[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
PATENT REFORM ACT OF 2007
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS, THE INTERNET,
AND INTELLECTUAL PROPERTY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
ON
H.R. 1908
__________
APRIL 26, 2007
__________
Serial No. 110-65
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
U.S. GOVERNMENT PRINTING OFFICE
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. (BOBBY) SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
MAXINE WATERS, California DANIEL E. LUNGREN, California
MARTIN T. MEEHAN, Massachusetts CHRIS CANNON, Utah
WILLIAM D. DELAHUNT, Massachusetts RIC KELLER, Florida
ROBERT WEXLER, Florida DARRELL ISSA, California
LINDA T. SANCHEZ, California MIKE PENCE, Indiana
STEVE COHEN, Tennessee J. RANDY FORBES, Virginia
HANK JOHNSON, Georgia STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida
BRAD SHERMAN, California TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota
Perry Apelbaum, Staff Director and Chief Counsel
Joseph Gibson, Minority Chief Counsel
------
Subcommittee on Courts, the Internet, and Intellectual Property
HOWARD L. BERMAN, California, Chairman
JOHN CONYERS, Jr., Michigan HOWARD COBLE, North Carolina
RICK BOUCHER, Virginia TOM FEENEY, Florida
MARTIN T. MEEHAN, Massachusetts LAMAR SMITH, Texas
ROBERT WEXLER, Florida F. JAMES SENSENBRENNER, Jr.,
MELVIN L. WATT, North Carolina Wisconsin
SHEILA JACKSON LEE, Texas ELTON GALLEGLY, California
STEVE COHEN, Tennessee BOB GOODLATTE, Virginia
HANK JOHNSON, Georgia STEVE CHABOT, Ohio
BRAD SHERMAN, California CHRIS CANNON, Utah
ANTHONY D. WEINER, New York RIC KELLER, Florida
ADAM B. SCHIFF, California DARRELL ISSA, California
ZOE LOFGREN, California MIKE PENCE, Indiana
Shanna Winters, Chief Counsel
Blaine Merritt, Minority Counsel
C O N T E N T S
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APRIL 26, 2007
Page
TEXT OF BILL
H.R. 1908, the ``Patent Reform Act of 2007''..................... 2
OPENING STATEMENTS
The Honorable Howard L. Berman, a Representative in Congress from
the State of California, and Chairman, Subcommittee on Courts,
the Internet, and Intellectual Property........................ 1
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Ranking Member, Subcommittee on
Courts, the Internet, and Intellectual Property................ 19
The Honorable Lamar Smith, a Representative in Congress from the
State of Texas, and Member, Subcommittee on Courts, the
Internet, and Intellectual Property............................ 28
WITNESSES
Mr. Kevin Sharer, Chairman of the Board and Chief Executive
Officer, Amgen Incorporated, Thousand Oaks, CA
Oral Testimony................................................. 32
Prepared Statement............................................. 34
Mr. Gary L. Griswold, President and Chief Counsel of Intellectual
Property, 3M Innovative Properties, St. Paul, MN
Oral Testimony................................................. 46
Prepared Statement............................................. 48
Mr. John R. Thomas, Professor of Law, Georgetown University Law
Center, Washington, DC
Oral Testimony................................................. 63
Prepared Statement............................................. 65
Mr. William T. Tucker, Executive Director, Research and
Administration and Technology Transfer, University of
California, Oakland, CA
Oral Testimony................................................. 76
Prepared Statement............................................. 77
Mr. Anthony Peterman, Director, Patent Counsel, Dell
Incorporated, Round Rock, TX
Oral Testimony................................................. 86
Prepared Statement............................................. 88
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable Howard L. Berman, a
Representative in Congress from the State of California, and
Chairman, Subcommittee on Courts, the Internet, and
Intellectual Property.......................................... 17
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress from the State of Texas, and Member,
Subcommittee on Courts, the Internet, and Intellectual Property 21
Prepared Statement of the Honorable Lamar Smith, a Representative
in Congress from the State of Texas, and Member, Subcommittee
on Courts, the Internet, and Intellectual Property............. 30
Prepared Statement of the California Healthcare Institute,
submitted by the Honorable Darrell Issa, a Representative in
Congress from the State of California, and Member, Subcommittee
on Courts, the Internet, and Intellectual Property............. 137
Prepared Statement of the Honorable Tom Feeney, a Representative
in Congress from the State of Florida, and Member, Subcommittee
on Courts, the Internet, and Intellectual Property............. 144
APPENDIX
Material Submitted for the Hearing Record........................ 148
PATENT REFORM ACT OF 2007
----------
THURSDAY, APRIL 26, 2007
House of Representatives,
Subcommittee on Courts, the Internet,
and Intellectual Property,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:06 p.m., in
Room 2141, Rayburn House Office Building, the Honorable Howard
L. Berman (Chairman of the Subcommittee) presiding.
Present: Representatives Berman, Jackson Lee, Watt, Coble,
Smith and Issa.
Staff Present: Perry Apelbaum, Staff Director and Chief
Counsel; Shanna Winters, Subcommittee Counsel; Rosalind
Jackson, Professional Staff Member; Joseph Gibson, Minority
Chief Counsel; and Blaine Merritt, Minority Subcommittee
Counsel.
Mr. Berman. This hearing of the Subcommittee on Courts, the
Internet, and Intellectual Property will come to order. I will
start out and recognize myself for a more lengthy opening
statement, but I will also give great leeway to my Ranking
Member and others who would like to make opening statements.
Let me first--I think we are trying to get an overflow
room. We have got one. Okay. You will have to find out where it
is though.
Let me begin by describing what this hearing is not about.
This hearing is not about creating a dynamic where all the
witnesses testifying support the bill H.R. 1908, the Patent
Reform Act of 2007. In fact, while the witnesses have
identified some aspects of the bill they like, a majority of
the witnesses disagree with major portions of the bill. And
there would have been another witness to raise disagreement
with the bill, but the independent inventor I invited couldn't
be here today. My goal is to foster the policy discussion to
yield the best result.
This hearing is also not about a perfect bill. I expect
over the course of the next several weeks, there will be
numerous changes incorporated into the bill that reflect
legitimate concerns over unintended consequences as well as
reforms considered that are not presently included. For
example, the issues of obviousness and 271(f) are currently
before the Supreme Court and are not addressed in the bill.
Furthermore, as to drafting errors, I have already
identified a number of necessary corrections that will be made.
For example, the word ``same'' should be changed to ``any'' in
the prohibited filing section to allow for only one shot at a
postgrant proceeding. You can't challenge under this bill--as
it will be corrected to require, that you can't challenge in
the first window and then challenge in the second.
This hearing is not about promoting an agenda for a
specific industry. While the media has portrayed the debate as
a tech versus Pharma battle, I prefer to see it as the
inability of current patent laws to accommodate the differences
of industry business models. For the sectors which rely on
business method patents or products which incorporate many
multiples of patents, the proliferation of questionable quality
patents and the burgeoning of patent speculation prevents the
system from promoting innovation. It is one system, and it must
work for everyone.
It is without doubt that most groups who have a stake in
the patent system recognize the need for reform, but it should
be realized that the final makeup of the reforms will certainly
require compromise by all.
The intention of this hearing is to move beyond the
previous rhetoric on patent reform and to address the real and
serious problems confronting the U.S. patent system. By
bringing to this hearing the cross-section of past patent
system users we have here today, I expect the discourse and
debate on the reforms proposed in the bill to be constructive
and thoughtful. This bipartisan, bicameral bill draws from many
of the issues raised by past legislative attempts, multiple
hearings and a slew of reports on patent reform by entities
such as the National Academy of Sciences as well as the Federal
Trade Commission and the United States Patent and Trademark
Office, among others.
H.R. 1908 is both long and complex, and, by its terms, not
particularly interesting. I do not expect that everyone has had
a chance to fully digest all of the changes proposed by the
bill. However, the Patent Reform Act of 2007 is effectively now
our starting point, and this hearing, I hope, will propel
discussion on where the bill should go. I would like to thank
the witnesses and especially my Subcommittee Members for
beginning the process today.
[The text of the bill, H.R. 1908, follows:]
HR 1908 IH ___________________________________________________
110th CONGRESS
1st Session
H. R. 1908
To amend title 35, United States Code, to provide for patent reform.
__________
IN THE HOUSE OF REPRESENTATIVES
April 18, 2007
Mr. Berman (for himself, Mr. Smith of Texas, Mr. Conyers, Mr. Coble,
Mr. Boucher, Mr. Goodlatte, Ms. Zoe Lofgren of California, Mr.
Issa, Mr. Schiff, Mr. Cannon, and Ms. Jackson-Lee of Texas)
introduced the following bill; which was referred to the Committee
on the Judiciary
__________
A BILL
To amend title 35, United States Code, to provide for patent reform.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Patent Reform Act
of 2007''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Reference to title 35, United States Code.
Sec. 3. Right of the first inventor to file.
Sec. 4. Inventor's oath or declaration.
Sec. 5. Right of the inventor to obtain damages.
Sec. 6. Post-grant procedures and other quality enhancements.
Sec. 7. Definitions; patent trial and appeal board.
Sec. 8. Study and report on reexamination proceedings.
Sec. 9. Submissions by third parties and other quality
enhancements.
Sec. 10. Venue and jurisdiction.
Sec. 11. Regulatory authority.
Sec. 12. Technical amendments.
Sec. 13. Effective date; rule of construction.
SEC. 2. REFERENCE TO TITLE 35, UNITED STATES CODE.
Whenever in this Act a section or other provision is amended or
repealed, that amendment or repeal shall be considered to be made to
that section or other provision of title 35, United States Code.
SEC. 3. RIGHT OF THE FIRST INVENTOR TO FILE.
(a) Definitions.--Section 100 is amended by adding at the end the
following:
``(f) The term `inventor' means the individual or, if a joint
invention, the individuals collectively who invented or discovered the
subject matter of the invention.
``(g) The terms `joint inventor' and `coinventor' mean any 1 of the
individuals who invented or discovered the subject matter of a joint
invention.
``(h) The `effective filing date of a claimed invention' is--
``(1) the filing date of the patent or the application for
patent containing the claim to the invention; or
``(2) if the patent or application for patent is entitled
to a right of priority of any other application under section
119, 365(a), or 365(b) or to the benefit of an earlier filing
date in the United States under section 120, 121, or 365(c),
the filing date of the earliest such application in which the
claimed invention is disclosed in the manner provided by the
first paragraph of section 112.
``(i) The term `claimed invention' means the subject matter defined
by a claim in a patent or an application for a patent.
``(j) The term `joint invention' means an invention resulting from
the collaboration of inventive endeavors of 2 or more persons working
toward the same end and producing an invention by their collective
efforts.''.
(b) Conditions for Patentability.--
(1) In general.--Section 102 is amended to read as follows:
``Sec. 102. Conditions for patentability; novelty
``(a) Novelty; Prior Art.--A patent for a claimed invention may not
be obtained if--
``(1) the claimed invention was patented, described in a
printed publication, or in public use or on sale--
``(A) more than one year before the effective
filing date of the claimed invention; or
``(B) one year or less before the effective filing
date of the claimed invention, other than through
disclosures made by the inventor or a joint inventor or
by others who obtained the subject matter disclosed
directly or indirectly from the inventor or a joint
inventor; or
``(2) the claimed invention was described in a patent
issued under section 151, or in an application for patent
published or deemed published under section 122(b), in which
the patent or application, as the case may be, names another
inventor and was effectively filed before the effective filing
date of the claimed invention.
``(b) Exceptions.--
``(1) Prior inventor disclosure exception.--Subject matter
that would otherwise qualify as prior art under subparagraph
(B) of subsection (a)(1) shall not be prior art to a claimed
invention under that subparagraph if the subject matter had,
before the applicable date under such subparagraph (B), been
publicly disclosed by the inventor or a joint inventor or
others who obtained the subject matter disclosed directly or
indirectly from the inventor, joint inventor, or applicant.
``(2) Derivation and common assignment exceptions.--Subject
matter that would otherwise qualify as prior art only under
subsection (a)(2), after taking into account the exception
under paragraph (1), shall not be prior art to a claimed
invention if--
``(A) the subject matter was obtained directly or
indirectly from the inventor or a joint inventor; or
``(B) the subject matter and the claimed invention,
not later than the effective filing date of the claimed
invention, were owned by the same person or subject to
an obligation of assignment to the same person.
``(3) Joint research agreement exception.--
``(A) In general.--Subject matter and a claimed
invention shall be deemed to have been owned by the
same person or subject to an obligation of assignment
to the same person in applying the provisions of
paragraph (2) if--
``(i) the claimed invention was made by or
on behalf of parties to a joint research
agreement that was in effect on or before the
effective filing date of the claimed invention;
``(ii) the claimed invention was made as a
result of activities undertaken within the
scope of the joint research agreement; and
``(iii) the application for patent for the
claimed invention discloses or is amended to
disclose the names of the parties to the joint
research agreement.
``(B) For purposes of subparagraph (A), the term
`joint research agreement' means a written contract,
grant, or cooperative agreement entered into by two or
more persons or entities for the performance of
experimental, developmental, or research work in the
field of the claimed invention.
``(4) Patents and published applications effectively
filed.--A patent or application for patent is effectively filed
under subsection (a)(2) with respect to any subject matter
described in the patent or application--
``(A) as of the filing date of the patent or the
application for patent; or
``(B) if the patent or application for patent is
entitled to claim a right of priority under section
119, 365(a), or 365(b) or to claim the benefit of an
earlier filing date under section 120, 121, or 365(c),
based upon one or more prior filed applications for
patent, as of the filing date of the earliest such
application that describes the subject matter.''.
(2) Conforming amendment.--The item relating to section 102
in the table of sections for chapter 10 is amended to read as
follows:
``102. Conditions for patentability; novelty.''.
(c) Conditions for Patentability; Non-Obvious Subject Matter.--
Section 103 is amended to read as follows:
``Sec. 103. Conditions for patentability; nonobvious subject matter
``A patent for a claimed invention may not be obtained though the
claimed invention is not identically disclosed as set forth in section
102, if the differences between the claimed invention and the prior art
are such that the claimed invention as a whole would have been obvious
before the effective filing date of the claimed invention to a person
having ordinary skill in the art to which the claimed invention
pertains. Patentability shall not be negated by the manner in which the
invention was made.''.
(d) Repeal of Requirements for Inventions Made Abroad.--Section
104, and the item relating to that section in the table of sections for
chapter 10, are repealed.
(e) Repeal of Statutory Invention Registration.--
(1) In general.--Section 157, and the item relating to that
section in the table of sections for chapter 14, are repealed.
(2) Removal of cross references.--Section 111(b)(8) is
amended by striking ``sections 115, 131, 135, and 157'' and
inserting ``sections 131 and 135''.
(f) Earlier Filing Date for Inventor and Joint Inventor.--Section
120 is amended by striking ``which is filed by an inventor or inventors
named'' and inserting ``which names an inventor or joint inventor''.
(g) Conforming Amendments.--
(1) Right of priority.--Section 172 is amended by striking
``and the time specified in section 102(d)''.
(2) Limitation on remedies.--Section 287(c)(4) is amended
by striking ``the earliest effective filing date of which is
prior to'' and inserting ``which has an effective filing date
before''.
(3) International application designating the united
states: effect.--Section 363 is amended by striking ``except as
otherwise provided in section 102(e) of this title''.
(4) Publication of international application: effect.--
Section 374 is amended by striking ``sections 102(e) and
154(d)'' and inserting ``section 154(d)''.
(5) Patent issued on international application: effect.--
The second sentence of section 375(a) is amended by striking
``Subject to section 102(e) of this title, such'' and inserting
``Such''.
(6) Limit on right of priority.--Section 119(a) is amended
by striking ``; but no patent shall be granted'' and all that
follows through ``one year prior to such filing''.
(7) Inventions made with federal assistance.--Section
202(c) is amended--
(A) in paragraph (2)--
(i) by striking ``publication, on sale, or
public use,'' and all that follows through
``obtained in the United States'' and inserting
``the 1-year period referred to in section
102(a) would end before the end of that 2-year
period''; and
(ii) by striking ``the statutory'' and
inserting ``that 1-year''; and
(B) in paragraph (3), by striking ``any statutory
bar date that may occur under this title due to
publication, on sale, or public use'' and inserting
``the expiration of the 1-year period referred to in
section 102(a)''.
(h) Repeal of Interfering Patent Remedies.--Section 291, and the
item relating to that section in the table of sections for chapter 29,
are repealed.
(i) Action for Claim to Patent on Derived Invention.--Section
135(a) is amended to read as follows:
``(a) Dispute Over Right to Patent.--
``(1) Institution of derivation proceeding.--An applicant
may request initiation of a derivation proceeding to determine
the right of the applicant to a patent by filing a request
which sets forth with particularity the basis for finding that
an earlier applicant derived the claimed invention from the
applicant requesting the proceeding and, without authorization,
filed an application claiming such invention. Any such request
may only be made within 12 months after the date of first
publication of an application containing a claim that is the
same or is substantially the same as the claimed invention,
must be made under oath, and must be supported by substantial
evidence. Whenever the Director determines that patents or
applications for patent naming different individuals as the
inventor interfere with one another because of a dispute over
the right to patent under section 101, the Director shall
institute a derivation proceeding for the purpose of
determining which applicant is entitled to a patent.
``(2) Requirements.--A proceeding under this subsection may
not be commenced unless the party requesting the proceeding has
filed an application that was filed not later than 18 months
after the effective filing date of the application or patent
deemed to interfere with the subsequent application or patent.
``(3) Determination by patent trial and appeal board.--In
any proceeding under this subsection, the Patent Trial and
Appeal Board--
``(A) shall determine the question of the right to
patent;
``(B) in appropriate circumstances, may correct the
naming of the inventor in any application or patent at
issue; and
``(C) shall issue a final decision on the right to
patent.
``(4) Derivation proceeding.--The Board may defer action on
a request to initiate a derivation proceeding until 3 months
after the date on which the Director issues a patent to the
applicant that filed the earlier application.
``(5) Effect of final decision.--The final decision of the
Patent Trial and Appeal Board, if adverse to the claim of an
applicant, shall constitute the final refusal by the Patent and
Trademark Office on the claims involved. The Director may issue
a patent to an applicant who is determined by the Patent Trial
and Appeal Board to have the right to patent. The final
decision of the Board, if adverse to a patentee, shall, if no
appeal or other review of the decision has been or can be taken
or had, constitute cancellation of the claims involved in the
patent, and notice of such cancellation shall be endorsed on
copies of the patent distributed after such cancellation by the
Patent and Trademark Office.''.
(j) Elimination of References to Interferences.--(1) Sections 6,
41, 134, 141, 145, 146, 154, 305, and 314 are each amended by striking
``Board of Patent Appeals and Interferences'' each place it appears and
inserting ``Patent Trial and Appeal Board''.
(2) Sections 141, 146, and 154 are each amended--
(A) by striking ``an interference'' each place it appears
and inserting ``a derivation proceeding''; and
(B) by striking ``interference'' each additional place it
appears and inserting ``derivation proceeding''.
(3) The section heading for section 134 is amended to read as
follows:
``Sec. 134. Appeal to the Patent Trial and Appeal Board''.
(4) The section heading for section 135 is amended to read as
follows:
``Sec. 135. Derivation proceedings''.
(5) The section heading for section 146 is amended to read as
follows:
``Sec. 146. Civil action in case of derivation proceeding''.
(6) Section 154(b)(1)(C) is amended by striking ``interferences''
and inserting ``derivation proceedings''.
(7) The item relating to section 6 in the table of sections for
chapter 1 is amended to read as follows:
``6. Patent Trial and Appeal Board.''.
(8) The items relating to sections 134 and 135 in the table of
sections for chapter 12 are amended to read as follows:
``134. Appeal to the Patent Trial and Appeal Board.
``135. Derivation proceedings.''.
(9) The item relating to section 146 in the table of sections for
chapter 13 is amended to read as follows:
``146. Civil action in case of derivation proceeding.''.
(10) Certain Appeals.--Subsection 1295(a)(4)(A) of title 28, United
States Code, is amended to read as follows:
``(A) the Patent Trial and Appeal Board of the
United States Patent and Trademark Office with respect
to patent applications, derivation proceedings, and
post-grant review proceedings, at the instance of an
applicant for a patent or any party to a patent
interference (commenced before the effective date of
the Patent Reform Act of 2007), derivation proceeding,
or post-grant review proceeding, and any such appeal
shall waive any right of such applicant or party to
proceed under section 145 or 146 of title 35;''.
SEC. 4. INVENTOR'S OATH OR DECLARATION.
(a) Inventor's Oath or Declaration.--
(1) In general.--Section 115 is amended to read as follows:
``Sec. 115. Inventor's oath or declaration
``(a) Naming the Inventor; Inventor's Oath or Declaration.--An
application for patent that is filed under section 111(a), that
commences the national stage under section 363, or that is filed by an
inventor for an invention for which an application has previously been
filed under this title by that inventor shall include, or be amended to
include, the name of the inventor of any claimed invention in the
application. Except as otherwise provided in this section, an
individual who is the inventor or a joint inventor of a claimed
invention in an application for patent shall execute an oath or
declaration in connection with the application.
``(b) Required Statements.--An oath or declaration under subsection
(a) shall contain statements that--
``(1) the application was made or was authorized to be made
by the affiant or declarant; and
``(2) such individual believes himself or herself to be the
original inventor or an original joint inventor of a claimed
invention in the application.
``(c) Additional Requirements.--The Director may specify additional
information relating to the inventor and the invention that is required
to be included in an oath or declaration under subsection (a).
``(d) Substitute Statement.--
``(1) In general.--In lieu of executing an oath or
declaration under subsection (a), the applicant for patent may
provide a substitute statement under the circumstances
described in paragraph (2) and such additional circumstances
that the Director may specify by regulation.
``(2) Permitted circumstances.--A substitute statement
under paragraph (1) is permitted with respect to any individual
who--
``(A) is unable to file the oath or declaration
under subsection (a) because the individual--
``(i) is deceased;
``(ii) is under legal incapacity; or
``(iii) cannot be found or reached after
diligent effort; or
``(B) is under an obligation to assign the
invention but has refused to make the oath or
declaration required under subsection (a).
``(3) Contents.--A substitute statement under this
subsection shall--
``(A) identify the individual with respect to whom
the statement applies;
``(B) set forth the circumstances representing the
permitted basis for the filing of the substitute
statement in lieu of the oath or declaration under
subsection (a); and
``(C) contain any additional information, including
any showing, required by the Director.
``(e) Making Required Statements in Assignment of Record.--An
individual who is under an obligation of assignment of an application
for patent may include the required statements under subsections (b)
and (c) in the assignment executed by the individual, in lieu of filing
such statements separately.
``(f) Time for Filing.--A notice of allowance under section 151 may
be provided to an applicant for patent only if the applicant for patent
has filed each required oath or declaration under subsection (a) or has
filed a substitute statement under subsection (d) or recorded an
assignment meeting the requirements of subsection (e).
``(g) Earlier-Filed Application Containing Required Statements or
Substitute Statement.--The requirements under this section shall not
apply to an individual with respect to an application for patent in
which the individual is named as the inventor or a joint inventor and
that claims the benefit under section 120 or 365(c) of the filing of an
earlier-filed application, if--
``(1) an oath or declaration meeting the requirements of
subsection (a) was executed by the individual and was filed in
connection with the earlier-filed application;
``(2) a substitute statement meeting the requirements of
subsection (d) was filed in the earlier filed application with
respect to the individual; or
``(3) an assignment meeting the requirements of subsection
(e) was executed with respect to the earlier-filed application
by the individual and was recorded in connection with the
earlier-filed application.
