[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
FULL COMMITTEE HEARING ON
THE IMPORTANCE OF PATENT
REFORM ON SMALL BUSINESS
=======================================================================
COMMITTEE ON SMALL BUSINESS
UNITED STATES HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
MARCH 29, 2007
__________
Serial Number 110-12
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
JUANITA MILLENDER-McDONALD, STEVE CHABOT, Ohio, Ranking Member
California ROSCOE BARTLETT, Maryland
WILLIAM JEFFERSON, Louisiana SAM GRAVES, Missouri
HEATH SHULER, North Carolina TODD AKIN, Missouri
CHARLIE GONZALEZ, Texas BILL SHUSTER, Pennsylvania
RICK LARSEN, Washington MARILYN MUSGRAVE, Colorado
RAUL GRIJALVA, Arizona STEVE KING, Iowa
MICHAEL MICHAUD, Maine JEFF FORTENBERRY, Nebraska
MELISSA BEAN, Illinois LYNN WESTMORELAND, Georgia
HENRY CUELLAR, Texas LOUIE GOHMERT, Texas
DAN LIPINSKI, Illinois DEAN HELLER, Nevada
GWEN MOORE, Wisconsin DAVID DAVIS, Tennessee
JASON ALTMIRE, Pennsylvania MARY FALLIN, Oklahoma
BRUCE BRALEY, Iowa VERN BUCHANAN, Florida
YVETTE CLARKE, New York JIM JORDAN, Ohio
BRAD ELLSWORTH, Indiana
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Kevin Fitzpatrick, Minority Staff Director
______
STANDING SUBCOMMITTEES
Subcommittee on Finance and Tax
MELISSA BEAN, Illinois, Chairwoman
RAUL GRIJALVA, Arizona DEAN HELLER, Nevada, Ranking
MICHAEL MICHAUD, Maine BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana STEVE KING, Iowa
HANK JOHNSON, Georgia VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania JIM JORDAN, Ohio
______
Subcommittee on Contracting and Technology
BRUCE BRALEY, IOWA, Chairman
WILLIAM JEFFERSON, Louisiana DAVID DAVIS, Tennessee, Ranking
HENRY CUELLAR, Texas ROSCOE BARTLETT, Maryland
GWEN MOORE, Wisconsin SAM GRAVES, Missouri
YVETTE CLARKE, New York TODD AKIN, Missouri
JOE SESTAK, Pennsylvania MARY FALLIN, Oklahoma
.........................................................
(ii)
?
Subcommittee on Regulations, Health Care and Trade
CHARLES GONZALEZ, Texas, Chairman
WILLIAM JEFFERSON, Louisiana LYNN WESTMORELAND, Georgia,
RICK LARSEN, Washington Ranking
DAN LIPINSKI, Illinois BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois STEVE KING, Iowa
GWEN MOORE, Wisconsin MARILYN MUSGRAVE, Colorado
JASON ALTMIRE, Pennsylvania MARY FALLIN, Oklahoma
JOE SESTAK, Pennsylvania VERN BUCHANAN, Florida
JIM JORDAN, Ohio
______
Subcommittee on Urban and Rural Entrepreneurship
HEATH SHULER, North Carolina, Chairman
RICK LARSEN, Washington JEFF FORTENBERRY, Nebraska,
MICHAEL MICHAUD, Maine Ranking
GWEN MOORE, Wisconsin ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana DEAN HELLER, Nevada
HANK JOHNSON, Georgia DAVID DAVIS, Tennessee
______
Subcommittee on Investigations and Oversight
JASON ALTMIRE, PENNSYLVANIA, Chairman
JUANITA MILLENDER-McDONALD, LOUIE GOHMERT, Texas, Ranking
California LYNN WESTMORELAND, Georgia
CHARLIE GONZALEZ, Texas
RAUL GRIJALVA, Arizona
(iii)
?
C O N T E N T S
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OPENING STATEMENTS
Page
Velazquez, Hon. Nydia M.......................................... 1
Chabot, Hon. Steve............................................... 2
WITNESSES
PANEL I
Doll, Hon. John, Commissioner of Patents, U.S. Patent and
Trademark Office............................................... 3
PANEL II
Gross, Mitchell, Mobius Management Systems, Inc.................. 19
Lord, Bryan P., AmberWave Systems Corporation.................... 21
Ward, Emily, eBay, Inc........................................... 23
Neis, John, National Venture Capital Association................. 25
Thomas, John R., Georgetown University Law Center................ 27
Kirsch, Kevin, Taft, Stettinius & Hollister LLP.................. 29
APPENDIX
Prepared Statements:
Velazquez, Hon. Nydia M.......................................... 41
Chabot, Hon. Steve............................................... 43
Altmire, Hon. Jason.............................................. 45
Doll, Hon. John, U.S. Patent and Trademark Office................ 46
Gross, Mitchell, The Information Technology Association of
America (ITAA)................................................. 53
Lord, Bryan P., AmberWave Systems Corporation.................... 60
Ward, Emily, eBay, Inc........................................... 93
Neis, John, National Venture Capital Association................. 96
Thomas, John R., Georgetown University Law Center................ 106
Kirsch, Kevin, Taft, Stettinius & Hollister LLP.................. 123
Statements for the Record:
Computing Technology Industry Association (COMPTIA).............. 136
Innovation Alliance.............................................. 140
(v)
FULL COMITTEE HEARING ON
THE IMPORTANCE OF PATENT REFORM
ON SMALL BUSINESS
----------
THURSDAY, MARCH 29, 2007
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
2360 Rayburn House Office Building, Hon. Nydia Velazquez
[chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Jefferson, Shuler,
Gonzalez, Larsen, Cuellar, Braley, Clarke, Ellsworth, Chabot,
and Akin.
OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ
Chairwoman Velazquez. I am very pleased to call this
meeting to order, this hearing, this morning on the potential
impact of patent reform on small business. For more than 200
years, the U.S. patent system has served America's investors
and helped to foster innovation and technological advancement.
The words ``strong, enforceable patent''--based on an
effective patent system--provides a critical incentive to
innovation. Granting investors certain exclusive rights helps
spur research inventors and development efforts, which in turn
help drive American technological leadership. In this way,
patents are an important linchpin with respect to continuing
America's economic growth and global competitiveness.
An effective patent and trademark office and sound
intellectual property laws are particularly significant to
small companies. As tireless innovators, small companies
produce more than 13 times as many patents per employee than do
their larger counterparts. This demonstrates the critical role
that patents play for small firms, enabling them to attract
investors, grow their companies, and compete with larger
entities.
Due to its importance to the U.S. economy and to small
business, today's hearing will examine the effect of potential
reforms on small firms. We will hear testimony on ways that we
can improve the system to enable small companies to compete in
a global economy. This includes harmonizing U.S. patent laws
with those of other industrialized countries and strengthening
patent quality.
We will also hear about potential changes to the litigation
system, which many suggest has become a deterrent to innovation
and technological progress. Reforming the U.S. patent system
could have a very significant impact on small companies'
ability to protect as well as enforce their rights. The current
system has a significant impact on the small companies that
manufacture complex products, license patented technologies,
and defend themselves in alleged infringement cases.
We will hear testimony that will discuss these issues,
which will illustrate the important stake that small companies
have in this debate. Small innovative companies play a
significant role in the most productive sectors of the United
States economy. These companies are often more willing to take
risks than larger competitors, positioning themselves to seize
market opportunities.
As remarkable inventors, small companies use and rely on
the U.S. patent system. For many, this is central to their
business and ongoing competitiveness. Today, we will ensure
that these small firms have a voice in the patent reform
legislation.
I look forward to the testimony on this important, if
complex, issue. And I will now recognize Mr. Chabot for his
opening statement.
OPENING STATEMENT OF MR. CHABOT
Mr. Chabot. Thank you very much, Madam Chairwoman. I first
want to apologize for being a little bit late and holding the
meeting up. I am usually very careful about being here on time.
Unfortunately, I had to speak at a meeting, and it went a
little longer than we had anticipated. I hate keeping people
waiting, so I do apologize for that.
I also want to thank you, Madam Chairwoman, for holding
this hearing this morning. I would also like to thank all of
our witnesses for agreeing to share their views on this
important issue. If I may, I would like to welcome Mr. Kevin
Kirsch, who I will be introducing here shortly, who hails from
the city of Cincinnati and also happens to be my Congressional
District, the First District of Ohio in Cincinnati.
Innovation is the heart and soul of this country, and we
need not look any further than to our founding fathers and the
United States Constitution to demonstrate the importance of
patents and the development of our great nation. Through Title
35, Congress has promoted ``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 impact of which is immeasurable.''
The impact of this protection and the protections that are
contained in here is immeasurable. We now live in an age where
what was once considered science fiction is now a part of
everyday life. Advances in medicine and health technology allow
us to lead longer lives. Wireless satellite, digital and
electronic technology, have allowed us to live fuller lives,
entertaining and communicating and traveling in ways that were
never imagined in the past.
The relationship between innovation, particularly advances
in technology, and small businesses cannot be overstated. In
2003, the Small Business Administration noted, ``Small firm
innovators are extremely effective at producing technically
important innovations, and technically important innovations
are most likely to be commercially important.''
In particular, the report found, among other things, small
firms produce more highly-cited patents than large firms on
average. Small firm patents are twice as likely as large firm
patents to be among the most cited patents. Small patenting
firms produce 13 to 14 times more patents per employee as large
patenting firms. Small firm innovation on average is linked to
scientific research twice as often as large firm innovation,
and so it is substantially more high tech or leading edge.
Thus, there is no doubt that small businesses have made
significant contributions under the current patent system. But,
like many other statutes such as the Sherman Act, our patent
laws were enacted more than half a century ago. Advances in
technology, together with uncertain patents and increased
litigation, raise legitimate questions as to the sufficiency of
Title 35 to protect and incentivize innovation in the 21st
century.
For small businesses, these concerns are compounded by the
problems faced by small businesses utilizing the patent system.
In its same report highlighting the successes experienced by
small businesses, the Small Business Administration found that
``Small firms find the patent system to be problematic. The
costs of obtaining and maintaining patents can be prohibitive,
and small firms are not able to undertake expensive litigation
to defend their intellectual property.''
I believe we have a unique opportunity today to explore in
greater detail how different industry sectors utilize the
patent system, determine what works for small businesses, and
what areas can be improved to ensure that innovation continues
to flourish into the future.
I would also like to take a moment to recognize all of the
time and effort that has been invested in this issue,
particularly by my colleagues on the Judiciary Committee. I
also happen to be on that Committee. As all of you know, patent
law is a complex area, and I would like to thank Ranking Member
Lamar Smith, and Courts and Intellectual Property Subcommittee
Chairman Howard Berman, in particular for their leadership on
this issue on that Committee.
And, again, I want to thank all the witnesses for being
here today and the testimony that we will be receiving here
shortly, and I yield back, Madam Chair.
Chairwoman Velazquez. Thank you.
Our first panel, we have The Honorable John Doll,
Commissioner of Patents. He is responsible for all aspects of
the patent-granting process for the United States, more than
5,000 employees, and an annual budget of more than $970
million. Commissioner Doll joined the Patent & Trademark Office
in 1974 as a Patent Examiner.
Thank you for being here today. Welcome, and you will have
five minutes to make your presentation.
STATEMENT OF THE HONORABLE JOHN DOLL, COMMISSIONER OF PATENTS,
UNITED STATES PATENT & TRADEMARK OFFICE, U.S. DEPARTMENT OF
COMMERCE
Mr. Doll. Thank you, Madam Chairwoman, Ranking Member
Chabot, Members of the Committee. On behalf of my 8,500
colleagues at the United States Patent & Trademark Office,
thank you for this opportunity to discuss the PTO's programs
and initiatives for small businesses.
We are all aware of the vital role businesses play in
promoting our economic growth. The inventions and innovations
brought to us by independent inventors, minority and small
businesses, have improved our lives and, in fact, saved lives.
As inventors turn their ideas into viable, marketable products,
it is important that they obtain the protection they need to
safeguard their inventions.
Many of the PTO's programs and initiatives serve to educate
and assist small businesses and independent inventors in
obtaining and maintaining that protection domestically and
internationally. The PTO would not be able to effectively do
what we do without the support of the administration and the
Congress. I would like to take this opportunity to thank the
administration and the Congress for supporting our current fee
structure, which includes a 50 percent reduction for small
entities, and ensuring that the PTO has access to all of our
fees.
