[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



   HOLMES GROUP, THE FEDERAL CIRCUIT, AND THE STATE OF PATENT APPEALS

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON COURTS, THE INTERNET,
                       AND INTELLECTUAL PROPERTY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 17, 2005

                               __________

                            Serial No. 109-7

                               __________

         Printed for the use of the Committee on the Judiciary


    Available via the World Wide Web: http://www.house.gov/judiciary


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                       COMMITTEE ON THE JUDICIARY

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois              JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
LAMAR SMITH, Texas                   RICK BOUCHER, Virginia
ELTON GALLEGLY, California           JERROLD NADLER, New York
BOB GOODLATTE, Virginia              ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
DANIEL E. LUNGREN, California        ZOE LOFGREN, California
WILLIAM L. JENKINS, Tennessee        SHEILA JACKSON LEE, Texas
CHRIS CANNON, Utah                   MAXINE WATERS, California
SPENCER BACHUS, Alabama              MARTIN T. MEEHAN, Massachusetts
BOB INGLIS, South Carolina           WILLIAM D. DELAHUNT, Massachusetts
JOHN N. HOSTETTLER, Indiana          ROBERT WEXLER, Florida
MARK GREEN, Wisconsin                ANTHONY D. WEINER, New York
RIC KELLER, Florida                  ADAM B. SCHIFF, California
DARRELL ISSA, California             LINDA T. SANCHEZ, California
JEFF FLAKE, Arizona                  ADAM SMITH, Washington
MIKE PENCE, Indiana                  CHRIS VAN HOLLEN, Maryland
J. RANDY FORBES, Virginia
STEVE KING, Iowa
TOM FEENEY, Florida
TRENT FRANKS, Arizona
LOUIE GOHMERT, Texas

             Philip G. Kiko, Chief of Staff-General Counsel
               Perry H. Apelbaum, Minority Chief Counsel
                                 ------                                

    Subcommittee on Courts, the Internet, and Intellectual Property

                      LAMAR SMITH, Texas, Chairman

HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
ELTON GALLEGLY, California           JOHN CONYERS, Jr., Michigan
BOB GOODLATTE, Virginia              RICK BOUCHER, Virginia
WILLIAM L. JENKINS, Tennessee        ZOE LOFGREN, California
SPENCER BACHUS, Alabama              MAXINE WATERS, California
BOB INGLIS, South Carolina           MARTIN T. MEEHAN, Massachusetts
RIC KELLER, Florida                  ROBERT WEXLER, Florida
DARRELL ISSA, California             ANTHONY D. WEINER, New York
CHRIS CANNON, Utah                   ADAM B. SCHIFF, California
MIKE PENCE, Indiana                  LINDA T. SANCHEZ, California
J. RANDY FORBES, Virginia

                     Blaine Merritt, Chief Counsel

                         David Whitney, Counsel

                          Joe Keeley, Counsel

                     Alec French, Minority Counsel


                            C O N T E N T S

                              ----------                              

                             MARCH 17, 2005

                           OPENING STATEMENT

                                                                   Page
The Honorable Lamar Smith, a Representative in Congress from the 
  State of Texas, and Chairman, Subcommittee on Courts, the 
  Internet, and Intellectual Property............................     1

                               WITNESSES

Edward R. Reines, Esq., Weil, Gotshal & Manges, LLP
  Oral Testimony.................................................     3
  Prepared Statement.............................................     6
Mr. Arthur D. Hellman, Professor of Law, University of Pittsburgh 
  School of Law
  Oral Testimony.................................................    33
  Prepared Statement.............................................    35
Mr. Sanjay Prasad, Chief Patent Counsel, Oracle Corporation
  Oral Testimony.................................................    61
  Prepared Statement.............................................    62
Meredith Martin Addy, Esq., Brinks, Hofer, Gilson & Lione
  Oral Testimony.................................................    65
  Prepared Statement.............................................    68

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Howard L. Berman, a 
  Representative in Congress from the State of California, and 
  Ranking Member, Subcommittee on Courts, the Internet, and 
  Intellectual Property..........................................    89
Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan..........    90
Prepared Statement of Joshua D. Sarnoff, on behalf of the 
  Electronic Frontier Foundation.................................    90
Letter from James B. Kobak, Jr., to the Subcommittee on Courts, 
  the Internet, and Intellectual Property........................    95
Letter to the Honorable Lamar Smith, and the Honorable Howard L. 
  Berman from Michael K. Kirk, Executive Director, American 
  Intellectual Property Law Assocation (AIPLA)...................    99
Status Report on Developments Relating to the Jurisdiction of the 
  United Sates Court of Appeals for the Federal Circuit submitted 
  by the Holmes Group Task Force, Intellectual Property 
  Committee, Section of Antitrust Law, American Bar Association, 
  and a Report on the United States Court of Appeals for the 
  Federal Court, Section of Antitrust Law, American Bar 
  Association....................................................   102
Letter from Meredith Martin Addy, Esq., Brinks Hofer Gilson & 
  Lione to Blaine Merritt, Esq., Chief Counsel, Subcommittee on 
  Courts, the Internet, and Intellectual Property, Committee on 
  the Judiciary, regarding corrections to written statement of 
  March 17, 2005.................................................   234