``(h) Supplemental and Corrected Statements; Filing Additional
Statements.--
``(1) In general.--Any person making a statement required
under this section may withdraw, replace, or otherwise correct
the statement at any time. If a change is made in the naming of
the inventor requiring the filing of 1 or more additional
statements under this section, the Director shall establish
regulations under which such additional statements may be
filed.
``(2) Supplemental statements not required.--If an
individual has executed an oath or declaration under subsection
(a) or an assignment meeting the requirements of subsection (e)
with respect to an application for patent, the Director may not
thereafter require that individual to make any additional oath,
declaration, or other statement equivalent to those required by
this section in connection with the application for patent or
any patent issuing thereon.
``(3) Savings clause.--No patent shall be invalid or
unenforceable based upon the failure to comply with a
requirement under this section if the failure is remedied as
provided under paragraph (1).''.
(2) Relationship to divisional applications.--Section 121
is amended by striking ``If a divisional application'' and all
that follows through ``inventor.''.
(3) Requirements for nonprovisional applications.--Section
111(a) is amended--
(A) in paragraph (2)(C), by striking ``by the
applicant'' and inserting ``or declaration'';
(B) in the heading for paragraph (3), by striking
``and oath''; and
(C) by striking ``and oath'' each place it appears.
(4) Conforming amendment.--The item relating to section 115
in the table of sections for chapter 10 is amended to read as
follows:
``115. Inventor's oath or declaration.''.
(b) Filing by Other Than Inventor.--Section 118 is amended to read
as follows:
``Sec. 118. Filing by other than inventor
``A person to whom the inventor has assigned or is under an
obligation to assign the invention may make an application for patent.
A person who otherwise shows sufficient proprietary interest in the
matter may make an application for patent on behalf of and as agent for
the inventor on proof of the pertinent facts and a showing that such
action is appropriate to preserve the rights of the parties. If the
Director grants a patent on an application filed under this section by
a person other than the inventor, the patent shall be granted to the
real party in interest and upon such notice to the inventor as the
Director considers to be sufficient.''.
(c) Specification.--Section 112 is amended--
(1) in the first paragraph----
(A) by striking ``The specification'' and inserting
``(a) In General.--The specification'';
(B) by striking ``of carrying out his invention''
and inserting ``or joint inventor of carrying out the
invention''; and
(2) in the second paragraph--
(A) by striking ``The specifications'' and
inserting ``(b) Conclusion.--The specifications''; and
(B) by striking ``applicant regards as his
invention'' and inserting ``inventor or a joint
inventor regards as the invention'';
(3) in the third paragraph, by striking ``A claim'' and
inserting ``(c) Form.--A claim'';
(4) in the fourth paragraph, by striking ``Subject to the
following paragraph,'' and inserting ``(d) Reference in
Dependent Forms.--Subject to subsection (e),'';
(5) in the fifth paragraph, by striking ``A claim'' and
inserting ``(e) Reference in Multiple Dependent Form.--A
claim''; and
(6) in the last paragraph, by striking ``An element'' and
inserting ``(f) Element in Claim for a Combination.--An
element''.
SEC. 5. RIGHT OF THE INVENTOR TO OBTAIN DAMAGES.
(a) Damages.--Section 284 is amended--
(1) in the first paragraph--
(A) by striking ``Upon'' and inserting ``(a) Award
of Damages.--
``(1) In general.--Upon'';
(B) by aligning the remaining text accordingly; and
(C) by adding at the end the following:
``(2) Relationship of damages to contributions over prior
art.--The court shall conduct an analysis to ensure that a
reasonable royalty under paragraph (1) is applied only to that
economic value properly attributable to the patent's specific
contribution over the prior art. In a reasonable royalty
analysis, the court shall identify all factors relevant to the
determination of a reasonable royalty under this subsection,
and the court or the jury, as the case may be, shall consider
only those factors in making the determination. The court shall
exclude from the analysis the economic value properly
attributable to the prior art, and other features or
improvements, whether or not themselves patented, that
contribute economic value to the infringing product or process.
``(3) Entire market value.--Unless the claimant shows that
the patent's specific contribution over the prior art is the
predominant basis for market demand for an infringing product
or process, damages may not be based upon the entire market
value of that infringing product or process.
``(4) Other factors.--In determining damages, the court may
also consider, or direct the jury to consider, the terms of any
nonexclusive marketplace licensing of the invention, where
appropriate, as well as any other relevant factors under
applicable law.'';
(2) by amending the second undesignated paragraph to read
as follows:
``(b) Willful Infringement.--
``(1) Increased damages.--A court that has determined that
the infringer has willfully infringed a patent or patents may
increase the damages up to three times the amount of damages
found or assessed under subsection (a), except that increased
damages under this paragraph shall not apply to provisional
rights under section 154(d).
``(2) Permitted grounds for willfulness.--A court may find
that an infringer has willfully infringed a patent only if the
patent owner presents clear and convincing evidence that--
``(A) after receiving written notice from the
patentee--
``(i) alleging acts of infringement in a
manner sufficient to give the infringer an
objectively reasonable apprehension of suit on
such patent, and
``(ii) identifying with particularity each
claim of the patent, each product or process
that the patent owner alleges infringes the
patent, and the relationship of such product or
process to such claim,
the infringer, after a reasonable opportunity to
investigate, thereafter performed one or more of the
alleged acts of infringement;
``(B) the infringer intentionally copied the
patented invention with knowledge that it was patented;
or
``(C) after having been found by a court to have
infringed that patent, the infringer engaged in conduct
that was not colorably different from the conduct
previously found to have infringed the patent, and
which resulted in a separate finding of infringement of
the same patent.
``(3) Limitations on willfulness.--(A) A court may not find
that an infringer has willfully infringed a patent under
paragraph (2) for any period of time during which the infringer
had an informed good faith belief that the patent was invalid
or unenforceable, or would not be infringed by the conduct
later shown to constitute infringement of the patent.
``(B) An informed good faith belief within the meaning of
subparagraph (A) may be established by--
``(i) reasonable reliance on advice of counsel;
``(ii) evidence that the infringer sought to modify
its conduct to avoid infringement once it had
discovered the patent; or
``(iii) other evidence a court may find sufficient
to establish such good faith belief.
``(C) The decision of the infringer not to present evidence
of advice of counsel is not relevant to a determination of
willful infringement under paragraph (2).
``(4) Limitation on pleading.--Before the date on which a
court determines that the patent in suit is not invalid, is
enforceable, and has been infringed by the infringer, a
patentee may not plead and a court may not determine that an
infringer has willfully infringed a patent. The court's
determination of an infringer's willfulness shall be made
without a jury.''; and
(3) in the third undesignated paragraph, by striking ``The
court'' and inserting ``(c) Expert Testimony.--The court''.
(b) Defense to Infringement Based on Earlier Inventor.--Section 273
of title 35, United States Code, is amended--
(1) in subsection (a)--
(A) in paragraph (1)--
(i) by striking ``of a method''; and
(ii) by striking ``review period;'' and
inserting ``review period; and'';
(B) in paragraph (2)(B), by striking the semicolon
at the end and inserting a period; and
(C) by striking paragraphs (3) and (4);
(2) in subsection (b)--
(A) in paragraph (1)--
(i) by striking ``for a method''; and
(ii) by striking ``at least 1 year before
the effective filing date of such patent, and''
and all that follows through the period and
inserting ``and commercially used, or made
substantial preparations for commercial use of,
the subject matter before the effective filing
date of the claimed invention.'';
(B) in paragraph (2)--
(i) by striking ``The sale or other
disposition of a useful end result produced by
a patented method'' and inserting ``The sale or
other disposition of subject matter that
qualifies for the defense set forth in this
section''; and
(ii) by striking ``a defense under this
section with respect to that useful end
result'' and inserting ``such defense''; and
(C) in paragraph (3)--
(i) by striking subparagraph (A); and
(ii) by redesignating subparagraphs (B) and
(C) as subparagraphs (A) and (B), respectively;
(3) in paragraph (7), by striking ``of the patent'' and
inserting ``of the claimed invention''; and
(4) by amending the heading to read as follows:
``Sec. 273. Special defenses to and exemptions from infringement''.
(c) Table of Sections.--The item relating to section 273 in the
table of sections for chapter 28 is amended to read as follows:
``273. Special defenses to and exemptions from infringement.''.
(d) Effective Date.--The amendments made by this section shall
apply to any civil action commenced on or after the date of enactment
of this Act.
SEC. 6. POST-GRANT PROCEDURES AND OTHER QUALITY ENHANCEMENTS.
(a) Reexamination.--Section 303(a) is amended to read as follows:
``(a) Within 3 months after the owner of a patent files a request
for reexamination under section 302, the Director shall determine
whether a substantial new question of patentability affecting any claim
of the patent concerned is raised by the request, with or without
consideration of other patents or printed publications. On the
Director's own initiative, and at any time, the Director may determine
whether a substantial new question of patentability is raised by
patents and publications discovered by the Director, is cited under
section 301, or is cited by any person other than the owner of the
patent under section 302 or section 311. The existence of a substantial
new question of patentability is not precluded by the fact that a
patent or printed publication was previously cited by or to the Office
or considered by the Office.''.
(b) Reexamination.--Section 315(c) is amended by striking ``or
could have raised''.
(c) Reexamination Prohibited After District Court Decision.--
Section 317(b) is amended--
(1) in the subsection heading, by striking ``Final
Decision'' and inserting ``District Court Decision''; and
(2) by striking ``Once a final decision has been entered''
and inserting ``Once the judgment of the district court has
been entered''.
(d) Effective Dates.--Notwithstanding any other provision of law,
sections 311 through 318 of title 35, United States Code, as amended by
this Act, shall apply to any patent that issues before, on, or after
the date of enactment of this Act from an original application filed on
any date.
(e) Post-Grant Opposition Procedures.--
(1) In general.--Part III is amended by adding at the end
the following new chapter:
``CHAPTER 32--POST-GRANT REVIEW PROCEDURES
``Sec.
``321. Petition for post-grant review.
``322. Timing and bases of petition.
``323. Requirements of petition.
``324. Prohibited filings.
``325. Submission of additional information; showing of sufficient
grounds.
``326. Conduct of post-grant review proceedings.
``327. Patent owner response.
``328. Proof and evidentiary standards.
``329. Amendment of the patent.
``330. Decision of the Board.
``331. Effect of decision.
``332. Relationship to other pending proceedings.
``333. Effect of decisions rendered in civil action on future post-
grant review proceedings.
``334. Effect of final decision on future proceedings.
``335. Appeal.
``Sec. 321. Petition for post-grant review
``Subject to sections 322, 324, 332, and 333, a person who is not
the patent owner may file with the Office a petition for cancellation
seeking to institute a post-grant review proceeding to cancel as
unpatentable any claim of a patent on any ground that could be raised
under paragraph (2) or (3) of section 282(b) (relating to invalidity of
the patent or any claim). The Director shall establish, by regulation,
fees to be paid by the person requesting the proceeding, in such
amounts as the Director determines to be reasonable.
``Sec. 322. Timing and bases of petition
``A post-grant proceeding may be instituted under this chapter
pursuant to a cancellation petition filed under section 321 only if--
``(1) the petition is filed not later than 12 months after
the grant of the patent or issuance of a reissue patent, as the
case may be;
``(2)(A) the petitioner establishes a substantial reason to
believe that the continued existence of the challenged claim in
the petition causes or is likely to cause the petitioner
significant economic harm; or
``(B) the petitioner has received notice from the patent
holder alleging infringement by the petitioner of the patent;
or
``(3) the patent owner consents in writing to the
proceeding.
``Sec. 323. Requirements of petition
``A cancellation petition filed under section 321 may be considered
only if--
``(1) the petition is accompanied by payment of the fee
established by the Director under section 321;
``(2) the petition identifies the cancellation petitioner;
and
``(3) the petition sets forth in writing the basis for the
cancellation, identifying each claim challenged and providing
such information as the Director may require by regulation, and
includes copies of patents and printed publications that the
cancellation petitioner relies upon in support of the petition;
and
``(4) the petitioner provides copies of those documents to
the patent owner or, if applicable, the designated
representative of the patent owner.
``Sec. 324. Prohibited filings
``A post-grant review proceeding may not be instituted under
paragraph (1), (2), or (3) of section 322 if the petition for
cancellation requesting the proceeding identifies the same cancellation
petitioner and the same patent as a previous petition for cancellation
filed under the same paragraph of section 322.
``Sec. 325. Submission of additional information; showing of sufficient
grounds
``The cancellation petitioner shall file such additional
information with respect to the petition as the Director may require.
The Director may not authorize a post-grant review proceeding to
commence unless the Director determines that the information presented
provides sufficient grounds to proceed.
``Sec. 326. Conduct of post-grant review proceedings
``(a) In General.--The Director shall--
``(1) prescribe regulations, in accordance with section
2(b)(2), establishing and governing post-grant review
proceedings under this chapter and their relationship to other
proceedings under this title;
``(2) prescribe regulations setting forth the standards for
showings of substantial reason to believe and significant
economic harm under section 322(2) and sufficient grounds under
section 325;
``(3) prescribe regulations establishing procedures for the
submission of supplemental information after the petition for
cancellation is filed; and
``(4) prescribe regulations setting forth procedures for
discovery of relevant evidence, including that such discovery
shall be limited to evidence directly related to factual
assertions advanced by either party in the proceeding, and the
procedures for obtaining such evidence shall be consistent with
the purpose and nature of the proceeding.
``(b) Post-Grant Regulations.--Regulations under subsection
(a)(1)--
``(1) shall require that the final determination in a post-
grant proceeding issue not later than one year after the date
on which the post-grant review proceeding is instituted under
this chapter, except that, for good cause shown, the Director
may extend the 1-year period by not more than six months;
``(2) shall provide for discovery upon order of the
Director;
``(3) shall prescribe sanctions for abuse of discovery,
abuse of process, or any other improper use of the proceeding,
such as to harass or to cause unnecessary delay or unnecessary
increase in the cost of the proceeding;
``(4) may provide for protective orders governing the
exchange and submission of confidential information; and
``(5) shall ensure that any information submitted by the
patent owner in support of any amendment entered under section
328 is made available to the public as part of the prosecution
history of the patent.
``(c) Considerations.--In prescribing regulations under this
section, the Director shall consider the effect on the economy, the
integrity of the patent system, and the efficient administration of the
Office.
``(d) Conduct of Proceeding.--The Patent Trial and Appeal Board
shall, in accordance with section 6(b), conduct each post-grant review
proceeding authorized by the Director.
``Sec. 327. Patent owner response
``After a post-grant proceeding under this chapter has been
instituted with respect to a patent, the patent owner shall have the
right to file, within a time period set by the Director, a response to
the cancellation petition. The patent owner shall file with the
response, through affidavits or declarations, any additional factual
evidence and expert opinions on which the patent owner relies in
support of the response.
``Sec. 328. Proof and evidentiary standards
``(a) In General.--The presumption of validity set forth in section
282 shall not apply in a challenge to any patent claim under this
chapter.
``(b) Burden of Proof.--The party advancing a proposition under
this chapter shall have the burden of proving that proposition by a
preponderance of the evidence.
``Sec. 329. Amendment of the patent
``(a) In General.--In response to a challenge in a petition for
cancellation, the patent owner may file 1 motion to amend the patent in
1 or more of the following ways:
``(1) Cancel any challenged patent claim.
``(2) For each challenged claim, propose a substitute
claim.
``(3) Amend the patent drawings or otherwise amend the
patent other than the claims.
``(b) Additional Motions.--Additional motions to amend may be
permitted only for good cause shown.
``(c) Scope of Claims.--An amendment under this section may not
enlarge the scope of the claims of the patent or introduce new matter.
``Sec. 330. Decision of the Board
``If the post-grant review proceeding is instituted and not
dismissed under this chapter, the Patent Trial and Appeal Board shall
issue a final written decision with respect to the patentability of any
patent claim challenged and any new claim added under section 329.
``Sec. 331. Effect of decision
``(a) In General.--If the Patent Trial and Appeal Board issues a
final decision under section 330 and the time for appeal has expired or
any appeal proceeding has terminated, the Director shall issue and
publish a certificate canceling any claim of the patent finally
determined to be unpatentable and incorporating in the patent by
operation of the certificate any new claim determined to be patentable.
``(b) New Claims.--Any new claim held to be patentable and
incorporated into a patent in a post-grant review proceeding shall have
the same effect as that specified in section 252 for reissued patents
on the right of any person who made, purchased, offered to sell, or
used within the United States, or imported into the United States,
anything patented by such new claim, or who made substantial
preparations therefore, prior to issuance of a certificate under
subsection (a) of this section.
``Sec. 332. Relationship to other pending proceedings
``Notwithstanding subsection 135(a), sections 251 and 252, and
chapter 30, the Director may determine the manner in which any
reexamination proceeding, reissue proceeding, interference proceeding
(commenced before the effective date of the Patent Reform Act of 2007),
derivation proceeding, or post-grant review proceeding, that is pending
during a post-grant review proceeding, may proceed, including providing
for stay, transfer, consolidation, or termination of any such
proceeding.
``Sec. 333. Effect of decisions rendered in civil action on future
post-grant review proceedings
``If a final decision has been entered against a party in a civil
action arising in whole or in part under section 1338 of title 28
establishing that the party has not sustained its burden of proving the
invalidity of any patent claim--
``(1) that party to the civil action and the privies of
that party may not thereafter request a post-grant review
proceeding on that patent claim on the basis of any grounds,
under the provisions of section 311, which that party or the
privies of that party raised or had actual knowledge of; and
``(2) the Director may not thereafter maintain a post-grant
review proceeding previously requested by that party or the
privies of that party on the basis of such grounds.
``Sec. 334. Effect of final decision on future proceedings
``(a) In General.--If a final decision under section 330 is
favorable to the patentability of any original or new claim of the
patent challenged by the cancellation petitioner, the cancellation
petitioner may not thereafter, based on any ground which the
cancellation petitioner raised during the post-grant review
proceeding--
``(1) request or pursue a reexamination of such claim under
chapter 31;
``(2) request or pursue a derivation proceeding with
respect to such claim;
``(3) request or pursue a post-grant review proceeding
under this chapter with respect to such claim; or
``(4) assert the invalidity of any such claim, in any civil
action arising in whole or in part under section 1338 of title
28.
``(b) Extension of Prohibition.--If the final decision is the
result of a petition for cancellation filed on the basis of paragraph
(2) of section 322, the prohibition under this section shall extend to
any ground which the cancellation petitioner raised during the post-
grant review proceeding.
``Sec. 335. Appeal
``A party dissatisfied with the final determination of the Patent
Trial and Appeal Board in a post-grant proceeding under this chapter
may appeal the determination under sections 141 through 144. Any party
to the post-grant proceeding shall have the right to be a party to the
appeal.''.
(f) Conforming Amendment.--The table of chapters for part III is
amended by adding at the end the following:
``32. Post-Grant Review Proceedings
321''.
(g) Regulations and Effective Date.--
(1) Regulations.--The Under Secretary of Commerce for
Intellectual Property and Director of the United States Patent
and Trademark Office (in this subsection referred to as the
``Director'') shall, not later than the date that is 1 year
after the date of the enactment of this Act, issue regulations
to carry out chapter 32 of title 35, United States Code, as
added by subsection (e) of this section
(2) Applicability.--The amendments made by subsection (e)
shall take effect on the date that is 1 year after the date of
the enactment of this Act and shall apply to patents issued
before, on, or after that date, except that, in the case of a
patent issued before that date, a petition for cancellation
under section 321 of title 35, United States Code, may be filed
only if a circumstance described in paragraph (2), (3), or (4)
of section 322 of title 35, United States Code, applies to the
petition.
(3) Pending interferences.--The Director shall determine
the procedures under which interferences commenced before the
effective date under paragraph (2) are to proceed, including
whether any such interference is to be dismissed without
prejudice to the filing of a cancellation petition for a post-
grant opposition proceeding under chapter 32 of title 35,
United States Code, or is to proceed as if this Act had not
been enacted. The Director shall include such procedures in
regulations issued under paragraph (1).
SEC. 7. DEFINITIONS; PATENT TRIAL AND APPEAL BOARD.
(a) Definitions.--Section 100 (as amended by this Act) is further
amended--
(1) in subsection (e), by striking ``or inter partes
reexamination under section 311'';
(2) by adding at the end the following:
``(k) The term `cancellation petitioner' means the real party in
interest requesting cancellation of any claim of a patent under chapter
31 of this title and the privies of the real party in interest.''.
(b) Patent Trial and Appeal Board.--Section 6 is amended to read as
follows:
``Sec. 6. Patent Trial and Appeal Board
``(a) Establishment and Composition.--There shall be in the Office
a Patent Trial and Appeal Board. The Director, the Deputy Director, the
Commissioner for Patents, the Commissioner for Trademarks, and the
administrative patent judges shall constitute the Patent Trial and
Appeal Board. The administrative patent judges shall be persons of
competent legal knowledge and scientific ability who are appointed by
the Director. Any reference in any Federal law, Executive order, rule,
regulation, or delegation of authority, or any document of or
pertaining to the Board of Patent Appeals and Interferences is deemed
to refer to the Patent Trial and Appeal Board.
``(b) Duties.--The Patent Trial and Appeal Board shall--
``(1) on written appeal of an applicant, review adverse
decisions of examiners upon application for patents;
``(2) on written appeal of a patent owner, review adverse
decisions of examiners upon patents in reexamination
proceedings under chapter 30; and
``(3) determine priority and patentability of invention in
derivation proceedings under subsection 135(a); and
``(4) conduct post-grant opposition proceedings under
chapter 32.
Each appeal and derivation proceeding shall be heard by at least 3
members of the Patent Trial and Appeal Board, who shall be designated
by the Director. Only the Patent Trial and Appeal Board may grant
rehearings. The Director shall assign each post-grant review proceeding
to a panel of 3 administrative patent judges. Once assigned, each such
panel of administrative patent judges shall have the responsibilities
under chapter 32 in connection with post-grant review proceedings.''.
SEC. 8. STUDY AND REPORT ON REEXAMINATION PROCEEDINGS.
The Under Secretary of Commerce for Intellectual Property and
Director of the Patent and Trademark Office shall, not later than 3
years after the date of the enactment of this Act--
(1) conduct a study of the effectiveness and efficiency of
the different forms of proceedings available under title 35,
United States Code, for the reexamination of patents; and
(2) submit to the Committees on the Judiciary of the House
of Representatives and the Senate a report on the results of
the study, including any of the Director's suggestions for
amending the law, and any other recommendations the Director
has with respect to patent reexamination proceedings.
SEC. 9. SUBMISSIONS BY THIRD PARTIES AND OTHER QUALITY ENHANCEMENTS.
(a) Publication.--Section 122(b)(2) is amended--
(1) by striking subparagraph (B); and
(2) in subparagraph (A)--
(A) by striking ``(A) An application'' and
inserting ``An application''; and
(B) by redesignating clauses (i) through (iv) as
subparagraphs (A) through (D), respectively.
(b) Preissuance Submissions by Third Parties.--Section 122 is
amended by adding at the end the following:
``(e) Preissuance Submissions by Third Parties.--
``(1) In general.--Any person may submit for consideration
and inclusion in the record of a patent application, any
patent, published patent application or other publication of
potential relevance to the examination of the application, if
such submission is made in writing before the earlier of--
``(A) the date a notice of allowance under section
151 is mailed in the application for patent; or
``(B) either--
``(i) 6 months after the date on which the
application for patent is published under
section 122, or
``(ii) the date of the first rejection
under section 132 of any claim by the examiner
during the examination of the application for
patent,
whichever occurs later.