Full access to our fees permits us to build on our
successes in enhancing quality and production. Full access also
allows us to offer a variety of services that are particularly
useful to the minority and small businesses, as well as
independent inventors.
Our website, USPTO.gov, is an excellent starting point for
inventors. It contains a wealth of information, including
searchable databases of issued patents and of published patent
applications. Our website also offers inventors a resource page
that provides information on financing, marketing, and
invention promotion scams.
Inventors can also call our inventor's assistance center
for one-on-one help in filling out forms as well as getting
answers to questions on rules, procedures, fees, and patent
examination policy. Our inventor's assistance center receives
approximately 6,000 calls a month. Help is also available
across the country through the PTO's Patent and Trademark
Depository Library Program. This is a nationwide network of
public, state, and academic libraries, which disseminate patent
and trademark information.
They also support inventors and entrepreneurs with seminars
and training sessions. The library network consists of 85
libraries located in 47 states, the District of Columbia, and
Puerto Rico. We also sponsor two-day conferences for
independent inventors and small businesses, which feature
sessions on how to conduct a patent search, what is patentable,
what is not patentable, how to protect your intellectual
property, and even how to write a business plan.
We are also working to streamline and demystify the patent
application process. We continue to promote electronic filing,
processing of patent applications, to enable all applicants to
file and follow up on their patent applications 24 hours a day
from any location in the world.
The U.S. PTO is considering and has a variety of
innovative patent processing initiatives, including a new
offering called accelerated examination. Under this program,
which began in August of 2006, the PTO offers a complete
examination within 12 months as an option to inventors who wish
a quick turnaround. The first patent issued under this new
program was filed on September 29, 2006, and issued as a patent
less than six months after on March 13, 2007.
Independent inventors and small businesses are becoming
involved in the global marketplace where counterfeiting and
piracy are a serious threat. Small and minority businesses are
particularly at risk here, since they often do not know the law
and do not have the resources to effectively fight the fight.
As part of the administration's STOP! initiative to combat
piracy and counterfeiting of intellectual property, the PTO
manages a telephone hotline. The phone number is 1-866-999-
HALT, where callers receive information from intellectual
property attorneys at the Patent & Trademark Office on how to
secure patents, trademarks, and copyrights.
We have also established a link on our website to
stopfakes.gov, which provides in-depth details of the STOP!
initiative and has a section devoted solely to small business
issue. An important part of the STOP! initiative is a
nationwide public awareness campaign to help educate small
businesses on protecting their intellectual property here and
abroad. Our research shows that 81 percent of small businesses
do not understand that their U.S. intellectual property rights
stop at the United States borders.
We look forward to working with this Committee to improve
and expand our outreach to small businesses. Madam Chairwoman,
thank you for this opportunity to discuss these issues with the
Committee.
[The prepared statement of Commissioner Doll may be found
in the Appendix on page 46.]
Chairwoman Velazquez. Thank you. Thank you, Mr. Doll,
Commissioner Doll. In your testimony, you mentioned that patent
applications received by your agency continue to increase. And
I also understand that the number of highly technical
applications covering fields such as biotechnology and computer
science has also soared.
Under these circumstances, I applaud your agency's effort
to address concerns that have been raised regarding patent
quality. Do you believe that effective planning, adequate
budgetary resources, and rulemakings are sufficient for your
agency to address the challenge of maintaining high patent
quality?
Mr. Doll. That is an excellent question, and you have
covered quite a bit of information. Right now, the office is
doing very well. We have a large number of new initiatives to
address quality. Quality is our number one initiative. If an
applicant receives a patent that isn't of good quality, it can
be much more harm and be much more expensive than if we spend
the time to do the good quality examination.
Chairwoman Velazquez. Okay. Is that a yes?
Mr. Doll. Okay. Yes.
Chairwoman Velazquez. Yes. Thank you.
Mr. Doll. Okay.
[Laughter.]
Chairwoman Velazquez.The next panel of witnesses will
discuss a number of issues associated with the rules of patent
litigation, including venue standards and the calculation of
damages in infringement cases. Do you believe that legislation
is necessary to address the concerns that some people have
raised about the rules governing patent litigation?
Mr. Doll. Is that a yes or no answer?
Chairwoman Velazquez. Yes, sir.
[Laughter.]
I just want for the record to reflect whether you believe
that is so.
Mr. Doll. Yes.
Chairwoman Velazquez. Okay. So does the administration have
positions on various key elements of pattern reform now being
considered by Congress? What are the PTO and administration
positions on, first, post-grant review and the need for a
second window; and, two, potential reforms in the ways that
damages are calculated in patent infringement cases?
Mr. Doll. With respect to the post-grant review and the
second window, we haven't seen exactly what is in the bills
that will be introduced in the House and the Senate, so it is
difficult to comment on those. I think post-grant opposition is
an excellent opportunity to complement a program that we
already have, and that is ex parte and inter-party
reexamination.
This is an opportunity where we may be able to expand past
the printed publication, which is the only requirement in ex
parte and inter-party reexamination, to actually get to
questions that are raised with respect to Title 35 of the
United States Code 101 and 112 with respect to utility
enablement and written description.
Chairwoman Velazquez. So do you think legislation is
required?
Mr. Doll. Post-grant is an interesting option, and I am
sure there will be lively debate with respect to that. The
system, as it works right now, as you said in your opening
statement, has been working very well for 200 years. I think
the reexamination procedure provides that opportunity, and a
venue post-grant may well open up the opportunity to discuss
enablement utility and written description.
Chairwoman Velazquez. Okay. Let us switch gears for a
moment. Could you highlight some of the efforts that the U.S.
PTO is making in order to help small businesses protect their
intellectual property against piracy, counterfeiting, and
infringement?
Mr. Doll. Yes. The first thing that I would like to talk
about were some of the things that we did in our testimony, or
in my testimony, and that was education that we do through our
independent inventor conferences--the conferences that we hold
that are two-day conferences that teach people exactly what
their patent is, how to get a patent, how to process a patent.
And, as I said, 81 percent of the small businesses don't
realize that if you have an invention that is internationally
viable or marketable that you need to protect that invention in
each one of the countries where that invention may be useful or
may be marketed or sold.
We have also the inventor's assistant, where you can call
in and speak to supervisory primary examiners to see exactly
what you need to protect your invention in the United States.
We have an independent inventor's office that we have just
opened in the past year where we just assigned one of our
experienced supervisory primary examiners to help in the
outreach effort to independent inventors and to small
businesses.
We work with the patent and trademark depository library
programs, as I said, in 47 states and in Puerto Rico, which
provide really invaluable information on exactly what
information is out there, what patents have already issued, and
to provide inventors and small businesses with the opportunity
to learn what their rights are and how to protect.
We have the STOP! initiative that I talked about where we
have received thousands of telephone calls where people don't
understand what they need to do to protect their inventions. We
have 18 conferences planned that have been held--some have been
held, some have been planned--across the countries where
Undersecretary Dudas and Deputy Undersecretary Pinkos go across
the country and talk about intellectual property and what their
rights are.
Education is the biggest thing that we can do. We have also
just recently started posting U.S. patent office employees in
foreign countries as intellectual property attaches. We have
them, or currently will have them, in Brazil, two in China,
Egypt, India, Thailand, Russia, and Geneva. What they have done
is funnel a lot of the information back to the embassies and
provided information that we can then funnel to the independent
inventors and small businesses on what the challenges are in
those countries.
Chairwoman Velazquez. Commissioner, let me just say that I
really appreciate your agency's efforts in all of these areas.
Let me recognize Mr. Chabot, but I will come back and ask
some other questions.
Mr. Chabot. Thank you very much, Madam Chair. And I first
would note the--if you are noticing, there is a lot of
Democrats here, not too many Republicans here. We were actually
invited down to the White House. Most of my Republican
colleagues are down at the White House meeting with the
President about a number of issues. I personally felt that
patent reform was much more important than meeting with the
President, so--
[Laughter.]
--that is why I am here today where I should be, so--
[Laughter.]
Chairwoman Velazquez. You are going to get in trouble.
Mr. Chabot. I will probably get in trouble, you are right.
[Laughter.]
Just for the record, I like the President.
[Laughter.]
Chairwoman Velazquez. Let the record reflect that.
Mr. Chabot. Of course, that could be controversial. That is
probably a 30-second ad next time, too, so--
[Laughter.]
But in any event, I also want to thank Commissioner Doll
for accommodating me recently in visiting the U.S. Patent &
Trademark facility, not too far from here. But my staff and
myself were very--it was very interesting seeing, you know,
what goes on down there, so thank you very much for allowing us
to do that.
Just a few questions, and I think you really covered a lot
in the chair's questions here. How does the U.S. Patent &
Trademark Office deal with over-broad claims? And is there any
way to determine whether large or small businesses submit
applications with overly broad claims?
Mr. Doll. Overly broad claims is a very important issue. It
is something that we deal with from the first days that we
start to train examiners. The most important thing that a
patent examiner can do is assess the scope and the breadth of a
claim. If they don't have a correct assessment of that breadth
and scope, they may not do a proper search.
And, in fact, what we have seen in the past couple of years
is that is the number one error that we find when an examiner
makes a determination is that the scope and the breadth of the
claim had been improperly analyzed. We are spending a great
deal of time in our new patent training academy where we have
just instituted a program last year where we bring people in
and we put them through an eight-month training program.
And we spend several days of the training talking about the
breadth of the claims, scope of claims. And we have hands-on
examples, and then we allow them to look at actual applications
where rejections have been written, have been upheld by the
courts, and talk about exactly what are the pros and cons of
interpreting this claim.
It is an extremely important issue. As far as understanding
whether large or small businesses, I don't have any statistics
on that right now, but I would be happy to look into that. But
a broad claim should never be allowed, so the claims that are
allowed are the claims that have been determined by the
examiner to have the correct scope and the correct breadth.
Mr. Chabot. Thank you. What do you think will be the long-
term impact of web-based searching for patents and patent
applications? And do you think it will reduce or increase
conflict in the patent system?
Mr. Doll. I think the web has opened up new doors to the
American public, to the independent inventor, to the person
working in their garage, to the small businesses that give them
the opportunity to actually come into the United States Patent
Office and look at what patents have been issued.
If they have a particular invention, an idea, or an
innovation that they would like to patent, they have the
opportunity to look through our databases to search the same
databases that the examiners searched for prior art with
respect to patents that have issued with respect to
applications that are pending to give them an idea as to
whether or not their invention has been done or not.
I think the web has really facilitated, again, the
independent inventor and the small business to give them the
opportunity to determine what is patentable and what isn't
patentable.
Mr. Chabot. Thank you. Could you comment on what problems
arise because the United States doesn't use the first to file
system for patents? And as you discuss this type of issue--and
I assume you probably do with other countries and their
representatives--what sort of feedback do you get as far as
satisfaction or dissatisfaction with the way they do it as
opposed to the way we do it?
Mr. Doll. Right. I will go back to how Madam Chairwoman
opened, with the United States patent system has been served
well for over 200 years by the first to invent policy that we
have. We are the only country in the world that has the first
to invent as opposed to the rest of the world which has a first
to file.
The first to file takes care of a lot of complex legal
questions, if there is a question of prior art as to who
invented a particular invention. In the United States, we have
a system where we determine who was the first inventor to
invent. It may not have always been the first person to file.
So there are pros and cons on both sides of that argument.
And as I said, the United States Patent Office has been served
for over 200 years very well by first to invent, and I think
small businesses and inventors and independent inventors have
been served very well by the first to invent.
But I am sure there will be a vigorous conversation in the
Congress this year, and possibly in years to come, and the
patent office will fully support and implement whatever program
Congress feels is appropriate.
Mr. Chabot. Thank you. If you had the unilateral power to
implement any changes to the patent system to help make small
businesses--to make it work better for small businesses, what
changes would you make?
Mr. Doll. I think a lot of the changes that we are
currently trying to implement work really well for the small
business, for the little guy, the innovator that is just trying
to get started.
One of those is the peer to patent review. When somebody
comes through the patent office, we do a great job. I think the
examiners do a phenomenal job in the amount of time that they
have to do an examination and to make a patentability
determination. What we are trying to do with the peer to patent
review pilot that we are getting ready to implement in early
June is to give the public an opportunity also to comment on
these applications.