 
   HOLMES GROUP, THE FEDERAL CIRCUIT, AND THE STATE OF PATENT APPEALS

                              ----------                              


                        THURSDAY, MARCH 17, 2005

                  House of Representatives,
              Subcommittee on Courts, the Internet,
                         and Intellectual Property,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 4:12 p.m., in 
Room 2141, Rayburn House Office Building, the Honorable Lamar 
Smith (Chair of the Subcommittee) presiding.
    Mr. Smith. The Subcommittee on Courts, the Internet, and 
Intellectual Property will come to order.
    Let me make some preliminary observations, and the obvious 
one is to thank you all for waiting. We had a series of votes 
that we were not expecting now, and that is what held us up.
    In addition to that, those were the last votes, as they say 
in the cloakroom, of the day, of the week, and I think of the 
month. And so a lot of Members are rushing to the airport to 
catch flights or are heading back home. So the fact that there 
may or may not be very many Members present has nothing to do 
with the record that we establish or the importance that we 
consider the subject matter to be. So I want to reassure you 
about that.
    We are, in fact, going to move forward and introduce 
legislation as a result of your testimony today. Hopefully by 
the time we finish we will have moved a little bit closer 
together--maybe I should say three of you have moved a little 
bit closer to the one, or one may have moved a little bit 
closer to the other three. And as you might anticipate, my line 
of questioning in just a few minutes will be to ask you all 
what you think of the others' suggestions and to try to see if 
we cannot reach if not a consensus, then some kind of a working 
agreement on the direction that we should go, because it is an 
important subject.
    I will recognize myself for an opening statement, and then 
we will introduce our witnesses.
    The purpose of today's hearing is to review the Supreme 
Court decision of Holmes Group versus Vornado Air Circulation 
Systems to determine whether the U.S. Court of Appeals for the 
Federal Circuit should have greater authority to hear all 
patent appeals from lower courts. In addition, the Subcommittee 
will explore the extent to which the Federal Circuit is 
accomplishing its main intended purpose of unifying patent law.
    Congress created the Federal Circuit in 1982 by merging the 
Court of Claims and the Court of Customs and Patent Appeals. 
The history of the enacting legislation reveals that Congress 
believed the merger would reduce overlapping functions between 
the two courts and create greater administrative efficiency 
within the Federal system.
    More importantly, patent practitioners, academics, and the 
Hruska Commission, which Congress created to study the Federal 
appellate structure, determined that the regional circuits were 
doing a poor job of developing coherent patent law. 
Specifically, litigants complained that the application of 
patent law to the facts of a case often produced different 
outcomes in different courtrooms in substantially similar 
cases. In other words, forum shopping was rampant, as some 
circuits were regarded as pro-patent and other circuits as 
anti-patent.
    Arguably, channeling patent cases into a single appellate 
forum would create a stable, uniform law and would eliminate 
forum shopping. Greater certainty and predictability would 
foster technological growth and industrial innovation and would 
facilitate business planning.
    Given this backdrop, some practitioners believe Holmes 
Group contravened the will of Congress when it created the 
Federal Circuit. The Holmes decision, which applies the well-
pleaded complaint rule to patent appeals, induces litigants to 
engage in forum shopping among the regional circuits and State 
courts. Legal experts predict an erosion in the coherence of 
patent laws that has been steadily building since the circuit's 
creation in 1982.
    In addition to debating the merits of Holmes Group, the 
Subcommittee will also explore the matter of how well the 
Federal Circuit is discharging its obligation to unify patent 
law. Opinions will always vary, but the Federal Circuit is 
probably viewed by most practitioners and others as having 
largely complied with its mandate to bring stability, 
uniformity, and predictability to patent law.
    In contrast, critics of the court voice the same concerns 
today that were first articulated on the eve of its creation, 
namely, that the Federal Circuit is a specialty court which 
might take patents out of the mainstream of legal thought, 
expose the court to a one-sided view of the issues, and 
discourage qualified people from serving as judges. There is 
value, say these critics, in the tension produced by the 
percolation of ideas within the judiciary.
    Moreover, since the Federal Circuit is more statistically 
apt to affirm patentee rights, critics of the patent system in 
general believe that the court may represent a roadblock to 
ongoing efforts by Congress and the Patent and Trademark Office 
to improve patent integrity or quality.
    Now, we obviously have a good panel today, and we will look 
forward to hearing from you all on these issues.
    Before you begin, I am going to ask you if you will stand 
and raise your right hands so I can swear you in.
    [Witnesses sworn.]
    Mr. Smith. Let me introduce the witnesses. Our first 
witness is Edward Reines, a partner in the technology 
litigation practice of Weil, Gotshal & Manges in Redwood 
Shores, California. Mr. Reines is Secretary of the Federal 
Circuit Bar Association and serves on its Board of Governors. 
He also teaches a patent litigation course at the University of 
California-Berkeley's Boalt Hall School of Law. Mr. Reines 
received his J.D. from Columbia Law School with honors and a 
B.S. from the University of Albany with honors as well.
    Our next witness is Arthur Hellman, professor at the 
University of Pittsburgh School of Law. Professor Hellman has 
testified a number of times before our Subcommittee on courts 
and constitutional issues. He received his B.A. magna cum laude 
from Harvard College in 1963 and his J.D. in 1966 from Yale Law 
School.
    Our next witness is Sanjay Prasad, the chief patent counsel 
for Oracle Corporation. He serves on the Board of Directors of 
the Intellectual Property Owners Association and is a past 
Chair of the IP Council's Roundtable of the Information 
Technology Association of America. Mr. Prasad earned his J.D. 
from Syracuse University College of Law, where he was an editor 
of the Law Review. He also earned a master's in computer 
engineering and a bachelor's in electrical engineering, both 
from Boston University.
    Our final witness is Meredith Martin Addy, a partner in the 
Chicago law firm of Brinks Hofer Gilson & Lione, where she 
focuses on intellectual property litigation. Ms. Addy is a 
member of the U.S. Federal Circuit Advisory Council that meets 
with the Federal Circuit judges at least twice a year to 
discuss practice and procedure. Ms. Addy received B.S. and B.A. 
degrees from Rice University, her J.D. from Georgia, and a 
master's in law from the John Marshall Law School.
    We welcome you all. Ms. Addy, I have to ask you: Do you 
have a time constraint or are you able to stay with us for the 
next 40 minutes?
    Ms. Addy. I have no time constraints.
    Mr. Smith. Okay. I understood you had to catch a plane, so 
good, I am glad you are with us. And I have to ask you: Are you 
from Texas, having gone to Rice University? I was curious.
    Ms. Addy. I am originally from Georgia.
    Mr. Smith. Originally from?
    Ms. Addy. Georgia.
    Mr. Smith. We welcome you all. Mr. Reines, if you will 
begin.

             TESTIMONY OF EDWARD R. REINES, ESQ., 
                  WEIL, GOTSHAL & MANGES, LLP

    Mr. Reines. Thank you very much, Chairman Smith. It is a 
pleasure to be able to participate in this hearing. I want to 
thank the Subcommittee and its staff for investing the time in 
the Holmes Group issue. This is, in my view, a great example of 
a problem that is best dealt with when it is manageable rather 
than waiting for it to be unmanageable before we turn to it.
    As the Chairman accurately described, the 97th Congress in 
1982 passed the Federal Courts Improvement Act, and I think the 
consensus is that was a major legislative success. It 
eliminated forum shopping and it cleaned up the choice of law 
and issues that we had with different regional circuits going 
in their own directions.
    The reintroduction of regional circuits creates a number of 
problems with forum shopping that will take place, I think, 
increasingly over time. This is the kind of issue where I think 
you are going to have a snowball effect. So what you have is, 
you know, as you start out, people don't know what the benefits 
are of forum shopping for different regional circuit courts 
because it's an unknown at this point. But once a decision 
falls one way or the other, one extreme or another, as is bound 
to happen, the concern level will grow as people try to use 
that decision and move their cases to those circuits, and then 
you get a snowball effect, as people find one circuit pro-
patent or anti-patent.
    The reason is because once the regional circuit says that 
it's going to apply its own law--and we've seen that; it's 
unlikely they're going to defer to a sister court--some of the 
old precedents will come back. People that are members of the 
Seventh Circuit are going to rely on old Seventh Circuit 
precedents that may be pro- or anti-patent. And so it's a 
reversion to pre-1982, and I think we can see that happening at 
the regional circuit level.
    The State court problem, we are also seeing problems, and 
somewhat surprisingly, the problem there is moving more 
quickly. In the State of Indiana, in the Green case now, patent 
and copyright cases have to be within the jurisdiction of the 
State court if they're pled with a counterclaim. So right now 
in the State of Indiana, if there's a counterclaim that's 
copyright or patent, it will be adjudicated by the State court.
    For centuries, patent and copyright cases have not been 
within the jurisdiction of the State courts. Just a few weeks 
ago, in New York, there was a recent decision from the Supreme 
Court. In New York, the trial court actually publishes some of 
their decisions, which you don't see frequently with State 
trial courts, and a few weeks ago there was a decision that 
happened to pop out of there that said we're going to take 
jurisdiction over copyright in the State court and New York 
Supreme Court, which if you've been there, you know that they 
don't really have a lot of background or familiarity with that 
subject matter--the point being that there's thousands of State 
courts around the country where--that aren't publishing 
opinions, that are presumably making similar decisions to the 
decision made by the New York State court. So the scope of the 
problem's under the radar at the trial court level. As those 
percolate up through the appeals, we'll see more and more 
problems. It's just going to take time, but it's going to have 
a snowball effect.
    So I think there's no dispute among the witnesses and, 
frankly, I haven't heard significant dispute among the 
scholarship, either, that there is a problem, both State courts 
being in patent and copyright--exercising patent and copyright 
jurisdiction, and regional circuits starting to adjudicate 
patent cases. So I think that's clear.
    Now, there's two questions. One is: Why address it now? The 
answer is to nip it in the bud. It's the type of problem that 
snowballs. Once you have vested interests that see an area of 
law that they can exploit--and I have no idea what that vested 
interest is going to be now, but there will be vested interests 
that will be developing as decisions continue to come out. And 
undoing that will be far more difficult than just stopping the 
problem before it becomes major.
    On the solutions, the Federal Circuit Bar Association 2 
years ago came up with a solution, and there's really seven 
benefits to the solution that we propose. One is it's simple. 
And two is it's effective. We remove no text from any statute. 
We added a total of five words. Those words come directly from 
related statutes, so the words ``claim for relief'' is from 
Federal Rule of Civil Procedure 8 and is defined in that rule. 
There's no ambiguity about it beyond what pre-exists and is 
inevitable. So that's one.
    The other word that we use is ``involving,'' and in the 
appellate statute for Federal Circuit jurisdiction now, it's 
used--this exact same word, ``involving''--involving a claim. 
So we use words right from the related statutes. We added only 
five words. We removed nothing.
    There's no question from anyone that I've heard that it 
solves the problem. You might hear a nitpick about procedural 
this or that, but no one says that the solution of the Federal 
Circuit Bar Association won't solve the problem. And if you 
want to do something when you're attempting a solution, you 
want to make sure it works.
    And the other important thing about the proposal is it 
keeps the structure the way it is now of having the district 
court jurisdiction the same as the appellate jurisdiction of 
the Federal Circuit for patent cases. So that it's derivative. 
The way it's drafted now, 1295 says the Federal Circuit has 
jurisdiction over patent cases where there's been original 
jurisdiction under 1338. So that way you keep that tied 
together. And also, the exclusivity is solved because that's in 
the second sentence and flows directly from there. So it keeps 
everything tied together.
    Our proposal has the benefit of having studied over years. 
There has been at least 10, 12 Law Review articles focused on 
the subject, suggesting legislative solutions, looking at ours. 
And no one has come up with anything that is a significant 
issue. Scholars have been looking at it for some time. 
Professor Hellman recently came out with some comments about 
it, which is the first I have heard of anything that really 
argues that there are some issues with it.
    The fourth thing I wanted to say is the main argument made 
is that this changes the formulation of the well-pleaded 
complaint rule. That's what you hear, and so one thing I've 
thought about, well, is that really as significant as it 
sounds? To me, it's not as sacred as some have wanted to make 
it.
    For one thing, if you look at the Federal question 
jurisdiction, there are at least ten Federal question statutes 
right now on the books that don't employ that language. So you 
have admiralty, civil rights, inter-pleader, and maybe most 
significantly, Federal claims. The other main jurisdiction, as 
the Chairman stated earlier, within the Federal Circuit--
there's two sort of large chunks. One is patents and one is 
Federal claims. And the Federal Circuit jurisdiction is 
derivative of both of those jurisdictions below.
    The Federal claims statute doesn't use the well-pleaded 
complaint rule. It doesn't use the ``arising under.'' So the 
fact that so many different Federal question statutes don't use 
that suggests it really isn't sacred to use that particular 
formulation, as some assume, without any real analysis.
    The second point about it is that you would think if it was 
such an important principle whose--where a change would 
threaten established bodies of laws and established rules, that 
someone would be able to point to one and would say--we'd use 
this study, someone would say, well, if you disconnect this 
from the standard formulation in a few of the Federal question 
statutes, you'll just have this problem or that problem. The 
only thing I have ever heard is Professor Hellman's criticisms, 
which are two. One of them is that we would be giving under 
this statute as amended jurisdiction over the civil action, 
meaning the whole case, and not on a per-claim basis under the 
patent jurisdiction statute; and that as a result of that, you 
would be giving jurisdiction to every claim included in such a 
case even if it's not on its own a Federal claim.
    But that argument really doesn't make any sense and doesn't 
carry any water at all because the statute as it stands now 
says the exact same thing. The statute as it stands now says 
there will be jurisdiction over a civil action arising under a 
patent suit. So it purports to have the same general civil 
action----
    Mr. Smith. Mr. Reines, would you conclude your testimony?
    Mr. Reines. I will. Thank you very much.
    I guess the final point I wanted to make on that is the 
second issue that's raised is that by adding the words ``claim 
for relief'' that you are disturbing existing law as to what's 
a claim for relief. That's an established phrase in the Federal 
Rules of Civil Procedure. I just don't see that as being a 
problem.
    So we thank you very much for hosting here, and I hope to 
answer any questions you have.
    [The prepared statement of Mr. Reines follows:]