``(2) Other requirements.--Any submission under paragraph
(1) shall--
``(A) set forth a concise description of the
asserted relevance of each submitted document;
``(B) be accompanied by such fee as the Director
may prescribe; and
``(C) include a statement by the submitter
affirming that the submission was made in compliance
with this section.''.
SEC. 10. VENUE AND JURISDICTION.
(a) Venue for Patent Cases.--Section 1400 of title 28, United
States Code, is amended by striking subsection (b) and inserting the
following:
``(b) Any civil action arising under any Act of Congress relating
to patents, other than an action for declaratory judgment or an action
seeking review of a decision of the Patent Trial and Appeal Board under
chapter 13 of title 35, may be brought only--
``(1) in the judicial district where either party resides;
or
``(2) in the judicial district where the defendant has
committed acts of infringement and has a regular and
established place of business.
``(c) Notwithstanding section 1391(c) of this title, for purposes
of venue under subsection (b), a corporation shall be deemed to reside
in the judicial district in which the corporation has its principal
place of business or in the State in which the corporation is
incorporated.''.
(b) Interlocutory Appeals.--Subsection (c)(2) of section 1292 of
title 28, United States Code, is amended by adding at the end the
following:
``(3) of an appeal from an interlocutory order or decree
determining construction of claims in a civil action for patent
infringement under section 271 of title 35.
Application for an appeal under paragraph (3) shall be made to the
court within 10 days after entry of the order or decree, and
proceedings in the district court under such paragraph shall be stayed
during pendency of the appeal.''.
SEC. 11. REGULATORY AUTHORITY.
Section 3(a) is amended by adding at the end the following:
``(5) Regulatory authority.--In addition to the authority
conferred by other provisions of this title, the Director may
promulgate such rules, regulations, and orders that the
Director determines appropriate to carry out the provisions of
this title or any other law applicable to the United States
Patent and Trademark Office or that the Director determines
necessary to govern the operation and organization of the
Office.''.
SEC. 12. TECHNICAL AMENDMENTS.
(a) Joint Inventions.--Section 116 is amended--
(1) in the first paragraph, by striking ``When''
and inserting ``(a) Joint Inventions.--When'';
(2) in the second paragraph, by striking ``If a
joint inventor'' and inserting ``(b) Omitted
Inventor.--If a joint inventor''; and
(3) in the third paragraph, by striking
``Whenever'' and inserting ``(c) Correction of Errors
in Application.--Whenever''.
(b) Filing of Application in Foreign Country.--Section 184 is
amended--
(1) in the first paragraph, by striking ``Except when'' and
inserting ``(a) Filing in Foreign Country.--Except when'';
(2) in the second paragraph, by striking ``The term'' and
inserting ``(b) Application.--The term''; and
(3) in the third paragraph, by striking ``The scope'' and
inserting ``(c) Subsequent Modifications, Amendments, and
Supplements.--The scope''.
(c) Reissue of Defective Patents.--Section 251 is amended--
(1) in the first paragraph, by striking ``Whenever'' and
inserting ``(a) In General.--Whenever'';
(2) in the second paragraph, by striking ``The Director''
and inserting ``(b) Multiple Reissued Patents.--The Director'';
(3) in the third paragraph, by striking ``The provision''
and inserting ``(c) Applicability of This Title.--The
provisions''; and
(4) in the last paragraph, by striking ``No reissued
patent'' and inserting ``(d) Reissue Patent Enlarging Scope of
Claims.--No reissued patent''.
(d) Effect of Reissue.--Section 253 is amended--
(1) in the first paragraph, by striking ``Whenever'' and
inserting ``(a) In General.--Whenever''; and
(2) in the second paragraph, by striking ``in like manner''
and inserting ``(b) Additional Disclaimer or Dedication.--In
the manner set forth in subsection (a),''.
(e) Correction of Named Inventor.--Section 256 is amended--
(1) in the first paragraph, by striking ``Whenever'' and
inserting ``(a) Correction.--Whenever''; and
(2) in the second paragraph, by striking ``The error'' and
inserting ``(b) Patent Valid if Error Corrected.--The error''.
(f) Presumption of Validity.--Section 282 is amended--
(1) in the first undesignated paragraph, by striking ``A
patent'' and inserting ``(a) In General.--A patent'';
(2) in the second undesignated paragraph, by striking ``The
following'' and inserting ``(b) Defenses.--The following''; and
(3) in the third undesignated paragraph, by striking ``In
actions'' and inserting ``(c) Notice of Actions; Actions During
Extension of Patent Term.--In actions''.
SEC. 13. EFFECTIVE DATE; RULE OF CONSTRUCTION.
(a) Effective Date.--Except as otherwise provided in this Act, the
provisions of this Act shall take effect 12 months after the date of
the enactment of this Act and shall apply to any patent issued on or
after that effective date.
(b) Continuity of Intent Under the Create Act.--The enactment of
section 102(b)(3) of title 35, United States Code, under section (3)(b)
of this Act is done with the same intent to promote joint research
activities that was expressed, including in the legislative history,
through the enactment of the Cooperative Research and Technology
Enhancement Act of 2004 (Public Law 108-453; the ``CREATE Act''), the
amendments of which are stricken by section 3(c) of this Act. The
United States Patent and Trademark Office shall administer section
102(b)(3) of title 35, United States Code, in a manner consistent with
the legislative history of the CREATE Act that was relevant to its
administration by the Patent and Trademark Office.
Mr. Berman. In brief the bill contains the following
changes: Section 3, in accordance with a number of
recommendations, moves the U.S. from a first-to-invent system
to a first-inventor-to-file system. The U.S. stands alone in
the world in awarding patents on the basis of first to invent.
In making this change, we harmonize this aspect of U.S. patent
law with other countries, thereby making it easier for U.S.
inventors to navigate international protection for their
patents.
Section 5 contains two important provisions relating to
damages: (1), apportionment; and (2), willfulness. In order to
prevent excessive damages, as some have characterized the
damages awarded in the Alcatel v. Microsoft case and a number
of other cases that came down before that case, the
apportionment language is designed to ensure that in most cases
a reasonable royalty will reflect the value of the underlying
invention.
As to willfulness, in order to discourage nuisance
licensing letters that trigger treble damages, the bill
requires that a notice be clear about the patent and what acts
allegedly infringe the patent before the infringement can be
considered willful.
Section 6 establishes what will hopefully be a meaningful
postgrant opposition proceeding. Postgrant will operate as a
check on the quality of patents issued from the USPTO and will
provide a less costly and more efficient alternative to
litigation. Postgrant provides the ability to challenge the
validity of a patent and provides mechanisms to prevent
harassment. The goal is to provide one petitioner one shot at
one patent. A drafting error, as I mentioned earlier, allows
multiple windows to be opened, but once amended, if a
petitioner opts to institute a postgrant proceeding, the
petitioner may not later opt to utilize the postgrant
proceeding again for the same patent. The USPTO Director must
prescribe regulations to provide for the Board to issue
sanctions for abuse of process. During this process, the
Subcommittee may want to consider providing additional
statutory guidance for the Director of the USPTO on the
structure of the postgrant proceeding.
This is the loudest I ever spoke. I will speak louder.
Section 8 contains a requirement for the Director to
conduct a study about the interplay and the efficacy of the
various reexamination procedures so that Congress will be able
to make an informed decision on which proceedings should be
phased out or eliminated.
Section 9 permits third parties a limited amount of time to
submit to the USPTO prior art references relevant to a pending
patent application. Allowing such third-party submissions will
increase the likelihood that examiners have available to them
the most relevant prior art, thereby constituting a front-end
solution for strengthening patent quality.
Section 10 tightens up the venue statute for patent cases
and offers the ability to appeal claim construction before a
trial is over.
Section 11 grants the PTO regulatory authority commensurate
with other agencies. Taken together, and as stated earlier,
these provisions represent the starting point for this
discussion.
The reason Congressman Rick Boucher and I got involved in
this issue over 5 years ago was because we identified a number
of needed reforms to address patent quality concerns. For me,
patent reform is about finding the right balance and
maintaining good public policy. Clearly robust protection
should be provided for intellectual property, but only for
inventions that are truly inventive and deserving protection.
While this bill is based on former iterations of bills I
sponsored and supported, some with Mr. Boucher, some with the
Ranking Member of the full Committee Mr. Smith, I am not wedded
to every word of my proposal; however, I am wedded to finding a
solution that works.
It is easy for groups to support parts of the bill they
like or are unaffected by; however, the most controversial
parts of the bill are those that seek to address the most
serious weaknesses in our patent system that we began to
identify years ago. For any other reforms to move forward, the
different industry sectors would be best served by coming
together to resolve the hard issues. Change is always
difficult, but I would hope that those with the most inventive
spirit will be able to focus on productive ways to address the
problems.
I now conclude my statement and would recognize our
distinguished Ranking Member, who is not unfamiliar with patent
reform battles in the past, my friend and colleague Howard
Coble, for his opening statement.
[The prepared statement of Mr. Berman follows:]
Prepared Statement of the Honorable Howard L. Berman, a Representative
in Congress from the State of California, and Chairman, Subcommittee on
Courts, the Internet, and Intellectual Property
Let me begin by describing what this hearing is NOT about.
This hearing is not about creating a dynamic where all the
witnesses testifying support this bill. In fact, while the witnesses
have identified some aspects of the bill they like, a majority disagree
with major portions of the bill--(and there would have been another
witness to raise disagreement with the bill but the independent
inventor I invited couldn't be here today). My goal is to foster the
policy discussion to yield the best result.
This hearing is not about a perfect bill. I expect over the course
of the next several weeks there will be numerous changes incorporated
into the bill that reflect legitimate concerns over unintended
consequences as well as reforms considered not presently included. For
example, the issues of obviousness and 271(f) are currently before the
Supreme Court are not addressed in the bill. Furthermore, as to
drafting errors, I have already identified a number of necessary
corrections that will be made (i.e. the word ``same'' should be changed
to ``any'' in the Prohibited Filings section to allow for only one shot
at a post-grant proceeding--you can't challenge in the 1st window and
then challenge in the second).
This hearing is not about promoting an agenda for a specific
industry. While the media has portrayed the debate as a tech vs. PhRma
battle--I prefer to see it as the inability of current patent laws to
accommodate the differences of industry business models. For the
sectors which rely on business method patents or products which
incorporate many multiples of patents--the proliferation of
questionable quality patents and the burgeoning of patent speculation
prevents the system from promoting innovation. It is one system and it
must work for everyone. It is without doubt that most groups who have a
stake in the patent system recognize the need for reform. But it should
be realized that the final make up of the reforms will certainly
require compromise by all.
The intention of this hearing IS to move beyond the previous
rhetoric on patent reform and to address the real and serious problems
confronting the US patent system. By bringing to this hearing the cross
section of patent system users we have here today, I expect the
discourse and debate on the reforms proposed in the bill to be
instructive and thoughtful.
This bi-partisan and bicameral bill draws from many of the issues
raised by past legislative attempts, multiple hearings, and a slew of
reports on patent reform by entities such as the National Academy of
Science as well as the Federal Trade Commission, and the United States
Patent and Trademark Office, among others.
H.R. 1908 is both long and complex. I do not expect that everyone
has had a chance to fully digest all of the changes proposed by the
bill. However ``The Patent Reform Act of 2007'' is effectively now our
starting point and this hearing I hope will propel discussion on where
the bill should go. I would like thank the witnesses and especially my
subcommittee members for beginning the process today.
In brief, the bill contains the following changes:
Section 3, in accordance with a number of recommendations, moves
the US from a ``first-to-invent'' system to a ``first-inventor-to-
file'' system. The U.S. stands alone in the world in awarding patents
on the basis of first to invent. In making this change, we harmonize
this aspect of U.S. patent law with other countries, thereby making it
easier for US inventors to navigate international protection for their
patents.
[Section 4, probably the least controversial portion of the bill,
is designed to simplify the process for providing an inventor's oath.]
Section 5 contains two important provisions related to damages; 1)
apportionment and 2) willfulness. In order to prevent excessive
damages--as some have characterized the damages awarded in the Alcatel
v. Microsoft case and a number of other cases--the apportionment
language is designed to ensure that in most cases a reasonable royalty
will reflect the value of the underlying invention. As to willfulness,
in order to discourage nuisance licensing letters that trigger treble
damages, the bill requires that a notice be clear about the patent and
what acts allegedly infringe the patent before the infringement can be
considered willful.
Section 6 establishes what will hopefully be a meaningful post-
grant opposition proceeding. Post-grant will operate as a check on the
quality of patents issued from the USPTO and will provide a less costly
and more efficient alternative to litigation. Post-grant provides the
ability to challenge the validity of a patent and provides mechanisms
to prevent harassment. The goal is to provide one petitioner one shot
at one patent (a drafting error allows multiple windows to be opened--
but once amended--if a petitioner opts to institute a post-grant
proceeding, the petitioner may not later opt to utilize the post-grant
proceeding again for the same patent.) Furthermore, the USPTO Director
must prescribe regulations to provide for the Board to issue sanctions
for abuse of process. During this process, the Subcommittee may want to
consider providing additional statutory guidance for the Director of
the USPTO on the structure of the post-grant proceeding.
Section 8 contains a requirement for the Director to conduct a
study about the interplay and the efficacy of the various re-
examination procedures so that Congress will be able to make an
informed decision on which proceedings should be phased out or
eliminated.
Section 9 permits third parties a limited amount of time to submit
to the USPTO prior art references relevant to a pending patent
application. Allowing such third party submissions will increase the
likelihood that examiners have available to them the most relevant
``prior art,'' thereby constituting a front-end solution for
strengthening patent quality.
Section 10 tightens up the venue statute for patent cases and
offers the ability to appeal claim construction before a trial is over.
Section 11 grants the PTO regulatory authority commensurate with
other agencies.
Taken together and as stated earlier, these provisions represent
the starting point for this discussion.
The reason Congressman Rick Boucher and I got involved in this
issue over 5 years ago was because we identified a number of needed
reforms to address patent quality concerns. For me, patent reform is
about finding the right balance and maintaining good public policy.
Clearly, robust protection should be provided for intellectual property
but only for inventions that are truly inventive and deserving
protection.
While this bill is based on former iterations of bills I sponsored
and supported, I am not wedded to every word of my proposal. However, I
am wedded to finding a solution that works. It is easy for groups to
support parts of the bill they like or are unaffected by. However, the
most controversial parts of the bill are those that seek to address the
most serious weaknesses in our patent system that we began to identify
years ago. For any of the reforms to move forward, the different
industry sectors would be best served by coming together to resolve the
hard issues.
Change is always difficult but I would hope that those with the
most ``inventive'' spirit will be able to focus on productive ways to
address the problems.
Mr. Coble. Thank you, Mr. Chairman. Someone said you are
having difficulty hearing. Can you hear in the back okay?
Thank you, Mr. Chairman.
I, too, remember the patent wars we fought together during
the late 1990's that actually took about 5 years, you will
recall, Mr. Chairman, to pass the last omnibus reform measure
in 1999, entitled the American Inventors Protection Act. It was
a good bill and improved patent practice in this country. And
if you all will pardon my modesty, Chairman Berman and I and
several in the audience were instrumental in getting that law
passed.
Early on, Mr. Chairman, you will recall we had Democrats
fighting Democrats, Republicans fighting Republicans, and, of
course, that created much interest. I received a call from a
reporter in San Francisco who said to me, I have been covering
patent law matters for 13 years. He said, it is the most dull,
boring, esoteric assignment I have ever had until now. Keep the
fighting going, he said. I hope, Mr. Chairman, there will be
more harmony in the early days this time.
Some of the issues we attempted to address then were not
politically ripe for reform. Nearly 8 years later, as you
pointed out, I think we are better positioned to review these
matters again and evaluate other problems that have since
evolved in the patent world. I will not attempt to provide an
abridged description of every topical issue that is addressed
in H.R. 1908, we would be here until suppertime if I did, but I
would comment on what I believe is a sticking point to the
debate.
Different individuals and companies use the patent system
in differing and varied ways. They have different business
models that occasionally clash. This has engendered a
discussion on whether too many patents of poor quality are
circulating in the economy today, which in turn has generated
questionable lawsuits governing infringement.
None of us wants to support a system that rewards legal
gamesmanship over true creativity, but in our zeal to weed out
bad lawsuits, I think we need to avoid proceeding on the
assumption that every patent holder who wants to license an
invention or enforce his or her property rights is ill-
intentioned. This is a standard and time-honored component of
the patent system and should be preserved.
Mr. Chairman, we had scant time to review the text of the
bill, but when it was introduced--and I think it speaks well
for you and for the Subcommittee that we have five Republican
cosponsors at this early stage, at this early time, and
sometimes unusual on this Hill, but not so on this
Subcommittee. And I share your concern about wanting to enact
reform if we can prior to the close of the calendar year. As we
do this, and as we strive to do it, we should probably heed the
admonition of John Wooden, the great basketball coach at your
alma mater, UCLA, who exhorted his players to move quickly
without hurrying. This is an important bill, Mr. Chairman, and
I look forward to working with you and many in the audience and
Members of the Subcommittee to its fruition, and I yield back.
Mr. Berman. I thank the gentleman. I think Florida
perfected that this year.
In the interest of proceeding to our witnesses, and mindful
of our busy schedules, I plan to recognize the Ranking Member
of the full Committee Lamar Smith for an opening statement, and
then ask other Members to submit their statements for the
record, to be submitted by the close of business Wednesday. And
without objection, all opening statements will be placed in the
record.
[The prepared statement of Ms. Jackson Lee follows:]
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress from the State of Texas, and Member,
Subcommittee on Courts, the Internet, and Intellectual Property
Mr. Berman. I recognize the gentleman from Texas, the
Ranking Member of the Judiciary Committee.
Mr. Smith. Thank you, Mr. Chairman. First of all, I want to
say it is a credit to you that you have invited the witnesses
and the Ranking Member have invited the witnesses that we have
here today. As you pointed out earlier, they are not
necessarily all enthusiastic supporters of every component of
the piece of legislation that we are considering; however, they
are all credible, and all have legitimate points of view, which
we look forward to hearing.
I would like to single out one individual, Mr. Peterman,
just because he represents a constituent firm--I guess
technically it is a former constituent firm since I no longer
represent the county that the firm is located in, but
nevertheless those are still, as far as I am concerned, strong
ties.
I would also, speaking to people who are present, like to
compliment our colleague from California Mr. Schiff for
doubling his representation today and for being a good father.
My only question is is it permissible under our rules for a
daughter to yield her father her 5 minutes of time for
questions?
Mr. Schiff. She would never yield to me.
Mr. Smith. The response was she would never yield to her
dad. So anyhow, I appreciate his efforts to include other
members of the family here.
Mr. Chairman, our Subcommittee is one of the few whose
jurisdiction is specifically defined in the Constitution,
article I, section 8. This passage empowers Congress, quote, to
promote the progress of science and the useful arts by securing
for limited times to authors and inventors the exclusive right
to their respective writings and discoveries, end quote.
The foresight of the Founders in creating an intellectual
property system demonstrates their understanding of how patent
rights ultimately benefit the American people. Nor was the
value of patents lost on one of our greatest Presidents,
Abraham Lincoln, who actually filed a patent himself. As a
young man, Lincoln took a boatload of merchandise down the
Mississippi River from New Salem to New Orleans. The boat slid
onto a dam and was dislodged only by heroic efforts. A few
years later while crossing the Great Lakes, Lincoln's ship ran
afoul of a sandbar. These two similar experiences led him to
invent a solution to the problem. The invention consists of a
set of bellows attached to the hull of the ship just below the
water line. When a vessel is in danger of getting stuck in
shallow water, the bellows are filled with air, and the vessel
that is buoyed floats clear of the obstacle.
Although Lincoln never profited from his invention, he was
a strong supporter of the patent system, saying it, quote,
added the fuel of interest to the fire of genius in the
discovery and production of new and useful things, end quote.
It is important to remember the origins of our patent
system as we deliberate the latest potential addition to it,
H.R. 1908. Last year we laid a substantial foundation for
patent reform, and I am pleased that we have continued that
momentum this year with the introduction of H.R. 1908. The need
to enact patent reform in the 110th Congress is great. This
bill represents a good starting point for us to work through
the remaining issues to complete that task. Chairman Berman,
Ranking Member Coble and I have talked about the text of the
legislation, and we agree that modifications will be made as
needed and where appropriate.
At this time we should focus our discussion on the elements
of the bill, not other issues that might be the subject of
either a Supreme Court decision or, in its absence, another
hearing. As we proceed in the coming weeks and months, we must
also strive to create a transparent and inclusive process for
Members as well as those affected by our work.
This is the most significant, comprehensive update to
patent law within the past decade. Arguably it represents the
biggest change since the 1952 act was written. This
Subcommittee has undertaken such responsibility because the
changes are necessary to bolster the U.S. economy and improve
the quality of living for all Americans.
A recent study valued U.S. intellectual property at
approximately $5 trillion, or about half of U.S. gross domestic
product. American IP industries now account for over half of
all U.S. exports and represent 40 percent of our economic
growth. These industries also provide millions of Americans
with well-paying jobs. When IP industries benefit, so do
Americans.
This bill will eliminate from the current system the legal
gamesmanship that awards lawsuit abuses over creativity. It
will enhance the quality of patents and increase public
confidence in their integrity. This will encourage individuals
and companies to engage in research, commercialize their
inventions, grow their businesses, create new jobs and offer
the American public an array of products and services that
makes our country the envy of the world. All businesses, small
and large, should benefit. All industries directly or
indirectly affected by patents, including finance, automotive,
manufacturing, high tech and pharmaceuticals, can also profit.
I am confident that by moving ahead, we will produce a bill
that protects intellectual property, generates jobs, increases
productivity, enhances patent quality and curtailing frivolous
lawsuits. H.R. 1908 can potentially, as we proceed along the
process, benefit almost everyone, from the lone inventor in the
garage to a high-tech company that files 1,000 patents each
year, and most businesses in between.
I look forward to working with you, Mr. Chairman, and the
Ranking Member and others on this legislation in the weeks
ahead. Thank you for recognizing me, and I will yield back the
balance of my time.
[The prepared statement of Mr. Smith follows:]
Prepared Statement of the Honorable Lamar Smith, a Representative in
Congress from the State of Texas, and Member, Subcommittee on Courts,
the Internet, and Intellectual Property
Mr. Berman. I thank the gentleman.
And now the introduction of witnesses. Our first witness
will be Mr. Kevin Sharer, who is coming from Thousand Oaks, CA.
He is chief executive officer and chairman of the board of
directors of Amgen. Before joining Amgen in 1992, Mr. Sharer
served in a variety of executive positions for MCI and General
Electric. And in addition to his duties at Amgen, he serves on
the board of directors for some major companies and also on the
Board of the U.S. Naval Academy Foundation. He received his
bachelor's degree in aeronautical engineering from the U.S.
Naval Academy, a master's degree in aeronautical engineering
from the U.S. Naval Postgraduate School, and a degree in
business administration from the University of Pittsburgh.
Our next witness is Mr. Gary Griswold, president and chief
intellectual property counsel of 3M Innovative Properties
Company. He has practiced intellectual property law at 3M and
DuPont for over 30 years. He is past president of Intellectual
Property Owners and the American Intellectual Property Law
Association, holds a B.S. In chemical engineering from Iowa
State and M.S. In industrial administration from Duke
University, and a J.D. From the University of Maryland.
Our third witness will be Professor Jay Thomas, who, I
might add, has been an often-used resource by this
Subcommittee. Professor Thomas is a professor of law at
Georgetown University. He recently received a grant from the
MacArthur Foundation that will allow him to continue to work as
a visiting scholar for the Congressional Research Service.
Professor Thomas has published five books pertaining to patent
law, intellectual property law and pharmaceutical patent law.