The worst thing that we can do for a small or an
independent inventor is to give them a patent where someone
else could legally or actually viably challenge that patent in
court. So allowing other people to comment on this application
while it is pending in the patent office, whether that be
during a peer to pilot review during the examination, or
whether that be during a post-grant opposition period, I think
gives the small inventor and the independent inventor an
opportunity to have a patent that they feel is extremely
strong, that they feel confident will withstand a legal
challenge in court.
Mr. Chabot. Thank you. And one final question, would some
type of formal or informal arbitration system be effective in
your view in contesting the validity of patents? Would that be
more effective than the current interference proceeding or
post-grant review?
Mr. Doll. Post-grant is an interesting option where we are
looking for a low-cost option, to try to be fair, to try to
balance the system, to make sure that the little guy, the small
inventor, the small business, has the same opportunity in a
reasonably cost-effective manner to challenge a patent and to
look at that.
We also have the reexamination proceeding that I think also
does that. For $2,520, somebody can challenge a current patent
and ask for reexamination, where they actually have a team of
three examiners look at a patent one more time and make a
determination whether or not there was prior art that raised a
substantial new question of patentability.
We have actually just created a new central reexam unit,
and in that reexam unit these are people that are highly
skilled, dedicated to the reexamination process, which look at
these applications and, again, go through the complete
examination process with respect to the new prior art that was
submitted by either the patentee or a third party requester,
and then any additional new art that they might uncover or
discover during their searches to make a complete
determination, again, as to the validity of those patents, and
possibly amend the claims, cancel claims, or possibly cancel
the entire patent.
Mr. Chabot. Thank you.
Madam Chairman, I yield back.
Chairwoman Velazquez. Thank you.
Mr. Larsen, you are recognized for five minutes.
Mr. Larsen. Thank you, Madam Chairwoman. I just have one
question, but it has got a little bit of a follow-up--or sort
of a lead-in to it. Since '90, when the U.S. Patent & Trademark
Office became self-reliant, until '05 when fee collections
exceeded appropriations, and during those years there was about
$750 million diverted right from PTO, U.S. PTO.
The U.S. PTO received in excess of 440,000 patent
applications in '06, is that right, a record number?
Mr. Doll. Yes.
Mr. Larsen. Yes. To help meet that demand, the agency hired
over 1,200 patent examiners, exceeding your goal by 200 people.
And they are going to continue to hire over 1,000 patent
examiners over each year for the next five years.
Recently, in testimony to the House Judiciary Committee,
the head of U.S. PTO testified that PTO's '06 budget
appropriation was sufficient to meet agency demands. But there
is still this concern about a precedent of fee diversion, and
what that might mean for available dollars. It is my
understanding as well that the decision to grant PTO a robust
budget appropriation has been a year-to-year determination as
well.
So given that as a lead-in, it is also my understanding
that the recent reports by National Academy of Science and the
FTC conclude the PTO does not have sufficient resources to
ensure that it can meet its mission. So given the conclusion of
those reports, and the testimony from the head of the PTO,
which seemed to be at conflict, can you--do you agree with the
conclusions of those reports? Or can you help enlighten us
about why there might be a difference of opinion between the
testimony given and the conclusions of these reports?
Mr. Doll. Well, I fully support the President's budget. I
fully support the appropriations that have been given by the
Congress to the U.S. PTO. And as I said in my testimony, we
really appreciate the full funding. Full access to our fees
gives us the opportunity to institute programs, to carry out
programs, and we have a list of new initiatives that I would
love to talk about, but I am afraid I don't have time to talk
about, that wouldn't be possible without full funding.
The full funding has allowed us to actually recreate the
independent inventor's office that I talked about, where we
have just recently reinstituted it, reinvigorated it, and made
it much more robust than it has been in the past, to reach out
to small businesses.
As far as the funding issue, what has happened in the
past--and I certainly don't disagree with where the money was
diverted to. They were very good projects and very worthwhile.
But what happened to the U.S. PTO is that we were unable to
hire at the levels that we felt we needed to hire to meet the
growing demand of the applications filed. And we currently have
a backlog of 735,000 unexamined applications.
What we did last year was examine 320,000 new applications.
So if you do the math very quickly, we added over 100,000
brand-new unexamined applications to the backlog last year.
This year, we will add over 100,000 additional new applications
to the backlog and end the year with over 800,000 new
applications in the backlog.
We have initiatives to try to address that. We are trying
to do a limitation on the number of continuations that an
applicant can file. We are trying to focus the examination by
limiting the number of claims that an application can contain,
without providing additional support.
We have no per se rules on strictly limiting the number of
applications or the number of claims, but we have set limits
where within those limits there is no additional help required
from applicant. But if you feel that you need more claims, you
are more than welcome to file them, but we are going to ask you
to file an examiner's support document to aid the examiner, to
help the examiner do a more focused examination.
Mr. Larsen. So, if I may, it sounds like you appreciate the
full appropriation.
Mr. Doll. Yes, sir.
Mr. Larsen. But with regards to the National Academy of
Science report and FTC report, you haven't directly answered
that question whether or not you agree with the conclusion of
those reports. It sounds from your answer is that they--NAS and
FTC have made a very good case that there is a lot of work to
be done that isn't getting done.
Mr. Doll. You are absolutely correct, and I certainly don't
mean to avoid the question. But I do want to make sure that I
support the budgets that we have been given and appreciate the
full funding.
However, there is always more that we can do. We have a lot
of initiatives that we would like to put in place. We have new
programs that we would like to institute. It would be great if
we could reach out to small businesses more, actually spend
more time in the field working with them, provide better search
systems, provide more up-to-date search systems.
More money would always be appreciated, so if you are able
to do that the patent office would find very good ways to
utilize that money to help small and independent inventors.
[Laughter.]
Mr. Larsen. That is an unusual request.
[Laughter.]
Thank you.
Thank you, Madam Chairman.
Chairwoman Velazquez. Mr. Jefferson.
Mr. Jefferson. Thank you, Madam Chair.
Mr. Chabot asked the question one way, which was, if you
had the power to enact to some provisions, which would they be?
I want to ask it a different way. Which of the proposals that
you are aware of that are under the so-called label of reform
of the patent system would be most advantageous to small
businesses if they were adopted?
Mr. Doll. I don't have a good answer, because the proposals
that I have seen have been proposals that are a long way from
final rules or law. And I would hope that the office would have
the opportunity to work with Congress and to work with the
Committee to make sure that there is always a fair and balanced
equity between the large entity, the people with the deep
pockets that can run to the office often, and that small
independent inventor that is trying to get his invention off of
the ground or trying to get a corporation started.
And so I am not sure which ones would be most
disadvantageous, because I see pros and cons on both sides, but
overall from the programs that I have seen and the bills that I
have seen from the last Congress it looked like we could make
all of them work fairly and equitably for.
Mr. Jefferson. The issue of access to the federal courts,
in your opinion, would that--just ask on this one, would that
be more or less disadvantageous to small or larger concerns?
Mr. Doll. I am not sure I understand the question.
Mr. Jefferson. Well, the cases now in court, there is some
talk about arbitration, some talk about other ways to get after
disputes. Do you think if we--right now the court actions that
are brought to deal with patent infringement questions--and so
my question, I am trying to get specific on one issue, I
couldn't get the broad ones, just ask about this. Do you think
that would disadvantage small business folks or not?
Mr. Doll. I think the court system has fair access for both
large and small entities. There is always a question of cost as
to whether or not the small entities have the resources to
fully fight the fight. We do have programs in the office, such
as the reexamination unit, where for what I think is a very
reasonable cost they have the opportunity to challenge the
validity of a patent.
Mr. Jefferson. Let me ask you another question and get out
of this area, then. On harmonization, there are differences
pointed out in the information I have gotten here about how
different regimes deal with patent issues. I would guess you
would say that the U.S. parent regime, if I can call it that,
is superior to the rest of the world's patent protection
regime, would you not?
Mr. Doll. Oh, absolutely.
Mr. Jefferson. So, consequently, we don't want to harmonize
too much, do we, with the rest of the world, if ours is better
than theirs, do we?
Mr. Doll. I was hoping harmonization would lean towards the
U.S. system.
Mr. Jefferson. Oh, I would hope so, too. But all of the
material I am reading about the reform seems to suggest that we
ought to join league with others in the world, because our
system is different. I suppose it is different because in your
opinion mine is better.
Mr. Doll. I think our system is better. I think our quality
is better. It is certainly less expensive. It is less expensive
to obtain a patent and maintain a patent in the United States
than it is anywhere else in the world, especially with respect
to Japan or the EPO. When it comes to our quality, I believe
our quality is better than the quality in either the European
patent office or in the Japanese patent office.
Mr. Jefferson. So you would warn against harmonization that
takes us to the other patent regimes as opposed to our own.
Mr. Doll. I agree with you, Congressman. The United States
system is the best system, and harmonization should lead
towards the United States, as compared to leaning towards
either the Japanese or the European system.
Mr. Jefferson. Thank you, Madam Chair.
Chairwoman Velazquez. Mr. Gonzalez?
Mr. Gonzalez. Thank you very much, Madam Chairwoman. And
welcome, Commissioner.
Mr. Doll. Thank you.
Mr. Gonzalez. These are huge issues, and we try to remain
focused on the implications and consequences of small
businesses. Obviously, things are going on in other committees,
things are going on in the Senate, but our charge really is
about small business, and sometimes they just kind of get lost
in the one size fits all, because many times the size is just
too big and it doesn't fit small businesses, and that is going
to be my fear.
And how do we define or characterize some of the smaller
players? Now, I am going to be reading from a recent article.
``Computer companies say they are often the targets of suits
filed by technological buffs.''--now, I would imagine
technological buffs are probably small business--``who obtain
patents they do not intend to use to provide a product or
service.''
And I am going to read on, ``Microsoft, the world's largest
software company, is a defendant in more than 35 patent
infringement cases. The vast majority of those cases were filed
by individuals and small companies whose main business is
licensing patents,'' said David Capers, Microsoft's General
Manager of Intellectual Properly Licensing.
``There is such uncertainly about patent quality and about
patent litigation that it really rewards those willing to play
the patent lottery. Microsoft says the current system gives
patent owners of any size--small, for instance--excessive
powers to demand royalties.'' And it goes on to discuss that.
And I understand the perspective from Microsoft, and I
understand Pfizer, and I understand Amgen, I understand what is
going on out there. The difference, though, is that I think
they can articulate and promote their view of the world much
better than small businesses, and that is my biggest concern.
And I am not saying every small business litigant is right,
and the big issue then, is, are we going to wait for the courts
for the litigate this, or are we going to legislate something?
Where courts used to defer to the legislature pursuant to the
Constitution of the United States and are now maybe deviating
from that. So we do have a charge, and we are going to be
acting.
What I am going to ask you to do, and I am going to
basically follow pretty much what my colleague, Congressman
Jefferson, was pointing out, but I am going to ask you to
present your testimony in this light. Worst case scenario for
the small business, when we talk about harmonization, what
would be the things that we need to guard against as we promote
the best interests of small businesses in the United States?
For instance, if we do have some harmonization, are we only
extending the problems from, let us say, a domestic model to an
international model for small businesses?
Secondly, patent quality--I am reading in our memo.
``Leading technology companies have raised concerns that
modifications to U.S. patent law should be made to help ensure
that patents issued by the PTO continue to be quality
patents,'' whatever that really does mean. Again, worst case
scenario for small businesses, if we attempted to do something,
where should we not be going?
And, last, patent litigation, basically, you know, loser
pays, and so on. And we can have that debate over and over
again, but I will tell you now it is a tremendously chilling
effect when someone asserts a legal right and doesn't have the
resources and takes a great risk, and then they lose because
sometimes I am just telling you they are truly outdone. And I
have witnessed this firsthand, and they will lose.
And then, of course, then they are going to be saddled with
the cost of the litigation that was brought in good faith, but
for whatever reason that jury or that judge just didn't see it
that day. And many times it is just the legal talent, in
quantity and quality in that courtroom. So I just want to know,
what would be the worst case scenario for businesses as we
attempt to reform patents?
Mr. Doll. I am at a loss as to what the worst case scenario
would be. What I would like to address, if you allow me, is to
talk about the quality, because I think that is the thing that
the U.S. PTO can do, has control over, and it gives the small
businessman or the independent inventor the most leverage,
whether it be in court or whether it be in litigation, or
before the patent office.
Our quality numbers are the best they have been in over 25
years. What we are doing in the office is we have a large
number of quality initiatives. We have a targeted review. We
are using a second pair of eyes. We have a quality review
program that looks at a statistically significant sample of
allowed applications--applications where the examiner has
finished their work. And we also have an in-process review,
where we look at the work as the examiners are doing it.