                 Prepared Statement of Edward R. Reines

    Mr. Chairman, Ranking Member Berman, and Members of the 
Subcommittee:
    In Holmes Group v. Vornado Air Circulation Sys., Inc., 122 S.Ct. 
1889 (2002) (``Holmes Group''), the Supreme Court voided the 
established principle that all patent infringement claims are to be 
appealed to the Federal Circuit. Instead, the Supreme Court limited the 
appellate jurisdiction of the Federal Circuit to those cases in which 
the claim for patent infringement was first asserted in the complaint, 
and not in a responsive pleading. The Court explicitly based the 
ruling, not on the Congressional intent behind the relevant statutes or 
on any policy rationale, but on a literalistic parsing of the text of 
the particular statutes involved.
    Regional circuits have now begun hearing patent infringement 
disputes on a sporadic basis, with a 20-year gap in their precedent. 
See, e.g., Telecomm Technical Services Inc. v. Rolm Co., 388 F.3d 820 
(11th Cir. 2004). Even more unsettling, Holmes Group has been construed 
to grant state courts jurisdiction over copyright and patent claims, 
even though such claims have been treated as within the exclusive 
jurisdiction of the federal courts for decades, if not centuries. See 
Green v. Hendrickson Publishers, Inc., 770 N.E. 2d 784 (Ind. 2002); 
Ross & Cohen LLP v. Eliattia (N.Y. Sup. Ct. 2005) (reprinted at 1/24/
2005 N.Y.L.J. 18).
    The Federal Circuit was unquestionably created, among other 
reasons, to resolve all patent appeals so as to create uniformity in 
the application and development of patent law. The post-Holmes Group 
cases make clear that the statutes governing the jurisdiction of the 
Federal Circuit, as interpreted, do not fulfill Congress' intent. 
Congress simply did not intend that the Federal Circuit would share the 
development of patent law with the state courts and regional federal 
circuit courts of appeal. Rather, Congress intended for the Federal 
Circuit to function as the unified court of appeals for patent claims 
for the many valid reasons documented in its committee reports. Thus, a 
problem exists because important statutes passed by Congress have been 
construed in a way that conflicts with the clear Congressional intent 
behind those very same statutes.
    The Federal Circuit Bar Association, in June 2002, created a 
committee (``FCBA Committee'') to consider the wisdom of a legislative 
response to Holmes Group. The FCBA Committee, comprised of Don Dunner, 
Professor Mark Lemley, Molly Mosley-Goren, Joseph Re, Steve Carlson, 
and myself, included leading lights in academia and experienced members 
of the bar.\1\ After extensive deliberation and analysis, and the 
consideration of multiple alternatives, the FCBA Committee concluded 
that the proposal set forth below is the most appropriate legislative 
response to Holmes Group. See Report of the Ad Hoc Committee to Study 
Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 12 Fed. 
Cir. B.J. 713, 714 (2003).\2\ This proposal already enjoys the support 
of the Federal Circuit Bar Association (``FCBA''), the Intellectual 
Property Owners Association (``IPO''), and the United States Counsel 
for International Business (``USCIB''), among others.
---------------------------------------------------------------------------
    \1\ The following is a brief description of the members of the 
committee. Don Dunner is a partner at Finnegan, Henderson, Farabow, 
Garrett & Dunner L.L.P. and served as Chairman of the Advisory 
Committee to the Federal Circuit for the first ten years of the Court's 
existence and participated in the drafting of the Court's rules (1982-
92). Mark Lemley is the William H. Neukom Professor of Law at Stanford 
Law School where he teaches intellectual property, computer and 
Internet law, patent law, and antitrust. Molly Mosley-Goren is of 
counsel at Fish & Richardson P.C., and author of Jurisdictional 
Gerrymandering? Responding to Holmes Group v. Vornado Air Circulation 
Systems, 36 J. Marshall L. Rev. 1 (2002). Joseph Re, Treasurer of the 
Federal Circuit Bar Association, is a partner at Knobbe, Martens, Olson 
& Bear, L.L.P. He clerked for the Honorable Howard T. Markey, Chief 
Judge of the U.S. Court of Appeals for the Federal Circuit. Steve 
Carlson is a practicing patent litigation attorney in Weil, Gotshal & 
Manges L.L.P.'s Silicon Valley Office. He clerked for the Honorable 
Paul R. Michel, Chief Judge of the U.S. Court of Appeals for the 
Federal Circuit. I chaired the committee.
    \2\ A copy of this report is submitted with this testimony.
---------------------------------------------------------------------------
    The FCBA proposes a straightforward legislative solution. We 
recommend an amendment to 28 U.S.C. Section 1338(a) that simply adds 
the phrase ``involving any claim for relief,'' as follows:

        The district courts shall have original jurisdiction of any 
        civil action involving any claim for relief arising under any 
        Act of Congress relating to patents, plant variety protection, 
        copyrights and trademarks. Such jurisdiction shall be exclusive 
        of the courts of the states in patent, plant variety protection 
        and copyright cases.