He also previously served as law clerk to Chief Judge Helen
Nies of the U.S. Court of Appeals for the Federal circuit.
Dr. William Tucker will be our fourth witness. He is
executive director of the Office of Technology Transfer, for
Research, Administration and Technology Transfer for the
University of California. Dr. Tucker's career has focused
primarily on agricultural biotechnology research and licensing.
Prior to joining the University of California, Dr. Tucker
worked for a number of biotechnology firms including Paradigm
Genetics, Celera Genomics, and Applied Biosystems; holds a B.S.
And Ph.D. in microbiology from Queensland and an B.A. From St.
Mary's College.
Our last witness is Anthony Peterman. Mr. Peterman is legal
director of patents for Dell, where he is responsible for
overseeing all patent-related legal issues for the company.
Prior to joining Dell, Mr. Peterman was with the law firm Baker
Botts, where he handled a variety of intellectual property
litigation and transactional matters. Mr. Peterman has a B.S.
Degree in electrical engineering and a J.D., both from the
University of Texas--well, one of the degrees is socially
useful.
It is good to have all of you here, and we will be--your
entire statements will be included in the record. We ask you to
summarize, keep it within the 5-minute time limit.
And, Mr. Sharer, why don't you--well let me just mention
initially, Mr. Sharer does have to leave in about 45 minutes.
So if there is an urgent--in the questioning, if there is some
urgent need to ask him a question before he has to leave, after
the witnesses have finished testifying, we would be willing to
entertain that question. But I think by 3:15 or so or soon
thereafter he will be gone.
Mr. Sharer, good to have you here.
TESTIMONY OF KEVIN SHARER, CHAIRMAN OF THE BOARD AND CHIEF
ELeeECUTIVE OFFICER, AMGEN INCORPORATED, THOUSAND OAKS, CA
Mr. Sharer. Thank you, Mr. Chairman. It is a real pleasure
to be here today, and I got the audio-visual system or the mic
anyway.
Amgen is the world's largest biotechnology company, and we
look forward to working with the Committee and you, Mr.
Chairman, to reform the patent laws. We support patent reform.
We are committed to working to find a consensus to move ahead.
And I think in your opening statement you rightly state that
there are different issues among the various industry groups,
and we are committed to working with our colleagues in industry
and with Congress to try to come out with a bill that works
best for everyone.
I think the Committee has a set of slides that my staff has
provided that I am going to refer to, and I title the slide or
the talk Patent Reform and Its Impact on Future Cures.
I think it is worth noting that what we do at Amgen and our
brethren in the biotechnology industry is invest huge amounts
of at-risk capital to try to advance biology to cure the
scourges of our time, the very worst diseases. Alzheimer's,
Parkinson's, cancer, diabetes, we are trying to move science
and medicine ahead for the good of our fellow citizens.
The second slide says, Why Does the U.S. Lead the World in
Biotechnology? This isn't very well known, but, in fact, as
much as 90 percent of the world's efforts in biotechnology are
concentrated in the United States, and that is not because we
only are trying to develop biotechnology. Every advanced
country in the world would like to have our position. There are
a few reasons for that. We have access to capital here, both
venture capital as well as capital markets. They are the envy
of the world. Government, industry, academia all work together
in their support of research and development. The Congress has
funded the NIH at high levels. We support--we appreciate that.
We have sound, science-based regulation in the FDA. The
coverage and reimbursement policies of both the Government and
insurance companies reward innovation. But foundationally, and
perhaps most importantly, we have a reliable intellectual
property protection system. That is the foundation upon which
all of this risk is taken.
The next slide talks about patents and why they are so
important to us, and it kind of refers to the next slide as
well. Our industry model is not like the industry model of some
of our colleagues in the technology industry. It can cost as
much as $1.2 billion to develop a drug. In fact, the leading
drug in our pipeline right now, which we think holds real
promise for osteoporosis and also bone cancer, is going to cost
us more than that to develop. It is going to take more than 15
years for that product, and we are proud to say we invented the
science or discovered the science and have the intellectual
property behind it.
The other thing to point out is that most of what we do
results in failure. This year Amgen will invest 22 percent of
our revenues, or $3.4 billion, in basic and clinical research,
and I fully expect most of those things to advance science, but
very, very few of them ever to reach the market.
I pointed out that there are different business models
between the software technology and the biopharmaceutical
industry, and I think those are at the root of some of the
industry different points of view on what is the right way
forward. I would only offer that our patents are relatively few
for a product. Technology have many, many. Our product R&D
cycle is very long, and the products last a long time.
As I said, we do support patent reform. There are statutory
changes that you propose that we fully support. I have listed
them on the slide. In the interest of time, I won't repeat them
here.
We also urge some thought about some additional changes:
diversion of PTO fees, limit inequitable conduct defenses to
clear offenses, and eliminate the best mode requirement.
As the Chairman said, we do have some views on some
elements of the bill that concern us. There are two. One is
postgrant opposition. It expands dramatically the ability to
invalidate patents. We understand the logic behind it, but we
seek a clear and quiet title that we can rely on going forward.
We are also concerned about the ability of the PTO to deal with
it.
Also apportionment of damages as written is of concern to
us. The right to exclusive use is fundamental to the value of
the patent, and with the recent Supreme Court decision in the
EBay case, the value of damages to us as a defense is very,
very important.
And finally, I would just like to say, we really, really
appreciate your leadership, and we look forward, Mr. Chairman
and Members of the Committee, to work with you and our industry
colleagues to advance this important bill. Thank you.
Mr. Berman. Mr. Sharer.
[The prepared statement of Mr. Sharer follows:]
Prepared Statement of Kevin Sharer
Mr. Berman. And Mr. Griswold.
TESTIMONY OF GARY L. GRISWOLD, PRESIDENT AND CHIEF COUNSEL OF
INTELLECTUAL PROPERTY, 3M INNOVATIVE PROPERTIES, ST. PAUL, MN
Mr. Griswold. Yes. Thank you, Chairman Berman, Ranking
Member Coble and Members of the Subcommittee. I am pleased to
have the opportunity to present the views of the Coalition for
21st Century Patent Reform on H.R. 1908. The coalition's
members share an interest in strengthening the country's
competitive position by strengthening the patent system, both
in regard to obtaining high-quality patents and providing for
their enforcement.
While I have heard the patent reform debate only involves
two industry sectors, let me assure you this is wrong. As you
noted, Mr. Chairman, patents matter to all companies,
investors, and institutions involved in R&D.
H.R. 1908 and all of a number of measures that could
improve the U.S. patent system, first inventor to file,
expanding prior art submission to patent examiners, limiting
willful infringement and extending prior user rights.
There are several aspects of the bill, however, that we
believe need to be improved. I will address three: section 5 on
apportionment damages; 6 regarding the availability of the
second window; and the postgrant oppositions in the absence of
provisions relating to inequitable conduct.
While we are pleased that a reasonable royalty remains as a
floor for reasonable damage awards, we are troubled by the
proposal to change the law because some believe that the awards
against adjudicated patent infringers are excessive. Limiting
damages tilts the balance in favor of infringers at the expense
of American researchers and innovators, and it has a profound
implication on our system of intellectual property law.
We are particularly troubled by the language in section 5
requiring a court to exclude or subtract from the award the
economic value which is properly attributable to prior art.
When damages are being determined, the defendant has already
been held to have infringed, and the patent owner is entitled
to be made whole. If the test for damages becomes one in which
the defendant can chip away at its liability for infringement
by showing that the individual features of the invention were
publicly known, the patent that needs remedy for infringement
will be severely diminished.
Most of you are familiar with these guys. In fact, we saw
some calls on them the other day when we were talking to you.
They include paper adhesive, both of which are known at the
time of the invention. These Post-it notes, under the proposed
prior art subtraction method for apportioning damages, an
infringer of the Post-it note patent would be permitted to
argue that the value of the paper and the adhesive, which are
both known, should be subtracted from the value of the
infringing notes, leaving essentially nothing on which to base
the calculation of damages. In fact, this would be true of most
inventions because individual elements of almost any invention
are present somewhere in the world today, but it is the
creative combination of those elements that results in
invention. If damage apportionment is codified, it will not
allow for fair compensation for inventors.
Turning now to postgrant, the coalition supports an early
opportunity for the public to weed out invalid patents, but we
oppose allowing third parties unlimited second window
opportunities to challenge patents. 3M has had firsthand
experience with several attacks on its patents. In 2005, after
we won a patent lawsuit on all issues at trial, the defendant
initiated a reexamination on three references that had been
known to the defendant before a trial. Six months later it
initiated the second reexamination on other prior art that it
had known before trial. We are not alone. Procter & Gamble won
a patent infringement lawsuit on the elastic leg cuffs on the
original Luvs diaper. The defendant did not appeal the
decision; however, they filed four reexaminations, lost all of
them, and it cost P&G a lot of money to defend those
reexaminations.
Although the bill would limit somewhat the opportunity to
challenge patents and reexamination, it would allow new
opportunities to challenge patents and postgrant proceedings
throughout the life of the patent. Providing these repeated
opportunities to challenge patents is expensive for large
companies; can be devastating for small companies and start-
ups.
Reform of the law on inequitable conduct is not in the
bill, but it should be, because incentives in the current
system reduce patent quality rather than increase it. Today
applicants have an incentive to submit every conceivable
relevant piece of prior art and PTO to avoid a later charge
that the applicant failed to disclose a relevant document.
Applicants also have an incentive not to discuss any of this
information with the examiner for fear of a later charge that
somehow they misled the examiner. As a result the examiner is
forced to sort through mountains of references without the aid
of the applicant.
We advocate adopting a ``but for'' test as a safe harbor.
The patent is enforceable unless the defendant can prove that
the PTO would have rejected the patent or claim but for the
applicant's knowing and willful--but for the applicant's
knowing and willful misconduct. This would properly limit the
defense, and applicants would be freed to work openly with
patent examiners to promptly issue high-quality patents.
With regard to four other important issues, best mode,
venue, interrogatory appeals and authorize the expanded PTO
rulemaking, I refer you to my testimony.
Thank you for the opportunity to express my views--the
views of our coalition.
[The prepared statement of Mr. Griswold follows:]
Prepared Statement of Gary Griswold
Mr. Berman. Professor Thomas has been here before and, I
might point out, has recently finished a paper on apportionment
of damages, which, if you start in California on the airplane,
you can finish by about Kansas.
TESTIMONY OF JOHN R. THOMAS, PROFESSOR OF LAW, GEORGETOWN
UNIVERSITY LAW CENTER, WASHINGTON, DC
Mr. Thomas. Thank you, Chairman Berman, Ranking Member
Coble and Members of the Subcommittee. I am grateful to have
the opportunity to come before you today to discuss the Patent
Reform Act of 2007, and, of course, I testify here on my own
behalf only.
Allow me first to thank each Member of the Subcommittee and
their staff for their continued travails within the murky world
of the patent system. I recently attended talks by Chairman
Berman and Ms. Lofgren on immigration reform that reminded me
of the breadth and depth of topics that each Member of this
Committee must address, and all of us in the patent community
are grateful for your continued efforts here.
My testimony is going to focus today on two aspects of this
bill; first, a renewed emphasis upon market-based patent
damages, which goes under the heading of apportionment; and
also postgrant opposition proceedings, and in particular the
emphasis upon the second window.
Turning first to damages, the fundamental premise of the
patent system is that the market is the best evaluator of the
worth of inventions. Reliance upon market mechanisms allows the
Government to promote innovation with relatively modest effort
and expense, particularly in comparison to a prize-based
system, which is the chief alternative to a patent regime. The
patent law, therefore, aspires to award damages for
infringement based on market-based rates that are intended to
be compensatory, not punitive.
Evidence is mounting, however, that judicial determinations
of damages for patent infringement have begun to exceed market
rates, and that is a trend that is in part due to, first, the
increasing popularity of the patent system, we have more extant
patents today than ever before; and also the notion that even
everyday consumer products are increasingly high-tech, they
embody not a dozen, not 20 patented inventions, but sometimes
hundreds or thousands of them. So in this milieu the prospect
that a high-technology firm must obtain some sort of license
from multiple patent holders in order to market is a virtual
certainty. Yet, the case law and empirical evidence alike
suggest the courts are inclined to award damages that far
exceed an individual patent's contribution to that particular
product.
I have gathered case law in my written statement. I also
cite an empirical study by Lemley and Shapiro suggesting that
the award rate on average exceeds 13 percent of the total
market price. As Lemley and Shapiro suggest, that figure seems
pretty high.
Damage awards that dramatically exceed the commercial
patented invention lead to a number of deleterious practical
consequences. First, excessive damage awards may promote patent
litigation, and they make litigation hard to settle because the
parties are very far apart on exactly what the value of that
infringement is. Second, it may promote speculation and
entrepreneurship within the patent system. It may also cause
patent protection to routinely extend beyond the scope of the
patent claims, and all of these lead to the final concern, the
imposition of unreasonable royalty burdens upon high-technology
manufacturers.
As currently worded, the damages reform of the Patent
Reform Act appear to apply to both measures of damages in the
patent law, reasonable royalties and lost profits. Because I
believe the identical concerns over apportionment apply to both
manner of damages calculations, I believe that application--
that methodology, I should say, of apportionment to each
methodology is appropriate.
Let me turn quickly to the Patent Reform Act's provisions
on postgrant administrative revocation proceedings, which are
commonly called oppositions. Though a lot of benefits are said
to flow from oppositions, concerns nonetheless have been
expressed that they would inject a great deal of uncertainty
into patent title, and this is a concern that is especially
directed at the second window.
Let me remind Members of the Committee that there are
current postgrant proceedings in place that can take place at
any time during the life of the patent. One of those, of
course, is the reissue proceeding that is effectively as old as
the patent system in this country, and under that proceeding
any patent holder can go back to the Patent Office and seek a
tune-up or tighten up the claims at any time. They can cancel
claims. They can add new claims again throughout the life of
the patent. So it is with the reexamination proceedings. Any
member of the public, the Commissioner, the patentee itself can
go back to the office and amend the claims. There are other
provisions such as disclaimers that can occur at any time
during the life of the patent.
So I think it is important to the Committee as it hears
concerns about stability of the right to recognize that the
patent instrument is already somewhat fluid. There are already
opportunities to amend claims. Oppositions, in my view, don't
represent a sea change, but rather a marginal change to
existing patent practice.
Thank you very much, Mr. Chairman.
Mr. Berman. Thank you very much, Professor.
[The prepared statement of Mr. Thomas follows:]
Prepared Statement of John R. Thomas
Mr. Berman. Mr. Tucker?
TESTIMONY OF WILLIAM T. TUCKER, EXECUTIVE DIRECTOR, RESEARCH
AND ADMINISTRATION AND TECHNOLOGY TRANSFER, UNIVERSITY OF
CALIFORNIA, OAKLAND, CA
Mr. Tucker. Good afternoon, Chairman Berman and Ranking
Member Coble and Members of the Subcommittee. I thank you for
the opportunity to appear before you today and discuss patent
law reform and offer the university's preliminary analysis of
H.R. 1908, the Patent Law Reform Act of 2007. We thank you for
your leadership on intellectual property matters and your
desire to assure that the U.S. patent system is updated and
performs well to create robust and reliable patents.
UC looks forward to working with you and the rest of the
Committee as you consider H.R. 1908. As executive director of
UC's Office of Technology Transfer, I oversee functions that
coordinate and support patenting and licensing activities
across UC's 10 campuses and 5 medical centers. For 5
consecutive years, UC has lead the Nation in the number of
patents issued to universities. In the past 25 years our
technology has resulted in over 700 new products being
introduced in the market and spawned over 300 start-up
companies. Over 80 percent of these companies are founded on UC
technology, remain in business in some form today. These
companies are the engines for economic development in
California and across the Nation.
Part of our mission as a university is to transfer
knowledge created by our faculty, staff and students to benefit
the public, and the Bayh-Dole Act has been incredibly
successful in spawning technology-based companies and creating
a return to the taxpayer for the Nation's investment in basic
research at our universities.
Now let me turn to our initial observations about H.R.
1908. The university has some concerns that the proposed
changes to the U.S. patent system in H.R. 1908 will diminish
our ability to protect university-created inventions or
leverage the economic value of these assets to ensure our
Nation's technological leadership.
UC understands that there are challenges with the U.S.
patent system and appreciates that this legislation is intended
to correct some of these difficulties. UC recognizes that many
elements of H.R. 1908 encourage stronger and better-quality
patents including the first window in the new postgrant
opposition procedure, the new derivation procedure, the ability
of third parties to submit prior art to the Patent Office, and
especially the retention of the CREATE Act, which encourages
research collaborations. We also thank the Committee for not
including a loser pays attorneys' fees system and language to
repeal 271(f).
However, UC believes some elements of H.R. 1908 weaken our
ability to achieve the public service mission, especially the
transition from first-to-invent to first-inventor-to-file and
expanded postgrant opposition. We believe that the proposed
change from a first-to-invent to a first-inventor-to-file
system has the potential of depriving the U.S. public from the
benefit of groundbreaking research carried out at universities.
Without patent protection, these breakthroughs may simply
become publications in journals on dusty library shelves. The
broad patent coverage for breakthrough discoveries creates
intellectual property assets that secure the financial
investment needed to transform early-stage research into
products and services.
Unlike our scientific colleagues and companies, university
research is operated in an open environment where dissemination
and sharing of research results is encouraged. In the publish
or perish university environment, if a first-inventor-to-file
system is not adequately mitigated with an effective grace
period, it could result in the loss of patent protection for
our inventions. We appreciate the inclusion of a grace period
language in H.R. 1908, but have concerns it may not adequately
address the reality of the academic university environment.
Also, the rush to the Patent Office mentality created by a
first-inventor-to-file system may force researchers to delay
publication after a patent application is filed. This would
slow the public reporting of scientific advances which is
antithetical to the fundamental principle of academia and the
intent of the patent system.
We also see a risk that the first-inventor-to-file system
could deprive the true inventor of his or her constitutional
benefit.
Now, turning to the new postgrant opposition procedure,
while UC supports the first window of postgrant review within
12 months of a patent's issuance, UC is concerned the second or
third window included in H.R. 1908 will leave a patent holder
open to repeated challenges to the validity of an issued patent
over its lifetime. UC is concerned that the additional
postgrant challenges will weaken the strength of issued patents
and change the risk-reward relationship so that inventors will
shy away from companies based on university-derived early-stage
research.
Unquestionably the vibrancy of the U.S. economy derives
from the contribution of small businesses, and our technology-
driven industries often begin with start-up companies founded
on university-based discoveries. If changes in patent law
create roadblocks to the formation of such businesses, I fear
that the Nation's technology leadership position will be
threatened. I have outlined some of our concerns and welcome
the opportunity to work with the Committee as the legislation
proceeds.
Again, I thank the Chair, the Ranking Member and Members of
the Committee for your leadership in the matter of patent
reform and for the invitation to present to you this afternoon.
I look forward to answering any of your questions. Thank you.
Mr. Berman. Thank you very much.
[The prepared statement of Mr. Tucker follows:]
Prepared Statement of William T. Tucker
Good afternoon, Chairman Berman, Ranking Member Coble and members
of the Subcommittee. My name is William (Bill) Tucker and I serve as
the Executive Director for Research Administration and Technology
Transfer in the University of California's Office of the President. I
am here to testify on behalf of the University of California. Thank you
for the opportunity to appear before you today to discuss the very
important issue of patent law reform and specifically to offer our
preliminary analysis of H.R. 1908, the ``Patent Reform Act of 2007.''
The University of California (UC) appreciates the leadership of the
House Judiciary Committee on the issue of Patent Reform, particularly
in examining improvements that would best serve the nation's continued
success at developing inventions that benefit the American public. UC
looks forward to working with the Committee as it considers patent
reform legislation.
My career has spanned both the academic and industrial sectors,
starting with a postdoctoral research fellowship at Stanford University
under Professor Stanley Cohen, one of the inventors of gene splicing
methods that launched the biotechnology industry, then as part of one
of the first companies to explore opportunities for commercial
applications of genetic engineering to agriculture. After working as a
bench scientist during which time I was an inventor on two issued
patents, I moved into technology management and business development
working at various technology-based companies before joining UC's
Office of Technology Transfer, where I focused on licensing plant
varieties bred by UC faculty. I am now the Executive Director
overseeing the administration, coordination, and support of technology
licensing activities throughout the UC system. My experiences within
both academia and industry have helped me appreciate the power of the
U.S. patent system as a catalyst for creating technological change and
economic value.
I should mention that UC is a member of several higher education
associations such as the Association of American Universities (AAU),
the American Council on Education (ACE), the Association of American
Medical Colleges (AAMC), the Council on Government Relations (COGR) and
the National Association of State Universities and Land Grant Colleges
(NASULGC), all of which have been actively reviewing patent reform
legislation on behalf of universities. UC concurs with these
organizations' recent joint statement on S. 3818, the ``Patent Reform
Act of 2006,'' which was submitted to the House and Senate Judiciary
Committees. To the extent that the provisions of H.R. 1908 are similar
to the provisions in S. 3818, the comments offered today by UC are in
large measure reflective of the higher education associations'
statement.
In view of the short time frame between the introduction of H.R.
1908 last week and today's hearing, UC understands that the higher
education associations as well as individual universities will need to
undertake a more thorough review of H.R. 1908 before reaching any final
position on the legislation. My comments today on behalf of UC are
preliminary; we are continuing our review of the legislation.
In evaluating H.R. 1908, UC's perspective is informed by its
position in the patent community as a leader in technology transfer
between academia and private industry, serving companies ranging from
start-up ventures to Fortune 500 companies, and across all the industry
groups who benefit from the innovative work done throughout our
university system. It has been UC's experience that the U.S. patent
system has worked well to foster innovation and to allow University-
developed inventions to reach the marketplace for the benefit of the
public.
UC supports many of the patent reform proposals in H.R. 1908, but
is also concerned with changes to the U.S. patent system which could
weaken the ability of patent holders to protect the rights to their
inventions, or which could harm university technology transfer efforts.
i. background about uc's technology transfer program
UC is comprised of ten campuses, including five medical schools,
and participates in the management of three national laboratories, with
over 170,000 faculty and staff serving 200,000 undergraduate and
graduate students. Our many scientists and engineers conduct basic and
applied research, collaborate with other research partners to build on
the nation's scientific knowledge base, educate and train students at
all levels, and make discoveries that can be transferred to industry
and translated into products that benefit the general public. UC's
technology transfer program is at the heart of this transition from
promising early stage research to products and applications that
benefits the public.
UC established its first technology transfer office in the 1970's
and since then has played an instrumental role in growing the
California and national economy by leveraging the U.S. patent system to
transform the technologies created by our faculty and staff into
patented technologies that become the basis for new companies and
industries. UC technology transfer encompasses a range of activities
carried on throughout the system to facilitate this commercialization,
including not only through traditional patenting and licensing efforts,
but also through the development of relationships with businesses,
industry, and government, in order to enhance the research and
education missions of UC and contribute to the economic prosperity of
California and the nation.
For twelve consecutive years, UC has led the nation in the number
of patents issued by the U.S. Patent and Trademark Office (USPTO) to
universities, receiving 390 patents during 2005 alone (the latest date
for which we have information). Indeed, in the recent Milken Institute
report ``Mind to Market: A Global Analysis of University Biotechnology
Transfer and Commercialization,'' UC was listed as one of the top
universities in the world for successful technology transfer efforts.
UC expends more than $4 billion on research activities, two-thirds of
which comes from the federal government through contracts and grants.
UC faculty disclosed a total of 1,314 inventions to UC in 2005. Since
the inception of UC's technology transfer program, over 700 inventions
have been translated into products with many more in the pipeline, and
the ensuing royalties have been distributed to investors and the
campuses to be reinvested in education and research. The American
public reaps the benefits of the federal investment when products reach
the marketplace for general use.