We have experts in each one of the technology centers to
address whether or not these inventions, whether or not these
applications are ripe for appeal. Before an application goes to
the Board of Appeals to make a determination as to whether or
not the examiner has made a correct determination, we have a
pre-appeal brief conference where the examiner sits down with a
supervisory primary examiner and an appeal specialist and goes
over the arguments made by applicant and made by the examiner,
to make sure that the inventor, to make sure the applicant
isn't spending money to write an appeal brief to go to the
Board of Appeals to get a decision whether or not the examiner
was right.
After the pre-appeal brief conference, we then have another
appeal brief conference, that once the applicant has spent the
money to write the appeal brief, and to file that formal
appeal, that the case is still ripe, that it should go to the
Board of Appeals. Our affirmance rate at the Board of Appeals
has been rising over the last couple of years, meaning that the
examiners are doing a better job of picking cases that really
are ripe for appeal, where the examiner has made the correct
determination during the prosecution.
Quality I think is the key. Regardless of how we harmonize,
I think if the applicant, whether it be a small or a large
entity, if they walk out of the patent office with a quality
patent, a patent that they are sure they can walk into court
and defend, that they have confidence in that they are going to
win, no matter how much it costs them to finance that
litigation, I think that is the best thing that we can do for
all of our applications.
We have another program that we are working on this summer.
We are actually working with our PPAC, our Patent Public
Advisory Committee, which is a Congressionally-mandated
advisory committee to the patent office. We are working with
them to do townhall meetings this summer across America. And
what we are doing is we are looking to--
Chairwoman Velazquez. Time expired, so if you want to
finish your sentence right there.
Mr. Doll. What we would like to do is get opinions from
stakeholders as to what we can do to the office to make it work
better for every one of our stakeholders, whether it be a large
or a small entity.
Mr. Gonzalez. Madam Chair, will you indulge me for 10
seconds?
Chairwoman Velazquez. Sure.
Mr. Gonzalez. Thank you.
Commissioner, what I was trying to elicit from you was
basically where not to go, and that is the lesson that we all
learned when we have had Alan Greenspan before us. He would
never tell you where to go, but he definitely told us where not
to go. And that is what I really wanted. And I know it is a
difficult one for any administrator or chairman or commissioner
to tell us, but sometimes a little bit of guidance does help
Congress, and I thank you for your service.
I yield back.
Chairwoman Velazquez. Okay. Mr. Shuler?
Mr. Shuler. Madam Chair, thank you.
Mr. Doll, thank you for your testimony here today. I want
to talk about third party requesters. You know, how effective
is a third party requester? Is that where you are seeing some
of the fraud and abuse on patents? How does help small
businesses?
And I looked through some of the statements, and it looks
like you have, you know, 5,000 employees who are actually
working with the patent office in order to conduct the files
and the processes. And it looks like they have to obtain about
one and a half patents under review per week.
Mr. Shuler. Well, is it more effective for your office to
be able to have a third party such as an attorney or some of
the court--you can read the line item ads in the classified
sections, or even sometimes you can actually see it on the TV,
``If you have a patent, please inquire at our office.'' How
effective, and what is the abuse side of that?
Mr. Doll. That is a great question, and I think that is an
opportunity for the patent system to take a quantum step
forward and to increase quality immeasurably. What we are doing
is the statistic that you reported is absolutely correct. The
average examiner has 20.4 hours to do an application. That is
the average examiner. That is the average application last
year.
In that time, the examiner does a search, reads the claims,
analyzes those things, and then makes a patentability
determination and informs the applicant as to what is
patentable and what isn't patentable. What we are doing with
the peer to patent review that you spoke about, or third party
submissions, is to allow other people to opine on the
patentability of this application.
Now, we have heard from some small entities that they see
this possibly as the big guy ganging up on the little guy. I
don't see it that way at all, because, again, what I would like
to do is talk about quality, because the more opinion that you
get, the more prior art that is before the examiner, the better
opportunity that examiner has to make that right determination
and to grant a patent properly.
When you look at the litigation history, and you look at
the court statistics, when the examiner has the best prior art
in front of them, they make the right decision the vast
majority of times. So the peer to patent review actually gives
the examiner a better opportunity to actually make that
determination.
We are starting a pilot in probably early June this year,
maybe July, where we are actually going to work in one of our
technology centers, one of our high-tech technology centers,
where we do software and all of our hardware computer
applications. And we are going to run the pilot for a year
where we are working with Beth Novak from New York University,
and we are actually going to have an external body review
applications that are voluntarily submitted to this program and
then published, and then allow this body, this third party
submission, of prior art with explanation to the patent office
as to why these claims are patentable or why they are not
patentable over the prior art that they turned up.
I think that gives applicant a much stronger feeling about
the patent that they get, and would give them the confidence to
say, ``My patent has gone through not only review by the patent
office, it has gone through a peer review by an objective third
party who would really like to opine and be experts in this
area.''
Mr. Gonzalez. Would it increase the costs from the
applicant?
Mr. Doll. No. No, it would not increase the cost at all,
because the third party review is purely voluntary on their
part. They would make a submission to the office, and then the
examine would review that submission and then make the same
determination. So there would be no cost at all, but I think a
much higher quality.
Mr. Shuler. And from your budget standpoint, will we see a
reduction in the budget, or would it be an increase in the
budget because of that third party?
Mr. Doll. The budget would stay the same. The examiner
would view this as actually additional prior art, and would
view that as a help in making the determination.
Mr. Shuler. Expediting the process much faster?
Mr. Doll. I don't think it would expedite it, because we
would not relieve the examiner from doing their search or
making their own determination. This would just be one more
submission that they would consider.
Mr. Shuler. All right. Great. Thank you, Mr. Doll.
I yield back.
Chairwoman Velazquez. Thank you.
Ms. Clarke?
Ms. Clarke. Thank you very much, Madam Chair.
Good morning, Commissioner. I wanted to ask about the
inventor's assistance center. Is it physically located in one
place? Can you tell us a little bit more about it?
Mr. Doll. Right. The inventor's assistance center really
is--it is one of our flagships for independent inventors. It is
staffed by retired supervisory primary examiners. They have one
administrative patent judge who retired and came back and is
working as an inventor assistance center person.
We have a great deal of expertise there on everything from
how to fill out the forms to actual examination questions and
how to deal with an examiner. It is one on one. It is
physically located in the Patent & Trademark Office. But
because we have an 800 phone number, anybody can call in from
anywhere where they would like and get that assistance.
Ms. Clarke. Commissioner, have you considered perhaps
partnering with SBA or one of the other entities that serves
small businesses, so that we can sort of decentralize that
operation and get perhaps an individual who does the outreach
into other communities and then channel them into the 1-800
number?
I raise that simply because when you re talking about, you
know, isolated communities, perhaps immigrant communities,
perhaps African-American communities of color, navigating the
system tends to be the challenge. Even though we have stuff
online, we may mention 1-800 numbers, when they are able to
actually physically see someone, especially because they are
holding on to their inventions so tightly. They want to see
someone face to face, because they don't want someone to steal
their information. Have you considered that?
Mr. Doll. That is a great suggestion, and it is an idea
that I will take back to the office. We have partnered with
various organizations, inventor organizations, small business
agencies. When we go to particular cities for our independent
inventor conferences, and we have had them come in and actually
talk to the independent inventors and the small businesses, it
is--as far as decentralizing, that is a wonderful idea, because
you are absolutely right.
When you see the inventors walk in to our independent
inventor conferences, they are holding their notebooks, and
they are holding--
Ms. Clarke. With sunglasses on, right?
[Laughter.]
Mr. Doll. And they are holding them very closely, because
they don't know who to trust, and they don't know who to
disclose their inventions to. As I said, we have an inventor's
scam listing on our website--
Ms. Clarke. Exactly.
Mr. Doll. --to show maybe who you shouldn't be dealing with
or who you actually do have a good relationship with. We do
outreach with other agencies, as you said. But incorporating
them into our inventor's assistance centers is a very good
idea, and thank you for that.
Ms. Clarke. No problem, Commissioner. And then, just
finally, can you tell this Committee, what is the culture of
diversity within the Patent & Trademark Office? The American
business environment consists of a multiplicity of diverse
ethnic groups. Therefore, diversity in staff and attorneys is
important and should be a reflection of the environment that
you serve.
Has your office organization done any training or studies
to identify how the Department can be more sensitive to this
changing environment? And what is the dynamics as it relates to
women in senior-level positions?
Mr. Doll. Again, that is a great question. And I would be
pleased to have you visit the United States Patent & Trademark
Office, because when you walk around our campus it is almost
like the United Nations. We are 54 percent diverse. Almost 50
percent of all our patent examiners are women. It is a truly
diverse organization.
Ms. Clarke. Well, thank you very much, Commissioner.
Mr. Doll. Thank you.
Ms. Clarke. Thank you, Madam Chair. I yield back the rest
of the time.
Chairwoman Velazquez. Thank you.
Commissioner, a large number of engineers and Ph.D.s are
employed by small companies, and they undertake extensive
research and development efforts. My question to you is: does
PTO gather any specific information about small business patent
applicants?
Mr. Doll. Well, we do have some data on the number. When it
comes to small businesses, small entities comprise about 30
percent of the applications that are filed. They comprise over
25 percent of all the patents that we issue.
Chairwoman Velazquez. Okay. Thank you. Let me thank you
again.
We are going to take a recess. We have a vote on the House
floor.
Commissioner, I will ask you, do you have any staff with
you?
Mr. Doll. Yes, I do.
Chairwoman Velazquez. And they will stay here to listen to
the second panel?
Mr. Doll. Oh, yes, absolutely.
Chairwoman Velazquez. It is going to be a very interesting
panel, and I think it is worth having your staff here.
Mr. Doll. Absolutely.
Chairwoman Velazquez. We will recess.
[Recess.]
Chairwoman Velazquez. I want to welcome all of the
witnesses and thank them for agreeing to be here today to shed
some light into this important issue.
Our first witness is Mr. Mitchell Gross. He is a Chairman
and CEO of Mobius Management Systems, a company that he helped
found in 1984. Mobius is the leading provider of comprehensive
software solutions for enterprise archives and records
management. Mobius has over 400 employees and is headquartered
in Rye, New York. Mr. Gross is testifying on behalf of the
Information Technology Association of America. Welcome.
STATEMENT OF MITCHELL GROSS, PRESIDENT & CEO, MOBIUS MANAGEMENT
SYSTEMS, INC., ON BEHALF OF INFORMATION TECHNOLOGY ASSOCIATION
OF AMERICA
Mr. Gross. Thank you, Chairman Velazquez and Ranking Member
Chabot, members of the Committee. I very much appreciate the
opportunity to appear before you today and discuss the
importance of patent reform to small business.
The United States patent system is something I work with
almost every day in my business, and I believe very strongly
that there are some problems with the system that demand our
attention as a nation and an economy.
First let me tell you a little bit about my company, Mobius
Management Systems. Mobius, as you stated, is a leading
provider of comprehensive software solutions, archiving, and
records management.
Twenty-five years Mobius has defined and led the market,
software that stores, index, distributes diverse documents,
reports, images, in any format from any source. Our solutions
have achieved industry-wide recognition for the ability to
support high-volume, high-performance simultaneous access
requirements in distributed environments that range from the
desktop to the mainframe.
Commentators have said that more than 85 percent, if not
more, of all the information we create today in the United
States, in both government and private sector, is created in
electronic form, documents to banking transactions, product
logistics, e-mail, data analysis, graphs, charts, and all the
rest. Much of that only exists in electronic form and is never
put on paper.
We at Mobius play a key part in designing and implementing
software systems to match. We create our own software, license
software products from other companies to implement the
solutions. Mobius has over 400 employees, headquartered in Rye,
New York. We still do the overwhelming majority of our
development in the United States.
I am also testifying on behalf of the Information
Technology Association of America, which counts many small
businesses among its 325 members. ITAA represents companies of
all size. About half of the ITAA members are small businesses.
I am privileged to serve on the Board of Directors of the ITAA
Information Technology Service.
Chairwoman Velazquez, as the head of a small business in
the information technology sector, I am aware and I am here to
stress the fact that the United States patent system is broken
and needs to be fixed. Let me make it clear from the outset,
however, that I am a strong supporter of patent protection and
the role it plays in fostering innovation. And I, too, am the
holder of a patent.