28 U.S.C. Sec. 1338(a) (bold text proposed). Because the Federal 
Circuit's jurisdiction over patent infringement appeals is derivative 
of the district court's patent jurisdiction defined in the first 
sentence of Section 1338(a), this solution will ensure exclusive 
jurisdiction for the Federal Circuit over all patent appeals. In 
addition, because Section 1338(a) also addresses federal exclusivity 
over patent and copyright claims, this proposal will at the same time 
ensure exclusive federal jurisdiction over all patent and copyright 
claims.

                             I. THE PROBLEM

A. The Pre-Federal Circuit Patent Law Morass
    Before patent appeals were centralized in the Federal Circuit in 
1982, the patent law of the regional circuits was chaotic. The 
complexity of patent cases, both in technical and legal dimensions, 
exacerbated the tendency of circuits to develop conflicting bodies of 
law. The lack of uniformity was disadvantageous for several reasons. 
The disjointed state of the law created costly uncertainty for 
innovators, whether they sought to enforce ownership rights or faced 
threats of patent infringement suits. Further, the lack of uniformity 
created an incentive for forum shopping, which was exploited with zeal 
by litigants.
    Scholars examining the state of patent law before the creation of 
the Federal Circuit routinely describe it disapprovingly. As one noted, 
``some circuits imposed higher standards on patentees attempting to 
assert the validity of their patents. Other circuits were known for 
being pro-patentee. Varying standards among the circuits and other 
factors caused uncertainty and great concern to American businesses 
that did not know if their patent protection would be sustained in 
court.'' See Christian A. Fox, On Your Mark, Get Set, Go! A New Race to 
the Courthouse Sponsored by Holmes Group, Inc. v. Vornado Air 
Circulation Systems, Inc., 2003 BYU L. Rev. 331, 333 (2003) (citations 
omitted). Of course, there is the famous story of then-Second Circuit 
Court of Appeals Judge Thurgood Marshall's visit with senators in 
advance of his confirmation hearing. When asked by one senator what he 
thought of patents, he reportedly replied: ``I haven't given patents 
much thought, senator, because I'm from the Second Circuit and as you 
know we don't uphold patents in the Second Circuit.''
    These problems were not merely anecdotal. See, e.g., Manufacturing 
Research Corp. v. Graybar Electric Co., 679 F.2d 1355, 1361 n.11 (11th 
Cir. 1982) (describing the ``morass of conflict'' in the Eleventh 
Circuit, and the former Fifth Circuit, concerning the proper standard 
of proof needed to invalidate a patent). The uncertainty fostered by 
the disparate treatment of patent law in the regional circuits sparked 
legislative interest.

B. Congress Carefully Studied The Problems In The Patent Area Before 
        Creating The Federal Circuit
    In view of reports about problems in the patent area, Congress 
studied the issue extensively. After hearings and analysis, the House 
Report concluded that, in the patent area, ``current law lacks 
uniformity or is inconsistently applied.'' See H.R. Rep. No. 312, 97th 
Cong. 1st Sess. (1981) (``House Report'') at 20. Further, the House 
Report concluded that patent litigation has been ``characterized by 
undue forum-shopping and unsettling inconsistency in adjudications.'' 
Id. Based on prior government reports, the House Report recognized that 
``patent law is an area in which the application of the law to the 
facts of a case often produces different outcomes in different 
courtrooms in substantially similar cases.'' Id. Indeed, the House 
Report observed that the evidence showed that ``some circuits are 
regarded as `pro-patent' and other `anti-patent,' and much time and 
money is expended in `shopping' for a favorable venue.'' Id. at 20-21. 
The House Report noted that ``[p]erceived disparities between the 
circuits have led to `mad and undignified races' between alleged 
infringers and patent holders to be the first to institute proceedings 
in the forum they consider most favorable.'' Id. at 21.
    The House Report also concluded that the pre-1982 state of patent 
litigation was detrimental to the economy. For example, it noted that 
the lack of uniformity made it ``particularly difficult for small 
business to make useful and knowledgeable investment decisions where 
patents are involved.'' Id. at 22. The House Report explained that 
addressing the problems in the patent area ``will be a significant 
improvement from the standpoint of the industries and businesses that 
rely on the patent system.'' Id. at 23. S. Rep. No. 275, 97th Cong., 
1st Sess. (1981) (``Senate Report'') at 5 (``[The Industrial Research 
Institute] polled its membership and found them overwhelmingly in favor 
of centralizing patent appeals in a single court.'').
    The House Report summed up its analysis by observing that ``Patents 
have served as a stimulus to the innovative process'' and that 
improvements in the then-problematic state of patent law ``can have 
important positive ramifications for the nation's economy.'' Id. at 23.

C. The Creation Of The Federal Circuit And The Present Statutory Scheme
    After the Congressional inquiry into the problems in the patent 
area I just summarized, Congress passed the Federal Courts Improvement 
Act in 1982, intending to consolidate all patent appeals in a new 
court, the Federal Circuit Court of Appeals. Under that Act, the 
Federal Circuit's jurisdiction over patent cases is governed primarily 
by two statutory provisions. The Federal Circuit's jurisdiction is 
fixed with reference to the jurisdiction of federal district courts by 
28 U.S.C. Section 1295(a)(1), which provides in pertinent part:

        The United States Court of Appeals for the Federal Circuit 
        shall have exclusive jurisdiction--

        (1)  of an appeal from a final decision of a district court of 
        the United States, the United States District Court for the 
        District of the Canal Zone, the District Court of Guam, the 
        District Court of the Virgin Islands, or the District Court for 
        the Northern Mariana Islands, if the jurisdiction of that court 
        was based, in whole or in part, on section 1338 of this title, 
        except that a case involving a claim arising under any Act of 
        Congress relating to copyrights, exclusive rights in mask 
        works, or trademarks and other claims under section 1338(a) 
        shall be governed by sections 1291, 1292, and 1294 of this 
        title;

28 U.S.C. Sec. 1295(a)(1) (emphasis supplied).
    The district court jurisdictional statute to which the Federal 
Circuit's appellate jurisdiction is fixed is 28 U.S.C. Section 1338(a). 
This statute provides for the district courts' original jurisdiction 
over patent infringement cases:

        The district courts shall have original jurisdiction of any 
        civil action arising under any Act of Congress relating to 
        patents, plant variety protection, copyrights and trademarks. 
        Such jurisdiction shall be exclusive of the courts of the 
        states in patent, plant variety protection and copyright cases.

28 U.S.C. Sec. 1338(a). Thus, in order for the Federal Circuit to have 
jurisdiction over an appeal, the district court's original jurisdiction 
must have arisen, at least in part, under an Act of Congress relating 
to patents.
    As I noted earlier, Congress created the Federal Circuit with the 
goal of, among other things, promoting uniformity in patent law. 
Kennedy v. Wright, 851 F.2d 963, 966 (7th Cir. 1988) (``The Federal 
Circuit's exclusive jurisdiction under Sec. 1295(a)(1) was created, 
after all, so that there could be a uniform jurisprudence of patent 
law.''). The following are some of the statements in the legislative 
history that illustrate Congressional intent in this regard:

          ``A single court of appeals for patent cases will 
        promote certainty where it is lacking to a significant degree 
        and will reduce, if not eliminate, the forum-shopping that now 
        occurs.'' House Report at 22.

          ``For these reasons the establishment of a single 
        court to hear patent appeals was a major recommendation of the 
        Domestic Policy Review initiated by President Jimmy Carter. . . 
        .'' House Report at 22.

          ``[T]he Industrial Research Institute, a private, 
        non-profit corporation with a membership of approximately 250 
        industrial companies that account for a major portion of the 
        industrial research and development in the United States, 
        polled its membership and found them overwhelmingly in favor of 
        centralizing patent appeals in a single court.'' House Report 
        at 22.

          ``[T]he central purpose is to reduce the widespread 
        lack of uniformity and uncertainty of legal doctrine that exist 
        in the administration of patent law.'' House Report at 23.

          ``Similarly, the uniformity in the law that will 
        result from the centralization of patent appeals in a single 
        court will be a significant improvement from the standpoint of 
        the industries and businesses that rely on the patent system.'' 
        House Report at 23.

          ``[The Industrial Research Institute] polled its 
        membership and found them overwhelmingly in favor of 
        centralizing patent appeals in a single court.'' Senate Report 
        at 5.

