible agreement in the Alexandria Group's work.
---------------------------------------------------------------------------
\5\ The applicant must still be the true inventor. Inventions
derived or stolen by others would not permit that deriver or thief to
be considered the true inventor. For this reason, the term of art used
to describe the new system is ``first-inventor-to-file''.
---------------------------------------------------------------------------
Therefore, I would like to strongly support Section 3 of H.R. 2795
which would change the U.S. patent system from a first-to-invent system
to a first-inventor-to-file system. Often known as just first-to-file,
the bill calls the new system ``first-INVENTOR-to-file'' to make clear
that an individual cannot obtain a valid patent if he is not an
inventor, i.e., if the individual derived the invention from someone
else and then file, or as some small Inventors are concerned
surreptitiously learn of their invention and beat them to the USPTO.
Under the new system, among two or more competing inventors the patent
would go to the inventor with the earliest ``effective'' patent filing
date.
With the switch to first-inventor-to-file by the U.S., no country
in the world would have a first-to-invent system. I join with my
colleagues in support of proposed changes that would amend Title 35 to
award priority to the first inventor to file a patent application, and
urge this subcommittee to include language to that effect in any patent
reform statute under consideration.
definition of prior art and grace period as ``best practices''
We also support the propose redefinition of prior art to that which
consists of information that is available to the public anywhere in the
world. Public availability requires reasonable accessibility and
includes all types of communications as well as public display and
uses. This may directly impact patent examination and, by extension,
overall quality, and will also hopefully be available in a post-grant
review procedure, also currently under consideration and a major
recommendation of the NAS and FTC/DOJ reports. It also consistent with
the currently-considered harmonization proposals and, thereby advances
that goal, as well. This is additionally true in its removal of the
``in this country'' limitation on the use of such prior art. In today's
globalized trade environment, with significantly easier access to data
from around the world, the anachronistic limitation to domestic art has
little place in our patent regime.
Along with this, a ``grace period'' would apply to all publications
of the inventor including earlier published patent applications. This
grace period would arise by operation of law without any requirement
for the filing of a declaration. The Coalition text supports a more
extensive grace period than the one contained in the Chairman's July
26th substitute text, and was the work product of on on-going dialogue
with the university community for whom this issue is particularly
resonant.
We also support the elimination of so-called ``secret prior art''
which might also be available to avoid art which would other invalidate
inventions. This elimination is also a major discussion issue in the
``mini basket'' of harmonization issues currently under discussion.
Permitting secret prior art, creates uncertainty and frustrates the
goal of searching for prior art for the purpose of improving patent
quality.
repeal of the ``best mode'' requirement
The best mode requirement of 35 U.S.C. Sec. 112 requires patent
applicants to disclose what they consider to be the best way of
carrying out their claimed invention. HR 2795 proposes eliminating this
requirement. This change would accomplish two purposes. First, it would
bring the US patent system into conformance with many other
jurisdictions throughout the world, which lack such a requirement.
Second, this change would eliminate a point of subjectivity in order to
make patent validity more predictable. Repeal of the ``best mode''
requirement would remove another barrier to global harmonization.
Furthermore, while this has often been portrayed as a positive, in
that it seems to encourage greater public disclosure, in practice, it
has more often resulted in a trap for the unwary or a ``gotcha'' in
patent litigation, further undermining confidence in the system.
18 month publication
Universal publication of patent applications after 18 months is the
norm in the rest of the world. However, in the U.S. patentees who do
not wish to file for a foreign patent can opt for non-publication of
their patent application, so long as they give up their right to file
on that invention outside of the U.S. Section 9 of HR 2795 would
eliminate this anomaly of the U.S. patent law. This change would also
lead to greater disclosure and sharing of information and, of course,
remove another barrier to harmonization.
It also prevents entities from making important and expensive
investments of research dollars, unaware that that research may at some
point infringe an issued patent. This is not a wise use of limited
research dollars. This also, by extension, encourages additional
research, which is all to the public good. In any event, it is my
understanding that USPTO statistics show that there is only a minor
``opting out'' that is occurring, but it may be in important
technologies,\6\ where the applicant may be using the opt-out
provisions initially to avoid exposing their technology publicly for a
period, while opting in later. Such gamesmanship should not be
encouraged, especially when the public policy grounds for publication
are so strong in the first place. 18 months is enough time for
inventors to determine whether or not to proceed with the publication
and prosecution or to abandon the application and keep it a trade
secret. We support universal publication.
---------------------------------------------------------------------------
\6\ And, interestingly, apparently not often by independent
inventors, who lobbied strongly and successfully for inclusion of the
opt-out language in the American Inventors Protection Act.
---------------------------------------------------------------------------
conclusion
In conclusion, while a member of the Coalition, and supportive of
that text, GE supports much that it in HR 2795, in particular in the
areas of harmonization which I have identified, and applaud the
continuing efforts of this subcommittee to improve the patent system,
globally, by updating U.S. law and practice to permit a more globally
harmonized system. Intellectual property protection on an international
level is a critical element of GE's research and development cycle and
to our continued introduction of innovative products and services to
global markets.
I would be pleased to respond to questions from the Subcommittee.
Mr. Smith. Thank you, Mr. Dickinson.
Mr. Armitage.
TESTIMONY OF ROBERT A. ARMITAGE, SENIOR VICE PRESIDENT AND
GENERAL COUNSEL, ELI LILLY AND COMPANY
Mr. Armitage. Yes, thank you, Chairman Smith, for the
opportunity to be here this morning.
I'll begin. Thank you, Chairman Smith, for the opportunity
to be here this morning to speak on the topic of patent
harmonization and its relationship to broader issues of patent
reform.
I, frankly, am most appreciative of the efforts that you
and other Members of your Subcommittee have undertaken to
advance the cause of patent reform in this Congress, including
the development of legislative proposals that would advance
harmonization along with broader patent reforms.
In my written testimony, I attempted to set out at some
length how patent harmonization efforts have been and remain
inherently intertwined with broader efforts at patent reform.
My written testimony offered a fairly detailed tour of the
three major reform efforts over the past 40 years--the 1966
President's Commission, the 1992 DOC Advisory Commission, and,
as Mr. Dickinson referenced, the more recent National Academies
report.
Remarkably, whether these efforts were undertaken in the
'60's or the '90's or at the start of this century, they
consistently reached many of the same conclusions. Significant
and some might say radical measures must be undertaken by
Congress to elevate patent quality. Improving patent quality,
however, is only one aspect of measures that must be undertaken
to ensure civil justice for patent litigants.
Like many others whose businesses are greatly impacted by
the U.S. patent system, my company supports a fair, balanced,
and comprehensive patent reform bill to both elevate patent
quality and advance civil justice for patent litigants.
Indeed, as Mr. Dickinson said, the reforms that we seek are
now supported by three dozen major companies and leading IP
associations. These reforms would result in greater
harmonization with patent systems outside the United States,
but harmonization for its own sake is not really the driver
behind these reforms.
In our view, we agree with Mr. Dickinson that the National
Academies recommendations should represent the template for
designing patent reform in this Congress. We believe first
inventor to file, elimination of the best mode requirement,
publication of all applications at 18 months, and introducing a
new 9-month window for post grant oppositions that would be
open to all issues of the validity of a patent ought to be
enacted into law.
First inventor to file, by itself, would remarkably
simplify our patent system and simplify the work of the Patent
and Trademark Office. It would also, frankly, be a necessary
predicate for conducting a post grant opposition that would be
open to all issues of whether a patent was valid or not.
Perhaps the most important benefits from making harmonizing
changes to the U.S. patent system would be the objectivity and
transparency that it would introduce into the patent law. The
reforms in 2795 in a few words would allow someone with
sufficient knowledge and skill to pick up any U.S. patent, read
it, reference only publicly accessible information, and be able
to make a full and complete determination of whether the patent
is valid or not.
And as we well know, today's patent system, even after
millions of dollars of discovery of issues that are sometimes
based on secret prior art, sometimes based on subjective
impressions of the inventor in what was or was not the best
mode always leaves uncertainty and doubt in whether a patented
invention is, indeed, validly patented.
Also, adopting a full set of reforms would facilitate the
initiative that Director Dudas at the United States Patent and
Trademark Officer has been championing to increase
responsibility of applicants. It would do so by creating a safe
harbor for inventors who obtain fully valid patents, so that
those fully valid patents couldn't later be challenged in court
on the basis that the patent was procured through inequitable
conduct.
Finally, as Mr. Dickinson noted, the patent reform process
in this Congress appears to have slowed because of
controversies over a few issues. The most controversial of
these issues relate to disabling or at least diminishing the
availability to inventors of adequate remedies when their
patents have been found both valid and infringed.
If Congress were to move forward, however, with patent
quality and related reforms that advance civil justice for
patent litigants, we believe that these misguided calls for
diminishing or disabling patent remedies would cease.
We have heard the arguments that it's unfair to put a
company out of business or force the payment of a king's ransom
because of a patent of questionable validity that can't be
effectively challenged either administratively or in the
courts. However, with the enactment of patent quality and
related civil justice proposals that we support, that specter
would disappear.