UC's technology transfer successes contribute to important advances
in scientific research and have a significant impact on the quality of
lives of people in the U.S. and worldwide. Among UC's inventions that
have been successfully commercialized are:
a vaccination for the potentially-fatal Hepatitis B
disease;
the Cohen-Boyer recombinant DNA patent held jointly
by UC and Stanford University that helped to spawn the
development of the biotechnology industry;
lung treatments for respiratory problems associated
with premature births;
a laser/water Atomic Force Microscope that helps
scientists to better view and analyze different properties of
matter at the nanoscale;
a dynamic skin cooling device that allows more
effective laser surgery with less pain and less post-operative
scarring;
the minimally invasive Guglielmi Detachable Coil used
to treat brain aneurysms;
the Cochlear Ear Implant to assist those with hearing
loss;
glucose monitoring techniques useful for diabetics;
and
the Nicotine Patch that assists smoking cessation,
among many others.
Inventions developed at UC and other U.S. universities have
provided significant benefit to society, improving the health of people
throughout the world. Some of these discoveries from universities are
highlighted in a recent report from the Association of University
Technology Managers (AUTM), the ``Better World Project,'' which is
available at: http://www.betterworldproject.net/.
A university's ability to ensure that these technologies are
successfully translated into useable products is predicated on having
strong, reliable patents that encourage industrial partners and private
equity funding sources to invest resources and commit to moving a
laboratory-based discovery through the arduous and often risky
development and commercialization process. Having a strong U.S. patent
system where patent holders can depend on the certainty of their
patents helps to ensure that technology transfer can occur.
ii. university patent licensing
A. The Bayh-Dole Act and University Technology Transfer
To understand UC's view of patent reform legislation, some
background on university patent licensing is helpful. Before 1980,
approximately 25 universities across the nation had established
technology transfer offices. These offices were granted only a handful
of patents and the ability to assert title to these patents was
hampered by the uncertainty surrounding the timing and scope of agency
approvals. There was no uniform federal patent policy at the time. In
addition, universities were forced to file patent applications before
their value could be assessed, and before they knew if they would be
permitted to own the patent at all. Companies were disinclined to
license these technologies given their uncertain legal status, and as a
result, many potentially-promising inventions were left to languish.
Today, more than 230 U.S. universities have technology transfer
offices, evidence of the success of the groundbreaking Patent and
Trademark Amendments Act, commonly known as the ``Bayh-Dole Act,''
legislation passed in 1980 under the leadership of the House Judiciary
Committee and the House Science Committee. The ``Bayh-Dole Act'' allows
universities to retain title to patents made under federal funding in
exchange for their commitment to work diligently with private industry
to develop those inventions into useful products for the U.S. economy.
The Bayh-Dole Act has been called one of the most successful pieces of
legislation of the twentieth century and has been instrumental in
furthering universities' paramount goal of creating and disseminating
knowledge in an open academic environment while ensuring that the
benefits of that research can be shared by the public.
UC appreciates the Committee's continued commitment to preserving
the Bayh-Dole Act with the Sense of Congress Resolution to honor the
25th Anniversary of the Bayh-Dole Act, which passed in the House of
Representatives on December 6, 2006.
B. Small Businesses Need Strong Patents to Thrive in the U.S. Economy
Universities are engines for innovation, but must rely on
industrial partners to bring early stage ideas to the marketplace. As
this Committee considers patent reform legislation, it is critically
important to consider the implications such legislation will have on
start up companies, other small businesses and the nation's economy. In
particular, startup companies depend on strong patent protection to
attract the venture capital and other financing necessary to launch a
new enterprise.
As encouraged by the Bayh-Dole Act, UC honors a preference to
license its federally-funded inventions to small businesses. For
example, in 2005, UC ranked second only to MIT in the number of
licenses entered into with new startup companies during 2003-2005, as
reported by the AUTM U.S. Licensing Survey (http://www.autm.net/
surveys/dsp.Detail.cfm?pid=194). UC's licensed technologies can be
linked to approximately 300 existing startup companies which use
technology ranging from medical compounds and devices to electronics to
biotechnology to semiconductors/nanotechnology. (See Figure 1.)
Over the past 20 years, on average over 80 percent of companies
founded based on a license to UC technologies are still in operation,
either as stand-alone entities or through merger and acquisition. This
observation is not unique to UC, but common among university based
startups. These resilient university-based startup companies create
long-term jobs and lead to sustainable regional economies. (See Figure
2.)
Such an innovation ecosystem, in which the universities, inventors,
entrepreneurs and investors interact, has the potential to reinvent
local economies. By way of example, such an innovation ecosystem helped
the San Diego economy transition to one of the nation's leading high
tech and biotechnology centers after the downsizing of the U.S.
military presence there.
The types of relationships and the stimulation of the regional
economy exemplified by San Diego's example are replicated throughout
the nation with many other universities. University research and
licensing programs touch various aspects of the economy and it is
extremely important that universities continue to play an instrumental
role in supporting and growing the economy, creating jobs, encouraging
American ingenuity and entrepreneurship, and making discoveries that
are transferable to companies that are able to translate them into
useful products.
iii. uc preliminary analysis of h.r. 1908, the ``patent reform act of
2007''
UC applauds Chairman Berman, Ranking Member Coble and all of the
Members of the Committee for their leadership on intellectual property
matters, their stewardship of the intellectual property system and
their care and concern for ensuring that the U.S. patent system is
updated and performs well.
UC understands there are challenges with the current U.S. patent
system and appreciates that patent reform legislation is intended to
correct some of these difficulties, especially as they relate to patent
quality and patent validity. In making changes to the U.S. patent
system, however, UC urges the Committee to pay careful attention to the
unintended consequences that could negatively impact the technology
transfer efforts of universities.
In moving toward a more robust patent system, it is critical for
Congress to ensure that the U.S. Patent and Trademark Office (USPTO)
will have the sustained and sufficient fiscal resources to allow the
USPTO to continue to provide timely and high quality service to
American innovators while implementing any changes resulting from the
legislation. It is also important to consider whether any reforms will
add additional burdens to the USPTO's workload that would lead to
delays in the already lengthy patent pendency process. The escalating
workload at the USPTO demonstrates the high rate of American innovation
and inventiveness. However, the USPTO has been challenged both
financially and administratively, resulting in increased pendency of
applications and perceived lapses in the quality of examination.
A. UC Supports Many of the Proposed Reforms in H.R. 1908
Upon an initial review of H.R. 1908, UC supports many provisions,
including:
the proposed new derivation proceedings to determine
appropriate inventorship in proceedings before the USPTO;
the creation of a procedure for third parties to
submit prior art to the USPTO concerning pending patent
applications;
changes to the patent venue and jurisdiction
procedure statutes;
the creation of a Patent Trial and Appeal Board;
a review of the existing reexamination procedure to
determine its effectiveness;
some of the language to create a new Post Grant
Opposition procedure;
the retention of the ``best mode'' requirement;
that the legislation does not change the current
state of the law on patent unenforceability;
the retention of the CREATE Act, an important bill
which encourages research collaborations in academic settings;
and
the retention of many provisions of the current prior
art rules.
Many of these provisions of H.R. 1908 will help to encourage the
issuance of stronger and better quality patents from the USPTO.
UC also wishes to thank the drafters for not including:
a ``loser pays'' attorneys fee system for patent
cases which had been included in S. 3818;
language to repeal 35 U.S.C. Sec. 271(f); or
additional restrictions on injunctions or the filing
of continuation applications.
UC would also have supported the inclusion of several additional
provisions in H.R. 1908, including:
a requirement that all patent applications be
published after 18 months of their filing with the USPTO, and
language to change the inequitable conduct defense so
that findings are made by a court and only on appropriately-
limited grounds of truly severe misconduct before the USPTO.
While UC supports many elements of H.R. 1908 as outlined above, UC
remains concerned about certain other elements of H.R. 1908 as
currently drafted.
B. The Impact of the First-Inventor-To-File Proposal on University
Technology Transfer Programs (Section 3)
H.R. 1908 would require the U.S. to shift its patent system to
award patents not to the first person to invent a new invention, but
rather, to the first person who filed a patent application with the
USPTO for that invention. This is unprecedented in American history,
though consistent with patent law in Europe and Asia.
UC believes that the strength of the U.S. patent system has in
large part been the result of the existing patent rules, including the
current first-to-invent system. In reviewing the situation, it is not
unreasonable to posit that the first-to-invent system, with its public
policy intent to reward innovation, collaboration and public discourse,
is at least partly responsible for the historical strength of the U.S.
commitment to the individual inventor.
UC is continuing to review the first-inventor-to-file system.
However, we are in agreement with the points made in the statement of
the higher education associations on S. 3818, that encouraged the
Committee to ensure that any first-inventor-to-file system includes an
effective grace period, a robust provisional patent application
procedure, and a strong Inventor's Oath requirement.
1. The First-Inventor-To-File System Proposed by H.R. 1908
Is Likely To Heavily Burden Academic Licensors and
Researchers
UC's primary concern with the proposed first-inventor-to-file
system is that it will reward with a patent the person who has the
means and ability to file patent applications as quickly as possible
over the first person to conceive a groundbreaking idea and realize it
in a working invention. UC strongly believes that this is likely to
have a profound adverse impact on university technology transfer
offices.
Under the current first-to-invent system, researchers at American
universities have had the ability to develop their ideas, and have a
one year grace period to get to the USPTO to file a patent application
after disclosing their idea. This one-year grace period has allowed
universities the time to evaluate the commercial potential and
patentability of an invention and allowed universities to focus on
locating the best licensing partner to develop the technology.
In a first-inventor-to-file system, inventors would not have rights
to their inventions until they file a patent application with the USPTO
before another party filed. There would be no one year grace period
available with regard to third party publications and past patent
filings. The result may be that university researchers lose their
ability to obtain patents for inventions. In a first-inventor-to-file
system, universities would have to act quickly to file applications in
order to preserve their inventors' rights, often before conducting a
reasoned analysis of the merits of an invention. Unless a quick filing
occurs, a university could risk losing rights to those inventions
altogether. And because research universities like UC receive such a
large number of inventor disclosures in a wide variety of fields, this
would be a huge burden for universities to undertake.
The first-inventor-to-file system may also create an incentive for
others to profit at the expense of universities. Because university
researchers typically publish the results of their research as soon as
possible, others could theoretically review publications, speed up
their own efforts to develop similar technology based on the ideas
generated by research institutions, and then file with the USPTO as the
first inventor to file. This situation is at odds with the university's
goals of creating an open academic environment, which emphasizes the
publication of research results in journal articles and the sharing of
information with scientific colleagues. To date, universities have been
able to do so without the fear of losing the right to protect an
invention if the invention is not first registered and filed with the
USPTO before it is disclosed to anyone else.
It has been UC's experience that the interference proceeding
available under current law has provided an important safeguard to
ensure that only a true inventor gains patent rights. The interference
procedure would be repealed by H.R. 1908. UC suggests that any patent
reform legislation continues to provide a strong mechanism to allow
true inventors to challenge an earlier filing by another party. The new
derivative procedure created by H.R. 1908 may help to fill such a void.
C. The Potential Problems For Academia Created by a First-Inventor-to-
File System May Be Compounded by the ``Absolute Novelty''
Requirements and Lack of Broad One Year Grace Period in H.R.
1908 (Section 3)
UC thanks the Committee for including some form of grace period in
H.R. 1908, under the proposed first-inventor-to-file system. While we
are carefully evaluating the new language, we are concerned that it may
be insufficient to effectively replace the protections of the one year
grace period available under current law.
1. ``Absolute Novelty'' May Impair the Public Disclosure of
Inventions
As discussed previously, public disclosure and collaboration are
crucial in the academic setting, where, unlike in the private sector,
the emphasis is on publishing and sharing research results to advance
the science rather than keeping new developments secret until patent
applications can be filed. As UC interprets the legislation, under the
``absolute novelty'' proposal, if anyone other than the inventor
discusses the proposal in public before a patent application is filed,
the inventor would lose the right to obtain a patent on the invention
because the public disclosures of any party other than the inventor
would be considered prior art.
The removal of the current one-year grace period in conjunction
with the first-inventor-to-file system will essentially force
universities to either move immediately to file patent applications
before a researcher's articles can be published or even discussed in
public (causing potential delay to the researcher's work as a result),
or to simply risk losing the right to patent the invention at all.
While private companies can bind their employees to confidentiality
agreement to avoid this risk, such an arrangement would be unacceptable
to researchers working in academia, and thus places them at a
disadvantage in terms of the potential commercialization of their work.
Rather than remove the current grace period, UC recommends that
Congress retain the current grace period law and encourage other
countries to adopt a similar grace period in their patent systems,
consistent with the recommendation included in the National Academies'
National Research Council report, a ``Patent System for the 21st
Century.''
While UC has not taken a final position on switching to a first-
inventor-to-file system, UC has concerns and is not certain that the
benefits of switching to a first-inventor-to-file system would outweigh
the potential negative consequences.
D. The Patent System Must Be Supported by a Strong Inventor's Oath
Requirement (Section 4)
UC is in agreement with the higher education associations'
statement on S. 3818 which asks for a strong inventor's oath
requirement to be included in any patent reform bill. At the heart of
the U.S. patent system historically is the certainty that the named
inventor is the one that truly made the invention, not someone who has
learned of it from someone else. An oath requirement also favors the
independent inventor and the open environment of universities by
encouraging honesty and full disclosure in the patent process.
A first-inventor-to-file system should be contingent on the law's
continued requirement for a strong and mandatory inventor oath, to
ensure that inventors are encouraged to disclose the full extent of
their inventions to the public and that they are bound by the
statements they have made.
However, as currently drafted, H.R. 1908 would permit a would-be
inventor to avoid the requirement of attesting under oath that they
truly invented the invention in question by submitting a ``substitute
statement'' instead, which does not need to be made under oath. This
further endangers inventors' rights. UC looks forward to working with
the Committee to strengthen the inventor's oath requirement.
E. Courts Should Be Given Discretion to Determine the Apportionment of
Damages in Litigation (Section 5)
UC is in agreement with the higher education associations'
statement on S. 3818 which suggested that trial judges already have
ample discretion under Georgia-Pacific and the current case law to
assess the relative economic value of a patented technology in
determining damages for patent infringement, and thus does not believe
that any statutory language is necessary to codify the apportionment of
damages available for infringement. Since damages calculations in
particular must be based on the circumstances between the parties in
the lawsuit and the marketplace in which they operate, UC believes it
would be best to continue to allow judges and/or juries to make these
determinations on a case-by-case basis instead of introducing a new
process for calculating the apportionment of damages.
F. UC is Concerned that the Prior User Rights Expansion in H.R. 1908
May Be Too Vague (Section 5)
Under current law, ``prior user rights'' provides a limited defense
from infringement for a party who actually ``commercially uses'' a
patented technology before a patent application is filed by another
party. By contrast, Section 5(d) in H.R. 1908 would significantly
expand the ``prior user rights'' defense to include ``substantial
preparations for commercial use'' of an invention, prior to the filing
of a patent application. UC, consistent with the higher education
associations' statement on S. 3818, opposes the expansion of ``prior
user rights'' included in H.R. 1908.
G. UC Believes One Post-Grant Cancellation Procedure is Sufficient
(Section 6)
1. UC is Concerned that the Two Additional Windows of Post-
Grant Review May Lead to Gamesmanship
H.R. 1908 sets forth three ``post-grant review'' procedures, known
as ``cancellations,'' by which a petitioner can move to cancel a patent
after it has been issued:
1) within 12 months of the patent's issuance (the ``first
window''),
2) upon a showing of ``substantial economic harm'' caused by
the patent, at any time (the ``second window''), and
3) upon the receipt of notice of a possible claim of patent
infringement under the patent (the ``third window'').
While UC, consistent with the higher education associations' statement,
supports the ``first window'' of post-grant review, UC opposes the
``second'' and ``third'' window proposals as potentially burdensome to
legitimate patent holders seeking to enforce their legitimate rights.
As currently drafted, the open-ended nature of the ``substantial
economic harm'' opening of the ``second window'' may lead to strategic
challenges to legitimate patents by free-riding competitors in an
attempt to hamper a patent holder's ability to ascertain certainty that
their patents are valid. This would be especially problematic for
patent holders with limited resources. It could also lead to
gamesmanship by parties with no real concern about the patent's
validity but rather, simply wishing to impede the true inventors
ability to enforce that patent against them. In addition, because the
patent grant of exclusivity is only for a limited amount of time, abuse
of the ``second window'' process would hamper the value of
legitimately-obtained patents in the marketplace.
All of these concerns loom even larger in the new ``third window''
cancellation proposed in H.R. 1908. As a matter of practice, UC only
notifies parties of infringement or files patent litigation as a last
resort when UC's rights under a strong patent have been egregiously
violated. Under the ``third window,'' a patent infringer could then
place UC's patent into post-grant review, not because of any real
concern over the validity of the patent, but rather, simply to delay
the enforcement of UC's valid patent rights and to buy itself more time
to infringe in the marketplace. Given the very high stakes in patent
enforcement and litigation, UC fears that the ``third window'' will
simply become another way for parties who do not respect intellectual
property rights to abuse the system.
2. Any Post-Grant Review Process Must Ensure Validity and
Promote Finality
UC is concerned about the addition of language in H.R. 1908 which
appears to leave a patent holder open to repeated challenges over the
validity of an issued patent over the lifetime of a patent based only
on a ``preponderance of the evidence'' standard presumption that a
patent is valid. Such open ended opposition procedures could discourage
companies, especially startups from investing in university
technologies because they could not rely on a strong patent to protect
their position in the marketplace. By weakening the presumption of
validity, fewer university technologies will be licensed and developed
into products that can be made available to the general public.
The new Post-Grant Opposition procedure also appears to operate
separately from the existing challenges available through the USPTO and
through litigation. UC believes that these existing procedures plus a
first window of post-grant review would provide sufficient
opportunities for opposers to challenge a patent and that allowing
opposers to challenge a patent throughout its life undermines the
economic usefulness of the patent. In order to give patent holders,
such as UC, confidence in the validity of their properly-reviewed
patents, there must be some assurance that once the patent has survived
a rigorous post-grant review process, it would not be subject to
repeated attacks by the same party solely for strategic purposes.
G. UC Suggests Minor Changes in the Venue and Jurisdiction Proposals
(Section 10)
While UC generally supports the proposed amendments to the patent
venue and jurisdiction statutes, the Committee may wish to consider
adding a separate venue provision for nonprofit educational
institutions. A provision allowing nonprofit educational institutions
to file suit in patent litigation in any district in which the
defendant is subject to the personal jurisdiction of the court would be
a helpful addition to H.R. 1908.
In addition, H.R. 1908 permits parties in a patent litigation to
file an immediate appeal to the Federal Circuit appellate court of any
order from the district court that construes the claims of the patent
as a matter of law, known as a ``Markman order,'' and requires in such
cases that the trial court's proceedings be stayed while the appeal is
pending. UC agrees that permitting interlocutory appeals of claim
construction rulings to the Federal Circuit could be potentially useful
to litigants, and could serve to preserve judicial economy and
encourage the strength of issued patents. However, UC is concerned that
the interlocutory appeals process could also be used as a delay tactic
in the litigation process, and proposes that the stay of the district
court's ruling be made discretionary with the trial court judge.
H. UC Does Not Believe the USPTO Needs Additional Regulatory Authority
(Section 11)
H.R. 1908 would provide the USPTO the ability to engage in
substantially broader substantive rule making than provided under
current law. UC, along with the higher education associations'
statement on S. 3818 expressed concern about granting the USPTO
expanded rule making authority since this could lead to opportunities
for the USPTO to act beyond the scope of what Congress intends through
the statutory process. The USPTO already holds fairly broad rule making
authority that should be sufficient to engage in the rule making
process.
I. UC Requests that H.R. 1908 Not Apply Retroactively (Section 13)
UC is concerned that the ``effective date'' in Section 13 would
make H.R. 1908 applicable to any patents issued after the effective
date. UC is concerned that the effective date in H.R. 1908 could be
made to apply retroactively to patent applications that are still
pending at the USPTO at the time the effective date occurs. UC would
appreciate it if the drafters would revisit the language of the
effective date in H.R. 1908 to specify that it would not to be applied
retroactively. The USPTO should also be given adequate time to
implement the legislation in an effective and thoughtful manner.
Conclusion
Chairman Berman, Ranking Member Coble and members of the
Subcommittee, thank you again for your leadership, time and attention.
We appreciate the opportunity to provide our preliminary comments on
H.R. 1908 and look forward to working with the Committee as it
considers the legislation.
ATTACHMENT
Mr. Berman. Mr. Peterman.
TESTIMONY OF ANTHONY PETERMAN, DIRECTOR, PATENT COUNSEL, DELL
INCORPORATED, ROUND ROCK, TX
Mr. Peterman. Mr. Chairman, Members of the Committee, my
name is Anthony Peterman. I am the legal director for patents
at Dell, and I really appreciate the opportunity to be here and
talk about this important issue today. Most importantly, on
behalf of Dell, the Business Software Alliance and all the
members of the Coalition for Patent Fairness, we want to thank
all of you who have sponsored and introduced this bill. You,
Mr. Chairman, Ranking Member Coble, Chairman Conyers, and
Ranking Member Smith and Representatives Boucher, Goodlatte,
Jackson Lee, Schiff, Cannon, Issa and Lofgren, we thank each of
you for your work in this area. We hope that the other Members
of the Subcommittee and of the full Committee will come to join
and support this legislation.
Dell and our coalition supports H.R. 1908 because it
addresses the major areas where we believe reform is needed,
and that is improve quality in the Patent Office and an
improved balance of fairness for all litigants in patent
litigation. While to some this may seem like an obscure issue,
enactment of this patent reform legislation is needed, and it
is needed now, to help sustain America's growth and vitality.
At first this need was probably noticeable only to those of us
dealing with patents and patent law every day, but over the
last 5 years, even neutral observers, including the National
Academy of Sciences and the Federal Trade Commission, have all
noted that our patent system needed attention and
modernization.
How do we get to this point? Two reasons, we believe.
First, the number of patent applications have soared, and the
PTOs, hard-working patent examiners, are doing their best to
keep up. But the result is that a greater number of lower-
quality patents are slipping through the system.
Second, plaintiffs are exploiting litigation rules and
seeking artificially high damages. It is litigation as a
business, and these cases cost a lot, and they take a long time
to resolve, even when the defendant has a straightforward
defense. Businesses faced with these claims have two options:
defend the patent in court, agree to pay settlement fees. And
with the cost of legal defense significant, the risk of
irrational damage high, a growing number of companies agree to
settle even when they believe they would have won on the
merits.
But this harm is not about any one company. The problem
hurts American competitiveness and the U.S. economy.
Fundamentally, businesses have to stop innovating, absorb the
increased costs or pass the cost onto customers. Either way we
all lose.
Let me be clear in this: We support a strong patent system,
and we support the inventor's right to assert its patents and
get a reasonable compensation for any infringement. Dell itself
is a market innovator. We have lots of patents. Many of the
members of our BSA and our coalition are very significant
patent holders. We want a strong patent system, but we think
these changes are needed as well.
Specifically, this bill will promote the issuance of
higher-quality patents. It increases the ability of examiners
to consider prior art, and it enables third parties to share
vital information with the examiner. The bill also establishes
a postgrant process after a patent has been issued and gives a
PTO a second chance to apply its expertise. And as part of
this, we believe that the second window, based on the showing
of economic harm, is very important to a meaningful postgrant
process.
Secondly, the bill makes key changes to restore the balance
in patent litigation. The bill clarifies that a patent holder
is entitled to claim damages based on their specific
contribution. Today too many plaintiffs are claiming and too
often getting excessive damages based on the value of an entire
product line.