Constitutional power of Congress to promote the progress of
science and useful arts by granting exclusive patent right for
limited periods of time has been and continues to be one of the
cornerstones of successful American economy. The United States
patent system does have a profound effect on innovation, new
business development, job creation, and everything else,
creating wealth of that nature.
Today, however, the U.S. patent system has developed a
number of flaws that need to be addressed by legislation. The
problem is important because the systems impact is so
important. The system as skewed as it is now has a profound
effect, retarding business development and wealth production.
Where I sit as a small business man, the issues with the
patent system stretch from the process of patent application
and grant at the PTO on through the process of enforcement,
licensing, and litigation. The issuing process is too
expensive, takes too long, and poses too much risk that an
over-broad patent of questionable validity will issue at the
end.
The enforcement side, the system is so tilted to the
plaintiff patentee's advantage; that is, the cost of losing
litigation can be so high with multiple worldwide damages based
on excessive estimates of the value of the infringement, that
defendants are forced to settle, regardless of merits of their
defense or the weakness of the patent underlying the
plaintiff's claim.
Legislation was introduced in the last Congress. And I
understand it will be soon introduced again. I applaud the
effort to move from generalities about the need for reform,
epic proposals that change the structure of how the PTO has
business and how patent infringement litigation is conducted.
If I had to try to characterize the problem in just a few
words, I might say too much risk of losing a fight when a bad
patent stands up against information. What is a bad patent? It
is one that is overly broad in its coverage, often one that
covers a process, usually one that does not seem very novel to
somebody like me who has been in the business for over 25 years
that I have been involved with at Mobius. I think the problem
may be particularly acute in the software and IT services
industry.
The United States needs to do a lot more to improve patent
quality at the outset. Everyone knows that not every patent is
issued by the U.S. Patent Office. A lot can be done to improve
the PTO's access to and knowledge of prior art, the key to
determining whether an application really presents a novel and
non-obvious innovation.
It remains important to have a viable low-cost
administrative process for reviewing patents that already have
been issued if the claims of the validity hold up unchallenged.
Of course, it is not the fact of over-broad patents that
matters. It is the consequence of infringement that weighs most
heavily in the equation. And right now the risk of very high
damages are exorbitant settlement requests in my mind very
real.
Basically, Chairman Velazquez, the current system in my
view leaves small business in a position where we are afraid to
innovate. I don't have confidence that undisclosed patent
applications are truly novel. My company does not have the
resources to do extensive patent searches every time we should
in the modern environment, featuring many more patents than has
been the case in the past.
If we make a mistake and step into a field of technology
covered by undisclosed applications, we run very high risks of
serious consequences in the face of a system that favors all
patentees.
While the discussion of what to do about the problem--
Chairwoman Velazquez. Mr. Gross, time has expired. Would
you like ten seconds to summarize whatever important point you
want to make?
Mr. Gross. Okay. Without reform, a system that is intended
to serve innovation is having the opposite effect. Whenever my
company engages in development of products and services, we
have to ask ourselves what is it.
Chairwoman Velazquez, that concludes my prepared remarks. I
would be happy to answer questions.
[The prepared statement of Mr. Gross may be found in the
Appendix on page 53.]
Chairwoman Velazquez. Thank you very much.
Let me remind the witnesses that you will have five minutes
to make your presentation.
Our next witness is Mr. Bryan Lord. He is the Vice
President for Finance and Licensing and General Counsel of
AmberWave Systems Corporation. Founded in 1999, AmberWave is a
small technology firm focused on research and development of
advance materials. And the company is a pioneer in the field of
strained silicon technology. AmberWave has been a symbol, a
portfolio of 180 patents, employs 23, and is based in Salem,
New Hampshire.
Welcome, sir.
STATEMENT OF BRYAN P. LORD, VICE PRESIDENT, FINANCE &
LICENSING, GENERAL COUNSEL, AmberWAVE SYSTEMS CORPORATION
Mr. Lord. Thank you. Madam Chairwoman, thank you very much
for that kind introduction. You have saved me a couple of
minutes of my testimony. Representative Chabot, members of the
Committee, thank you as well for the opportunity to be here
with you today.
I want to echo Representative Chabot's comments about the
special effort that the Judiciary Committee has been making on
this issue. We appreciate that and equally appreciate the Small
Business Committee taking an effort to take a special look at
this from the small firm's perspective. I would also note that
uniquely this has been what appears to be a bipartisan effort
as well. And we appreciate the two of you sitting side by side
and taking a look at this from our perspective.
As you mentioned, Madam Chairwoman, AmberWave Systems is a
small company, 23 employees. We like to think of ourselves as a
bit of a special company as well. And that is because we are
one of 5,000 spinouts of university technologies that have
occurred over the course of the last 25 years.
This is largely due to the successful buy-dual litigation
that was passed years ago and has really been the catalyst for
a special network of firms that combine entrepreneurship,
invention, and investment into what some business school
professors have called a value network.
These value networks are really the secret behind why
economies like Silicon Valley; New England's Boston Route 128;
Research Triangle Park; the Austin, Texas region all have a
very special and robust economy associated with them.
I will try to be brief. I want to make just three points.
One is America does have the world's most innovative economy.
And that is, in large part, because of a very properly and
well-functioning patent system.
I will, respectfully, disagree with Mr. Gross and say that
our patent system is not broken. We think that our patent
system, in fact, is the gold standard in the world. And
changing the patent system in a manner that would call for
wholesale change would be inconsistent with I think its proper
role in creating our world's most innovative economy.
Second, I think that patent reform still is necessary and
an appropriate topic for us to be talking about. AmberWave is
one of the founding members of a group called the Innovation
Alliance, a coalition of firms, small, medium, and large, that
all believe that the most appropriate place for us to be
focusing our attention is on improving patient quality in very
much the same way that Commissioner Doll talked about from the
PTO's perspective, and that, really, as the PTO is working hard
on their efforts, as the Supreme Court has also taken cases
under consideration, really, through patent quality, we can
really address most of the ills and help those that are working
within the system and still discourage those that are abusing
the system.
Let me point out that if the changes that were proposed in
the 109th Congress were reintroduced, just hypothetically but,
as some have said and speculated that would be the case, these
changes would have a severe negative impact on small firms like
AmberWave and this innovation ecosystem that I talk about Let
me highlight just three ways quickly.
One is the so-called first to file method and revision. As
Commissioner Doll talked about, inventors clutch their
notebooks to their chest. And it's really through the first to
invent process and standard that's unique in the world that
inventors get credit for their invention that is properly
documented in their notebook.
To suggest that we should harmonize with the rest of the
world and go to a first to file standard suggests that what we
really do is have a race to the courthouse and reward a patent
lawyer who first pays a fee, as opposed to an inventor who
properly documents their invention in their notebook.
Second, so-called post-grant review. We have talked about
that. I think the most troubling problem with post-grant is the
incessant uncertainty and unreliability that would be added
into the system for a patent in a post-grant regime.
We think the pre-grant focus, as the commissioner talked
about, is the appropriate place to talk about it, but to throw
into the system an uncertainty and unreliability into patents
would make it very difficult to found new businesses.
Finally, the so-called apportionment provision is very
difficult and problematic for small firms. What it suggests is
that a quantitative standard would be directed towards juries
to assess and award damages after an infringement was found.
That would prohibit the jury from taking into account a
disproportionate and significant impact that a small firm may
bring to an overall product. And that would be harmful on small
businesses.
So far this debate has been largely between big tech and
big pharma, as we saw in the last Congress. And we appreciate
the opportunity here in the 110th for you to be expanding the
interests and hearing from voices like small firms, like
AmberWave, and the innovation economy that we participate in.
Thank you.
[The prepared statement of Mr. Lord may be found in the
Appendix on page 60.]
Chairwoman Velazquez. Thank you, Mr. Lord.
Our next witness is Ms. Emily Ward. She is the Associate
General Counsel for patents at eBay Inc. eBay is a global
online marketplace enabling trade on a local, national, and
international basis. With a diverse and passionate community of
individuals and small businesses, eBay offers an online
platform where millions of items are traded each day. eBay was
founded in 1995 and is based in San Jose, California.
Welcome, Ms. Ward. You will have five minutes.
STATEMENT OF EMILY WARD, ASSOCIATE GENERAL COUNSEL, PATENTS,
eBAY INC.
Ms. Ward. Thank you, Chairwoman Velazquez, for that
gracious introduction. Chairwoman Velazquez, Ranking Member
Chabot, and members of this Committee, we would like to thank
you for giving us this opportunity to testify about the
importance of patent reform to small businesses.
Patent litigation reform is not just about patent holders
or the technology industries that are developing cutting-edge
technologies, products, and services that improve our everyday
lives.
The patent litigation reform debate should not just be a
legalistic discussion of arcane patent law technicalities. No.
Patent litigation reform is about making it easier for
hardworking small business people and entrepreneurs across
America to use technology tools to succeed in their chosen
field of business.
I believe that the most important message here today is
that while Twenty-First Century digital technology is important
for big global businesses to operate successfully, it is even
more important for American small businesses.
Technology tools help level the playing field. They enable
small businesses to succeed in our highly competitive global
economy. The unfortunate reality today is that patent
litigation abuses are imposing significant legal costs on major
technology companies across the board. These costs are passed
along to technology users in the form of higher prices.
Higher prices hit small businesses with their narrow
margins particularly hard. Take a look at the technologies that
have been targets of abusive patient litigation: computer
hardware, software, cell phones, BlackBerries, printers, and
online services and Web sites.
As consumers, many of us would like to have the largest
cell phone, the newest laptop, or cutting-edge digital
entertainment systems. These are fun gadgets, but we don't
really need them. This is not the same for small business
people. It is hard to find a small business person who is not
using a host of digital technology equipment and tools every
single day to do business.
In short, small business must have and needs affordable
effective technology. They are not fun gadgets. They are the
tools that enable small business people to operate
independently and with unprecedented efficiency.
Just take the Internet and eBay marketplace as an example.
Millions of small business people across the globe use Internet
technology to compete against the retail giants and sell their
products to consumers. Hundreds of thousands of American small
businesses that use the eBay marketplace to connect with
customers across the nation and increasingly to export to
consumers in other parts of the world, this is a massive
success story of how technology tools, hardware, software,
communications, and the Internet are helping small businesses
to survive and thrive.
These same technologies have been targeted by patent
licensing businesses that do not make any commercial products.
They pursue a new business model. And this business model is to
write patent applications or purchase patents, with the aim
being to exhort exorbitant licensing fees and patent lawsuits.
The weight of these licensing costs and risks of more huge
judgments and settlements, like the one in the BlackBerry case
last year, which I am sure people are familiar with, which
settled for $612 million, drive up the costs of these
technologies in ways that hurt small businesses' bottom lines.
Furthermore, small businesses often produce goods and
services as partners with larger businesses. When these larger
businesses pay hundreds of millions of dollars due to frivolous
licensing demands or patent lawsuits, that cost is borne,
either directly or indirectly, by the small business partners
or customers.
Finally, small business entities have suffered by being
directly targeted by patent licensing companies as well. For
example, a patent licensing entity called Pan IP sued about 50
small businesses, including a New York ski shop, 2 electronics
stores, a pie company that was literally called The Little Pie
Company, an Oregon fabric store, a New Jersey plumbing store,
an Indiana chocolate shop, among many other defendants for
alleged patent infringement.
The patent licensing fees that the plaintiff was seeking
were large enough, about 25 to 50 thousand dollars apiece, to
be financially crippling to a small company. But, however, the
average cost for a small business to defend patent lawsuits and
to hire attorneys is even more staggering and can easily run
into the hundreds of thousands to millions of dollars.
As I said in my opening, I believe that the patent
litigation debate should get beyond the legal technicalities
and focus on the real world impact of abusive litigation. That
said, eBay believes that modest reforms in the current system
to address inequities are very important and would benefit the
overwhelming majority of small businesses. They include
addressing the unpredictability and potential unfairness of
damages calculations and informed shopping and addressing
willfulness claims. These moderate reforms would prove of major
benefit to the millions of small businesses who rely on
technology to compete.
Thank you.
[The prepared statement of Ms. Ward may be found in the
Appendix on page 93.]
Chairwoman Velazquez. Thank you, Ms. Ward.
Our next witness is Mr. Neis, Mr. John Neis. He is the
Managing Director of Venture Investors, an early-stage venture
capital firm with offices in Madison, Wisconsin and Ann Arbor,
Michigan. Mr. Neis is testifying on behalf of the National
Venture Capital Association, which represents approximately 480
venture capital and private equity firms.