When a high-quality patent is issued, and its claims are
properly limited to truly novel and innovative technology that
an infringer can't avoid by redesigning a product or
incorporating any alternative technology, no possible
justification should exist for denying such an inventor the
full economic rewards from his contribution, including the
assurance that ongoing infringement of such a valid patent will
be stopped by the courts.
Thank you for permitting me this opportunity to speak today
as part of your ongoing efforts at patent reform.
[The prepared statement of Mr. Armitage follows:]
Prepared Statement of Robert A. Armitage
Mr. Smith. Thank you, Mr. Armitage.
Mr. Mueller.
TESTIMONY OF GARY MUELLER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, DIGITAL NOW, INC.
Mr. Mueller. Thank you, Mr. Chairman and Members of the
Committee, for allowing me to be here today and express my
views on patent harmonization.
I would also like to thank the competitive--the Association
for Competitive Technology for its leadership on this issue and
helping me prepare for this testimony.
My name is Gary Mueller, and I'm the president and chief
executive officer of Digital Now. We're a small, Herndon-
based--Herndon, Virginia-based company. We have several
employees on staff locally and a handful of programmers
throughout the United States, and we highly leverage our
partners and our suppliers in our business.
Despite our small size, we think we're poised to take
advantage of emerging technology and being a leader in consumer
services on the Internet. In the past, we've built film
scanners and Internet photo sites for photo finishers. Now
we're providing digital safe deposit box services to safely and
securely store files, digital emotional property that belongs
to the consumer, such as digital photos, home videos, important
documents and records, as well as digital IP, or intellectual
property, that consumers buy over the Internet, such as music,
ring tones, e-books, and games.
Let me say up front that I support the changes in the
patent processes in the U.S., including the harmonization
efforts. I specifically support the first to file proposal and
the proposal to file all publications or patent applications
within 18 months of their filing date.
I'll try to be succinct. I have four points to make from a
small business perspective. One disclaimer first. I am not a
patent attorney.
Okay. Point one. File locally, grant globally. In 1999, we
got a patent for a lamphouse technology quite unique for--and a
film-scanning technique capability. Because of the cost and
complexity, we decided not to file outside the United States.
It was a mistake.
In the fall of 2000, I was at Photokina, which is a large
trade show for us in Cologne, Germany. And I was shocked when
Gretag, a large equipment company based in Regensdorf,
Switzerland, was openly showing the use of our patent in a new
competitive scanner.
When I discussed the issue with our patent attorney, he
just told me it was too late. Wait until they enter the U.S.
market.
The lack of that patent protection cost me European sales
and revenue. That impacted U.S. jobs and hurt my ability to
build a great next product.
So I'm sensitive to this issue of harmonization, as someone
who has to make payroll and watch the bottom line. It makes no
sense to pay for the same work of patent searching and
examination to be done for the same invention in each country
where patent protection is sought. Small companies simply can't
afford it. A single search and examination in a single office
should be recognized in every other country where patent
protection is sought.
Point two. File now and attract the cash cow. As a small
business, our goal is not to put competitors out of business,
but to bring others into our businesses. Patents are a key tool
to attract investment equity, secure business loans, develop
supplier and channel partners, and, yes, ensure that we're
fairly compensated for what we created.
When I learned Gretag was violating our patent, I did not
want to put them out of business. I wanted to play ``Let's Make
A Deal.'' As a big company, they had more resources, stronger
world-wide distribution channels, and a customer support
infrastructure. That's leverage for what we bring to the
market.
We are now seeking new investors for our new initiatives,
and guess what they ask first? ``Do you have any patents?''
We've already mentioned the Mossinghoff study. So I won't
go into that. But I believe that that study supports the
position of first to file, and we see that as an important
element for our business as well.
Point three. Turbo charge the PTO. In my own view, speed,
or the lack thereof, is one of the biggest issues facing my
industry when it comes to patents. They say that speed kills on
the highway. Well, pendency kills on the information
superhighway. The longer I have to wait for a patent to be
granted, the longer I have to wait for that tool to attract
investment and partners.
The average length for receiving a patent from the U.S. PTO
is 29 months. For software, a very changing industry, the
average pendency is even longer--40 months. Our own patent on
image rotation, automatic image rotation, took us almost 6
years to get.
I've had to abandon other patent applications and,
therefore, the business opportunities that those patents
represented because the market moves faster than the PTO
office. The opportunity to participate and probably improve the
marketplace was lost.
In today's fast-paced world, a patent delay is a potential
market denied. Why? Because, as a small business, I have to
weigh the risks of ongoing costs of R&D and commercialization
against the ability to protect that investment from those that
can outpace me.
This also speaks to speed in publishing all applications in
18 months. If someone has beaten me to the punch, I want to
know about it right away, as soon as possible, and cut my
losses. Go to plan B.
If not, I'm in a better position to raise funds, take the
additional risk, continue development, and, best of all, get a
product to the market and sell it.
Clarity would come with the publication of all patent
applications at 18 months after the filing date. We would have
more information about the competitive environment in which we
operate.
Point four. Small business entrepreneurs need an on-ramp to
get in the game. As a small business, we have to deal with
``bet the company'' issues almost every day, much more than the
larger counterpart sitting at the table. We are often in the
red to prove our technology and our business models.
Consequently, we have to ante up early in the process
$30,000 or more to get through the patent application process.
That money would otherwise be used to keep the doors open by
paying the rent or making the payroll. To suggest that we
should not spend this precious capital on improving our
products and services, but spend it by rushing to the patent
office is a very tough sell in our environment.
There is a real and persistent fear among entrepreneurs,
who are often cash poor, that inventions disclosed and patents
applications once published will be stolen by larger, deep-
pocket competitors. These fears can be best addressed by a
patent system driven by quality, clarity, and speed.
Achieving progress on these points helps a lot. Education
is also going to be important to re-educate the small
entrepreneur.
In general, bad behavior fosters bad behavior. Bad behavior
because of the length of the patent process, the backlog of the
PTO, and the system in general fosters bad behavior by
entrepreneurs and inventors.
Harmonization, improving the PTO performance will foster
good behavior, especially with small business entrepreneurs. We
will trust the system, have greater clarity, know where we
stand with our initiatives and ideas, and we'll use the system
to our advantage.
Mr. Smith. Mr. Mueller, we're going to need to move on. I
think you got your four points in, though.
Mr. Mueller. I did. Perfect timing.
[The prepared statement of Mr. Mueller follows:]
Prepared Statement of Gary Mueller
Mr. Smith. Thank you very much.
Mr. Choate.
TESTIMONY OF PAT CHOATE, POLITICAL ECONOMIST AND AUTHOR OF
``HOT PROPERTY: THE STEALING OF IDEAS IN AN AGE OF
GLOBALIZATION''
Mr. Choate. Thank you, Mr. Chairman.
I'm here today on behalf of the Professional Inventors
Alliance. The two founders of that, Ron Riley and George----
Mr. Smith. Mr. Choate. Yes, pull the mike a little bit
closer to yourself.
Mr. Choate. Okay. I'll be happy to.
I'm here on behalf of the Professional Inventors Alliance.
Two of the founders of that organization, Ron Riley and George
Margolis, are here with us today.
Small inventors are part of a group called the ``small
entity inventors.'' That is independent inventors, small
businesses such as Mr. Mueller's, nonprofits, academics. They
make up and contribute 45 percent of the patents done in this
country.
If you remove the foreign patent applications submitted,
they're the largest contributors to the patent system. They
make the most patent applications. And studies done by the
Small Business Administration reveal that they produce more
highly sighted patents than large firms on average, and small
patenting firms produce 13 to 14 times more patents per
employees as large patenting firms.
They're an important part of the innovation in this
country. And so, how patent law affects them is vastly
important to our technological and innovative future for this
country.
The question really is not whether one is for or against
harmonization. Harmonization is a good thing. No one opposes
having similar administrative procedures. I think it's a good
thing for the world to file patents in English. English is the
language of commerce in the world today.
The question of reasonable access to prior art is--is a
very desirable thing, and it's facilitated by the Internet.
Researchers such as myself increasingly depend upon it. Ten
years ago, I employed two research assistants. Today, I employ
none. The Internet serves that function actually even better.
And I think no one objects to standard searches.
The question is, is in this process of harmonization, will
we lower the U.S. patent standards to that of other countries,
or will we raise--insist upon raising the standards of other
countries to our own, which I think is the finest patent system
in the world and has served us very well for two centuries?
As I take a look at the issue, there are three major issues
that this patent system faces today. The first is the extended
pendency rates. In the past 12 years, they've gone from 19
months to almost 30 months.
We talk about wanting a surge of innovation in this
country. We can go over into Virginia, and there is something
like 500,000 to 600,000 patent applications in a warehouse
waiting for their turn to be considered. If we could get the
pendency rate down to something like 6 months, we could unleash
a vast amount of new innovations.
And what we're talking about here are some simple
procedures and the Congress appropriating another billion or $2
billion to hire more patent examiners, which would be one of
the best investments this country could make.
The second major question is piracy. So much of what we're
talking about today reflects our inability to deal with piracy.
Now this Congress and this country led the way in the 1990's to
create TRIPs, a major shift in world intellectual property
rights. We created for ourselves and to get those rights, we
swapped off the American apparel and textile industry. We have
major rights there.