Let me give you an example that Dell has faced. Many of our
LCD monitors have a music stand feature where you can lift them
and tilt them. We faced a patent litigation on that feature.
The damages that were alleged were not based on the music stand
feature, not even based on the monitor, but based on the entire
revenue from our systems and the monitor. And we believe this
bill will refocus that analysis back on the music stand feature
where it should be.
In addition, this bill provides that punitive damages for
willful infringement should apply only to truly reprehensible
conduct, and it won't be asserted in every situation like it is
now.
The bill also attempts to address the venue problem. This
is the problem of making sure patent suits are brought in
courts that have some nexus to the parties and their business
and not in courts that are chosen simply for an advantage. Now,
we would, from our perspective, like a few changes to the venue
provision. We would also like the 271(f) provision addressed if
the Supreme Court doesn't fix that.
In conclusion, let me say that we truly appreciate all the
effort on this Committee that went into developing this bill.
We know that it was a balance of interests. We strongly support
the bill. We think its introduction will help American
innovation and competitiveness. And we appreciate your
leadership and your guidance in this area. Thank you.
[The prepared statement of Mr. Peterman follows:]
Prepared Statement of Anthony Peterman
ATTACHMENT
Mr. Berman. Thank you all very much. Very interesting. We
have a lot of issues to follow up on.
If it is all right with the Subcommittee, what I would like
to do is initially just recognize myself to ask Mr. Sharer a
question, because he does have to leave in 15 minutes. I know
at least two other Members of the Subcommittee want to ask him
a question, anybody else who wants to as well, and then we will
go back to a more regular process.
Mr. Sharer, you acknowledge that the software and financial
services industries have raised legitimate problems in the way
the system impacts business activities in those sectors. Since
the system has to work for all industries, could I have your
commitment as CEO of Amgen, as an active participant, both
pharma and bio, to work with us in addressing their concerns,
especially as related to challenging validity for patents
already issued, the second window, and excessive damage awards,
the apportionment issue?
Mr. Sharer. Yes, sir, Mr. Chairman. I think it is incumbent
upon industry leaders to come together and try to resolve our
differing views for the good of all. I happily commit to you
that I will and am pursuing that course now. We seek to have
conversations, and I am sure we will soon, with leaders in
other industries to try to find common ground here. I know they
have legitimate issues. I think we do, too, but I look forward
to finding common ground.
Mr. Berman. Very good.
I now recognize Mr. Coble for a question to Mr. Sharer.
Mr. Coble. Thank you, Mr. Chairman. And again, good to have
all of you with us this afternoon.
Mr. Sharer, as you know, the bill extends additional
rulemaking authority to the Director of the PTO. Is it your
belief that we may be ceding excessive authority to the
executive branch to create or make patent law?
Mr. Sharer. I am not a patent lawyer, sir. I am not
specifically familiar with that provision. If you would allow
me, I would like to ask my colleagues to be able to submit a
written testimony on that point.
Mr. Coble. I could ask subsequently after you leave to the
other Members.
Mr. Sharer. Yes, sir.
Mr. Berman. I know that the gentleman from California Mr.
Schiff has a question for Mr. Sharer.
Mr. Schiff. Thank you, Mr. Chairman. I will be very quick.
Mr. Sharer, I am inclined to think there is a lot of force
and validity behind the proposal that you and others have made
to add a ``but for'' provision to deal with the inequitable
defense doctrine, inequitable conduct doctrine. But you also
suggest in your written testimony that the standard be changed
to require one or more patent claims to be declared invalid by
the court prior to the use of this doctrine.
I am not sure exactly what you are proposing there. Are you
proposing that there be other patents in other cases that have
been held to be invalid with respect to that party? Are you
proposing there has to be with respect to the same case or
invention? How would that work? And would those have to be
other cases of invalidity because of some kind of inequitable
conduct, or would the fact that maybe there was prior art or
rather problems with the patent be sufficient to constitute a
prior strike?
Mr. Sharer. That is a level of detail that I am not
prepared to answer today, Congressman. I would like to let our
patent counsel give you and the Committee written testimony
that more expansively defines that and specifically answers the
question. What I can say is for us, what is really, really
important is once the patent is issued, we can have confidence
that it is going--issued, have confidence it is going to
persist, and that when we have a case where an infringer is
found to infringe, we can get appropriate claims and damages. I
am concerned in some parts of the bill, particularly
apportionment of damages, that it is going to be less expensive
for infringers. That worries me.
Mr. Schiff. Well, if you could have somebody provide some
further information, I am interested in knowing what that
means.
Mr. Sharer. We will.
Mr. Schiff. And also there was a suggestion that the
standard be raised for making that claim. I didn't know if that
was separate and apart from ``but for'' causation or whether
you are referring to the ``but for'' causation by that, but
thank you.
Thank you very much, Mr. Chairman.
Mr. Berman. Thank you.
Another question for Mr. Sharer. Mr. Issa.
Mr. Issa. This is truly California day. You are getting it
from the dais. And thank you for coming from California.
Mr. Sharer, you talked about specifically your quiet title,
how important that was to your investment, both from those who
invest in your company, but also from your investment in the
product. That is kind of one of those elements that is a line
in the sand for you, isn't it?
Mr. Sharer. Yes, sir, Congressman. We have to have
confidence in the patent to invest the amount of money over the
years, and with the uncertainty, I am really concerned about
that.
Mr. Issa. So as the postgrant has something piled on to or
in addition to the historic reexamination, looking at all the
other items we can talk about and perhaps the others as well,
that is the item that keeps you from sleeping at nights in this
proposal to a certain extent, doesn't it, the idea that you
would have bite after bite after bite in trying to invest while
knowing your patent is continually being attacked outside the
court process?
Mr. Sharer. If that provision were to go into effect in
kind of our worst concern way, you are right, Congressman, that
we would be concerned that we would never really have a quiet
title. I am optimistic and hopeful, though, that we can find
common ground and find a way to meet the needs of all the
parties. But you are right, that general area does concern us.
Mr. Issa. And I am concerned about this because I think it
cuts badly on both your industry and on the tech industry, so
perhaps that is the one place in which this isn't going to be
characterized as a battle between bio and tech. If we were--and
this is certainly up to the Chairman to first think of--if we
were to say there is only one bite, period, only one postgrant,
period, new invention, but that it did two things, one, we left
in place some sort of a reexamination as it currently is known,
that being the second bite, but it is a bite you have lived
with for a long time; and two, if that postgrant raised your
likelihood of willfulness as a matter of having to go through
that examination of the most unpleasant type, would those be
balances that you believe from your business model would be
well worthwhile to both narrow the claims, make the patent
stand on its own better, and at the same time have a benefit
for having gone through the process, perhaps--in my opinion,
willfulness now being much more in play because, quite frankly,
a neutral third party other than the PTO has now looked at your
patent, and the world has had an opportunity to pile on, and
two, because that window has closed. Would that work for you?
And really I would like to focus on you and your industry.
Mr. Sharer. I think, Congressman, that anything we can do
to absolutely limit, make very specific and define if there is
going to be another look, that would be much preferable to some
continuous look, and that may be a compromise that we have to
make. I am not prepared to say that today, but it certainly
goes in the right direction, and we would be willing to talk
about that for sure. It would be helpful.
Mr. Issa. The last thing, which is strictly reexamining,
this is the if, if, if. If postgrant is a single window, if
there is under the same basic principles today, do you believe
reexamination needs to be improved; that inherently it has not
served your industry, to be honest, on either side well, and
that is why it is not used except in some of the--I think we
are almost pejorative in the way they had been used--meaning of
that reexam, is that something we should consider in this
legislation?
Gaming of that reexamine, is that something we should
consider in this legislation.
Mr. Sharer. I can't specifically comment on that in a broad
way. I can say from an Amgen point of view we have certainly
benefited from the current patent system and have been able to
found a company 27 years ago and grow because of it.
I don't know of any cases in our experience where that has
been a problem. But again I don't have comprehensive knowledge
about our entire patent experience.
Mr. Issa. Thank you. And thank you for your continuing
investment in California. I yield back.
Mr. Berman. Thank you.
The unfairness of this aspect is, there are other views on
the issue discussed, but the rest of the process will give you
a chance, without Mr. Sharer up there to hear them, so you can
even be more aggressive in your response to his comments.
We want to you sleep well at night, and my guess is--or you
wouldn't go so far as to say a good night's sleep is worth
eliminating the ability of someone to challenge the validity of
an patent in an infringement lawsuit, would you?
Mr. Sharer. No, sir.
Thank you for hosting me today. And I look forward to
working with you and other Members of the Committee and my
industry colleagues to get a good bill that will serve the
whole country.
Mr. Berman. Thank you for being here.
All right. We will start the 5-minute rule on questions.
Mr. Griswold, let me tell you the problem I have initially
with sort of your opposition to this second window and get your
response. What prompted me to get into this issue was a glut of
questionable quality patents issued, a lot of them, from about
1998 through 2003; patents that wouldn't qualify for the first
window now if we eliminated this second window.
How would you address those patents in a less costly and
more efficient alternative to litigation?
Mr. Griswold. Well, one of the opportunities that is
provided is opening up post, the reexamination process.
Mr. Berman. What do you mean ``opening up''? It is open. No
one uses it.
Mr. Griswold. Yes, but the inter partes' reexamination
process. One of the reasons was because of the estoppel
language in that process, so that is one of the pieces of that
that would be used more. And that is the idea of making it
better, by reducing the estoppel.
Mr. Berman. Would you go along with more robust discovery
in the inter partes reexam process, so that people can actually
get some information to utilize in reexamine?
Mr. Griswold. Relative to postgrant oppositions, as you
know, relative to the postgrant opposition, which we support,
which is a first window----
Mr. Berman. But these are patents for which the first
window is gone. They have already been issued. I am talking
about that----
Mr. Griswold. The existing body of patents.
Well, one question you have there, one of the issues on
that is, do we change all the rules forever to put--to allow
for these continual attacks on patents--another--throughout the
life of the patent to accommodate to a concern relative to an
existing body of patents? That is a question.
Mr. Berman. It is a question. Is your answer to that
question, we don't change any rules, notwithstanding?
Mr. Griswold. We have made proposals relative to that that
would provide an integrated system relative to postgrant, that
would provide an opportunity after the initial opportunity that
would--but it would be limited so that you wouldn't have--so
you--so Mr. Sharer could sleep better at night, but--not
probably as nice as he would like, but it would help him.
Mr. Berman. But with the clear and convincing standard that
you recommend for that window, what is the incentive for a
person to take advantage of--who first learns about the claim
of a patent long after either an existing patent, or long after
the first window has been shut by virtue of the passage of
time, he first learns of it with a clear and convincing
standard to upset the validity of that patent? Why not just go
to court?
Mr. Griswold. Well, I guess there are two questions there.
One is, if we are talking about patents that are--where there
would have been a first window, then we would like--our view
is, we should be driving people to the first window for newly
issued patents.
If you are talking about patents that are in existence
today, then that is a different question, and as I said before,
a proposal we put together, which is very--which is integrated
between postgrant as well as reexamination; it brings it all
together--would provide an opportunity.
Mr. Berman. Thank you.
Let's just turn, still with Mr. Griswold. I do intend to
have a second--I intend to be here for as many windows as I can
open; and when all the Members and witnesses have left, I will
probably close the last window.
But--so there are a number of questions of other witnesses
as well, but just on the last time, remaining time, on
inequitable conduct, I understand the concern. And we have to
think about addressing that issue here. But what about a little
quid pro quo?
Would you be prepared to endorse or get those changes in
the inequitable conduct sort of defense that you want with a
requirement that mandates that applicants for patents conduct a
search for prior art, submit the search statement and any prior
art found with a list of relevance and meaning of the prior
art? In other words, the applicant, do more to help bring
information to the examiner that ensures that only things that
should be patented are patented?
Mr. Griswold. Well, the answer to that is, if the hovering
of inequitable conduct ceases or is substantially diminished,
the willingness of applicants to focus in on prior art, and
talk about the prior art will be substantially enhanced. That
is the question and----
Mr. Berman. What if we codify that substantial enhancement
with a requirement?
Mr. Griswold. We need to take a hard look at that. That, we
would take a very hard look at.
Mr. Berman. My time has expired. I recognize the Ranking
Member of the Subcommittee, Mr. Coble.
Mr. Coble. Thank you, Mr. Chairman. And, gentlemen, I will
put the same question, if you will permit me to, directed to
Mr. Sharer, regarding the bill extending additional rule-making
authority to the director of PPO.
Does either of you have any heartburn about that, that we
may be ceding excessive authority to the executive branch to
create or make patent law?
Anybody want to weigh in on that?
Mr. Peterman. I will just say quickly, we don't--I think
the patent office needs that rule-making authority and can
handle it.
Mr. Coble. Mr. Griswold.
Mr. Griswold. My concern is that, as we know from the last
number of years, when we have been trying to change the laws
here, there has been tremendous debate involving people from
all sorts of industries. And we think that kind of debate needs
to take place in this kind of a forum, as opposed to the PPO.
So we would be concerned about expanding the rule-making to
get into substantive rights in the way that this could with the
Chevron deference, I believe, that would be provided by that
activity to that activity.
Mr. Coble. Professor? Dr. Tucker?
Either of you?
Mr. Thomas. Thank you. The USPTO stands among the oldest
administrative agencies in this Republic, and when I first
learned that the USPTO was not considered a full-fledged agency
that enjoyed regulatory authority, I was rather surprised. The
USPTO has already promulgated a number of rules, such as rule
56 pertaining to inequitable conduct, that arguably are
substantive patent law rules.
I also believe that there is no complaint that the USPTO
has gone beyond the notice of opportunity for comment rule-
making procedures of the APA, and in fact, has been very
outgoing with town hall meetings soliciting input ad nauseam
from a patent bar, which you have probably become aware is not
shy about commenting upon proposals.
So I certainly would have no problems with the USPTO being
formally granted to some degree what it has already assumed.
Mr. Coble. Dr. Tucker.
Mr. Tucker. From the university's perspective, we think the
USPTO has sufficient rule-making authority already, and that to
grant extra rule-making authority would take away from the role
of the Congress. And we are very much aligned with Mr.
Griswold's position on this.
Mr. Coble. Let me ask you a very general question prior to
the illumination of the red light. How does H.R. 1908 benefit
the public? I am sure there is benefit.
Dr. Tucker.
Mr. Tucker. We see it as benefiting the public if it
creates stronger patents and it doesn't take away from our
ability as a university, as the research engine of this Nation
in general, to create the inventions that lead to new
companies. Anything that happens in 1908 that puts a road block
in the way, as I said, of us creating companies and creating
inventions is going to do a disservice to the U.S. economy.
We would like to see strong patents. We want to see robust
patents. We understand problems exist with certain business
method patents that are obvious on their face to us in the
working world, so to speak, but somehow manage to get too
obvious in the standards of the USPTO; and we would like to
have mechanisms in place that either improve the examination or
give the ability for people to comment and have those patents
not issued.
But--so that is my comment. Thanks.
Mr. Coble. Thank you, Dr. Tucker.
Mr. Griswold.
Mr. Griswold. There are certain pieces of the 1908--you
were asking generally if--are there pieces in 1908 generally,
or parts of it, that would be very helpful?
Mr. Coble. ``Generally'' was my question.
Mr. Griswold. Generally, I guess I have to go from
generally to specifically.
There are pieces that I mentioned, like first inventor to
file, expanding prior arts submissions and limiting willful
infringement, extending prior user rights, those would be
positive. Having a one-window opposition could be positive to
weed out patents. So that would help the public because the
public would not have to live with those patents for their
entire term if we had a single window opposition system.
Mr. Coble. I thank you, sir. I see my yellow light, Mr.
Chairman, so I yield back.
Mr. Berman. The other gentleman from North Carolina.
Mr. Watt. Thank you, Mr. Chairman.
I don't have the benefit of being as conversant with this
subject as my colleague from North Carolina since this is my
first term on this Subcommittee. But I want to start by doing a
couple of things, first of all, by applauding your effort to
bring together--I just noticed for the first time today the
divergent cosponsors of the bill that you adopt. It is a broad,
broad cross-section of----
Mr. Berman. Of the universe.
Mr. Watt [continuing]. Of the intellectual property
universe of this House. And I know, having worked with some of
those folks, that if you have that many people on a bill at its
inception and they are already working together, that is a
wonderful, good start. So I want to applaud that first.
And then, second, I want to applaud that notwithstanding
that, in your opening statement you made it absolutely clear
that you don't perceive this to be the final product. It is a
work in progress, despite the broad bipartisan and broad bi,
tri, philosophical cosponsorship that you have. So I think this
is great.
And I am happy to be a part of the process and I hope none
of my questions seem so basic as to embarrass myself.
Third, I want to just say to Mr. Peterman, because this is
the first opportunity I have had--the opportunity in public to
say, since the death of your colleague and my wonderful friend,
Thurman Woodard, I want to extend my personal condolences to
you. I know that was a tremendous loss to your corporate
family.
And for those who us who believe in really, really true
diversity in the corporate community, it is a tremendous loss
to all of us because we know that he stood for that, first and
foremost--well, not first over at Dell, but it was a high
priority.
Now, having said all of that, let me ask a couple of
questions because I am in only the first window. Some of us
have to get on an airplane and so--and I am approaching that
time, so I won't be around for the second window.
This is strange to me that we are talking about first and
second windows here.
I come from a legal background that has statutes of
limitation on everything, and I am wondering--maybe this is
such a basic, stupid question: What would be the problem of
establishing some kind of reasonable statute of limitation on
first and second windows with exceptions for people who have
gamed the system to get their patents--or maybe that is what
the first and second windows already do, and I just don't know
enough about it.
Perhaps I could have you all comment on just that basic,
elementary, perhaps stupid question, why this part of the law
is so different that it has to have an almost totally separate
set of rules for us?
Mr. Thomas. Mr. Watt, as you know, statutes of limitations
serve the notion that quiet and tranquility from litigation is
also a just solution in many cases. But statutes of limitations
in many circumstances are based upon knowledge of a wrong. So
knowledge that crimes have been committed, that is when the
statute of limitation is triggered.
Mr. Watt. Wouldn't it be just as reasonable to think about
when a person knew or reasonably should have known--which is a
standard proposition. I mean, that would be consistent with
what you just said, wouldn't it?
Mr. Thomas. It is certainly an alternative solution.
I think that the current proposals have decided to have set
periods of time based on the period the patent grants, and then
other set periods based on knowledge of the patent or awareness
of the patent will have commercial significance.
One thing to remember, Mr. Watt, is that the value of many
patent inventions is not realized until many years after the
patent issues. So, although the patent has come out, its
commercial value is not implicated until much later down the
road. So if we impose short second windows----
Mr. Watt. I am not talking about--I didn't say anything
about short, because I think you will find that my definition
of a statute of limitation might be a lot longer than--so don't
impute the word ``short'' to me. I am just trying to figure out
philosophically why some different system that puts some
reasonable time limits on this won't be a reasonable
proposition.
Mr. Thomas. I think everybody is in agreement, reasonable
time limits are appropriate, but we may differ on what is
reasonable.
Mr. Watt. I am sorry, Mr. Chairman. I ran out of time and I
never got to do anything, other than praise you, so----
Mr. Berman. The gentleman is given an additional minute.
Mr. Watt. Well, I will use that 1 minute to raise the
second issue that I have, rather than belaboring this one.
The race to the patent office argument, the grant to the
first person to file obviously has some appeal to it, but I
could see how it might have some substantial problems for a
small, noncorporate university--although I suspect most of them
are getting a lot more sophisticated in this area, also.
Does the current system or does this bill provide enough
protection in either first, second window or even under the
theory that I was talking about, for that kind of just totally
unsophisticated inventor?
Mr. Tucker. Certainly, from the university's perspective,
yes, the race to the patent office is a problem. We generally
are not as well resourced as perhaps a corporation, and it is
an incredible burden on us.
But I think one of the issues is getting the patent right,
and a race to the patent office may, in fact, end up getting a
less well-crafted patent, which gives less protection for the
invention and, therefore, less ability for people to get to
invest in it.
So, I mean, the race to the patent office, in my belief, is
that we should--we need to really think about it and especially
the university where the invention is so early staged that it
takes a little bit of time to understand what, indeed, the
invention is and how best to leverage that and how best to
protect it to get the advantage we need.
Mr. Watt. Mr. Griswold, I think you would have the opposite
side of that coin. I suspect so.
Mr. Griswold. We support first-inventor-to-file, but
because I am part of a coalition with many large companies
doesn't mean we are the fast--we have the fastest hounds in the
race, I can tell you. Oftentimes somebody else is there first.
But we believe that--and actually there are studies done by
a former Commissioner of Patents Gerry Mossinghoff which shows
that interference--today, it is first-to-invent, whoever is the
first to invent is supposed to get the patent, but the party
who was first to file is presumed to be the first inventor.
They have an inference process that determines that, and as it
turns out, the first inventor, first to file, typically wins
those cases. So we are, in effect, on a first-to-file system
anyway, and the rest of the world is on a first-to-file system.
One of the things that is really discouraging for people
like us, for us, is if we have someone who operated on a
different basis and they come to us and they haven't protected
themselves relative to filing outside the United States, they
work in a different system which is on a first-to-file--first-
to-file basis. So we think first-to-file is the best system for
the world, actually.
Mr. Berman. The time of the gentleman has expired.
Mr. Watt. Thank you, Mr. Chairman.
Mr. Berman. I might add, apart from the notion of how you
can get extra time around here, on the statute of limitations
problem--I guess we could have this as a private conversation.
But I don't know that Professor Thomas got into the limitations
on how far back you can go for damages. You can't file near the
end of the patent period and then collect lost profits or
damages from the day that your patent was infringed. In that
sense there are some limits.
And on the first-to-file issue, torn between the loyalty to
my home State university and alma mater and the fact that no
other university is as resistant to my bill as the University
of California, I think you will find that the inclusion of the
grace period in the first-to-file and the maintenance of the
CREATE Act, which Mr. Tucker did reference, many of the
universities don't feel quite as passionately about this as the
University of California seems to feel.
I recognize the gentleman from, okay, gentleman from Ohio
then, yielded by the gentleman from California.
Mr. Chabot. Thank you, Mr. Chairman. And sorry I was a
little bit late. I am Ranking Member of the Small Business
Committee, so--we had a hearing going on and so I missed a
little of the testimony and apologize for that.
In that capacity, Professor Thomas, we did have the
opportunity to hear you testify there, and I want to thank you
for that testimony. We thought you did a very good job there.
Let me ask one question, and I will just go down the panel
and you can all take a shot at it. Could you comment on whether
or not H.R. 1908 encourages innovation and investment that
businesses, particularly small businesses--and as I mentioned
we have a particular interest in that on the Small Business
Committee--need in order to grow in the future, as many of the
companies represented here have already experienced? And will
the changes proposed by H.R. 1908 provide the quality of
patents in certainty and predictability needed across all
industry sectors?
And, Mr. Griswold, if you want to go first, please.
Mr. Griswold. Yes. Well, there are pieces, as I said
earlier, to 1908 that I think would do that. There are pieces
that would stimulate invention and assist in the process for
more high-quality patents. There are other pieces, however--for
example, if compensatory damages are reduced, I don't think
that is a stimulus to invention; I think that is a negative. I
think if you open up an opportunity, another opportunity for
serial attacks on patents, I don't think that is a positive
either for promoting invention.
When we are talking about innovation, sometimes in this
discussion about innovation, we hear different groups talking
about innovation promoting innovation. Innovation that was
constitutionally supported with the patent system is the kind
which incents people because of the period of exclusivity to
invest and make inventions. And that is the kind of innovation
and investment that the patent system is supposed to protect.