Welcome, Mr. Neis.
STATEMENT OF JOHN NEIS, ON BEHALF OF NATIONAL VENTURE CAPITAL
ASSOCIATION
Mr. Neis. Thank you, Chairwoman Velazquez, Ranking Member
Chabot, and members of the Committee. My name is John Neis. And
I am Managing Director at Venture Investors, an early-stage
venture capital firm based in Madison, Wisconsin. It is my
privilege to have the opportunity to share the views of the
venture capital community on proposals for patent reform.
Venture capitalists invest in small emerging growth
companies that strive to commercialize innovation. Companies
that received their start with venture capital dollars include
Genentech, Amgen, Intel, Cisco, Google, Medtronic, Microsoft,
and eBay. At one time, all of these market leaders were small
companies with big ideas.
The complexity of balancing the legitimate interests of
numerous parties as Congress examines patent reform does not
elude us. While we all agree there are abuses of the patent
system and improvements could and should be made, we believe
it's absolutely critical that any reform proposals are
thoroughly vetted by legislators who are fully apprised of the
consequences associated with each change to the system.
At the center of our concerns is the reality that the cost
of defending against infringement is disproportionately
burdensome for the small venture-backed company while the
benefit of infringing relative cost is disproportionately
attractive to the large company.
Our young, emerging companies are disadvantaged relative to
the larger Goliaths in so many ways that often the only
competitive advantage they possess is the sustainability of
their intellectual property. Yet, some proposals, while well-
intentioned, erode the ability of small companies to defend
their patents at a cost that doesn't threaten their viability.
Allow me to provide some examples.
The goal of post-grant opposition invalidating flawed
patents is one we share. However, an open-ended second process
weakens the presumption of validity. A company that has a
legitimate patent may not be able to get venture funding if
that patent is going to be challenged again and again.
The post-grant review clearly favors large companies with
deep pockets, who could use these proceedings to delay patent
issuances to a venture-backed company. If a post-grant
opposition procedure is to be adopted, it should allow only a
single window with a short predictable duration of
approximately six months. Petitioners for cancellation should
be required to identify themselves and should be required to
file all issues regarding patentability.
If a party elects to challenge a patent issuance through
this process, they should not be permitted to again raise these
issues in any subsequent proceeding, which would protect the
patentee from having to repeatedly defend the patent based upon
the same arguments.
One area that we do not feel needs reforming is the
calculation of damages. The current system in which the full
impact of a patented feature on a product is considered is an
appropriate one. Patentees have never been systematically
overcompensated, nor are they currently.
The apportionment of damages proposal, which limits damages
to only the patented feature, does not recognize that the sale
of the whole product is often dependent on the presence of a
patented improvement. Arbitrarily denying the courts the
ability to base computations on the entire market value of a
product will lead to equally arbitrary results as judges go for
the hypothetical price of an unsold feature. This is an area of
reform that is best left alone.
In my written testimony, I have described similar
unintended consequences with many of the other proposed reforms
regarding willful infringement, injunctive relief, prior use
rights, and venue shopping, each of which alone could add cost,
delay, and uncertainty that favors a deep-pocketed Goliaths in
a battle against a small company that is solely reliant on
successfully commercializing a single innovation.
Many of the companies supported by my firm have fewer than
20 employees. Lawyers charge as much as $600 an hour for their
expertise. A freshly minted Ph.D., the one who is actually
turning the innovation into a commercial reality, makes the
equivalent of $60 an hour or less. While I have nothing against
lawyers, only the investment in the latter is going to help
advance innovation.
We share the objective of reducing unnecessary litigation.
Money spent by Google or Roche in frivolous patent litigation
is not only a drag on the U.S. economy. It's money that could
be better spent acquiring young companies that are moving
technology in new directions. However, reforms that add new
processes, delays, and uncertainty force my young companies to
spend their scarce dollars on J.D.'s, rather than Ph.D.'s. And
that stifles innovation.
The best reforms will be those that focus on the front end,
ensuring that patents are issued, the ones that are issued, are
of high quality. Part of the problem in getting quality patents
out of the system has been the lack of information available to
patent examiners.
Reported plans to use the power of the Internet to access
technical experts is a radical idea that can improve access for
patent examiners. While this is only a pilot project, we feel
that it is the type of innovation that offers tremendous
promise.
In conclusion, the U.S. must continue to be the leader in
promoting and insisting on sound, strong, and consistent
intellectual property protections for those who need it most.
Improving the quality of the patent system is critical to our
nation's innovation leadership. However, so is protecting the
smallest of companies that have contributed so substantially to
that leadership in our nation.
Thank you.
[The prepared statement of Mr. Neis may be found in the
Appendix on page 96.]
Chairwoman Velazquez. Thank you, Mr. Neis.
Our next witness is Mr. John Thomas. He is professor of law
at Georgetown University in Washington, D.C. Professor Thomas
teaches courses in patent law and food and drug law. And his
publications include both a textbook and a case book on patent
law. Professor Thomas was recently awarded a grant from the
MacArthur Foundation in order to continue his work as a
visiting scholar at the Congressional Research Service.
Welcome.
STATEMENT OF JOHN R. THOMAS, PROFESSOR OF LAW, GEORGETOWN
UNIVERSITY LAW CENTER
Mr. Thomas. Thank you, Madam Chairwoman, Ranking Member
Chabot, and members of the Committee. Thank you again for the
opportunity to testify here today before you. I very much
respect the work of the Committee to take on a field of law
that sometimes deserves its reputation as being rather daunting
and impenetrable. But small businesses and their owners are
increasingly feeling the impact of the patent system upon
competition, upon sustainable development, and upon social
justice. So the issues that are before you impact your
constituents very much.
Legislation before the 109th Congress would have dealt with
two controversial features that I want to discuss: oppositions
and market-based damages, the latter sometimes sailing under
the heading of apportionment. Let me talk about oppositions
first.
The legislation would have created a post-grant
administrative revocation proceeding before the Patent Office
with the intended goal of, first, having a low-cost litigation
substitute to allow members of the public to test patent
validity and also taking advantage of the expertise of the
Patent Office, two features that would seem to favor the
interest of small firms.
Now, concerns have been expressed that these opposition
proceedings would inject uncertainty into the proprietary
rights granted by patients. And those are important concerns.
But when weighing them, I hope the Congress would consider
that, in fact, there are a number of existing post-grant
proceedings that have already been discussed before you.
One of them is a reissue, a proceeding that is just about
as old as the patent system in this country. And that procedure
allows any patent owner to return to the Patent Office with her
patent and effectively tune it up, change claims, amend claims,
omit claims. And that can be done, again, at any time during
the life of the patent.
Similarly, we have two flavors of reexamination proceedings
that allow, again, the patent owner, third parties, the
Commissioner of Patents to challenge an issued patent, again at
any time during the life of the patent.
In view of these established post-grant proceedings, savvy
patent decision-makers have long accounted for the role of the
Patent Office once a patent issues. And, again, that
intervention can be at any time.
So I think Congress may wish to consider carefully whether
opposition procedures really are going to amount to a sea
change, established patent practice, and also whether time
limits on bringing an opposition are appropriate, both in view
of our long tradition of respecting public views and public
inputs into the patent system, and also the sense that many
products are not valuable or their value is not realized early
in their life span. In fact, they only impact--for some
pharmaceuticals, they can't be marketed early in their life
span. So the worth of that patent does not accrue until later
on.
Let me also talk about the damages proposal, the
apportionment proposal. The fundamental premise of the patent
system is that the market values inventions best. That is why
the patent system has been such a success over its
alternatives, such as a prize system, where an entity like this
would dole out money to different firms based on what they
thought of the merits of the invention.
Now, filling that premise is the concept that patent
damages should be based on the value of that invention. As
evidenced, for example, by the recent $1.52 billion verdict
reached against Microsoft, there is some mounting evidence that
judicial determinations of patent damages have become overly
generous.
In the general sense, that is due to the increasing
complexity of technology or even everyday consumer products we
buy are not just one invention but dozens or hundreds or even
thousands of them and also the sense that there are just a lot
more patents out. The number of issued patents today is an
order of magnitude more than a generation before.
So the combination means that there are a lot of patents
and there are fairly heavy damages. So within this milieu, high
tech firms increasingly have to obtain not just one patent
license or two patent licenses. They have to pay dozens of
them.
How are the cases stacking up on that? Recent empirical
evidence suggests that the average royalty award awarded by
courts is 13 percent. Now, if someone entering into the world
of academia did some patent license negotiations, that's a
pretty high number, particularly if a product is covered by
hundreds or dozens of patents.
I have also listed a number of judicial opinions in my
statement. It also suggests that there are some problems afoot.
Damages awards that are super competitive, that are above the
marketplace rate lead to emphasis on litigation. They promote
patent speculation. They cause the patent scope to effectively
cover other products and technologies that are not within that
patent. And ultimately they may impede the process of
technological innovation dissemination that the patent system
is meant to foster.
So I believe that the apportionment concerns are very
significant ones. And I encourage the Committee to consider
them further. Thank you very much.
[The prepared statement of Mr. Thomas may be found in the
Appendix on page 106.]
Chairwoman Velazquez. Thank you, Mr. Thomas.
And now I will recognize Ranking Chabot for the
introduction of his witness.
Mr. Chabot. Thank you, Madam Chair.
And I am proud to introduce our final witness here today,
not only because of the expertise that he brings to these
hearings but because he is, as I mentioned before, a
constituent of mine from the first district of Ohio,
Cincinnati.
Mr. Kirsch has an impressive background in commercial and
intellectual property litigation matters. He is currently a
partner with the Cincinnati law firm of Taft, Stettinius and
Hollister in their Litigation Department. Prior to joining
Taft, Mr. Kirsch was intimately involved with intellectual
property issues, including leading the Legal Services
Department for Luxottica retail, the world's leading designer,
manufacturer, and distributor of prescription frames and
sunglasses.
He was also formerly a partner with Oppenheimer, Wolff and
Donnelly, focusing on complex commercial patent, trademark,
copyright, misappropriation of trade secrets, and domain name
disputes.
Mr. Kirsch was of counsel with Stradling, Yocca, Carlson
and Rauth, a leading high technology law firm in Newport Beach,
California. He is admitted to practice before the state courts
of California, U.S. District Courts of California, U.S. Courts
of Appeals for the Ninth Circuit and the Federal Circuit. And
so he has a considerable amount of wealth. I think he will have
something to add to this panel.
We welcome your testimony, Mr. Kirsch.
STATEMENT OF KEVIN KIRSCH, PARTNER, TAFT, STETTINIUS &
HOLLISTER, LLP
Mr. Kirsch. Thank you very much, Ranking Member Chabot,
Madam Chairwoman Velazquez, and the rest of the members of the
Committee. I appreciate very much the opportunity to speak here
today on issues concerning patent reform.
Before I begin with my prepared comments, I would like to
just quickly address a comment made by Committee Member
Gonzalez and also by Committee Member Jefferson. Based on my
experience in litigation, patents are swords. They are not
shields. They are only as good as the desire and the ability to
enforce brought by the person who holds the patent.
In litigation, leverage is key. And so two initiatives that
have been sort of promulgated by various factors of removing
the ability to get injunctive relief and removing the ability
to get willfulness damages or curbing those abilities would
severely impact small business' ability to retain contingency
fee lawyers to work on their cases because typically small
businesses can't afford the $2 million it costs on average for
a small patent case and the $4 it costs on average for a $25
million-plus patent case. So to remove those two components I
think would potentially cause great harm to small businesses
and their ability to effectively enforce their portfolios.
So let me dive into my prepared statement. From a patent
litigator's perspective, the largest issue confronting the
current system is the pervasive uncertainty created by a
systemic flow in the system of patent procurement that allows
patents to issue with undefined and ambiguous terms and a
system of jurisprudence ill-equipped to adequately treat patent
cases.
Although the patent statute requires patent applicants to
claim their inventions with specificity, patent applicants are
not required during the application process to define the terms
in the patent claims in such a manner so as to educate the
public as to the intended meaning of such claim terms.
For example, when a claim term recites the signal A as
multiplexed together with signal B, did the applicant intend
that signals A and B are multiplexed together with each other
on the same signal line or signals A and B are multiplexed
together at the same time? As such, many patents are inherently
ambiguous at their point of issuance.
When litigated, these patents are then put forward for
interpretation to a District Court judge with typically no
relevant technical background and no training in patent law.