But when we deal with countries such as China, we have not
filed a single WTO case against China, and they're facing major
violations.
And then finally, the premature--what I call the premature
publication of patents. The issue, it would seem to me, is not
to pick up that 10 percent of inventors that are left out of
that, but for us to go and renegotiate to take the United
States off that 18-month patent rule.
Think about it, what it says. First of all, we've set up
the rule, the 18-month rule, because we're unwilling to deal
with the pendency issue. We're unwilling to deal--if we were
issuing patents at 6 months, there'd be no need for an 18-month
rule.
Alexander Graham Bell, for example, got his patent in 3
weeks. It was 600 lawsuits, including 5 challenges at the
Supreme Court. This is doable.
But more importantly, what we find is this 18-month rule is
a major boon to pirates around the world. The Japanese patent
office, for example, sent some of their people to China,
visited with various countries. And what they found was rows
and rows of computers where the Japanese--I mean the Chinese
companies were pulling down the information off the Net about
Japanese and English and German and American patents. And they
said, ``We don't need to research. All we need is this access
to the 18-month rule.''
And moreover, when the Japanese went back and checked their
own computers, they found they were getting 17,000 hits a day
from Chinese companies looking into their patents, and they
found that South Korea was hitting it 50,000 times a day.
Another thing that happens with the 18-month rule, if an
inventor makes a filing for a patent, if it goes up at 18
months and if he's denied or if that inventor is denied a
patent, after that 18-month rule the application is filed, he,
in effect, loses the right to operate his innovation as a trade
secret. It's given away already.
Now about a third of the patent applications every year are
rejected. We're losing 60,000 or 70,000 innovations a year that
inventors have, where they could use it as a trade secret, re-
release it entirely to the world.
As to the question of best mode, the golden covenant that
the Constitution provides is an exchange of knowledge for a
grant of the exclusive right to use. Best mode is, I think, a
necessity.
This country has had some very bad experiences in the past.
As we moved into the early part of the century and World War I,
Germany had a monopoly on dyes, certain chemicals, painkillers,
analgetics, aspirin, et cetera. The Germans cheated. The
Germans didn't give the best mode of use.
When the Dupont Company, at the direction of the U.S.
Government, moved to try to replicate those inventions in a
time of crisis, what they discovered is that if you followed
the techniques laid out by I.G. Farber and others, you'd kill
your chemist. Best mode is very important.
And thank you for your questions, and I am glad to come.
[The prepared statement of Mr. Choate follows:]
Prepared Statement of Pat Choate
Mr. Chairman and Members of the Committee:
Thank you for the invitation to present my thoughts on ``Patent
Harmonization.'' I appear as a member of the Advisory Board of the
Professional Inventors Alliance--a group of independent inventors that
support strong patent protections.
the three p's
The U.S. patent system has three major problems today.
1. Pendency rates are far too long, denying the nation new
innovations in a timely manner;
2. Piracy of U.S. intellectual property rights is not being
adequately addressed;
3. Premature publication of patent applications at 18-months
is (a) enabling the theft of U.S. intellectual properties, (b)
denying patent applicants the ability to use their innovations
as trade secrets, and (c) encouraging inventors not to file
patent applications, thereby diminishing the nation's general
knowledge.
Proposals to shift from a first-to-invent to a first-to-file
system, to eliminate the ``best mode'' requirement in a patent
application and to expand the publication of patent applications will
weaken the U.S. Patent System and discourage American innovation at
just the moment both should be strengthened to meet expanding global
competition.
six national economic tools
The President and Congress have six basic tools to direct the U.S.
economy:
1. Fiscal Policy
2. Monetary Policy
3. Exchange Rate Policy
4. Trade Policy
5. Technology Policy
6. Competition Policy (Antitrust)
For more than two centuries, the strongest of those six has been
U.S. Technology Policy, the heart of which is the nation's system of
intellectual property laws and the rights they create. Those laws and
rights, the strongest in the world, have encouraged national innovation
and the spread of general knowledge beyond anything achieved by any
other country in history.
These intellectual property rights, in whatever form they exist,
are ultimately social contracts between the originator of an idea and
society. The arithmetic of the exchange is simple: the temporary award
of ownership allows the public to benefit from new ideas and encourages
the creation of even more innovations.
What varies among nations is the way they balance this quid prod
quo--ownership for disclosure--and which interests they favor in their
patent policies.
At its heart, the American system of intellectual property
protection--whether that protection comes as a patent, copyright,
trademark, computer mask, or trade secret--favors the rights of
ownership. U.S. law gives inventors and writers the long-term,
exclusive right to make, use, or sell their creations and powerful
legal means to defend their rights in U.S. courts.
Most other nations, however, still view an originator's discovery
as a legacy to society almost from the inception. Thus, those
intellectual property systems favor the quick distribution and shared
commercialization of new ideas, even if this puts the inventor or
writer at a disadvantage.
Think about cameras. In the United States, Kodak violated
Polaroid's instant photography patents, lost their case in court and
then had to pay Polaroid $1 billion in damages. In Japan, by contrast,
one company develops a killer application, such as technology to
stabilize shots, but all other Japanese camera makers soon introduce
the same technology. In the U.S., the innovator could use that
technology to sweep the market. In Japan, a government-approved and
often a government-guided cartel shares the technology among
competitors.
The differences of national emphasis--ownership vs. sharing--among
the U.S. European, and Japanese intellectual property systems are
substantial.
The stated or explicit goal of patent harmonization efforts is to
synchronize these divergent patent systems so they generally work
alike. In itself, this bringing together of national systems is
desirable.
However, there is an unstated, and vital, issue involved: Will
patent standards and protections be raised or lowered in the
harmonization process? Harmonize up? Or, harmonize down?
That is the choice now before Congress.
parties in conflict
For almost two centuries, Congress has set intellectual property
rights by allowing the affected parties to find a compromise. Now that
process is impaired, largely because of the changing nature of the
parties at interest. Before the 1960s, the battle was between domestic
industries and between individual industries and large corporations.
With globalization, the conflict is between national systems, which
means foreign nations and their corporations versus both small and
large entity inventors. As U.S. corporations offshore their R&D and
manufacturing, their interests are increasingly aligned with those of
foreign-based multinational companies that are trying to weaken U.S.
protections for small entity domestic inventors.
Small versus Large Entities--The United States Patent and Trademark
Office (USPTO) distinguishes between what it terms ``small entities''
(independent inventors, companies with 500 or fewer employees, not-for-
profit organizations and universities) and ``large entities'' (larger
corporations).
Until the last half of the 20th century, the principal patent
conflict was between independent inventors and large U.S.-headquartered
corporations, reflecting the fact that individual inventors are a
natural enemy of the status quo, large corporations and state-owned
enterprises.
``Innovation is a hostile act as it threatens the status quo and
those who benefit from it,'' says inventor Paul Heckel. That threat,
Heckel claims, explains the difference between the U.S. patent system
and those of Japan and Europe. Those systems were developed to minimize
the threats to entrenched interests, while ours was created after our
Revolution when the entrenched interests, that is, the British, had
been overthrown and those in power had little but the vast future of a
nation to develop.
The American experience is that these small entities, particularly
independent inventors, can devastate an entrenched interest, almost
overnight. Indeed, doing just that, and becoming rich and famous is the
dream of most such entrepreneurs. Moreover, it happens repeatedly in
America. Small entity invention has a particular American quality,
reflecting our culture. Even with all the filings from large U.S.
corporations and their counterparts from around the world, small entity
inventors still file roughly 45 percent of all U.S. patent applications
every year. That happens nowhere else in the world.
Such innovation is the very heart of what Austrian economist Joseph
Schumpeter called ``creative destruction.'' For more than two hundred
years, it has been the engine of America's economic growth. It is our
principal hope for meeting the global economic challenge we face.
For the small entity inventors, their IP rights are essential.
Patents provide them the means to raise capital, make license
arrangements and defend themselves against infringers. As surely as
night follows the day, other nations will seize upon patent changes to
weaken intellectual property rights in the United States and thus
weaken those same IP rights abroad.
Moreover, with weakened protections, no U.S. IP holder will be
safe, whether small or large. In a world where China, India, and other
nations are quickly becoming the world's workshop--manufacturing
everything from the simplest to the most advanced technologies--a large
and growing number of traditional U.S. corporations are in reality
little more than intellectual property holders, who are ``non-
practicing'' their technologies. In this radically different economic
environment, the protection of those corporations' intellectual
property rights is vital because those rights are what constitute their
stockholders' real value.
Small Entities versus Transnational Entities--Europe, Japan, China,
India and other nations aggressively use their patent systems as a tool
of national development. Changes in U.S. patent laws that enable their
corporations to get a look at U.S. patent applications before a patent
is awarded is to their advantage. So, too, processes that ease their
ability to challenge U.S. patents as a means to coerce a license or
shorten the duration of a patent through confrontation, or place the
validity of a patent into legal limbo is also to their advantage.