So when you do things like reduce the compensation, or
reduce the ability to get an injunction or any of the other
rights, or somehow diminish the patent right, then that reduces
that type of innovation. So you have to be really careful to
mess with the system because at the end of the day you may be--
and we won't know right away.
See, one of the things that bothers me and one of the
things I talk to people in our company about is that we are the
stewards of the patent system. We are the stewards of how
things operate today in our company today relative to the
patent system. And I am really concerned that if you make
changes that are too dramatic, you will wind up effecting
something that we will see the impact on 15 years from now
because that is the way these things play out.
Mr. Thomas. Thank you.
I think it is certainly important to be mindful of concerns
that might arise in the future. I think it is also important to
address existing concerns that are very prevalent right now.
And in that vein, I believe that this bill has a number of
features that are in the interests of small businesses.
The oppositions we have talked about, one thing to
remember, the patent that is one person's incentive is another
person's limitation. So it will also give the ability of small
firms to challenge patents of their competitors without having
to pay the extraordinary resources that patent litigation will
consume.
Obviously, the grace period is perceived as favoring small
business. Assignee filing will make a more streamlined process
for all firms, including small businesses, to obtain patent
rights.
Venue reform would prevent small businesses from being
hauled in in far reaches of the country in order to defend
themselves from charges of patent infringement.
And, finally, having a better base of damages, a more
defined sense of what damages are, rather than very divergent
figures based either on one feature or the whole system, I
think will promote efficient bargaining in the shadow of the
law, which also will benefit small business. Thank you.
Mr. Chabot. Mr. Tucker.
Mr. Tucker. Congressman Chabot, when I sit in my office at
the university and we think about, you know, what we do, and as
we start to form companies, you know, some of the people that
we talk to very early on are the first-stage investors in
technology; and one of the things they need from us to do a
deal, to put their first one--$5, $10, $15 million--is, they
come to us and ask about the intellectual property, because
they need that to ensure that investment. So anything in the
bill that takes away from their ability to enjoy that
intellectual property asset is going to impact the startup of
businesses. And that is where we see it.
Bryan Lord from AmberWave, who was a licensee of the
University of California, testified quite eloquently, I
believe, at the Small Business subcommittee hearing about the
impact of changes in the patent law on small businesses. And
we--I would like to reiterate his testimony. And I think he
very aptly stated the concerns that universities have with
regard to changes.
That being said, as Mr. Griswold said, there are lots of
things in this legislation that we believe will help to create
stronger patents. And in that sense, that is why we are here.
We want to cooperate with the Subcommittee to get to
legislation that will work for us as universities and for
businesses. And we know we are all very different.
Mr. Chabot. Mr. Peterman.
Mr. Berman. Time is almost expired, so finish your answer--
start your answer.
Mr. Peterman. In terms of promoting innovation, I don't
think the intent here is to harm patents or to weaken the
patent system. We all still want a strong patent system. The
targeted changes that would improve litigation, I think are
beneficial for small business. They are more susceptible to
patent attacks. They have few resources to defend themselves
against these expensive litigations.
I think there is a letter from several farmers groups that
this Committee has received that sort of express that concern.
The second thing on the quality of patents, I agree there
are things in here that will improve the quality of patents. I
think one of the things that small businesses would need is
this second window. If we are going to have postgrant
opposition, they are not going have to have the resources to
attack every patent they see coming out of the patent office.
They will need the second window to attack those that come up
and may be asserted against them.
Mr. Berman. The gentleman from Tennessee has returned. Mr.
Cohen.
Mr. Cohen. Thank you, Mr. Chairman. I will ask the panel,
what is not in this bill that you think ought to be in it?
Mr. Griswold. A couple of things that I mentioned. One is a
fix on inequitable conduct. And the Chairman and I had a
discussion about--he was trying to negotiate a deal here, and
since he has all the power, I don't know that I want to do
that.
But anyway, that is something that is missing, a fix on
inequitable conduct, which at the end of the day, leads to
lower-quality patents because of the failure--the inability of
the applicant and the patent office to have the kind of open
communication you would like to have without the hovering of
inequitable conduct.
Another thing is elimination of the best-mode requirement,
which is kind of a duplicative requirement which is--a
litigation reform that was recommended by the National Academy
of Sciences report, that we eliminate the best-mode
requirement. That is not in the bill.
Those are a couple of key pieces that are not in the bill.
Mr. Cohen. Let me ask the other three panelists.
Do you all agree those components should be in the bill? Or
do you disagree?
Mr. Thomas. I agree with Mr. Griswold.
Mr. Tucker. I agree with Mr. Griswold with respect to
inequitable conduct, but we prefer to have the best-mode in. We
believe it is incumbent on the person disclosing invention to
disclose the best way to do it.
We would like to see a requirement that all patent
applications get published after 18 months. Right now, this
legislation doesn't include language that was present, I
believe in other versions, that allows--so that, now, you are
allowed to exempt certain applications from publication; and we
believe that making that consistent for all applications is
important.
Mr. Berman. Just to interject on that point. If it is the
way you say it is, it isn't the way we intended it. In other
words, the bill calls for publication of all patents in 18
months.
Mr. Peterman. I guess I will be the only one to disagree on
the three features that Mr. Griswold mentioned.
We think it is very important to have rules in place that
encourage inventors to be as honest as possible to the patent
office. And we think changes to those would need to be looked
at very carefully.
The two things, I guess, we would see changed: We like the
venue provision, but we think it could be improved and we would
like to work on that. And I mentioned, although the Supreme
Court is addressing the 271(f) issue, if that is not fixed, we
would like to see that there as well.
Mr. Cohen. Tell me about the venue portion. I understand
this is going be greatly damaging to the prosperity of
Marshall, Texas.
Mr. Peterman. I like Marshall, Texas. I am from Texas.
Mr. Cohen. You have been there, I take it. I haven't. Not
on my list.
Mr. Peterman. You know, in the way it is written now, it
allows the plaintiff to incorporate or to sue where the
plaintiff resides. So that is one issue.
We have many cases where there is certainly a shell entity
and a storefront that is located in one of these districts, and
that is the basis for the venue there. There may be others. I
don't want to get into a lot of it, but I think one of the ones
that is fairly apparent is that one where it says the plaintiff
can sue where it resides.
And we see shell corporations who acquire patents and sue,
and they will just incorporate in that city and sue there.
Mr. Cohen. And Marshall, Texas, is the place they do this?
Mr. Peterman. It is one of the places. There are others.
Mr. Cohen. What are the others?
Mr. Peterman. I think there is a court in Minnesota, maybe
the Central District, but there are other courts where
plaintiffs sue in order--because they think they have an
advantage, and they will get moved quickly to trial without
seeing anything finished on summary judgment.
Mr. Cohen. How does the bill improve upon that?
Mr. Peterman. I think the bill is the start. It starts by
saying, first of all, you can only sue where the plaintiff or
defendant resides. Currently, the law is pretty much anywhere a
product is sold, they can be sued. So that is, for most of us,
anywhere in the U.S.
The second feature is that it would say that you can
otherwise sue where the defendant has, I think, business
contacts and some nexus there. And I think that also limits to
some extent where you can sue. Many companies, certainly
Internet companies, don't have a business presence in many
places.
Mr. Cohen. And are there parties that should be represented
here with issues that are not?
You don't think so? Yes, sir. Doctor? Professor?
Mr. Griswold. I am not a professor, but I am from
Minnesota, so I am a little nervous.
Mr. Cohen. You read your paper like you are.
Mr. Griswold. Well, that is all right. If that is good
then, I am a professor.
The problem with venue is this. Yes, there are concerns
with where lawsuits are brought. One of the--it is one of the
overall issues with trying to get legislation together.
If you go too far to do some of the things that my
colleague on the end here would like to do, you really harm
other people because they can't--like us, we spend a billion
and a half dollars on R&D, you get patents on the fruits of
that investment, and we want to be able to bring patent
litigation to prevent infringement where we would like to bring
patent infringement litigation. And I don't think he wants to
impact that.
But what he does, but any fix that we talk about does and
will impact our ability to sue and that is a big issue for us.
So that is a problem.
The other problem with it is, I don't think--I don't think
I am clever enough, and maybe everybody else is, but I don't
think we are clever enough to figure out how to write something
that will work for people like us, but will not be avoidable--
or, well, our friend from Dell--and not be avoidable by people
that want to avoid it.
There are different ways to do it. For example, as he
pointed out, if you want to set up a company around one patent,
people do that. So whatever rules you set up, you will find--
people find a way to move around it.
So I think venue is one that is probably something that
should be left out of the bill totally. That is our view.
Mr. Cohen. Thank you, sir.
And thank you, Mr. Chairman.
Mr. Berman. Thank you.
The gentleman from California, Mr. Issa, a cosponsor of the
bill and a holder of patents, high-quality patents.
Mr. Issa. They were the earlier ones, before it was so busy
at the patent office, which unfortunately means they are
starting to expire.
Why are you laughing? I am crying. You know, in 1994 in
order to deal with GAAP, we said, well, we are going to make
our patents 20 years from application. So at least there is one
Member on the dais who was once sued on a patent that had never
been litigated until it was in the extension period; and then
only against me, even though it was one of my customers, for
more than a decade, but he had then retired and decided this
patent that was 17, 18, 19 years old, was suddenly valuable.
I tend to have a little trepidation when people say, do it
like Europe. Just so you understand.
Mr. Griswold, when you talk about the harm we could do with
a second window for everything to deal with the body of
existing patents, if we had a single postgrant window that
began after enactment of this, would you think that we should
do something rather than just ignore the thousands of--millions
of patents that are out there now? Or could we have,
realistically, two standards, one for patents about to be
granted, one which would allow for the use of postgrant on a
much more limited basis for those patents that are already out
there, recognizing that there is no court, no patent office,
that can handle 2 million claims in 1 day if we said, you know,
you have 90 days to deal with every patent out there?
Do you see that as something that we can finesse? Or do you
say--do you see that as some problem that is bigger than what
you talked to me about before?
Mr. Griswold. I would be concerned with setting up a
special program for a certain body of patents. I think that
there are a couple of things, one I had mentioned already, that
reexam, because of the change in inter partes reexam that is
more likely to be used, at least with the proposal on the
table.
Mr. Issa. Are you talking about the boards they are going
to do, taking it away from----
Mr. Griswold. And making the estoppel provisions less
onerous. That is one piece.
And the other piece would be this, that the proposal that I
mentioned earlier in my response to a question--it is called a
``postissuance revocation proposal''--would help in this
regard. It is not in this bill, but it is something that we
have put together that would bring together----
Mr. Issa. I appreciate that.
But in the 5 minutes-plus, whatever time, I commend the
Chairman for bringing this fine piece of legislation to the
forefront. And as I continue adding time, Mr. Chairman, thank
you so much; this really was wonderful of you to do and
particularly today.
But in your opinion, the body of existing--if for a moment
we just left it alone and only concentrated on the new, you
would be more or less happy with a single postgrant window at
this point as part of the enactment language?
Mr. Griswold. Yes, we would be fine with A because we think
the number one thing is to weed out patents shortly after they
are granted----
Mr. Issa. I will tell you, in my notes the number one thing
is, do no harm because--that is why I asked the question. This
would assure less harm then hypothetically dealing with the
body of millions that were out there under another system.
The conversion to first-to-file seems to be more
controversial than I would have expected. I am somebody--I am
an old guy. I am used to--I grew up in this whole thing of 1
year and swear behind and reduction to practice, but
realistically aren't we sort of in a position where the
transition to first-to-file is pretty inevitable, and we just
have to decide the terms under which we want to do it?
Is there anyone that sees that as somehow not something
that if we don't deal with it now, we are going to deal with it
in all likelihood in the future?
I guess I will go the grand State of Texas.
Mr. Peterman. Thanks. I would like to say, you know, maybe
that is right. I think one of the important things in first-to-
file, though, is that we maintain protection rights which I
believe this bill does for first-user and first-to-market in
terms of prior art, but we wouldn't want to see that go away in
terms of a first-to-file system.
Mr. Issa. Okay, I appreciate that.
Last, the last in my time: The Georgia Pacific, 15 points
of tests that have historically led to a big factor in
determining the importance of a patent, et cetera, the damages,
in your opinion, if we are able to capture that accurately as
uniform guidance to the courts, is that a meaningful goal when
we are trying to--and I will use the word one more time--
``finesse'' the differences in opinions on this issue?
Can I get somebody that hasn't answered?
Mr. Thomas. Mr. Issa, I believe that the case law and
empirical evidence show that courts are having a very difficult
time reliably measuring damages in apportionment situations.
And because, both theoretically and practically, the patents
damage system should be based upon the market measure of
damages, I believe it is a reform very much worth pursuing.
Mr. Issa. And then, as to Georgia Pacific, as to that
standard, that is the standard most are trying to come to,
right?
Mr. Thomas. Yes, I think Georgia Pacific has, one of those
15 factors has reflected that concern----
Mr. Issa. The 13?
Mr. Thomas. Yes, the 13th factor reflects the concern that
courts are encountering today.
Mr. Issa. Thank you, Mr. Chairman. I hope for a second
round. Yield back.
Mr. Berman. The gentleman from Georgia, Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chairman.
Mr. Peterman, we have heard from the other witnesses that a
postgrant review process with a second window would be harmful.
And you state in your testimony that such a second window is
essential. Why is it essential for Dell?
Mr. Peterman. Sir, for a postgrant opposition proceeding to
be helpful just having it be within, say, the first year after
a patent grant, if there are too many patents, it is not
possible to really oppose all the patents.
The other thing I would like to highlight is, there are
situations where the way a patent comes out of the patent
office, if we were to look at it that day, it wouldn't look
like one that would ever be an issue for us. And then, maybe
later, maybe 6 years later or further down the line in the life
of the patent, something changes and/or--and now, today, what
is happening is, sometimes litigants will get a hold of these
patents and look at them creatively.
We have an example--and I don't want to say too much about
this case because it is still pending--but we have a situation
where there is a patent that has been asserted against us for
any Internet transaction that crosses an international border.
As we looked at the patent when we were sued, if we had had
this short postgrant opposition period, we wouldn't have
opposed the patent, because it didn't look like anything we
did. Yet this patent later was asserted against us.
I think in situations like that, where the patent is
asserted later and it is not something you could have thought
of opposing in that first period, I think we all believe there
needs to be that second window for challenging the patent or,
otherwise, the postgrant procedure is not that helpful.
Mr. Johnson. Let me ask Mr. Griswold, are there any
industries where it would be appropriate to have more than a
12-month period?
Are there any industries that you----
Mr. Griswold. The problem with a second window, as we talk
is, it gives just another opportunity for a patent to be
attacked, which is a major, major concern. So you can wind up
with--I gave some examples on reexamination, how it was used
serially, inappropriately in our opinion.
And so I think, generally speaking, it is not good to have
a patent owner be subjected to a continuous attack.
Mr. Johnson. Generally speaking, there may be some
instances where there should be more than a 12-month window of
opportunity?
Mr. Griswold. I wouldn't say that. I would say that if--as
I mentioned before, there may be, if you integrated all of the
reexamine and postgrant into one process and then put a lot of
limits on it, it may be possible to come up with a system that
would approach something that would give the patent owners some
peace in the valley while giving another opportunity.
Mr. Johnson. I notice that Dell's position on patent reform
is supported by a broad array of industries, including media
companies that own movie studios and publishing, financial
service companies, and energy companies and farmers.
What brings all of these diverse industries together on the
patent issue?
Mr. Peterman.
Mr. Peterman. I would say it is the two things we believe
this bill addresses. And one is that all these industries are
seeing problems with quality patents, and we believe the bill
goes a long way to helping us have more quality patents.
I think the other is that all these industries are seeing
problems with speculative patent litigation, litigation just
for the sake of litigation. And we believe this bill does a lot
to help with that problem as well.
Mr. Johnson. Mr. Griswold, why shouldn't the Patent and
Trademark Office, which, quite frankly, has the best expertise
in both law and technology, in that area where they examine
these processes, why shouldn't they be given broad rule-making
authority over patent matters?
Mr. Griswold. Well, the concern is--as I was mentioning
earlier, was the concern with setting standards on what is or
is not patentable, basically getting into what you can patent
or not patent. Rules like that we are real concerned with,
because we will not have the opportunity for this kind of
debate, and eventually they can directional process to decide
whether or not that is the best direction.
There are, as was pointed out by Professor Thomas, some
hearings and things like that. But it is not the same process.
At the end of the day, they decide and it is not a vote of over
400 people to make this decision, so that is a concern. And
they have--and they carry a lot of weight if they have
substantive rule-making authority.
Mr. Johnson. All right. But now the fact that you have got
a 435-person Congress to vote on these, I guess you could say
micro issues versus a Federal agency that deals in this area of
the law day in, day out, 24/7.
But you would hold that it would be better for the entire
legislature to make those kinds of decisions?
Mr. Griswold. The kind of rules we are talking about, they
really have substantial impact on the basic rules around rice.
We believe that is correct.
Mr. Johnson. Doesn't the Administrative Procedure Act
enable you to be able to challenge the rule-making authority or
the rule-making of the agency? Wouldn't that be sufficient?
Mr. Griswold. I don't think it would be sufficient, but I
will say that I am not an expert in that area of the law, the
Administrative Procedure Act.
But I don't believe so. I think we have to force the kind
of debate like we are having here. And I think Chairman Berman
is doing a good job of forcing that kind of debate, as we
speak.
Mr. Berman. He would like not to do it every month for the
rest of his congressional life.
The gentleman from Virginia, Mr. Goodlatte.
Mr. Goodlatte. Thank you, Mr. Chairman. And thank you for
holding this hearing and for introducing this legislation,
which I am pleased to cosponsor and glad to see you are forcing
this debate. I think it is a good thing.
And I might focus in again on the second window. That
seemed to be--since the courts took care of, for the most part,
the injunctive issue that held us all up last year, second
window seems to be the number one issue that we are all looking
at at this time.
And, Mr. Peterman, if I might just characterize--and
correct me if I'm wrong--the difference between you and Mr.
Griswold is in the companies that you are working for. Dell
manufactures and sells products that contain many different
patents, many of which I assume you license from other people;
and when you put that product on the market, you don't know
whether there is a challenge to any of what could be hundreds
of patents in a particular product that you are offering.
And Mr. Griswold, 3M manufactures--is that your company,
3M?
Mr. Griswold. Yes.
Mr. Goodlatte. You are a major company that invents and has
a long history of inventing a lot of innovative products, and
often manufactures the same products that you invent. And they
often do not contain hundreds of patents, but a more limited
number. And your concern in moving forward here is that when
you develop a product and put it on the market, you want to
make sure you have the ability to protect it, enforce it all
the way through. And the less often you have to do that, the
better off you are.
So, Mr. Peterman, let me--if I have characterized that
correctly, Mr. Griswold--let me ask you to tell us how you
would address Mr. Griswold's concerns that you face, moving
forward. What do you say to him in terms of the problems that
he has presented to us?
And I am going to do the same thing to you, Mr. Griswold,
with his problem.
Mr. Peterman. Yes. I would say--and it is our position that
if we are going to have--I have said this, if we are going to
have postgrant, we don't see that it makes sense to stop it at
a year, that it ought to be the life of the--there ought to be
a second window.
I guess my response is that there are already several
procedures that put a patent at risk or, you know, avoid quiet
title during the life of the patent--the reexamine process,
which they have talked about, the fact that any time you assert
in litigation it is open to a validity challenge.
I think where we struggle is understanding how this
postgrant procedure is so different from the existing reexam--
--
Mr. Goodlatte. What is the issue with preponderance of the
evidence with--this new second window that has been proposed
uses a preponderance of the evidence standard; and you are in
favor of that standard, is that correct?
Mr. Peterman. We are in favor of that standard, and
certainly the difference is that, currently, in patent
litigation, the standard for proving invalidity is clear and
convincing. That is certainly a difference.
Preponderance is a lower----
Mr. Goodlatte. Why do you favor that difference?
Mr. Peterman. We believe in challenging a patent. And
typically this would be a challenge over something that wasn't
fully considered, or considered at all, by the patent office,
that there shouldn't be a presumption of validity in that case.
Mr. Goodlatte. Do you have any words of comfort for Mr.
Griswold?
Mr. Peterman. I am not sure that I do, unless I have said
them already.
Mr. Goodlatte. Let's see if he can do a better job for you.
Mr. Griswold, first of all, where are you on this
preponderance-of-the-evidence issue? And secondly, how would
you solve their problems since you don't like the solutions in
the bill?
Mr. Griswold. Actually, we share some--and we have some
software businesses, so you characterized us, maybe, not quite
the way we are.
Mr. Goodlatte. But you have at least part of a foot in one
camp and part of it in the other.
Mr. Griswold. Not only us, but remember I am here for the
Coalition of 21st Century Patent Reform, which is 42 companies
that all over the place, diverse companies from every industry.
And our company is a very diversified technology company.
So let me address a couple of your questions. The first one
is relative to clear-and-convincing versus preponderance.
If you want people to come into a first window and go after
a patent to weed it out early on, if you have a preponderance
of the evidence, later on, they are not going to do that. So if
you are going to drive them to a first window, you need to have
a clear-and-convincing standard. Otherwise, they are better off
going to the patent office at a lower standard than district
court. So that is one piece of the equation.
Another thing that I would say relative to Peterman's
business, or Dell's business versus ours and how we operate, we
have historically been comfortable with clearing our products
no matter what they--no matter what is in them. We clear
products before we put them on the market.
We also file oppositions against patents in other
countries. We also look at patents to see what they might cover
versus what they say they do cover. And we take all that into
account. And that is the kind of--that is the way we operate.
I can't give him comfort that he should do that. But I can
tell you that is how we operate relative to our overall
businesses, no matter what industry we are in. And I have
discussed this kind of issue with the rest of the people--some
of them; not everybody here, of course, but a number of the
companies--and that is the process they use.
So they would be trying to weed out patents early on in
their life during the first window. They would also be clearing
their products to make sure they didn't have problems before
they put them on the market.
Mr. Goodlatte. And do you think that is as easy to do when
you have a product that has hundreds of licensed patents
involved, as opposed to one that has fewer? Do you have very
many products on the market that contain hundreds of patents?
Mr. Griswold. We have products that have many--we have tens
of patents, hundreds of patents; I have to go down the list.
Probably if you talk to a lot of people, we do, but we have
very complicated----
Mr. Goodlatte. Do you have greater difficulty clearing
those than you do one that just has a few patents attached to
it?
Mr. Griswold. It is more of a challenge if you have a more
complex product or that could implicate a number of different
types of patents. But we do it anyway.
Mr. Goodlatte. Thank you, Mr. Chairman. And I apologize to
the other two gentlemen for leaving you out of that discussion,
but----
Mr. Berman. I thank the gentleman.
The gentlelady from Texas.
Ms. Jackson Lee. Thank you very much.
I will take a moment and pause to reflect upon what I hope
will be a continued discussion. I hope the Chairman will hold
additional hearings. I think in order for us to get our hands
around the many, many issues, and frankly, to create a
legislative document that answers the Chairman's questions and
many of our own--even though I think we have a very good
vehicle to operate from, I am pleased to have been able to join
Chairman Berman on this thoughtful journey including the
legislation that is partly underlying this particular hearing.
But probably representing many innovative countries--
companies, rather, in Houston and claiming Dell, I am
interested in making sure that this is the kind of vehicle that
does what we would like it to do and continues to put America
at the cutting edge of invention and technology.
This past week we passed legislative initiatives dealing
with teaching math and science and engineering, providing
scholarships, getting people back into the creativity that
creates work.