The judge is charged with the daunting responsibility of
construing the meaning of each of the asserted claims, which
could far more easily have been defined by the patentee during
the procurement process.
The construed claims are then presented to a jury at trial
charged with the responsibility of rendering a verdict, whether
a particular product or process, method of doing business,
software program, etcetera, infringes one or more of the
construed claims of the asserted patent and charged with
rendering a verdict on a host of possible defenses asserted by
the alleged infringer.
Is there any greater evidence of the need for definition of
each of the claim terms by the patentee during the procurement
process than the hundreds of millions of dollars and countless
jurist hours spent related to claim construction hearings each
year?
Short of trial, the claim construction hearing is the most
significant event in patent litigation. During a claim
construction hearing, attorneys spend hours, if not days,
presenting arguments and evidence to a District Court judge
regarding the meaning of typically 5 to 10 claim terms. The
judge then spends hours, if not days, writing lengthy opinions
regarding what 5 to 10 claim terms mean.
Despite brilliant jurists, quality attorneys, and excellent
law clerks assisting the judges in crafting the opinions, the
reversal rate at the Federal Circuit on claim construction
approaches 40 percent. Further, the Federal Circuit basically
repeats the entire claim construction process as it treats
appellate review of claim construction de novo.
In addition to the extraordinary and economic opportunity
costs lost by the claim construction process, the inherent
uncertainty caused by the ambiguity in the meaning of terms
subverts one of the primary purposes of the patent system. With
an almost 40 percent reversal rate, how can alleged infringers
receive actual notice of what is disclosed and claimed in a
patent until after the Federal Circuit rules on the meaning of
the claims?
What if we could cure the single most problematic aspect of
patent cases, removing the confusion associated with claim
terms, and set District Court judges free from the daunting
task of interpreting the languages of patents?
One possible solution to the confusing and ambiguous nature
of some claim language would be to require applicants for
patents to define terms in the claims of the patents at the
time of the filing of the application or at a very early stage
of the patent application process, require the examiner to
review and reject the proposed definitions until such time as
they are written in plain English and allowed, and hold the
patent to the allowed definitions during litigation. The
process may also involve the patent examiner identifying claim
terms for definition by the application in an early stage of
the examination process.
While not having a retroactive effect and while not
completely eliminating disputes as to the meaning of patent
claims, as the parties may then revert to arguing as to what
the definitions mean, this process may lead to fewer patent
disputes since the public will have a much better understanding
of exactly what is covered by the patent claims and may also
lead to more streamlined and efficient patent litigations.
One other issue that I would like to address briefly that
is ripe for reform concerns the way patents are litigated. With
rare exception, District Court judges do not wish to preside
over patent cases. District Court judges are uncomfortable
dealing with the technology; do not fully understand patent
law; and, understandably, do not appreciate the high rate of
reversal associated with patent cases.
A system of District Court judges, preferably patent
attorneys, positioned throughout the country dedicated
primarily to patent cases with the support of special clerks
with technology backgrounds, preferably patent attorneys, would
appear to present a far better alternative to the current
system.
In addition, patent cases should be tried on the bench,
rather than a jury. Is it really fair to ask a juror to decide
whether patent A on a subtle nuance of semiconductor MOSFET
capacitor technology when viewed in light of patent B on
another subtle nuance of semiconductor MOSFET capacitor
technology renders obvious patent C, which is being asserted
against a semiconductor chip manufacturer?
The jurors just don't understand this. I have been in mock
jury panels. I have watched them work. They don't get the
technology. They don't get the patent law. They don't
understand the issues. And they come out on such a--they
basically decide this issue on the most bizarre reasons that
have nothing to do with the merits of the case.
Finally, one other benefit to actually having special
District Court judges with the technical background would
potentially allow us to open the door to give deference to the
claim construction rulings of those courts.
The Federal Circuit does not give any deference whatsoever
to what the District Court judges are doing currently. If you
put in special judges who actually understood the issues and
were trained in patent law, it is more probable that we would
receive that type of deference for them.
So thank you very much.
[The prepared statement of Mr. Kirsch may be found in the
Appendix on page 123.]
Chairwoman Velazquez. Thank you.
This has been an incredible, incredible panel. What it
shows is the complexity of this issue and the ramifications of
what patent reform could have on both ends of those who are
opposing it and those who are in favor of it.
Let me just say that, as we heard from the different
witnesses, this could have significant impact on small
businesses. Given the fact that our Committee has been given
expanded jurisdiction, we have a responsibility to try to
understand this issue and to see how it is going to impact on
small businesses.
So with that, let me thank all of the witnesses. And I
would like to address my first question to the two patenting
experts, Mr. Thomas and Mr. Kirsch.
From my perspective, there are legitimate small business
concerns, both in favor of and opposed to patent reform
legislation. There are small companies being sued under
spurious claims and others that must compete with companies
employing questionable patents. These companies support patent
reform. There are also small businesses that develop and
license technologies, and they are concerned about changes in
patent law that might make their patent rights less certain.
These companies do not support patent reform.
Would you agree with this assessment?
Mr. Thomas. Yes.
[Laughter.]
Chairwoman Velazquez. Mr. Kirsch?
Mr. Kirsch. Yes.
Chairwoman Velazquez. Okay. Thank you.
My next question is addressed to Ms. Ward. One of the more
difficult facets of the debate about patent reform is how best
to qualify or quantify the impact the spurious patent
litigation has on innovation.
When Mr. Lord testifies that potential patent reform
legislation could mean that his company will have a difficult
time attracting future venture capital investments, I
understand his concern. For many companies, no investors mean
no research and development.
Less clear to me is how patent litigation impacts ongoing
innovation. Ms. Ward, can you tell me how the patent
infringement cases, like the ones your company has faced,
impact innovation, particularly for small companies?
Ms. Ward. Yes. I would be happy to. That is an excellent
question. Reformation of patent litigation abuses will actually
help and improve innovation. I think a number of the witnesses
testified that, frankly, there is so much money being spent on
lawyers, there is so much money being spent on settlements and
judgments right now in patent litigation.
That is because abuses are so common under the current
system. Tamping down and making, if you will, minor adjustments
or minor corrections in the current litigation system to really
tamp down abuses will actually help free up more money and take
it away from defending or paying spurious licensing fees and
more money into innovation, more money into R&D, more money
into engineers.
One quick note is that when we were facing the Merc
Exchange/eBay case about a year ago, where there were a lot of
opponents to sort of the automatic injunction rule that had
been in place before the Supreme Court decided Merc Exchange,
those opponents would say, ``Look, if you grant eBay's request
in the Merc Exchange case, gosh, the patent system will end.
The whole thing will fold. This will be a complete disaster.''
If you sort of see, what has happened is the Supreme Court
unanimously agreed and put in place the four-factor test that
is sort of traditional in looking at injunctions, applied it as
well to patents, and what you will see is that since that time,
actually, the system has worked much better.
Chairwoman Velazquez. Anyone else who would like to comment
on that?
Mr. Lord. Yes. Madam Chairwoman,--
Chairwoman Velazquez. Yes, Mr. Lord?
Mr. Lord. --I would like to jump in. Thank you--
Chairwoman Velazquez. Sure.
Mr. Lord. --for the comments.
You know, I think that what we really have here is an
appeal from large technology companies to change and reduce the
burden on large companies' legal budgets.
And, quite frankly, I don't buy the argument that a
reduction in a large company's overall litigation budget will
result in increased investment in research and development.
Large companies should already have an incentive to invest
in research and development because of their very place in the
marketplace. That ought to be encouraged. But I don't think
that it's fair to say that there is a one-to-one correlation
that a dollar reduced from a large company's litigation
department will shift into a dollar in early-stage research and
development.
Chairwoman Velazquez. Thank you, Mr. Lord.
Mr. Gross and Ms. Ward, why is apportionment of damages so
important to the proponents of patent reform?
Mr. Gross. I mean, I was somewhat surprised and actually
wasn't aware about the average size of the settlements of
patent disputes. Just for frame of reference, my peer group of
public companies, where there is available information, the
maximum license royalty fee that we pay for embedded products
is ten percent.
My particular company is two percent. And if we were faced
with a 13 percent average royalty rate, we would shut our doors
very quickly. We couldn't afford to do that. We couldn't afford
to pass that cost along to our customers.
The risk of a patent settlement that makes your
commercialization efforts not worth it are what keeps a lot of
small businesses from proceeding along the process of creating
innovation and commercializing it.
Ms. Ward. If I could just answer your question regarding
damages apportionment? The proposal that has been enunciated in
previous bills, the House and the Senate, is just that damages
should be in a sense related to the inventive contribution or
the inventive value of the patented invention and should not
necessarily include the value that others in a sense
contribute.
If I could give you sort of a real world, you know, just an
example? If somebody is an engineer in a company and they are
working in a group of 200 engineers and every engineer is
making a contribution to the final product, that engineer
should be accorded in a sense his salary. He or she should not
necessarily be accorded a percentage of every other person's
salary because every other person has made a contribution to
that final product. And those contributions in a sense should
be recognized separately.
All we're talking about is sort of common sense adjustment,
that the damages that a patentee should get should actually be
related back to the value of his invention that he contributes.
Chairwoman Velazquez. Mr. Kirsch?
Mr. Kirsch. If I may, this apportionment of damages issues
is actually addressed by the Georgia Pacific standard, which is
that there is about--I can't remember the number of terms but
about 15 different factors that you weigh when you're looking
at Georgia Pacific specifically related to royalty that factors
deal with damages.
But you are supposed to look at the actual contribution of
the invention to the overall product that you are analyzing for
your damages analysis? So it should actually be done by the
standard that is being followed by most of the courts anyway. I
think the apportionment issue is more of a statutory sort of
codification of existing case law.
Mr. Neis. If you would, may I jump in, please, Madam?
Mr. Lord. Go ahead. I have already spoken.
Mr. Neis. Yes. I would like to add there. You know, I have
got a portfolio company that has developed revolutionary new
treatments for cancer. These devices sell for about $3 million.
It's an enormous piece of equipment. It's having a huge impact
on cancer treatment. Some of their patents are covering
relatively minor aspects of the total system, but those minor
aspects are what impact their ability to get market share.
And if you went to an apportionment of damages approach
where you were just looking at the value of that component that
might be--you know, a court could arrive at a $50,000 value.
That is not going to compensate them for loss of half of their
marketplace that people started trying to infringe the patents.
So this is an area that really makes it ripe for abuse by large
companies.
Chairwoman Velazquez. Thank you. Now I will recognize Mr.
Chabot.
Mr. Chabot. Thank you very much, Madam Chair.
I will start with you, Mr. Kirsch, if I can. In your
testimony, it makes you wonder whether the judicial system is
really equipped to handle patent disputes. And you mentioned
about how kind of incomprehensible this stuff might be to
juries or really to anybody probably up here on this panel if
we were sitting on one of those juries as well. What do you
think? I mean, what should be done about that? What is, say, a
bench trial versus jury trial? What do you think we ought to
do?
Mr. Kirsch. As I suggested, I think that we ought to
develop a system of judges throughout the country who are
specialists in this area who get patent attorneys to actually
become District Court judges, especially in the areas where you
have just a heavy amount of patent litigation. In the
alternative, Darrell Issa's idea of opting in, so you have a
judge, such as in the Northern District of Ohio, Judge
O'Malley, has indicated that she actually enjoys doing patent
cases. And that is very rare because you go to the Southern
District of Ohio and start asking all of those judges. And
uniformly they hate doing patent cases.
But if we could basically have a way of either funneling
patent cases to judges that are interested in this subject
matter and that become trained in it or actually setting up a
system where we have specially trained judges with backgrounds
with stats, with technical backgrounds that can handle these
types of cases, we would be far better off.
I mean, I do think on the bench trial issue--and my
statement was a little broad in that there are certain issues
you could put to a jury. For example, you could ask a jury who
was the first to invent. And that's kind of a more specific
fact issue. But to ask a juror to try to analyze whether two
prior references actually read on a patent's being asserted
against another product in the semiconductor arena or in
pharmaceutical arena, they're just not going to understand it.
And we would be better served having a judge with special
training with special staffs actually dealing with these
issues.
So I think that some type of program that would allow for
that greater specialty would be very beneficial to the system.
Mr. Chabot. Thank you.
Mr. Thomas, what would you say is the most important change
or modification or reform that could be made essentially in the
patents? If you had to pick one, what do you think would be the
most significant that would be doable?
Mr. Thomas. Thank you.