Since the early 1990s, one of the principal goals of Japanese and
European-financed lobbying in the United States has been to change U.S.
patent practices. Theirs is a formidable force. Overall, the Center for
Public Integrity reports that foreign governments and corporations now
fund almost one-third of all lobbying in Washington, D.C. When the
lobbying dollars of the largest U.S.-based corporations and their trade
associations is added to the foreign efforts, almost 80 percent of all
lobbying dollars come from a coalition of businesses and governments
that wish to weaken U.S. patent protections. Their goal, moreover, is
fully understandable--in America, an inventor with strong patent
protections, a contingency fee law firm, and access to the federal
court system is a real economic threat to a patent pirate.
harmonizing down u.s. patent standards
Not surprisingly, many U.S. corporations have long sought to weaken
patent protections for independent inventors. Repeatedly over the past
forty years, a succession of Presidents has appointed patent reform
commissions dominated by these corporate interests. Their reports
repeatedly offer the same solutions--(1) they seek to cut the term of
patent protection; (2) they seek to give the world a look at a patent
application before the USPTO grants patent protection; (3) they seek to
weaken the legal remedies and damage awards to small entity patent
holders; and (4) they seek to change the award of an invention from the
first-to-invent to the first-to-file a patent application.
In short, these corporate-led commissions have urged Congress to
harmonize down--that is, to make the U.S. patent system more like that
of Japan and Europe rather than have U.S. patent negotiators try to
raise the patent standards of those nations to that of the United
States.
Moreover, the temptation of the Executive Branch of the U.S.
Government to reduce IP rights is great. The temptation arises out of
the creation of TRIPS within the World Trade Organization, which has
put IP rights into trade negotiations. In the past, the United States
has traded away various U.S. industries to secure global trade
agreements--textiles, apparel and steel are the most visible examples.
In the current WTO round, developing nations refused to begin the
negotiations unless the United States would agree to compulsory
licensing of pharmaceuticals. The USTR capitulated, putting this nation
on a slippery slope of IP concessions in exchange for trade rights.
Indeed, we are already along that path. China is a flagrant
violator of U.S. IP rights, yet our government refuses to bring a case
against China at the WTO for denying U.S. intellectual property owners'
rights that are supposedly theirs under China's accession agreement to
the WTO. Again, the U.S. is swapping away IP rights for foreign policy
and other trade goals.
This ``harmonize down'' effect comes into sharp relief by reviewing
a landmark GAO study--Intellectual Property Rights--US Companies'
Patent Experiences in Japan, published in the spring of 1993. It
provides a baseline comparison of the U.S. and Japanese patent systems,
as they existed 13 years ago. The changes since then are dramatic.
In this study, GAO examiners interviewed Japanese patent officials
and lawyers, and they surveyed 300 corporations who were top patent
holders in Japan. The respondents were top U.S. patent holders in three
sectors--chemicals, semiconductors, and biotechnology--and included 90
percent of the U.S. companies that were part of the top 200 U.S. patent
holders in 1991. Almost half of these companies had 10,000 employees or
more, 32 percent had between 501 and 10,000, and 19 percent had 500 or
fewer. More than 90 percent of these respondents had also filed patent
applications in Japan during the past five years, two-thirds held ten
or more Japanese patents, and all were experienced international
businesses. The majority of these respondents were also large
enterprises, with 60 percent reporting sales of more than $1 billion
annually.
While the 300 responding companies had all the resources needed to
hire the best talent and do whatever the Japanese required foreign
businesses to do in Japan, two-thirds reported significant problems
dealing with Japan's patent system. By contrast, only 25 percent said
they had similar patent problems in Europe and 17 percent in the United
States.
In stunning detail, the GAO study also revealed that, unlike the
United States, which administered its patent system in a country-
neutral manner, Japan's patent system then was at once a defensive,
offensive, and a strategic tool of national development. It was being
used to (1) keep foreign goods out of Japan, (2) protect proprietary
Japanese technology, (3) examine the inner workings of the best foreign
technology and (4) get foreign patents under advantageous conditions.
The GAO concluded that the differences in patent policy between the
U.S., Japan and Europe were as follows:
The United States awarded patents to the person who
is the first-to-invent. Europe and Japan awarded patents to the
first-to-file an application.
The United States provided seventeen years of
protection from the date it issues a patent, no matter how many
years the USPTO took to process the application. Europe and
Japan provided protection that ended twenty years after the
filing date, despite how much time they consumed in the review
process.
United States patent applications were secret until
the government granted a patent. All other nations published
patent applications eighteen months after an applicant files.
The United States gave inventors a grace period of
one year in which to file an application after they have shown
their invention to the public and imposed no restrictions on
the ways originators may reveal their inventions. Europe and
Japan gave inventors a grace period of six months for
disclosure and limited the types of disclosures they could make
without losing their right to a patent.
The United States and Europe excluded third parties
from the patent review process. The Japanese Patent Office
allowed third parties, including rival companies, to
participate in their patent reviews.
The United States did not allow third party
opposition during the patent review process. Japan allowed
third parties to oppose a patent application even before they
grant an award. Europe allowed third party opposition but only
after they grant a patent.
The United States Patent Office automatically
examined every patent application filed. Europe allowed patent
applicants to defer examination for up to six months. Japan
allowed patent applicants to defer examination for up to seven
years.
The United States accepted patent applications in all
languages. Europe accepted applications in the languages of
nation party to the European Patent Convention. Japan accepted
the patent applications in Japanese.
The United States and Europe processed patent
applications rapidly, generally in nineteen months or less.
Japan processed patent applications slowly, generally in six to
seven years.
The United States' and Europe's scope of patent
protection is wide, giving the inventor exclusive rights within
a broad boundary of claims. Japan construed the scope of its
patent protection as narrowly as possible.
The United States and European legal systems eased
the private enforcement of patent rights. Japan has discouraged
private action.
Most of the 300 corporate respondents to the GAO survey answered
that they were unable to protect their intellectual property in Japan,
and many also acknowledged that they were forced to enter cross-
licensing and partnership deals with Japanese rivals that they would
never have even considered in Europe or the United States.
If these large transnational corporations were unable to cope in
Japan, then most individual inventors and small firms faced an almost
impossible task.
In the intervening years, Japan has made some changes in its patent
system. It has established a tribunal to hear patent cases, takes
applications in English, hired more examiners and lowered its pendency
rate. Yet, its basic system remains unchanged. It uses the first-to-
file approach, limits patent terms to 20 years, pre-publishes
applications and permits third party opposition.
As this list reveals, the direction of U.S. patent law changes over
the intervening years has been to change the U.S. patent system so that
it is more like Japan's.
Moreover, the USPTO is taking (May 3, 2006 deadline) public comment
on a proposed rule on the practice of continuation applications that
will further make the U.S. system like Japan's--a rule that will cut
the number of a patent claims in an application.
As you know, pendency is an ongoing and increasing problem for the
PTO and frankly for American competitiveness. However, any change in
PTO rules that limits the number of continuations and the number of
claims will not affect pendency. But, it will create great suffering
for small entity inventors--universities, biotechnology firms, emerging
technology companies, small businesses and independent inventors.
Currently, they can file a patent application and modify it as one's
research progresses. Application and revision costs are borne by the
applicant progressively and timely public disclosure occurs.
The proposed rules restrict the patent applicant to 10 claims and
to 1 continuation absent special circumstances. The PTO thinks that
this will reduce examiner workload and relieve pendency, though it has
yet to demonstrate this. Instead, the rules create new, amorphous
requirements that the patent applicant must meet. Essentially the rules
mean that the patent applicant must perform the examination process
themselves all in advance. This radical change represents a first step
toward converting the PTO into a registration system.
This rule change is so significant it is something for Congress and
not for the PTO to decide. I urge this Committee to review those
proposed changes and comments in hearings.
three harmonization issues
First-to-Invent Versus First-to-File--For more than two centuries,
the United States has awarded a patent to the first person to invent
the creation. All other nations award the patent to the first person to
file a patent. The Governments of Japan and Europe support U.S.
adoption of a first-to-file system. Several Presidential and academic
study commissions also favor a first-to-invent approach. In the 1993
GAO survey, three-quarters of the companies with 10,000 employees or
more favored a first-to-file system, as did about half the companies
with 501 to 10,000 employees.
In that survey, of course, a quarter of the large corporations and
about half of the mid-sized companies favored a continuance of the
first-to-invent approach. I am unaware of any survey of small entity
inventors on this issue. Various independent inventor groups, however,
advocate leaving the first-to-invent system in place, arguing that it
is functioning well.
In a recent study of whether small or large entities are advantaged
or disadvantaged by the first-to-invent approach, former Commissioner
of Patents and Trademarks Gerald J. Mossinghoff did a statistical
analysis of what happens when two parties claim to have invented
something at nearly the same time, a process called interference cases
or two-party decisions. If there were problems in the first-to-invent
system, a large number of such cases would exist.
Remarkably, in the 22-year period 1983-2004, Mossinghoff found
there were only 3,253 two-party decisions, a period when the USPTO
received 4.5 million applications and granted more than 2.4 million
patents. Thus, there were on average only such 155 such cases per year,
or as Mossinghoff pointed out, fewer than one in one thousand
applications filed.
Mossinghoff also found that the number of small entities advantaged
in that 22-year period by the interference process was 286 and the
number disadvantaged was almost the same (289), a strong statistical
suggestion that the USPTO was ably managing the process.