    Because Congress was also deeply concerned with forum shopping in 
the patent area, Congress did not intend to limit Federal Circuit 
jurisdiction to patent claims raised in the complaint. Congress 
expressly contemplated that counterclaims for patent infringement could 
influence appellate jurisdiction. The legislative history reflected an 
intent to have all patent appeals go to the Federal Circuit, including 
appeals from cases with patent counterclaims, unless the patent law 
counterclaim was frivolous, trivial, or manipulatively included:

        Federal District judges are encouraged to use their authority 
        under Federal Rules of Civil Procedure, see Rules 13(i), 16, 
        20(b), 42(b), 54(b), to ensure the integrity of the federal 
        court of appeals by separating final decisions on claims 
        involving substantial antitrust issues from trivial patent 
        claims, counterclaims, cross-claims, or third party claims 
        raised to manipulate appellate jurisdiction.
        . . .

        If, for example, a patent claim is manipulatively joined to an 
        antitrust action but severed or dismissed before final decision 
        of the antitrust claim, jurisdiction over the appeal should not 
        be changed by this Act but should rest with the regional court 
        of appeals.

Senate Report at 19-20. Recognizing that ``[i]mmaterial, inferential, 
and frivolous allegations of patent questions will not create 
jurisdiction in the lower court,'' Congress reasoned that ``therefore 
there will be no jurisdiction over these questions in the appellate 
court.'' Senate Report at 19. Thus, Congress was fully aware that a 
patent law counterclaim could direct a case to the Federal Circuit on 
appeal. Congress nonetheless did not call for a bar on Federal Circuit 
jurisdiction over patent law counterclaims. Rather, Congress relied on 
the fact that courts would be capable of sifting out sham or unrelated 
patent counterclaims designed to create jurisdiction improperly in the 
Federal Circuit.
    Consistent with the legislative history, from the creation of the 
Federal Circuit in 1982 until Holmes Group issued in 2002, courts have 
uniformly interpreted the above jurisdictional statutes to grant the 
Federal Circuit exclusive jurisdiction over all patent appeals, 
regardless of the particular pleading containing the patent claim. This 
principle was first established in a series of Federal Circuit cases, 
including Schwarzkopf Development Corp. v. Ti-Coating, Inc., 800 F.2d 
240, 244 (Fed. Cir. 1986) (stating that bona fide counterclaims for 
patent infringement trigger Federal Circuit jurisdiction); In re 
Innotron Diagnostics, 800 F.2d 1077, 1080 (Fed. Cir. 1986) (asserting 
jurisdiction over patent infringement claim that was consolidated into 
pre-existing antitrust case); and Aerojet-General Corp. v. Machine Tool 
Works, Oerlikon-Buehrle Ltd., 895 F.2d 736 (Fed. Cir. 1990) (asserting 
jurisdiction over patent infringement counterclaim). This 
interpretation of the Federal Circuit's jurisdiction was shared by its 
sister circuits. See, e.g., Xeta, Inc. v. Atex, Inc., 825 F.2d 604 (1st 
Cir. 1987) (applying Schwartzkopf and Innotron to hold that ``the 
patent counts of a counterclaim fall within the district court's 
jurisdiction under 28 U.S.C. Sec. 1338.'').

D. Holmes Group Decision
    In Holmes Group, the Supreme Court removed the jurisdiction over 
appeals in cases involving patent counterclaims that the Federal 
Circuit had been exercising for two decades. According to the Supreme 
Court, whether a civil action ``arises under'' the patent law as 
provided by Section 1338(a) involves only an analysis of the complaint, 
not responsive pleadings. The Court reached this conclusion because of 
its belief that the particular language of Section 1338(a) necessarily 
implicates the well-pleaded complaint rule. Holmes Group, 122 S.Ct. at 
1893. The well-pleaded complaint rule allows a court to only consider 
the complaint allegations in determining what law a civil action 
``arises under.'' Id.

E. Holmes Group Disrupted Two Fundamental Principles Of Intellectual 
        Property Litigation
    Holmes Group has unsettled two fundamental principles governing the 
jurisdiction of federal courts over intellectual property cases. When a 
patent infringement claim is present in a case, but not in the 
complaint, the appeal must now go to one of the eleven regional 
circuits, not the Federal Circuit. On an irregular basis, the regional 
courts of appeals have now recommenced issuing opinions in patent 
infringement cases. See, e.g., Telecomm Technical Services Inc. v. Rolm 
Co., 388 F.3d 820 (11th Cir. 2004). More such appeals are on the way, 
as the Federal Circuit has transferred other cases out of its 
jurisdiction pursuant to Holmes Group. See, e.g., Medigene AG v. Loyola 
Univ., 2002 WL 1478674 (Fed. Cir. June 27, 2002) (transferring appeal 
to Seventh Circuit).
    The second fundamental problem created by Holmes Group is the 
disruption of the long-standing principle that patent and copyright 
infringement claims are within the exclusive jurisdiction of the 
federal courts. See Puerto Rico Telephone Co. v. Telecommunications 
Regulatory Board, 189 F.3d 1, 13 (1st Cir. 1999) (recognizing that 
Section 1338 ``confer[s] on the federal courts exclusive jurisdiction 
over any action arising under a federal statute `relating to' patents 
and copyrights''); North Dakota v. Fredericks, 940 F.2d 333, 336 (8th 
Cir. 1991) (``Federal district courts have original and exclusive 
jurisdiction of patent-infringement cases.''); Schwarzkopf Development 
Corp. v. Ti-Coating, Inc., 800 F.2d 240, 244 (Fed. Cir. 1986) 
(``Adjudication of a patent counterclaim is the exclusive province of 
the federal courts.''); Bassett v. Mashantucket Pequot Tribe, 204 F.3d 
343, 352 (2d Cir. 2000) (``[T]he Copyright Act gives federal courts 
exclusive jurisdiction to enforce its provisions.''). Holmes Group has 
been interpreted to limit federal exclusivity to cases where the patent 
or copyright claim is asserted in a well-pleaded complaint. See Green 
v. Hendrickson Publishers, Inc., 770 N.E. 2d 784 (Ind. 2002); Ross & 
Cohen LLP v. Eliattia (N.Y. Sup. Ct. 2005) (reprinted at 1/24/2005 
N.Y.L.J. 18).
    In Green, the Supreme Court of Indiana explained that ``until very 
recently the logic and language of a consistent body of federal 
decisions appeared to preclude a state court from entertaining a 
counterclaim under copyright [or patent] law.'' After thorough 
analysis, Green found this logic ``trumped'' by Holmes Group, and 
concluded that state courts may now adjudicate patent and copyright 
claims asserted in counterclaims and other responsive pleadings. 
Similarly, in Ross, the state court determined that, because a 
copyright infringement claim was first asserted in a counterclaim, 
``under the well-pleaded complaint rule, this Court [a state court] has 
jurisdiction to determine the counterclaim on the merits.'' Under Green 
and Ross, state courts will have jurisdiction over patent and copyright 
infringement counterclaims even though federal courts have had 
exclusive jurisdiction over such claims since the 1800s.
    The reallocation of jurisdiction stemming from Holmes Group means 
the Federal Circuit no longer has unified jurisdiction over patent 
appeals because regional circuit courts of appeal and state courts will 
now also decide such cases. Although some degree of comity may be given 
to Federal Circuit law, the regional circuits may believe they are 
bound by their own 20+ year old precedent. Indeed, the Telecomm court 
characterized Federal Circuit's precedent as merely ``persuasive 
authority.'' Telecomm, 388 F.3d at 826. Thus, under Holmes Group, each 
circuit would have to decide whether to bind itself to Federal Circuit 
law, apply the old patent law it created before patent jurisdiction was 
removed from it in 1982, or simply create new precedents from scratch. 
In Telcomm, the eleventh circuit attempted to avoid this conundrum by 
citing no patent law precedent of any kind in deciding the complex 
patent law issue it faced. Telecomm, 388 F.3d at 826.
    The inevitable lack of uniformity between Federal Circuit law and 
the regional circuit and state court precedents will create an 
incentive for a return to the forum shopping that the Federal Circuit 
was designed to eliminate. Over time, as the various regional circuits 
and state court systems renew adjudicating patent disputes, more 
doctrinal differences will be inevitable. As a consequence, wasteful 
forum shopping will surely resume. In short, while manageable now, this 
problem is bound to snowball.
    Justice Stevens' concurrence in Holmes Group suggests that one 
justice believes that allowing conflicting patent appeals to percolate 
through the regional circuits (and through the state courts under Green 
and Ross) could be beneficial. See 122 S.Ct. at 1898 (Stevens, J., 
concurring). However, we believe that Congress had valid reasons for 
rejecting that approach and concluding that any such benefit is far 
outweighed by the resulting cost of doctrinal unpredictability and 
forum shopping. Because a substantial, but sporadic number of cases 
will be appealed to the regional circuits or state courts of appeals, 
patent law outside of the Federal Circuit will develop in fits and 
starts. It is doubtful that any coherent body of non-Federal Circuit 
patent law will develop in the foreseeable future.
    Other commentators have drawn similar conclusions about the cost of 
Holmes Group. For example, commentators have emphasized the danger of 
the resurrection of ``dead letter'' anti-patent precedents from 
particular circuits. See, e.g., Elizabeth I. Rogers, The Phoenix 
Precedents: The Unexpected Rebirth of Regional Circuit Jurisdiction 
over Patent Appeals and the Need for a Considered Congressional 
Response, 16 Harv. J.L. & Tech. 411, 462 (2003) (``In those cases in 
which a patentee is unlucky enough to find herself stuck in a situation 
in which Vornado will vest appellate review in a regional circuit whose 
long-dormant precedents were unfriendly to patents, certain patent 
rights that were previously fairly stable and predictably valued may 
now be rendered worthless.''). Doctrinal variances between circuits may 
restart the forum shopping that Congress sought originally to minimize. 
See, e.g., Christian A. Fox, On Your Mark, Get Set, Go! A New Race to 
the Courthouse Sponsored by Holmes Group, Inc. v. Vornado Air 
Circulation Systems, Inc., 2003 BYU L. Rev. 331, 352 (2003) (``[T]he 
Court's decision may reintroduce inconsistencies and forum shopping in 
patent law cases and spark races to the courthouse between patentees 
and alleged patent infringers. In summary, [Holmes Group] could 
undercut the foundation of uniform patent law that the Federal Circuit 
has helped establish over the past twenty-one years, a foundation that 
provides vital support for the economy and businesses of the United 
States.''). Many agree that Congress will have to act to repair the 
dangerous condition posed by Holmes Group. See, e.g., Scott W. 
Hackwelder, An Argument for Congressional Amendment of Federal Circuit 
Jurisdiction in Response to Holmes Group, Inc. v. Vornado Air 
Circulation Systems, Inc., 54 Syracuse L. Rev. 475, 498 (Warning that 
``adverse effects stemming from the Holmes Group decision may have to 
be realized before Congress again takes corrective action to address 
the issue of patent law uniformity.''). One commentator explained the 
need for curative legislation in direct terms:

        The original intent of Congress in forming the Federal Circuit 
        was to establish some continuity and consistency when settling 
        patent law disputes. This decision is contrary to Congress' 
        clear mandate to have the Federal Circuit settle patent law 
        disputes. Now it's just a question of how long it will take for 
        a bill to be introduced which will reestablish the Federal 
        Circuit's jurisdiction over patent law disputes.

Joseph Etra, Holmes v. Vornado: A Radical Change In Appellate 
Jurisdiction, 5 Colum. Sci. & Tech. L. Rev. 4.
    Congress should not wait until a critical mass of adverse effects 
materializes and the problem gets out of hand. Once inconsistent 
decisions begin to populate the law of the regional circuits, parties 
may develop vested interests in maintaining the opportunity to shop in 
particular forums. At that point, the reform which now has broad 
support will become much more difficult to achieve.

                       II. THE PROPOSED SOLUTION

    The Supreme Court expressly resolved Holmes Group on a technical 
parsing of the relevant statutes, and did not even purport to conform 
its holding to Congress' intent in creating the Federal Circuit. See 
Holmes Group, 122 S.Ct. at 1895 (``Our task here is not to determine 
what would further Congress' goal of ensuring patent-law uniformity, 
but to determine what the words of the statute must fairly be 
understood to mean.''). The Supreme Court, and Justice Scalia in 
particular, have repeatedly emphasized that where defects in statutory 
language fail to give effect to Congressional intent, it is the role of 
Congress, not the courts, to re-draft the relevant statute. See, e.g., 
Hartford Underwrites Ins. Co. v. Union Planters Bank, 530 U.S. 1, 13-14 
(2000) (Scalia, J.) (``It suffices that the natural reading of the text 
produces the result we announce. Achieving a better policy outcome--if 
what petitioner urges is that--is a task for Congress, not the 
courts.'').
    After extensive deliberation, the FCBA has concluded that the most 
appropriate legislative response to Holmes Group is to amend Section 
1338(a) to read as follows:

        The district courts shall have original jurisdiction of any 
        civil action involving any claim for relief arising under any 
        Act of Congress relating to patents, plant variety protection, 
        copyrights and trademarks. Such jurisdiction shall be exclusive 
        of the courts of the states in patent, plant variety protection 
        and copyright cases.

28 U.S.C. Sec. 1338(a) (bold text proposed). The FCBA believes that 
this surgical insertion of five words into the jurisdictional statute 
is the most logical and elegant solution to Holmes Group. However, the 
overriding concern of the FCBA is to see the Holmes Group problem 
fixed. The FCBA is not preoccupied with pride of authorship in a 
particular solution or in mere semantic differences between this 
proposal and others. In the course of its study, the FCBA considered 
many potential legislative solutions. See, e.g., Report of the Ad Hoc 
Committee to Study Holmes Group, Inc. v. Vornado Air Circulation 
Systems, Inc., 12 Fed. Cir. B.J. 713, 719-23 (2003). The FCBA selected 
the solution I advocate now because it offers the following advantages:

          It minimizes additions and deletions to the current 
        statutory language and borrows existing phraseology from 
        related statutes and rules.

          It exploits the fact that Federal Rules of Civil 
        Procedure 8 defines ``claim for relief,'' broadly to include 
        ``an original claim, counterclaim, cross-claim, or third party 
        claim'' and thus employs an established term with known 
        meaning. Fed. R. Civ. P. 8.

          It exploits the fact that 28 U.S.C. Sec. 1295(a)(1), 
        which sets forth Federal Circuit appellate jurisdiction, uses 
        the term ``involving a claim'' and thus employs an established 
        term with known meaning.

          It ensures that federal courts shall have exclusive 
        jurisdiction over all claims for relief arising under the 
        patent laws.

          It ensures that the Federal Circuit will have 
        jurisdiction over all appeals from civil actions in which 
        either party asserted a claim for relief arising under the 
        patent laws.

In short, inserting the phrase ``involving any claim for relief'' into 
28 U.S.C. Sec. 1338(a) elegantly restores both federal court 
exclusivity over patent and copyright cases and federal circuit 
jurisdiction over patent claims in one stroke. It preserves the 
existing language of the various statutes while adding only a single 
well-understood phrase, which draws meaning from Federal Rule of Civil 
Procedure 8 and 28 U.S.C. Section 1295(1).
    Since the FCBA Committee recommended this solution in 2002, it has 
received widespread support. The FCBA has evaluated the comments of 
which it has learned. They have generally been quite minor. The main 
comments are that: (1) there might be undesired, incidental procedural 
hitches resulting from the particular language proposed, (2) defendants 
may include non-bona fide patent counterclaims in a case so the Federal 
Circuit receives an appeal, and (3) a more far-reaching approach might 
solve more problems. The first critique has been articulated by another 
witness, Professor Hellman, and I start there first.