I am going to start with you, Professor Griswold, because
it is interesting that I am an original cosponsor of this
legislation, and I am pleased to be so. But as my good friend
from North Carolina said, there are a lot of us who are like
apples and oranges on this bill. And when I hear some of the
commentary about stymieing--stymieing litigation, closing the
courthouse door, you sort of raised the hairs on back of my
neck. I happen to believe in the opportunity of the small guy
to get in the door.
But at the same time I think what we are trying to
accomplish is to ensure some safeguards so that innovativeness
and the inventiveness that creates the churning of the economy
and jobs and prominence for this economic aspect of this
country goes fairly smoothly. So I want to try to explore this
issue of the unlimited time period for filing postgrant
proceedings, because I assume what that means for some is that
the door is not closed on what they have been awarded.
Professor Griswold, what does that mean, and what is the
basis, if I am correct, of your opposition? What does that mean
to the smaller entity that maybe does not have a period of
closure around the grant that they have received.
Mr. Griswold. Excuse me. So your question relates to a
small entity who is a patent owner and what will happen. Well,
what happens is that this will give--a second window would give
the people that want to take on the validity of that patent, or
challenge the validity of that patent, another opportunity to
attack the patent. And so there would be another opportunity--
another situation where that small business would have to
defend itself in the Patent and Trademark Office.
Ms. Jackson Lee. How would you fix that?
Mr. Griswold. Well, our fix is to have a single window so
that you have one chance right after the patent issues and that
is when we do the weeding process with the postgrant opposition
system. There would still be the reexamination opportunities,
both ex parte as well as inter partes reexamination that would
still be available for people to attack the individual, the
small business patents. They exist today. Frankly, under this
bill, they would be more available. I know parties would be
more available, because of the estoppel would be less onerous.
Ms. Jackson Lee. Thank you, Mr. Tucker.
How does this bill impact university inventors and
scientists? You obviously are doing a lot of research in the
pharmaceutical industry. What does this bill do in its overall
perspective?
Mr. Tucker. I think for us the biggest change that this
bill brings into place is the change from first-to-invent to
first-inventor-to-file. And for us that is the biggest issue
that we really face from a practical standpoint. Our open
academic environment has--as I said, the pressure to publish is
intense. So faculty members are out there talking about their
inventions. They are publishing their inventions. It is the way
they get recognition. It is the way they get more grants.
You know, as a practical matter, they don't all come up to
the technology transfer office in their university before they
go out there and describe their next fabulous invention. And we
have to--you know, in the current system, we are able to seek
patent protection for that disclosure because we have that 1-
year grace period after the filing.
Ms. Jackson Lee. So would you go back to the present system
or would you see a fix in the present bill?
Mr. Tucker. We are not formally opposed to the change, and
we respect the Committee's and the drafters' attempt to create
this grace language. We don't--we are still analyzing the grace
language, and we would like to be able to work with the
Committee to get grace language that gives us the protections
that we have today in the first-to-invent system. So, you know,
it depends how that grace language looks. It depends on the
stance the University of California would take.
And we know, and the Chairman has pointed out, we are
perhaps more aggressive on this matter than some of our other
colleagues. We have been involved in the patenting and
licensing of technology for a very long time. So our opinion is
colored by our experiences, and so that is it.
Ms. Jackson Lee. Well, let me if I might, Mr. Chairman, ask
a question to Mr. Peterman. I know my time has elapsed. Could I
ask an additional 1 minute?
Mr. Peterman, first of all, welcome; and we proudly say
welcome to a wonderful civic and corporate friend of Texas and
obviously our neighbor.
Let me add my same deep sympathy to the loss of Thurman and
to his family for what he has represented to many of us on
promoting diversity but also promoting technology.
And I have had the opportunity to visit Dell. At the same
time, I know that Michael Dell could be considered an inventor.
We all start somewhere. I still hear the legions of tales, if
you will, tall tales or short tales, about Bill Gates at
Harvard; and I think every Harvard student and every other
student thinks they are on the verge of doing the same thing as
probably Bill and Michael did at one time.
You are now a big company and you have indicated that this
legislation, as many of us wanted to consider, restores a
balance in the litigation and a balance between defendants and
plaintiffs and it limits the punitive damages. But why don't
you try to project yourself and answer the question, do you
think it damages too much, not renders damages, that
innovativeness that is important, and how do you see that the
bill balances your concerns as a large company and the concerns
of what had to be the beginnings of your company?
Mr. Peterman. Thank you.
First, I would like to thank you for your condolences and
also Mr. Watts. We really appreciate that.
I think that it is our view that this bill strikes the
right balance, that it establishes a more fair process. I
mean--and I guess the damages issue is the one we have talk
about the most. We certainly do not intend to take away
anybody's access to the courts or take away their right to a
decision on the merits and adjust rewards for their patents.
I think that the changes in this bill will not impact
somebody like Mr. Dell in the way he started his business. I
think that it will actually in some ways help that innovation.
It will clear up any chances or help some of the chances that
those small companies if they are attacked on patents can
defend them properly and that if there are damages that the
damages are appropriate.
Ms. Jackson Lee. Thank you, Mr. Chairman. I just want to
thank you, and I hope as you continue--and I apologize for
having to leave--that we will possibly be able to have another
hearing and we might be able to listen to inventors--and I know
there may be some here--but inventors who will be, from
whatever range, be impacted by the legislation. I think we are
on the right direction, going in the right direction, and I
think look forward to going to a good legislative initiative.
I yield back.
Mr. Berman. Thank you. That could be requested. It
conflicts with a good night's sleep, but certainly we are going
to discuss collaboratively what more we need to do.
I have a couple questions. But let me just say initially,
Mr. Tucker, I appreciated your comments in response to the
gentlelady from Texas' question. Because if we start focusing
on what the grace period protects and what it needs to protect,
perhaps there is some useful language--a look at this that can
deal with the university's problem in this area, and not
particularly right now but between now and the signing
ceremony, we should----
Mr. Tucker. Well, yeah, Mr. Chairman, we are committed to
work with you and the Committee on crafting language; and my
esteemed colleagues in the room here, my attorneys, et cetera,
are looking at how best to look at the language that is in the
bill and how we might be able to work with you on getting
something that supports university innovation.
Mr. Berman. And just to my questions, Professor Thomas, you
wrote a paper that I referenced earlier which--part of why I
actually finished it was because it was well written--I almost
understood it--and had wonderful examples.
Now, take Mr. Griswold's example, the Post-It. You had
paper, and you had adhesives, and they just combined these two
items which were both prior art and patented something. Now
they are in court against someone who has infringed that
patent, and the defendant says paper, adhesive--they get a
little bit for the idea of thinking of sticking the adhesive on
the paper. But how would you address that in terms of them
getting some value for an idea that I happen to like a lot? I
use them all the time.
Mr. Thomas. Well, I have observed that Mr. Griswold is more
than capable of defending himself and would probably be able to
do so in a courtroom.
Mr. Berman. What would he say, though? Because he
apparently thinks under our apportionment language he is out of
the ballpark, right?
Mr. Griswold. Right.
Mr. Thomas. I would respectfully agree with Mr. Griswold.
Mr. Berman. Be his lawyer for a second.
Mr. Thomas. I would certainly argue that it is the synergy
of those two ingredients placed together. Obviously, there were
paper clips, there were glues that would attach paper to
objects. But they would have a fixed attachment, not a
removable attachment, as patent lawyers who draft claims like
to say. So that is not a feature presented by the prior art and
not in that combination.
I believe the bill language as it exists is flexible enough
to account for both situations, situations where there is one
patented invention that is part of a larger system, that has
other unrelated components. On the other hand, inventions that
rely really on that combination--the example I give in my paper
is a combination therapy for the pharmaceutical industry,
claiming that should not be apportioned because it is the
aggregation of those two medicines.
Mr. Berman. That produces the cure.
Mr. Thomas. That is correct.
Similarly, it is the aggregation of the paper and that
particular adhesion that produces.
So I agree with you and with Mr. Griswold. Those are
situations where apportionment would not be appropriate. And I
also find nothing in the language of this bill that actually
says you must subtract everything that existed in the prior art
and leaving essentially no damages for any of that to work.
Mr. Berman. I would like to say case matter over, but you
sound like you want rebuttal time.
Mr. Griswold. Well, I don't think that is the way our
opponents would say somehow in this language. I think what they
would say, they would go to that language and the provision
that says ``shall exclude what is in the prior art,'' and they
would exclude my piece of paper and my releasable adhesive. So
that leaves us with nothing.
So I am happy to hear Professor Thomas--and, Professor, I
will call you Professor--Professor Thomas say that there should
be no apportionment in that situation, but I don't think it is
clear at all that that would be the outcome if you had a bill
and a piece of legislation like this, no way.
Mr. Berman. Well, now that issue is framed, isn't it? We
just have to look at that language.
Mr. Griswold. Yeah. And what I would say, that is exactly
right, Mr. Chairman, and that is what we should do if we are
going to talk about damages legislation and look at the
language.
Mr. Berman. All right. This may not be the perfect place to
get terribly more detailed in dissecting the language.
So let me go to another question, to Mr. Griswold. National
Academy of Sciences says--first, you accept our new postgrant
within the certain number of days after the issuance of the
patent, and you say you actually think it might be helpful in
strengthening patent quality, right? It is the second window
that is the focus of your concern.
Mr. Griswold. Conceptually, a postgrant opposition system
that had a single window right after grant, that had a very
carefully laid out process, including limitations on discovery
and all those things, would be a system that we have supported,
yes.
Mr. Berman. All right. ``like'' is too strong a word.
Mr. Griswold. Okay. Well, we have to define ``like,''
because we have to be cautious.
Mr. Berman. All right. Ah, yes. You don't concede much in
these exchanges.
What about a second window that would only be triggered--or
maybe we would call it a second trigger--where an infringement
case is brought and the district court has the ability, if the
validity of the patent becomes an issue, to refer back to this
existing postgrant procedure as a quicker, cheaper more
efficient way of determining validity?
Mr. Griswold. The way the----
Mr. Berman. As sort of like the National Academy of
Sciences report recommended.
Mr. Griswold. Yeah. I don't think that actually that works
that well for this reason, at least the way it is laid out in
this bill, because of the openness of the discovery. It is
cheaper and quicker in some courts that were referred to in
previous dialogue, are as fast or fast as this postgrant
procedure we are talking about. You can get to trial, you can
get a judgment as fast as you could in postgrant. So that is
one piece.
Another thing is----
Mr. Berman. What is the open review proceeding that the
National Academy of Sciences made reference to in making this
recommendation?
Mr. Griswold. Yeah. They were focused on----
Mr. Berman. They didn't say it was just the existing
reexamine procedure?
Mr. Griswold. No. They were talking about a----
Mr. Berman. More robust.
Mr. Griswold. They were talking about a more robust. I
don't know the metes and bounds of robust, but our view is that
in your hypothetical, for example, that you would have a whole
bunch of issues that come up, one--with this proposal, for
example, you have preponderance of the evidence is a standard.
That is a different standard than is used in the district
court. So people would go--may want to go to the patent office
because they have a lower standard on validity.
Mr. Issa. Would the Chairman enter into a colloquy on that
point?
Mr. Berman. Scary thought, but----
Mr. Issa. Mr. Chairman, this is the first you brought that
idea up; and, to continue my earlier statements, I think it is
brilliant. I think it hits on exactly the point many of us have
been wrestling with, which is if we eliminate the second window
except as to certain circumstances--and I might add that your
concept with the caveat that a first window never was opened
would clearly allow one window in that first year unless at a
later date, as Dell was speaking, Mr. Peterman was saying,
unless later on, 10 years later, somebody asserts a patent has
never gone through a postgrant.
Your way of finessing it may make this new right more
palatable to everybody, since one of my concerns is this is a
new tool and how big do you have to make a new tool that never
existed in American law before? But I think it is brilliant,
Mr. Chairman.
Mr. Berman. Well, in order to avoid any problems of
inequitable conduct, I should say there was prior art on that
ingenious idea. But if you are talking about patents already
issued--boy, we are changing procedures here, aren't we? If we
are talking about patents already issued, should the guy have
to wait until he is sued to get that review?
I was more thinking of this--the issue of already issued
patents that were never tested is one group of things. But the
notion of the referral by the Federal judge in an infringement
case on the validity issue--I guess it is worth more thought.
Mr. Issa. Thank you, Mr. Chairman.
Mr. Berman. Thank you for opening up the issue.
All right, my friend from North Carolina.
Mr. Coble. Thank you, Mr. Chairman.
I think it has been a productive hearing, and I have just
one question. My friend, Mr. Griswold, mentioned peace in the
valley; and hopefully at the end of this exercise--not today of
course, Mr. Berman--we will all realize at least some fragment
of peace in the valley. And I want to ask a question just for
my edification, admitting that I don't know.
The Eastern District of Texas was mentioned earlier, and I
think that district is popularly known as a rocket docket
district, so named because of the accelerated pace by which
patent cases flow or move along very quickly. And it was
mentioned earlier that this is not the only rocket docket
district. How many rocket docket districts are there? Mr.
Griswold?
Mr. Griswold. I can't say with certainty how many, but
there are a couple of others that people would indicate are
rocket dockets. Perhaps Professor Thomas may have studied this
more than I have, would say so, but I know there are at least
two more besides Texas that are rapid.
Mr. Coble. Are you comfortable in identifying them, Mr.
Griswold?
Mr. Griswold. Well, somebody said Minnesota.
Mr. Coble. I heard that earlier.
Mr. Griswold. But it is not Minnesota. But that is what
happens with people from Texas sometimes.
Mr. Coble. Okay.
Mr. Griswold. They confuse people from Minnesota with
people from Wisconsin. And what happens is--I really confuse
people because I work in Minnesota, but I live in Wisconsin,
and that rocket docket we are talking about is in Wisconsin.
Mr. Berman. Now that I know Dell is in Houston and
Minnesota is in Wisconsin.
Mr. Griswold. Yes. That is more than the other--the other--
by the way, we have one of our headquarters in Texas. So
everybody who was giving all the accolades to Texas, we have a
southern headquarters in Texas. So thank you for not mentioning
that. But we appreciate--well, we like being in Texas, too.
But, anyway, the other one would be Virginia.
Mr. Coble. Which district?
Mr. Griswold. The Eastern District of Virginia.
Mr. Coble. I am asking just for my information.
Mr. Griswold. These guys may have more on that.
Mr. Coble. Anybody know any additional information on this?
I am asking just for my own information.
Mr. Chairman, thank you for a good hearing. Thank you all
for being with us.
Mr. Berman. Thank you all, Mr. Coble. Some of us think it
is not only a rocket docket but that the rocket only points one
way.
Mr. Issa.
Mr. Issa. Thank you, Mr. Chairman. And I know Judge Ellis
will be happy that you did get to the Eastern District of
Virginia. He is very proud of the work they have done there,
and their rocket points many ways--they believe always the
right way--as to the successful and appropriate decisions.
Mr. Chairman, I would like to ask unanimous consent the
statement from the California Health Care Institute be included
in the record in its entirety.
Mr. Berman. Sure. It is included.
Mr. Issa. Thank you.
Mr. Berman. Assuming it is about patent reform.
Mr. Issa. Don't we have need for extraneous?
Yes, it is their statement to the Committee relevant to
today's hearing.
[The information referred to follows:]
Prepared Statement of the California Healthcare Institute, submitted by
the Honorable Darrell Issa, a Representative in Congress from the State
of California, and Member, Subcommittee on Courts, the Internet, and
Intellectual Property
Mr. Issa. Could you restart my time now?
Mr. Peterman, I think that you can see that the Chairman
has been thinking and trying to find ways to make this work. I
don't want this hearing to be all about postgrant, but wouldn't
you agree that postgrant by definition--because we are not
eliminating reexamination as it currently existed in this bill.
Postgrant is a new right by those who want to reduce or
eliminate claims of a patent that does not exist in law today.
Mr. Peterson. Yes, that is true.
Mr. Issa. And if it is a new--by the way, you do really
well if you just make short quick answers, because then I look
like I knew what I was asking. But if you add a new right and
you are up here on the dais and you want to do no harm, isn't
it reasonable that one of the goals we have--and you can see
the Chairman struggling for it--is to make sure that right is
narrow enough or small enough that if it fails or it doesn't
accomplish what we want, we haven't been too expansive?
And isn't that one of the reasons that, on one hand, you
want to deal with 10 years down the road when some guy who had
a patent that didn't look at all like what you are doing
asserts it, you want to have this capability, but you don't
want to simply throw mountains of paperwork at every new patent
simply for the sake of trying to protect your rights. Is that
about where I see Dell's position?
Mr. Peterson. Yeah, I think that is true. I think,
actually, it is one concern that we have that, if we only have
a short window, that it would only be used to throw mounds of
paper at patents and it wouldn't really be that helpful.
Mr. Issa. So if we assume for a moment that Mr. Griswold
takes advantage of company Lee 1 year for postgrant and if you
would be barred from later bringing it, we are not going to
give you a second window, if there is a first window used in
the first year, that you would then be a little more willing to
look at the details of ones that seemed extraneous and take
advantage of that. In other words, would you be more
comfortable than you presently are if you were eclipsed once
there was a postgrant?
But if nobody submitted a postgrant, it was never
published, your patent counsels didn't say, here is the 175 for
this month that are up here to look at and we are going to go
over them, would you be comfortable if that was the only
universe you had to worry about? Such that the unproven,
untested patent by the inventor who just did it because he had
an idea, Abe Lincoln sounding a little bit that way since he
never made the product, would you be comfortable instead of
looking at a hundred thousand you are only looking at 175 that
are up for postgrant, that is that middle ground that your
company in the abstract would be more comfortable with?
Mr. Peterson. I think I will first say that I think we are
hoping and looking at any proposals, and I don't want to
foreclose anything.
Mr. Issa. But look at mine most favorably, please.
Mr. Peterson. We will certainly do that.
I am not sure--I am sorry. I am not sure I understand the
proposal. But I think what you are saying is that there will be
sort of a rolling window of the patents that are sort of up in
the first grant.
Mr. Issa. Well, basically, we are only talking for a moment
about new patents being granted tomorrow. Tenthousand new
patents are granted tomorrow. Mr. Griswold would like to have
one shot and then quiet title. You would like to have a shot 10
years from now when it is asserted against you. If I see the
middle ground to be discussed in this legislation, there is
only one shot, but if it is not asserted in that first year,
then the patent is then asserted 10 years later, it triggers
that window. If it is----
And, conversely, if it is triggered, even if it is
triggered to be honest by 3M, they have a patent and they go
ahead and throw it into the postgrant themselves with some
information that was sent to them by somebody, then you are on
constructive notice that you are not going to get a second
window. Will you use this window? Does that give you a middle
ground where your company would not be burdened by every
patent, only those that were going through a postgrant?
Mr. Peterson. Yeah. I understand what you are saying. I
think we would be concerned about that.
I think one reason would be----
Mr. Issa. But less concerned than you----
Mr. Peterson. Well, I think one of the difficulties with
this is that----
Mr. Issa. Can I make you less unhappy, is what I am asking.
Mr. Peterson. I guess it concerns me that one party could
trigger this opposition and might foreclose challenge later by
all parties. And if that party doesn't do a good job or doesn't
put its full effort into it, perhaps it is too much of an
advantage for the patent holder.
Mr. Berman. Would the gentleman yield?
Mr. Issa. Of course, Mr. Chairman.
Mr. Berman. But given the hypothetical you used where 3M or
its agent could trigger that first window on its own in order
to stop any future challenge, isn't that a little bit like the
presiding officer of the House after a bill that he or she
supported has passed saying, and the motion for reconsideration
is laid upon the table? In other words, stopping the ability to
come back to that bill sometime in the future. Is that prone to
a kind of setup which sort of undermines the--it allows sort of
a fake opposition to--even where you are dealing with companies
that are aware of what patents are being issued today?
Mr. Issa. You know, Mr. Chairman, I am very aware of that;
and that was one of the challenges that we were both facing,
both of us, in the last Congress. The concept being, though,
that the vast majority of patents, many of them are the ones
that really hook companies 10 years later. They are thrown out
there. They really don't want to notify the world that they are
out there, and this is what they mean, and they don't want it.
So many patents would never get looked at as a result in a
postgrant because companies--it would be burdensome to go after
all of them.
Dell has put out a good point, which is what happens if it
isn't re-examined? I look and say--and if Amgen were still
here, they would be the first to say, but, my goodness, you
know, we can't be hit five times. The idea of postgrant, as I
understand it in your legislation, is once a postgrant is
opened, it is not opened as to one party. Everybody gets to
pile on.
So the fair notice that there is a postgrant, and
therefore, you look at it and you see if you have anything in
your library of information would appear to be part of the
process.
And from my history of reexamination, that is what was
wrong with reexamination in the current, is that it wasn't open
enough and people didn't gather their information, and it is
one of the reasons that sequential reexaminations occur, is
that you can have five different companies each submit slightly
different information over a period of time to the PTO.
Mr. Berman. Professor Thomas, what do you think about this?
Mr. Thomas. I continue to prefer a symmetry of access to
the patent office between the patentee and concerned members of
the public.
Many of the firms that are coming to you now and telling
you that they will be severely disadvantaged if their patent
instruments are changed or modified through an opposition
process of course are the ones who are filing reissue
applications at any time during the life of the patent, are
filing any number of continuation applications which seems to
have virtually no time limit and there is an infinite number
apparently available.
Now that latter situation might change. But, again, I think
it is important to use the door analogy. To open the door to
the patent provider itself throughout the entire term, it seems
unjust to allow members of the public not to have the same
access to the expertise of the patent office to the same term.
In my opinion, the debate should not be whether we have a
second window. The debate should be why are we having just a
second window and not allowing the symmetry of access to
members of the public throughout the entire life of the patent.
Thank you.
Mr. Issa. Yeah. Mr. Chairman, the only question that brings
up is, since your bill does not eliminate the reexamination
process and even though I have said I would like to have us
make it a little more robust, ultimately that is the public's
access for the life of the patent is the current PTO
reexamination process.
Mr. Berman. Well, since we are just talking among friends--
--
Mr. Issa. Since we have asked unanimous consent, at least
the votes on the dais.
Mr. Berman. You are right, and we made the reexamine
process a little better by getting rid of this estoppel. But
should it be more robust?That is all we have done to make it
better. The whole issue of gathering information, limited forms
of discovery, other things like----
I mean, in a way, if we are trying to achieve the same
goal, I am open to a lot of different ways of skinning the cat;
and so I think we should take seriously what you are throwing
out here as a more robust reexamine that could be used at any
time. I mean--yeah.
Mr. Issa. I look forward to working with this, Mr.
Chairman.
Mr. Berman. Anybody else? Mr. Coble, do you have more
questions?
Mr. Coble. Mr. Chairman, I have a very belated request. Mr.
Feeney, the distinguished gentleman from Florida, whose
schedule precluded him to be here, wanted to ask unanimous
consent to have his statement entered into the record.
Mr. Berman. It will be included in the record.
[The prepared statement of Mr. Feeney follows:]
Prepared Statement of the Honorable Tom Feeney, a Representative in
Congress from the State of Florida, and Member, Subcommittee on Courts,
the Internet, and Intellectual Property
Mr. Berman. I think we will close this.
I just want to ask--it is the Chair's intent to talk with
the Subcommittee, apart from the substantive questions of what
we go forward with, about whether there should be a second
hearing, whether there should be some informal discussions, a
working group thing with people, a little flexibility on what
we might do. But, at this point, it is my notion to try and
move to a mark-up mid-May, something like that; and I think the
parties should think of that as the time frame for a mark-up,
subject, of course, to the will of the Subcommittee.
So if there is nothing else, then the hearing is adjourned.
Thank you all very much. You really were a great help, I
thought.
[Whereupon, at 4:38 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record