Mossinghoff's data provides a strong argument for not changing from
a first-to-invent to a first-to-file patent system. Specifically, the
supposed disadvantage of the present approach is that it leads to
confusion and conflicts. Yet, as Mossinghoff's data reveals, the number
of interference cases in the 22 years analyzed was administratively
trivial.
His data also reveals that small entities were involved in only
17.6 percent of these two-party cases, although they generate 45
percent of all patent applications. The overwhelming majority of those
interference cases (82.4 percent) were between large entities fully
capable of financing their advocacy.
Mossinghoff's data reveals that the number of small entity
inventors affected by interferences occurs only with one of every 7,800
applications. This is so statistically insignificant as to be
irrelevant. One of 7,800 is not a problem.
The point is that our present system is not adversely affecting
large or small entity inventors. Then, why change it? Why go to all the
trouble, all the costs of changing to something else, when the benefits
are so illusory and slight? If there is some benefit other than doing
like other nations do, advocates of that change should be forthcoming
as to what that is.
The other question raised in Messinghoff's paper is about the
ability of those few, those one of 7,800, inventors to finance the
legal costs of a two-party case. He found that 575 small entity
inventors took their cases to conclusion, which also strongly suggests
that legal costs were not a barrier, even for those few.
The question of legal costs is related to a broader argument made
for altering the U.S. Patent System, namely that the U.S. is in a
``patent litigation'' emergency--that is, a flood of lawsuits with
little or no merit is threatening the innovation process.
I examined that issue in a recent working paper published by the
U.S.-China Economic and Security Review Commission (A Great Wall of
Patents, October 2005). I concluded from publicly available data that
the U.S. does not have a patent litigation crisis. Indeed, the data
makes clear that the threat of lawsuits for most inventors is actually
diminishing.
The real litigation threat is to a handful of large corporations
whose business models rely on the aggressive, unapproved and
uncompensated use of the patented works of others. The owners of that
intellectual property are suing these large companies and winning large
awards. In appeal, the courts are upholding these awards as valid. Now,
a handful of these large entity patent holders have banded together and
are trying to achieve through legislation what they cannot get in the
courts--easier access to the IP of others, at a lesser cost and with
fewer penalties.
Federal judicial caseload statistics for patent lawsuits and USPTO
data on patent applications and patents issued reveal:
An inventor is less likely to be involved in a patent
suit today than in the past. The number of patent lawsuits
filed per the number of patent applications filed has been on a
downward slope since 1990.
Likewise, the number of patent lawsuits filed per the
number of patents granted by the USPTO has also declined even
greater--almost 13 percent between 1988 and 2004.
Only 5/10,000 of one percent of patents issued are
challenged in a patent trial.\1\
---------------------------------------------------------------------------
\1\ Calculated from data contained in Federal Judicial Caseload
Statistics, 2004, Table C-4 and Performance and Accountability Report:
fiscal year 2004, Table 1, p. 116.
In 2004, more than 28 percent of patent lawsuits
settled with no court action required.\2\
---------------------------------------------------------------------------
\2\ Calculated from data contained in Federal Judicial Caseload
Statistics, 2004, Table C-4.
In 2004, more than 53 percent of patent lawsuits
settled before pretrial.\3\
---------------------------------------------------------------------------
\3\ Ibid.
In 2004, more than 14 percent of patent lawsuits
settled during or after pretrial.\4\
---------------------------------------------------------------------------
\4\ Ibid.
In 2004, only 96 patent cases went to trial, which
represents only 3.5 percent of all patent cases filed that
year.\5\
---------------------------------------------------------------------------
\5\ Ibid.
Put into context, the number of patent lawsuits that went to trial
during the period 2001 to 2004 rose from 76 cases to 96.
Fewer than 100 patent trials a year is not a patent litigation
crisis--particularly in a nation that issues almost 200,000 patents
annually and where litigants settle almost all patent lawsuits before
trial.
Although the current first-to-invent system is working very well,
imagine what is likely to happen if Congress were to change it to the
first-to-file approach.
The large corporations could standardize their global patent
operations and perhaps get some savings out the efficiencies. They are
well accustomed to working in first-to-file systems around the world.
For the small entities, the shift would be chaotic. They are not
accustomed to the first-to-file approach. Their experiences and
knowledge of the patent system are grounded in the first-to-invent
system. Hundreds of thousands of inventors, academics, lawyers and
paralegals would be forced to learn a new system--a costly and
disruptive process at best for them, and for the USPTO.
The first worry on the part of many inventors and academics would
be whether someone would steal their innovations and rush to the USPTO
to file an application--a legitimate concern in today's world of
unchecked piracy. Indeed, Chinese inventors are now taking patent
applications posted on the Net and using that information to be the
first-to-file in China.
The fear of patent piracy, here and abroad, would motivate
countless inventors to rush to file. Inevitably, the result would be a
flood of premature patent applications. In turn, the influx of such
applications will greatly burden the USPTO at a time when patent
pendency is already rising.
And what are the principal gains from incurring these costs and
dealing with the resulting chaos, other than pleasing patent
bureaucrats in other countries and allowing transnational corporations
to save a few patent-processing fees? Other than being like other
nations, what is the advantage to the United States and small entity
inventors for making such a shift?
In short, the advocates of this change have failed to prove that
the marginal benefits of this shift will equal the marginal costs and
inventor confusion. This is significant, for we are at a moment when
larger patent issues loom, such as unchecked patent piracy by nations
such as China, the growing technological challenge from abroad and
rising pendency rates at home. Our limited USPTO resources should be
devoted to those issues, rather than to a change that would create
unproductive chaos.
Imagine the response if we were to ask England and Japan to change
from a right to a left hand drive system for their automobiles so they
could be like us and thus make life easier for our automakers. Congress
should view their demands for patent harmonization in a similar way--
deciding what is in our inventor's and our country's best interests.
Best Mode--Should inventors be required to include in their patent
applications the ``best mode'' to replicate and use their creations?
I think the answer is yes--absolutely. The golden covenant of a
patent is simple--exclusive use in exchange for making public new
knowledge. Otherwise, the patent grantee gains the benefits of
government-licensed exclusivity, while denying the public the full
knowledge to which they are entitled.
In the early part of the 20th century, I.G. Farben, the giant
German chemical cartel, was granted hundreds of chemical patents in the
United States, giving them exclusive use over their creations. However,
Farben cheated. When DuPont and other chemical makers tried to
replicate those processes during World War I, they discovered that
vital elements were missing. Indeed, Pierre DuPont, who lost more than
$100 million of 1917 dollars trying to replicate those chemicals,
claimed that if DuPont chemists had followed the Farben patents, they
would have been killed.
The point is the United States should not give exclusive rights to
inventors unless they share with the public the best and true mode.
Expanding public knowledge is one of the patent system's most important
functions.
Pre-Publication of Patent Applications at 18-Months From Filing--In
1999, the United States enacted harmonization legislation that required
the USPTO to reveal to the world vital information from all patent
applications that have been on file for 18-months. An exception was
made for those inventors who seek a patent that is limited to the
United States. Today, approximately 10 percent of patent applications
fit that criteria and are not published on the Internet at 18-months if
not granted.
The 18-month rule may be meaningless for large entity inventors. It
devastates small entity inventors--giving competitors and pirates the
world over vital details about their creations before patent
protections are granted.
The 18-month rule is driving small entity inventors away from the
patent process, denying the nation substantial knowledge. In the past,
an inventor could take a failed application and apply the knowledge as
a trade secret. With 18-month publication and 30 months plus patent
pendency, the secret is spilled to the world. The USPTO rejects about
one-third of all patent applications. This means that approximately
60,000 to 70,000 potential U.S. trade secrets will be made available to
U.S. competitors and pirates worldwide annually.
Are foreign competitors stealing ideas and technologies from what I
label the premature publication of patent applications? Consider this:
In 2004, the director of Japan's External Trade Organization's
Intellectual Property Rights Office in Beijing visited a leading
Chinese company. The head of that corporation's intellectual property
division showed him a room with several dozen computers whose exclusive
purpose was to search the patent applications put up on the Internet by
the USPTO and its equivalent in Japan and Europe. The Chinese executive
explained it was easier and far less expensive to pull information from
foreign patent applications than to do their own research.
When informed of this, the Japanese Patent Office began monitoring
the number of hits its patent application files on the Net were
getting. They counted 17,000 hits per day from China and 55,000 per day
from South Korea.
Likewise, the very system that is supposed to protect America's
most precious technological secrets is revealing them prematurely to
the rest of the world. When I explain the 18-month publication rule to
business executives, they are dumbfounded that such a thing could be
possible.
I conclude that the real issue is not whether to include the 10
percent of patents under the 18-month rule, but how to stop pre-
publication altogether. I cannot imagine any benefits to U.S. inventors
or the nation from the present approach, while the liabilities are
obvious.
conclusion
Harmonization of the world's patent systems is a desirable goal for
the United States. The vital question in that harmonization process is
whether the United States should lower its standards to those of other
nations or whether we should work to raise their standards to ours.
Put another way, what is there in the patent systems of Germany,
France, Italy, England, Japan, Brazil, India and South Korea that is so
superior to that of the U.S. that Congress should change two centuries
of success to follow their lead and be like them? The argument that all
other nations do something--that the U.S. should join a herd simply
because there is a herd--is insufficient reason to change U.S. patent
laws that have worked so well for this nation for so long.