A. Professor Hellman's Critique Of The FCBA Proposal
    Professor Hellman agrees that Holmes Group has created a 
significant problem and that a solution is warranted. He has put 
forward an alternative proposal based on two issues he has with the 
FCBA solution.
    First, Professor Hellman expresses concern that amending 28 U.S.C. 
Section 1338(a) in the manner suggested by the FCBA could reopen the 
interpretation of precedents on an otherwise unrelated topic. 
Specifically, Professor Hellman raises an issue as to whether the FCBA 
proposal will cause a reconsideration of when a claim that is not a 
traditional patent or copyright infringement claim implicates patent or 
copyright issues sufficiently that it should be treated as a patent or 
copyright claim for purposes of jurisdiction. In Christianson v. Colt 
Industries, 486 U.S. 800, 808-09 (1988), the Supreme Court ruled that, 
for jurisdictional purposes, a non-patent claim that depends ``on 
resolution of a substantial question of federal patent law'' is 
effectively a patent ``claim'' for jurisdictional purposes 
Christianson, 486 U.S. at 808-09. In copyright law, copyright 
jurisdiction turns on whether ``a complaint alleges a claim or seeks a 
remedy provided by the Copyright Act.'' Bassett v. Mashantucket Pequot 
Tribe, 204 F.3d 343, 355 (2d Cir. 2000).
    The FCBA solution is not designed to address this issue at all. 
Further, there is no reason to believe the proposed addition would 
affect this issue. Both the statute in its current form and the 
proposed change require the presence of a claim for relief. The 
judicial interpretation on what constitutes such a claim thus should 
not be affected by the proposed change.
    Professor Hellman's concern in this regard would apply with equal 
or greater force to what I understand to be his own proposal. Both his 
re-write of the Federal Circuit's appellate jurisdiction provision (28 
U.S.C. Sec. 1295(a)(1)), and his rewrite of the federal exclusivity 
provision (28 U.S.C. Sec. 1338(a)), track the FCBA proposal and add the 
phrase ``claim for relief.'' This observation is not intended as a 
criticism of Professor Hellman's proposal. Neither proposal raises a 
significant issue in this regard.
    Second, Professor Hellman theorizes that that the FCBA's proposed 
addition of language to 28 U.S.C. Section 1338(a) may somehow render 
obsolete supplemental jurisdiction for certain claims by giving the 
district court original jurisdiction over the entire ``civil action'' 
rather than just the specific federal claims within the case. This 
critique has no force because 28 U.S.C. Section 1338(a) as it presently 
stands already gives district courts original jurisdiction over the 
entire civil action. The jurisdiction statute currently states: ``The 
district courts shall have original jurisdiction of any civil action 
arising under. . . .'' 28 U.S.C. Sec. 1338(a) (emphasis supplied). The 
FCBA proposal preserves that language: ``The district courts shall have 
original jurisdiction of any civil action involving any claim for 
relief arising under. . . .'' Thus, once a civil action triggers 
jurisdiction under 28 U.S.C. Sec. 1338(a) by including a patent or 
copyright claim, the scope of original jurisdiction remains consistent 
with pre-Holmes Group law.
    In sum, while it is, of course, possible that unintended 
consequences might be generated by any amendment to Section 1338, the 
FCBA proposal, which is over two years old, has been thoroughly 
evaluated. As demonstrated by the relatively minor concerns expressed 
by Professor Hellman, the proposal has withstood that scrutiny 
remarkably well.

B. The Manipulative Use Of Patent Counterclaims
    There has been some concern expressed that, if patent counterclaims 
create appellate jurisdiction in the Federal Circuit--as they did prior 
to Holmes Group, parties may manipulatively include such counterclaims 
in a case so that the Federal Circuit would hear an appeal it might not 
otherwise have jurisdiction over. At the outset, there is no evidence 
that this has been a problem over the last twenty years, despite the 
fact that the Federal Circuit could have exercised jurisdiction over 
such cases before Holmes Group. In any event, this concern ignores the 
wealth of case management tools at the disposal of district court 
judges to combat any such abuses.
    As explained above, when Congress created the Federal Circuit, it 
expected that patent counterclaims would trigger Federal Circuit 
appellate jurisdiction. To address potential abuse, Congress 
specifically encouraged district courts to use all the procedural 
devices at their disposal to prevent the manipulation of appellate 
jurisdiction through the improper addition of counterclaims or 
otherwise.\3\ For example, if a counterclaim is frivolous or a sham, 
the district court can readily dismiss it and strike it from the case. 
If a patent counterclaim is unrelated to the claims in the complaint, 
the district court can readily sever or otherwise separate that 
counterclaim from the case so that improper manipulation does not take 
place.\4\
---------------------------------------------------------------------------
    \3\ Senate Report at 19-20 (``Federal District judges are 
encouraged to use their authority under Federal Rules of Civil 
Procedure, see Rules 13(i), 16, 20(b), 42(b), 54(b), to ensure the 
integrity of the federal court of appeals by separating final decisions 
on claims involving substantial antitrust issues from trivial patent 
claims, counterclaims, cross-claims, or third party claims raised to 
manipulate appellate jurisdiction. . . . If, for example, a patent 
claim is manipulatively joined to an antitrust action but severed or 
dismissed before final decision of the antitrust claim, jurisdiction 
over the appeal should not be changed by this Act but should rest with 
the regional court of appeals.'') (emphasis supplied).
    \4\ Some have implied that it might be desirable to keep the status 
quo so that the antitrust issues that necessarily have patent issues 
embedded in them will be occasionally resolved by the federal regional 
circuit courts of appeal or state courts. This makes no sense for a 
host of reasons. First, the Federal Circuit grants fair treatment to 
antitrust issues. Second, if the Federal Circuit were not doing so, 
obviously the Supreme Court would quickly step in and remedy the 
situation. The Supreme Court has not shown itself to be shy when it 
comes to the Federal Circuit or any other court. Third, having cases 
only irregularly appealed to the eleven regional circuits is a poor way 
to develop a coherent body of precedent to compete with Federal Circuit 
law. Fourth, if a regional circuit did create materially different 
rules than the Federal Circuit, because jurisdiction would turn on 
which pleading contained the patent claim, unseemly races to the Court 
would necessarily follow. The Federal Circuit was created precisely to 
avoid ``expensive, time-consuming and unseemly forum-shopping.'' House 
Report at 20. Fifth, patent law more broadly would suffer because there 
would be no solution to the Holmes Group problems identified earlier in 
my testimony.
---------------------------------------------------------------------------
C. There Is No Need For Changes To Other Aspects Of The Federal 
        Circuit's Patent Appeal Jurisdiction
    The FCBA has considered the effect of Holmes Group on a variety of 
procedural contexts, such as amended complaints, patent claims that are 
resolved pre-appeal, and consolidated actions. For the reasons below, 
the FCBA believes that a legislative response to Holmes Group should 
not specifically address these other procedural contexts.

1. Amended Complaints
    The FCBA has considered whether the legislative proposal needs to 
contain express language to ensure that patent claims brought first in 
amended pleadings trigger Federal Circuit jurisdiction. The FCBA 
concludes that the proposed language is sufficient to give the Federal 
Circuit jurisdiction over appeals in cases where patent claims were 
interjected in amended pleadings. As proposed, 28 U.S.C. Section 
1338(a) would be amended to refer to ``any claim for relief'' arising 
under patent law, which should adequately address amended pleadings. 
Moreover, existing law appears to hold that the Federal Circuit 
properly has jurisdiction over appeals where patent claims were first 
stated in amended pleadings.
    Indeed, existing caselaw routinely confirms that, in jurisdictional 
disputes, the amended pleadings govern. See, e.g., Johnson v. Hussmann 
Corp., 805 F.2d 795 (8th Cir. 1986) (overruled on other grounds) 
(``Appellant's amended complaint had been artfully pleaded to avoid 
federal jurisdiction.''); Coastal Corp. v. Texas Eastern Corp., 869 
F.2d 817 (5th Cir. 1989) (``Coastal's amended complaint filed on 
January 31 conferred jurisdiction on the district court at least from 
thence forward. . . .''); Boelens v. Redman Homes, Inc., 759 F.2d 504 
(5th Cir. 1985) (finding federal jurisdiction lacking, because 
``plaintiffs did not allege in the amended complaint or the pretrial 
order that the defendants' warranty, on its face, violated any of the 
substantive provisions of [federal law].'').
    Indeed, Justice Stevens recognized in his concurrence in Holmes 
Group that the Federal Circuit would, indeed, have jurisdiction over 
appeals containing an amended claim for patent infringement. See Holmes 
Group, 122 S.Ct. at 1896 (Stevens, J., concurring) (``Thus, if a case 
began as an antitrust case, but an amendment to the complaint added a 
patent claim that was pending or was decided when the appeal is taken, 
the jurisdiction of the district court would have been based `in part' 
on 28 U.S.C. Sec. 1338(a), and therefore Sec. 1295(a)(1) would grant 
the Federal Circuit jurisdiction over the appeal.'').
    Thus, the FCBA has concluded that under existing law, the Federal 
Circuit may properly exercise appellate jurisdiction over cases in 
which a patent claim was first asserted in an amended pleading. 
Accordingly, the proposed amendment does not need to specifically refer 
to amended pleadings.