In general I would favor those reforms that lower
transaction costs and increase certainty. That would enable
small business to navigate the sometimes treacherous patent
terrain the best and I think the reforms that serve those
purposes are best suited for small entities. That is why I like
oppositions, which tend to allow patent validity be tested in a
relatively low-cost forum by an expert tribunal before patents
can be enforced and more costly litigation.
Mr. Chabot. Thank you.
Mr. Neis, as an investor, what problems do you perceive
with the quality of patents issued by the U.S. Patent and
Trademark Office? And how does this affect your investment
decisions?
Mr. Neis. Well, clearly we are making--I mean, we are
typically backing a couple of guys with the great idea at the
formative stages of a company in that intellectual property is
what is really driving the attraction of venture capital
dollars into the company in the first place.
So quality up front is important. We think the greatest
room for improvement is an improvement of quality, giving the
PTO the resources and better access to information so that not
overly broad patents are issued.
But we would rather see the improvements up front early in
the process, where it's much lower cost, rather than wholesale
changes after issuance that really add a whole layer of delay
and burden and uncertainty for these small companies because at
the end of the day, you know, our companies can only win in
these litigation fights one way. They can win in the courts.
The big company can win two ways. They will win either in the
courts or simply by attrition. They will just spend the little
company into bankruptcy.
Mr. Chabot. Madam Chair, I had a couple of more questions.
But I think in the interest of time, I would be happy to yield
back to you if you had something you wanted to ask.
Chairwoman Velazquez. No. Go ahead.
Mr. Chabot. Okay. Thank you.
Ms. Ward, what recommendations do you have with regard to
making damage calculations more predictable under the current
patent system?
Ms. Ward. I think that the provision that was proposed in
the Senator Hatch and Leahy bill is excellent. It actually goes
back and says, ``What is the value of the inventive
contribution?'' and that is the measure for the damages base.
And you should actually consider sort of the comparison between
the inventive contribution and then also the comparison of
other improvements that may have been added by the company or
others and sort of kind of take those against each other in
terms of looking at the damages.
Mr. Chabot. Thank you.
Mr. Lord. Representative Chabot?
Mr. Chabot. Yes?
Mr. Lord. May I jump in there, please?
Mr. Chabot. Yes, absolutely
Mr. Lord. I think something has been misstated that I would
like to correct on the apportionment issue. And that is that
the proposal that has been put forth is actually codification
of one of the 15 factors in the Georgia Pacific test.
Codification of Georgia Pacific that says that all of the 15
factors, which Ms. Ward should be referring to would be I think
a good solution for our patent system. The problem is that the
proponents of apportionment want to take one of the prongs out
of the Georgia Pacific test and make that single prong the law
of the land.
Her hypothetical actually identifies exactly the problem.
Not all engineers are created equal. And Mr. Neis talked about
this. Some technologies, like some engineers, are Nobel
Laureate technologies. And those are the types of technologies
that ought to be rewarded in the marketplace.
So simply doing a head count doesn't work. And that is why
Georgia Pacific has 15 factors. And that is what we ought to be
codifying.
Mr. Chabot. Thank you.
Mr. Gross, I will conclude with you. You had said very
clearly the patent system in your view is broken, it has
considerable flaws, it is too expensive, defendants are forced
to settle, and folks are afraid to innovate. What one or two
doable things would you do if you had the power to do so to
change it?
Mr. Gross. One thing I might recommend is a program similar
to what is available for trademarks. And that is kind of a use
it or lose it process where you develop and get a patent if you
don't commercialize it within some period of time, you lose the
rights or there is some way that there is a just way to provide
for a royalty treatment of it.
The other thing that is particularly a problem to small
business is that the patent litigation process tends to be one
where small patent holders or even large patent holders will go
sue the deep pockets that are using the technology. The end
result has been it is quite surprising that the deep pockets
turn to the little pockets that have the technology.
And we in almost 5,000 license agreements are forced to
indemnify our users of our technology, which makes us extremely
cautious and extremely careful and extremely fearful of coming
up with new products that may step on a patent that we can't
adequately research, so somehow finding a way that the risk of
the patent can be properly associated and somehow finding a way
that patents and technology can, in fact, become commercialized
and provide some benefit both to the commercializer and the
general population.
Mr. Chabot. Thank you.
Madam Chair, let me commend the panel for really very
excellent testimony here this morning. I want to commend you
for putting the panel together and for holding this hearing and
exercising our Committee's jurisdiction in this area. There are
other committees clearly that are relevant as well, but I think
it is important that we look at the impact that the whole
patent system has on small businesses. And so I want to commend
you on your leadership on that. Thank you.
Chairwoman Velazquez. Thank you, Mr. Chabot.
I have two or three more questions. My first question I
would like to address to Professor Thomas. We heard this
morning concerns being raised about the so-called second
window. It sounds to me that companies, small companies in
particular, fear that a second window for filing an opposition
to an issued patent will make less valuable their patent
rights.
I understand you have studied the post-grant opposition
issue. Thus, will the availability of a second window
fundamentally weakens patent rights?
Mr. Thomas. Well, in my opinion, no. If I may expand for
this answer?
Chairwoman Velazquez. Yes.
Mr. Thomas. Again, the patent system represents a bargain
between the public and the inventor. The inventor obtains
exclusive rights, but it's over the public interest. And, as a
result, it seems suitable that the public may be able to
comment upon that grant, if not for the entire term of the
patent, at least to such time as the value of that invention is
realized.
Please recall that certainly for pharmaceuticals, many of
these products are simply not going to be approved by the FDA
for many years after the patent is obtained. So if we have a
very short initial period and no further chance for an
opposition, you are essentially exempting the pharmaceutical
industry and all the public health concerns that the patent
system embraces from the opposition system. That sounds to me
to be an unwise design choice.
Thank you.
Chairwoman Velazquez. Thank you.
Anyone else who would like to comment on this?
Mr. Kirsch. You know, actually, I would like to make one
comment with respect to it. I think we need to be careful with
any procedure that we put into place for the post-opposition
process.
In reviewing H.R. 2795, there were a few things within that
proposal that raised concern that had a lower standard of proof
where there was a preponderance of the evidence versus clear
and convincing and District Court levels. It allowed for
discovery. So any affiant during the course who submitted a
declaration would be susceptible to a deposition.
These types of procures, that could be a large cost to a
small company. So if a small company got a patent and then put
it through this post-opposition procedure with no actual
opportunity to go collect damages at the end of the day because
all they're doing is defending against the actual validity of
the patent and paying for all this discovery over a period of
time that's supposed to go up to a year, I mean, it could be a
pretty onerous burden for small businesses.
Chairwoman Velazquez. Thank you.
Professor Thomas, can you explain how passage of
legislation that includes provisions on willful infringement
and apportionment of damages will have had an impact on the
$1.52 billion judgment that a jury rendered in the recent
Microsoft v. Alcatel?
Mr. Thomas. Thank you.
Well, Microsoft is well-capable of representing itself, and
I haven't studied the case carefully because of the lack of
published opinion. But it's my understanding that the jury
awarded .5 percent of the entire price, not just of the
operating system but the entire computer, the hardware, based
on two patents relating to MP3 files. And while I enjoy
listening to music from my computer very much, I rather doubt
it's worth that much percentage given all the other technology
that has gone into a computer.
So certainly the apportionment standard would allow or
perhaps place a renewed emphasis on something we already have
in our law, which is a fairly nuanced law that looks for some
cases where the technology, that kind of technology, drives the
sale and, therefore, it is appropriate to base damages on the
entire product--that's the entire market value rule--and other
cases where apportionment is more appropriate. You can see how
courts went fairly quickly to fault apportionment because it's
easier to do, quite frankly. And it's easier for jurors to do.
I think legislation might nudge our law in the right direction.
A willful infringement reform would also make sure that
there is, in fact, a finding of infringement before we go
through the nettlesome issues of what did the inventor, what
did the accused infringer know, when did she know it, and do we
think she is a bad person, and ten elements that really don't
have much to do with the issue at trial.
Thank you.
Mr. Lord. Madam Chairwoman?
Chairwoman Velazquez. Yes, Mr. Lord?
Mr. Lord. The one-half percent, I might point out, is much
more in line with the types of royalty rates that we see over
on the tech side of things. I want to also make a note that the
13 percent that has been talked about I'm quite confident that
13 percent includes as part of its calculus biotechnology
licensing rates, which, as you probably know, are far more
excessive because of the business models that are present much
more sharing, much more of a joint development effort in the
biotech space, which obviously then has the net effect of
driving up that average 13 percent. The half percent,
regardless of how we might deal with apportionment, is much
more in line with the type of royalty rates that we see in the
big tech, in the high tech side of things.
Chairwoman Velazquez. Thank you.
Mr. Gross, am I correct that concerns about the patent
system in its current state have caused your company to change
its behavior or its direction? And if so, could I ask you to
highlight a couple of companies how your company has changed
its behavior?
Mr. Gross. Yes. Thank you.
Many years ago we came up with an innovation that we
actually spent close to $10 million developing. And in our
initial search as a company, we found no direct patents that we
would infringe upon. And after we went to commercialization, we
found that there are other people that propose to go after our
technology. And faced with the cost of that, we abandoned that
technology. And for a small company of our size, that is a lot
of money to spend.
Chairwoman Velazquez. But let me ask you, how would reform
of the patent law have eased your concerns; and, second, the
actions your company will be able to take after the patent
system is reformed?
Mr. Gross. A couple of things. One, the ability of us to
more openly, clearly, and less expensively challenge patents
that just touched on pieces of what we were doing and,
therefore, posed a problem to us would have made it a lot
easier.
The other thing that I think was important is what we found
with a lot of the things that we ran up against. They were
warehoused patents. In other words, several of them were owned
by very, very large companies with floors full of lawyers that
just take out patents with no intent to use those patents but
intent to exercise those patents if somebody else did
commercialize the technology or to use it, frankly, as a
blocking technology, so some review process that could prevent
that.
The other thing is the indemnification issue that I
mentioned earlier. The requirement of our customers to
indemnify us is a big factor in our decision of where to go
with technology. And something that deals with that
indemnification process would help us greatly.
Chairwoman Velazquez. If anyone else would like to add?
Yes, Ms. Ward?
Ms. Ward. May I add something? Going to Mr. Gross' example,
which I definitely sympathize because I have heard it quite a
lot, there are two aspects of the reform that would actually
specifically help Mr. Gross. The first is in post-grant
opposition having that second window so that the companies like
Mr. Gross, the ones that are actually faced with the threat,
can then go back and look and see, ``Is there prior art? Are
there issues about the patent that make the patent flawed and
faulty?'' and bring those before the Patent and Trademark
Office, which is a less expensive venue than bringing it before
court. That reform would actually help companies like Mr.
Gross.
The other reform that would actually help companies like
Mr. Gross is reform on the willfulness issues, which I am sure
you know Mr. Gross has probably suffered as well as other small
companies in that, even though he did actually very good faith
and very detailed searches, that alone may not be a sufficient
defense to willfulness.
Usually, the defense is, after you do those good faith
searches, you have to go out and hire an outside counsel
opinion, which are 20 to 50 to 100 thousand dollars to get, and
have an outside counsel issue a written report saying, ``Well,
your technology doesn't infringe'' or ``The patent is
invalid.'' And it's a big expense, and it's a huge burden on
small companies.
So those two changes would actually help companies like Mr.
Gross'.
Chairwoman Velazquez. Yes, Mr. Neis?
Mr. Neis. I would just like to add. I mean, you know, the
issue with post-grant opposition, as Mr. Kirsch pointed out, is
that it does add a layer of costs for these small companies.
I mean, these companies are often starting out with only a
couple of million dollars of funding that they are using to
advance their technology. And if they have to consume that, use
that money for attorneys, it is preventing them from spending
that money on technology development.
It is not just the cost in terms of the dollars. It is the
enormous distraction for the management team in the formative
stages that really is going to stifle innovation. So if there
is to be any kind of post-grant opposition, it really needs to
be short and allow these companies to get to certainty very,
very quickly.
Chairwoman Velazquez. With that, I want to commend all of
the witnesses for participating in this hearing today. It has
been quite an important hearing to help us understand the
importance of this issue.
And let me just say that we will continue this Committee to
monitor what will happen regarding patent reform. And I believe
that a case has been made this morning regarding the impact
that it could have on small businesses.
So, with that, the Committee adjourns.
[Whereupon, at 12:30 p.m., the foregoing matter was
concluded.]
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