As I describe in this testimony, the U.S. has followed the lead of
other nations in recent years and lowered its vital patent standards in
the name of harmonization. Those changes, and those now before the
Congress, weaken U.S. IP protections. Our independent inventors are
greatly disadvantaged by those changes--shorter effective patent terms
and the premature publication of patent applications particularly.
It would be very useful to have these harmonization issues
rethought in a forum where small entity inventors--independent
inventors, small companies, non-profit organizations and academic
inventors--are an integral part of the process. Such an exchange would
be congruent with our long tradition of bringing a balanced compromise
on patent policy to the Congress.
Thank you for allowing me to share my perspectives with you.
Mr. Smith. Thank you, Mr. Choate.
To me, one of the primary purposes of today's hearing is to
try to better answer the question of why independent inventors
sometimes object to our efforts to try to implement a first
inventor to file, the harmonization that you all have been
talking about. And my questions are going to be focused
primarily on trying to answer that particular question.
Mr. Dickinson, for example, you mentioned in your testimony
that the very individuals who, in recent tradition, have been
most concerned about this change, the individual or small
inventors, have actually been disadvantaged by our current
system.
In just a minute, I'm going to ask you all to respond to a
couple of Mr. Choate's points. But I'd like for you to go into
a little bit more detail, Mr. Dickinson and Mr. Armitage. You
mentioned harmonization, bringing in objectivity and
transparency. Mr. Mueller, you actually said that a patent
system that requires application for the same invention to be
researched and re-examined in each country where patent
protection is sought makes little sense in today's global
marketplace, and that harmonization will reduce the cost and
complexity of obtaining patent protection around the world.
If you can go into a little bit more detail, elaborate a
little bit more as to why you think independent inventors are
actually benefitted by harmonization? And maybe you can
speculate--I'm going to give Mr. Choate equal time in a
minute--maybe you can speculate as to why independent inventors
seem to be opposed to the idea of harmonization?
And Mr. Choate, just a quick comment, your direction. You
said you supported the concept of harmonization in some areas,
but you had concerns about this particular proposal. I wonder a
little bit if conservatives like you and me sometimes just
don't resist change regardless.
And I'm going to come back to that theory in just a minute.
But Mr. Dickinson, if you will begin?
Mr. Dickinson. Thank you, Mr. Chairman.
A couple of questions there. Let me see if I can respond.
And I have pretty good contact with the independent inventors,
talk with them a lot about these issues, and particularly this
issue of first to file versus first to invent.
Interestingly, I think the record shows that some 30 years
ago, when hearings were held on this topic, the roles were
actually reversed. The independent inventors actually supported
moving to first to file, while the largest entities in some
cases resisted it. Now we seem to have changed sides a little
bit. I don't think the arguments have really changed, however.
The challenge with first to file, and I think the reason
why independent inventors--and they probably can speak for
themselves--but I think the reason why they tend to generally
oppose it is that they're worried on a couple of things.
One, that they will lose the so-called race to the Patent
and Trademark Office. And that, on its face, is not such--
there's maybe some validity to that on its face. In reality,
large companies like mine, we have fairly--we try to make them
very streamlined, but we have fairly cumbersome processes for
approval. We have fairly elaborate mechanisms for taking the
inventions from the bench, going through the invention
disclosure process, and on up to an application.
So, for us, we're a little inhibited in that race.
Independent inventors, on the other hand--particularly with the
development of the Internet, the opportunity now to
electronically file patent applications, the ability to do
research and to find legal resources, patent legal resources on
the Internet and do the searching on the Internet--they are
able to make those decisions a lot quicker.
Mr. Smith. Let me interrupt you because I want to--Mr.
Choate made a point in his written testimony that I'm not sure
he mentioned it in his oral testimony that maybe we're trying
to address a problem that doesn't really exist.
He makes the point that if there were problems in the first
to invent system, a large number of interference cases would be
filed, and they are not. So would you address that?
Mr. Dickinson. That's an interesting question. I think one
reason why there aren't that large number of interferences is
because of circumstances that give rise to the interference
and, by extension, the concern that independent inventors have,
the fact that two inventors coming to the same invention in
roughly the same period of time only happens in a very few
instances.
I think we declare each year something on the order of, off
the top of my head, 400 interferences out of 400,000 patent
applications that might be filed. So that process of
determining who the first inventor is only occurs in a very
minor subset. That dispute only occurs in that little--in that
little----
Mr. Smith. Mr. Dickinson, let me sneak in another question
here to Mr. Armitage and Mr. Mueller. Mr. Choate also makes the
point somewhat similar to the one I just repeated. Our present
system is not adversely affecting large or small inventors,
then why change it? Why go to all this trouble? Mr. Armitage?
Mr. Armitage. Can I first go back and maybe add a little
perspective on your original question----
Mr. Smith. Sure.
Mr. Armitage [continuing]. About why sometimes independent
inventors think of the first to file system as a bad deal for
them.
In some of the discussions I've had over several decades,
first of all, they think it's a true first to file system--in
other words, whoever files first is going to get the patent--
rather than a system that truly protects the inventor who files
first. And if you're not the inventor and just the first filer,
you're not entitled to a patent.
In your bill, in fact, there's a section--a new section on
inventors rights contests. If someone who files first and
they're not the inventor, they don't get a patent. The first
inventor to file gets the patent.
Second thing, and I think it's very important given what
Mr. Choate said, sometimes when first to file is used, people
think they're getting the European patent system with no grace
period, where if an applicant files two patent applications on
the same subject matter or similar subject matter, one
application can collide with the other and destroy the right to
fully patent the invention.
They also think they're getting the European rule on
absolute novelty, where any divulgation of the invention, even
if it isn't publicly accessible, can be prior art. And in fact,
in the first inventor to file proposal that's in H.R. 2795,
none of those are true. It's a very inventor-focused system.
Mr. Smith. Thank you, Mr. Armitage.
I'm going to come back and ask some more questions in just
a few minutes. And Mr. Choate, we'll be sure and give you equal
time.
For now, my time is up, and the gentleman from California,
Mr. Berman, is recognized for his questions.
Mr. Berman. Thank you very much, Mr. Chairman.
I apologize for not being here during most of the
testimony. I sort of came in the middle of Mr. Choate's
testimony, where mostly you were talking about the--the--your
dislike. And I think I was aware of that because it was
controversial at the time of the 18-month publication.
But I am curious that from the testimony, both you and Mr.
Dickinson cite the study by Commissioner Mossinghoff for
opposite propositions. Dickinson says it supports the change to
first to file. Mr. Choate says it shows the advantages of
maintaining the current system.
Can you each respond to the other one's arguments?
Mr. Dickinson. I think the principal take-away from
Commissioner Mossinghoff's study was that the purported
advantage to small inventors by the current system doesn't
really exist and that when small inventors get into the dispute
resolution mechanism for that contest, the interference, that
they are disproportionately, actually negatively affected. And
that's irrespective of the fact that it costs probably multiple
hundreds of thousands of dollars to be able to even try to take
advantage of that mechanism.
So that in the first instance, because of the cost, small
inventors might not even be able to prove that they were the
first inventor. And secondly, if they are able to do that, if
they are as we say the ``junior party''--namely they are the
second filer, but are seeking to prove they were the first
inventor--the junior party routinely loses. Loses some 80
percent of the time because of the nature of the rules, the
nature of the interference practice, and because the first
filer is very often able to demonstrate they were also the
first inventor.
Mr. Berman. Mr. Choate?
Mr. Choate. First of all, in the Mossinghoff study, it
found that the small entity inventors were advantaged 286
times, and they were disadvantaged 289 times. That's 3 case
difference. Now what that says is it's a wash at 289 to 286.
Moreover, more dramatically, it says there's 576 such cases
over a 22-year period when you were dealing with something like
4.5 million patent applications.
When you run those kinds of numbers, 500 cases--500 plus
cases out of 4.5 million, and it splits, it says, first of all,
the interference process is working fairly. Secondly, it says
with 500 out of 4.5 million, it is a trivial, it is
statistically totally insignificant in the management or
operation of a system----
Mr. Berman. But the figure is the figure of the number of
patents filed.
Mr. Choate. That's right.
Mr. Berman. Not the number of places where two people----
Mr. Choate. No, no.
Mr. Berman [continuing]. Claim to have invented the same
thing.
Mr. Choate. The point I'm making is when you have a system
where you're filing 4.5 million patents and you only have--you
have less than 600 instances over 22 years where there's a
contest, it means that that is so small, it means the system
works so well that you only have 600 cases out of 4.5 million.
It's a tribute to the system.
Mr. Berman. That's the system with the 18-month
publication?
Mr. Choate. No. It's the system with the way that we file
patents now, a first to file system. I have other arguments
against the 18-month rule.
But the current system, from the Mossinghoff data, if you
had this kind of efficiency in any business, everyone would be
coming to study how you did it.
Mr. Dickinson. Mr. Berman, just a quick, brief follow-up. I
think the data that Mr. Choate references actually proves the
other point.
I mean, we have so few of these contests, the need to
determine who the first inventor is versus the first to file is
so infrequent and so costly that there is very little harm in
moving the system to first inventor to file to achieve the
bigger goal of getting global harmonization.
Mr. Berman. And why couldn't I draw the other inference
it's very little reason to change it?
Mr. Armitage. Could I jump in here? This morning on NPR,
there was a report that a new virus, a new vaccine against the
Marburg virus had been tested in monkeys and appears to be very
effective.
Now it's stupid for researchers to work on the Marburg
virus because it kills very few people, right? Wrong. It's a
horrible death if you happen to have the Marburg virus, and
also the fear in any community when that virus infects even one
person is horrific.
Going back to what Mr. Mueller said, that's exactly the
problem that faces the patent system. If you're a small
inventor in an interference, it can be death. And not only
that, the way the first to invent system works, you never know
you're the first inventor because you never know when someone's
secret invention date will come out of hiding, and they get
your patent. Either take it away and give someone else a patent
and exclude you from marketing the products you've developed,
or simply invalidate your patent.
So it's really the fear that it injects, the uncertainty it
injects into every patent in the entire system that makes those
small number of deaths intolerable.
Mr. Smith. Thank you, Mr. Berman.
The gentleman from California, Mr. Schiff?
Mr. Schiff. I just wanted to follow up on one issue related
to the first to file, first to invent, and ask you to speak for
some people that are not at the table today. The university
community I know has raised some concerns about moving to a
first to file system. And I know within the university
community, in fact, within the individual universities, there
are difference of opinion.
But give us your assessment, pro and con, of what this
change will mean to universities. I know they're concerned,
among other things, with not being able to compete with the
private sector in the race to file and the different nature of
the academic process at a university. If you could share your
thoughts on those issues?
Mr. Mueller. I'll speak from my perspective. I went through
getting my master's in electrical engineering and doing a paper
and developing research on how to do film scanning. And came up
with some novel ideas and some new techniques.
From my perspective, when I look at this strategy, I
believe there's an opportunity to foster under a first to file
system. If that was in place, somebody would have tapped me and
said, ``Gary, that's great. Let's write it up, and let's get it
into the process.'' And why can't that be part of the
educational system, especially with all of the research that's
going on there now?
And as a small company, we're always looking at research
activities and working with graduate students that have some
great ideas that may apply to ours. And I would think that in a
first to file system, if encouraged and trained to the small
entrepreneurial community that includes strong element of
educational institutions, that that would be a great place to
capture those ideas and credit to first person that invented
it, have them file it, and then attract businesses like myself
to say, ``Well, gee, I saw this patent application. You've done
some research on this. I've now got a job for you.''
And so, I look at it from that perspective and say the
first to file, with the discipline of understanding that it's
there and the encouragement to the educational institutions
would be a great plus.
Mr. Schiff. So you think that the universities can easily
adapt if they educate their researchers, Ph.D. candidates to--
--
Mr. Mueller. They should be doing that. I mean, I was
recently up at Penn State because my son's looking at going
there, and I actually ran into a lady who was actually teaching
a minor in entrepreneurialship as part of the engineering
department.
And I think that if you bring the educational environment
and the research that goes on in the educational environment
together with this concept of ``great idea, great graduate
paper. New intellectual property has been invented here. Let's
get you into the system.'' I think that would be a tremendous
plus for the American educational system as well as the
entrepreneurial environment in the U.S.
Mr. Schiff. If you could give me, I don't know if you
wanted to add on also, but I'm curious, too, about in the
effort to find consensus on this, are we missing the bigger
problem at the patent office in terms of the delay and the
backlog? Are we going after the low-hanging fruit rather than
the bigger problem?
Mr. Dickinson. Speaking to the latter maybe, as a former
director, I think that a number of the challenges and problems
of the PTO can be addressed by some of the reforms we're
talking about.
But as I mentioned earlier, I think the biggest and best
way to do that is to make sure that the PTO has the resources
that it needs. And then when it gets those resources, that it
deploys them effectively and efficiently. I think one of the--
--
Mr. Schiff. On that second point?
Mr. Dickinson. Yes.
Mr. Schiff. Which do you think is the bigger problem, a
lack of resources or lack of effectively utilizing the
resources they have?
Mr. Dickinson. Fortunately, because of the work of this
Congress and several previous Congresses and the
Administration, full funding has come in the last several years
on an annualized basis to the PTO. So the resources are moving
to be in place.
The next thing we'll have to see is whether they can be
deployed in ways which try to ameliorate some of the problems.
I was very fortunate that, at several points, I was able to get
the resources and hiring necessary. I think in 3 years running,
I hired 900 examiners each of those years, and pendency started
to come down. It literally does.
So while we like to say you can't buy your way out of the
problem, you can buy your way out of a big chunk of the problem
by hiring the folks who do the professional work.
And then, candidly, one important point. I think you need
to give the examiners more time. I think no single deployment
of those resources--this is a personal opinion--better serves
the examiners' cause and better serves our causes as applicants
than to get more time for examination, both in terms of quality
and, I think by extension a little bit, pendency.
Mr. Schiff. Yes, sir.
Mr. Choate. To the question of the universities and the
small inventors, we've used the system that--for 200 plus
years. And our whole administrative structure is built around a
first to invent. All of our forms, all of our people, all of
our knowledge, all of our lawyers, our paralegals, the whole
system is set up to operate in the way that it does, and it
operates very well.
If we administratively change this system, the first thing
that you're going to have from small inventors and academics
and small businesses is that fear is going to be acted upon
that others are going to rush. And so, what you're going to
see, I think, is a flush of premature applications going to the
patent office. Applications that haven't been thought out or
done in the way that they should be, which, in turn, will
exacerbate our problem with pendency upon the backlog.
I mean, the question I think that should be paramount here
is do the marginal--what are the marginal benefits of making
this radical change in our country against what are the
marginal costs of undertaking that?
I think the costs are going to be far more enormous than
the benefits that are going to be laid out. I think where the
attention should go, rather than taking a patent system and
taking our patent people and focusing them into creating and
administering this new system, it should be to give them the
resources that they need and go after that pendency rate.
For the Congress to set some Apollo moon shot objective to
say that in 3 years, you want that pendency rate down to 18
months, and a year after that, 12 months, and a year after
that, in 6 months. As Mr. Mueller said and as I think the
history of the patent system says, if we can move those patents
through there, we can get those innovations online, and that's
what's in the best national interest.
Mr. Smith. Thank you, Mr. Schiff.
Do you want to respond real quickly, Mr. Armitage?
Mr. Armitage. Just one comment. In terms of the kind of
surgery to the patent system first inventor to file is, you can
think of it as an appendectomy. Okay, something gets taken out
that had no function anyway.
Literally, what you're doing and every time there is a
contest over who should get a patent is first determine who
filed first. You can't have a patent interference unless you
know who filed first. And then in those rare cases someone has
proofs of invention to prove they invented first, that's the
appendix that gets cut out.
So, in other words, there isn't any infrastructure that
needs to be rebuilt in a first inventor to file. There is just
this piece of the patent system that has enormous cost and
uncertainty that gets removed. And indeed, I think we
demonstrated with data on how much interferences cost, how long
they take, that this is a seriously inflamed appendix.
Mr. Dickinson. Quickly----
Mr. Smith. Yes, Mr. Dickinson?
Mr. Dickinson [continuing]. With regard to the university
community and a small addition to that, too.
International harmonization often pairs a grace period with
first to file. We like to not try to link them, but they are,
for good or bad, inextricably linked. Europe and other major
developed countries don't have a grace period. That's
particularly disadvantageous to the university community, where
publication is the norm.
So you're constantly worrying about whether an early
publication is going to defeat the absolute novelty in a
country in Europe, which does not have a grade period.
If we were able to get the international harmonization, and
that would--I think it requires a pairing of first inventor to
file and grace period--the university community would actually
be better served, I think.
Mr. Smith. Thank you, Mr. Schiff.
Let me go back to that question, Mr. Mueller, with you, and
I appreciated your response to Mr. Schiff's question about the
impact on universities.
A university president with whom I spoke recently who is an
expert on patent reform said basically what you did, which is,
yes, there would be some initial, you know, inconvenience., but
they could adjust, and they could adapt. And if you took the
long view, it would be better for everybody involved.
And Mr. Choate, that gets back to the direction I was going
with you and which is I just wonder if there is just sort of a
resistance to change regardless of or irrespective of whether
there is a great deal of harm or a great deal of benefits?
And I'm going to quote you, part of your written
statement----
Mr. Choate. Okay.
Mr. Smith [continuing]. Which is a little bit different
than what you just said a minute ago. You were talking about
the cost far outweighing the benefits.
In your written statement, you said that all the cost of
changing to something else when the benefits are so illusory
and slight. And I wonder if that wasn't a quote, a slight
admission of a slight benefit as a result of harmonization?
And to me, the benefits are real and not imagined, not
illusory. But even your own statement says they may be slight.
But that gets back to my point. Do you just oppose
harmonization just because it is a change, and it's a little
bit of an unknown future?
Mr. Choate. Well, two things. As with everything, there are
benefits to--there would be benefits to having everything the
same. It would cut some of the administrative costs for those
corporations, obviously, that are engaged internationally. It
might speed time, and certainly I acknowledge that in my
testimony.
And as far as defending the status quo, that's a very
unusual--I find myself in a very unusual position doing that. I
don't usually defend the status quo. But in this particular
case, I think it merits defending.
I think the existing system, though we might like it to be
somewhat different, that the cost of changing it and the chaos
of changing it would be great. And----
Mr. Smith. Let me ask some of the other witnesses to
respond. You made the point a while ago you thought there might
be a rush to file if we changed the system. I don't know
whether that would occur or not. But if it did, it would sort
of wash by and then we'd be back, left with a better system
perhaps.
But Mr. Dickinson, Mr. Armitage, Mr. Mueller, do you want
to respond to some of the points we've been discussing?
Mr. Armitage. Yes, I think the question I would have is
rush to file by whom?
Forty some percent of our patent system is foreign
inventors who come to the U.S. patent office. They already file
based on a first inventor to file principle. You have another,
maybe quarter of the patent system that's large entity,
domestic-based inventors. They're already operating under a
first inventor to file system to the extent they file globally,
and most do.
And then you have independent inventors, small businesses,
and universities that, if they're getting any kind of good
legal advice, know the imperative to file applications promptly
once they're able to make a complete disclosure of the
invention. And there are a couple of reasons.
One, technology moves quickly. Prior art is published. Your
invention may be unpatentable if you wait to file. And of
course, if you're waiting to file in the hope of winning a
patent interference, good luck.
If you're a small entity inventor, the costs and delays and
the lost opportunities of not having the presumption of being
the first inventor because you were the first filer leaves you
with very little prospect of winning a patent interference.
So if there are a few inventors who, as a result of this,
get better legal advice and file their applications in a little
more timely manner, that's a big plus for them and for the
patent system.
Mr. Smith. Thank you, Mr. Armitage.
Mr. Choate, one other question for you. Then I'll give Mr.
Mueller a chance to respond.
Why wouldn't it be an advantage to the independent inventor
as a small businessman, business owner, to have harmonization
where their patents would be better protected in other
countries? If they were dreaming big dreams and expected their
patents to be used across the world, why wouldn't they benefit
from harmonization?
Mr. Choate. Well, having their patents defended in other
countries is, as we have learned, is really not a function of
designing better patent laws. It's a function of the
willingness of the U.S. trade representative to insist that
American inventors' rights be respected and that treaties be
enforced.
Mr. Smith. Yes. Which we know is difficult.
Mr. Choate. Which we know is difficult. So, in that
circumstance, the best option for the small inventor is to say
who may or may not get their rights enforced overseas is to
ensure that a system that works is continued. They're
comfortable. They're comfortable with this system.
Mr. Smith. Thank you, Mr. Choate.
Mr. Mueller, you had a comment a while ago?
Mr. Mueller. Yes, I just wanted to respond to the comments
that maybe there's going to be a rush to the patent office. And
I'm sitting here saying, well, guess what? As a small business
person, I'm not rushing unless I think I have something that's
really worth it because I'm still facing the cost of the whole
process to do this, and I've got other uses for those funds.
So I think that's going to be a significant mitigating
factor. And then when I go back and think about the educational
institutions, how many grad students I know that have deep
pockets that can do that as well?
So--and they're the ones that are actually, when they're
doing their graduate paper and doing the research, they're
doing a plethora of studies and analysis and looking at what
everybody else has published and what everybody else has done.
So they're doing their homework.
And if they think that they've got something they can go to
the patent office with, it's probably worth the time and an
effort to pursue it.
Mr. Smith. Thank you, Mr. Muller.
Let me see if other Members have questions. The gentleman
from California, Mr. Berman?
Mr. Berman. Well, thank you, Mr. Chairman.
I note, Mr. Armitage, that you chose not to confine
yourself to the issue of first to file and decided to comment
on other aspects of patent reform. So I'd like to just pursue
that with you a little bit.
You criticized the second window provision of our bill, a
provision that was once in an earlier draft, a bill that was
circulated by the Subcommittee. I'm not particularly wedded to
the second--I mean, one window, two windows, whatever. It's
finding a way that we can address the problem of the quality of
patents that have already issued.
And having one window right after the patent is issued I
don't think is adequate to dealing with that. I mean, we see
patents that are being litigated now that were issued 6 years
ago and 5 years ago. You mentioned the coalition support for
reform that permits the public to see post issuance revocation
of any patent at any time, which is what I think. But are you
referring to the current inter parte/ex parte re-exam?
I know that you know the limitations of that process, and
how do we avoid--how do we try to provide a useful, effective
alternative to costly litigation that goes on and on at
tremendous expense to both sides? That's what we were trying to
do with the second window, to have something when the person
knows that they're being charged with infringing conduct.
Mr. Armitage. You raise a good question. The coalition, in
its September 1 text that will be part of the record of this
hearing, actually proposed that post issuance revocation of all
patents at any time during the term of the patent be available
either through the new post grant opposition procedure, which
was designed to have a 9-month window immediately after the
patent granted, or by expanding inter parte re-exam in several
important ways.
First of all, inter parte re-exam today is not open to all
patents. It would be. Second, inter parte re-exam today can't
be effectively used because of the estoppel against later going
into court and really having the opportunity to fully litigate
the patent when you have full discovery available. That would
go away.
Mr. Berman. What would go away?
Mr. Armitage. The draconian part of the estoppel principle
that basically makes it unusable. So what----
Mr. Berman. Oh, I thought you said----
Mr. Armitage. Would go away under, frankly, 2795 as well as
the coalition text.
Mr. Berman. But----
Mr. Armitage. So we would be left with then, at any time
during the life of the patent, the ability to raise any new
question of patentability based on a patent or a printed
publication.
Mr. Berman. But without discovery?
Mr. Armitage. Without discovery. And therein, I think, lies
the rub. Because even in a post grant opposition, there is
going to be very limited discovery available. And indeed, for
certain kinds of prior art, such as unpublished prior art based
on foreign knowledge of a patented invention, that is a serious
compromise in the 9-month window for post grant opposition.
Now it's a limited compromise because if you're talking
about an alleged public disclosure in India that occurred a
year or two before the patent was filed, and now you're talking
about an opposition immediately after the patent was granted,
it may be fair to have that administrative proceeding with
limited discovery be able to wipe out a patent.
But let's fast forward 15 years into the life of the patent
and then say do you really want less discovery than you can get
in a Federal District Court? And do you really want simply an
administrative proceeding that was entirely designed to be a
quality check in the immediate post issuance period?
My concern with your bill, Representative Berman--which I,
frankly, admire your willingness to stick with the patent
reform issue given all of the difficulties--is that it goes
just a step too far.
In a post grant opposition, you can raise all issues of
patentability. You have in an inter parte re-exam the ability
to raise almost all issues of patentability except if you want
to prove public knowledge of an invention based on its use or
sale, which could be anywhere in the world. And frankly, that,
to me, is a bridge too far for an administrative proceeding.
Mr. Smith. Thank you, Mr. Berman.
Mr. Schiff?
Mr. Schiff. Sir, I have no further questions.
Mr. Smith. Okay. Thank you.
That concludes our hearing. Thank you all very much for
your testimony. You've been very informative.
I am not sure we resolved everything, but at least we know
more than we did. And so, appreciate your expert testimony.
With that, the Subcommittee stands adjourned.
[Whereupon, at 10:20 a.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 hearing on patent harmonization. The
past hearings on patent reform have primarily focused on litigation,
quality, and damages issues, but have not really delved into the
specifics of the harmonization issues--so I appreciate the opportunity
to do so now. We have tried to bring in all the interested parties in
this debate--by having witnesses from the technology and pharmaceutical
sectors (among others), public interest groups, academics, and the
USPTO. Our last attempt at harmonization was met with resistance by the
small inventor community and that is why I believe that it is extremely
important to include individual inventors in this process. Individual
inventors are responsible for nearly half of all U.S. Patent
applications filed each year.
Article I, Section 8 of the Constitution is the basis for our
patent system today: Congress has the power to promote the progress of
science and useful arts, by securing for limited times to authors and
inventors the exclusive right to their respective writings and
discoveries. The United States stands apart in awarding patent
protection to the inventor who is ``first-to-invent.'' Some question
whether we are global leaders in innovation specifically because we
reap the benefits of a first to invent system.
Confidence in the patent system is essential to encouraging
innovation. When functioning effectively, the patent system should
encourage inventors to push the boundaries of knowledge and
possibility. Two presidential commissions have recommended that the
U.S. change its patent system to a first-inventor-to-file system--first
in 1966 and again in 1992. Most recently, the National Academies of
Science recommends adopting that change as well. The advantages to
amending the ``first to invent'' standard so that the ``first inventor
to file'' is entitled the ownership of a patent seem clear. This change
will bring U.S. patent laws into harmony with international patent laws
and create ease in determination of priority rights. However, even
though this change may encourage inventors to file more quickly and
enable inventions to enter the public realm sooner, we must listen and
evaluate the concerns of inventors, both large and small, as part of
making substantial reform to the system's framework. I have always been
a strong believer in the importance of robust patent protection and as
we move towards a global economy, harmonization of patent laws becomes
an extremely important issue for discussion.
I yield back the balance of my time.
----------
Copy of the Coalition Bill from Q. Todd Dickinson, Vice President and
Chief Intellectual Property Counsel, General Electric Company