2. Patent Claims Resolved Pre-Appeal
    The FCBA has also determined that the legislative proposal need not 
specifically address situations in which the patent claims asserted at 
the district court level are no longer at issue on appeal. Because no 
patent claims are left in such cases, the uniformity of patent law is 
not implicated by where such appeals are adjudicated. Furthermore, the 
general rule under existing law is to fix appellate jurisdiction at the 
outset of a case so that the parties and the trial court know the 
governing law for purposes of resolving motions, writing jury 
instructions, and generally applying the law in the district court. 
Whether a patent claim is resolved pre-appeal generally has no impact 
on appellate jurisdiction, assuming it was bona fide. See Kennedy v. 
Wright, 851 F.2d 963 (7th Cir. 1988) (Easterbrook, J.) (rejecting 
notion that Federal Circuit jurisdiction should reflect the issues 
actually litigated in a case, and transferring appeal from contract-
based ``patent ownership'' phase of bifurcated patent suit to the 
Federal Circuit); Abbott Labs. v. Brennan, 952 F.2d 1346 (Fed. Cir. 
1991) (``The path of this appeal was established with the filing of the 
civil action to obtain a patent in accordance with 35 U.S.C. Sec. 146 
and although the Sec. 146 issue was not appealed, this appeal of the 
other issues was correctly taken to the Federal Circuit.'').
    A limited exception to this rule is for voluntary dismissals of 
patent claims. Where a plaintiff voluntarily dismisses its patent 
claims, the courts have found jurisdiction to lie in the regional 
circuits. In Gronholz v. Sears, Roebuck and Co., 836 F.2d 515 (Fed. 
Cir. 1987), after plaintiff filed a two-count complaint for patent 
infringement and for unfair competition, and subsequently voluntarily 
dismissed its patent count, the Federal Circuit treated plaintiff's 
voluntary dismissal of its patent count as an amendment of the original 
complaint, and ruled that ``[a]pplying the well-pleaded complaint rule 
to the complaint then remaining, we determine that the present suit 
does not `arise under' the patent laws for jurisdictional purposes.'' 
The Ninth Circuit agreed with this approach in Denbicare U.S.A., Inc. 
v. Toys R Us, Inc., 84 F.3d 1143 (9th Cir. 1996) (exercising 
jurisdiction over appeal of remaining claims after patent-related claim 
was voluntarily dismissed).
    The FCBA has concluded that the legislative proposal need not 
specifically address cases where patent claims are resolved pre-appeal. 
Congress' goal to promote uniformity in patent law does not appear to 
be frustrated in this situation because in these cases the patent 
claims are not at issue on appeal. Because the Federal Circuit will 
generally have jurisdiction over appeals from cases having patent 
counts in the plaintiff's pleadings, there is nothing to ``fix'' 
legislatively concerning these cases.

3. Consolidated Cases
    The FCBA has considered whether the proposed legislation should 
contain express provisions concerning consolidated cases. Consolidated 
suits present a wide variety of procedural contexts, depending on 
whether the suits are consolidated for trial or only pre-trial 
proceedings, the issues raised in the non-patent suits, the number and 
identity of the parties, the timing of the suits, and the terms of the 
district court's consolidation order. Because of the wide range of 
procedural postures presented by consolidated suits, the FCBA believes 
that appellate jurisdiction over these disputes is best left to case-
by-case development. As noted above, district courts have powerful 
tools to structure cases in the interests of justice.
    In cases consolidated for a merits determination, the Federal 
Circuit and the regional circuits have often ruled that non-patent and 
patent suits should all be appealed to the Federal Circuit. For 
example, in Interpart Corp. v. Italia, 777 F.2d 678 (Fed. Cir. 1985), 
Interpart's 1980 non-patent suit against Vitaloni was consolidated with 
Vitaloni's 1982 patent suit against Interpart. After Vitaloni lost in 
both cases, Vitaloni appealed the non-patent claims to the Ninth 
Circuit and the ``exceptional case'' ruling from its patent claims to 
the Federal Circuit. Both courts of appeals agreed that the Federal 
Circuit should have jurisdiction over both suits. Id. at 680-81. The 
Federal Circuit followed this approach in In re Innotron Diagnostics, 
800 F.2d 1077 (Fed. Cir. 1986).
    In Nilssen v. Motorola, Inc., 255 F.3d 410 (7th Cir. 2001), Judge 
Easterbrook suggested that the proper approach to consolidated 
proceedings is for the district court to order them consolidated for 
appeal where appropriate. In Nilssen, after the district court severed 
the patent and non-patent cases, and the Federal Circuit declined 
jurisdiction over the appeal from the non-patent cases, the Seventh 
Circuit ordered the two fragments re-consolidated, and ordered that the 
``cases must be rejoined for all purposes, including any appeal from 
the final judgment.''
    In Tank Insulation Int'l, Inc. v. Insultherm, Inc., 104 F.3d 83 
(5th Cir. 1997), the Fifth Circuit found jurisdiction over an appeal 
from the antitrust-related component of a previously consolidated suit 
involving patent and antitrust components. Had the components remained 
consolidated at the time of appeal, the Fifth Circuit stated it would 
not have had jurisdiction: ``So long as the actions were consolidated, 
section 1295 unquestionably vested the Federal Circuit with exclusive 
jurisdiction of the entire action; however, when the consolidation 
order was vacated, the antitrust action returned to its original, 
independent status.'' Id. at 85.
    As for cases consolidated only for pre-trial purposes, in FMC Corp. 
v. Glouster Eng'g Co., 830 F.2d 770 (7th Cir. 1987) (Posner, J.), the 
Seventh Circuit ruled that discovery-related disputes arising from the 
antitrust-related component of a consolidated action should be appealed 
to the regional circuit, not the Federal Circuit, because consolidation 
for pre-trial purposes should not direct the ultimate appeal in the 
antitrust suit to the Federal Circuit.
    The FCBA concludes that because of the wide variety of procedural 
contexts presented in consolidated cases, questions of appellate 
jurisdiction over these disputes are best addressed on a case-by-case 
basis. For cases consolidated for a merits determination, many courts 
have found that the best approach is to direct the entire action to the 
Federal Circuit for appeal. For consolidated cases only involving 
patent counterclaims, a legislative response directed to the 
counterclaim issue should be sufficient, without generally addressing 
consolidated suits.

                            III. CONCLUSION

    Holmes Group has been implemented to give state courts and regional 
federal circuit courts of appeal jurisdiction over patent claims. This 
conflicts sharply with the Congressional intent behind the creation of 
the Federal Circuit, not to mention a host of policy considerations.
    We believe the most appropriate response to Holmes Group (as well 
as Green and Ross) is to amend 28 U.S.C. Sec. 1338 to ensure that the 
district courts have original jurisdiction over all claims for relief 
arising under the patent laws. Because the Federal Circuit's 
jurisdiction is derivative of the district court's jurisdiction under 
Section 1338(a), this amendment will vest the Federal Circuit with 
appellate jurisdiction over all cases containing patent infringement 
claims. Furthermore, this amendment will ensure that there is exclusive 
federal jurisdiction over all patent infringement claims.

                               ATTACHMENT




    Mr. Smith. Thank you, Mr. Reines.
    Professor Hellman?

TESTIMONY OF ARTHUR D. HELLMAN, PROFESSOR OF LAW, UNIVERSITY OF 
                    PITTSBURGH SCHOOL OF LAW

    Mr. Hellman. Thank you, Mr. Chairman. I appreciate this 
opportunity to discuss this seemingly narrow but, in fact, 
quite important subject.
    As you already heard, in the Holmes Group decision the 
Supreme Court repudiated the understanding of the law that 
prevailed in the lower courts on two important points: The 
Court held that the appellate jurisdiction of the Federal 
Circuit does not encompass claims--cases in which claims under 
the patent laws are raised in a responsive pleading rather than 
in the plaintiff's complaint. The consequence of that decision, 
as again you've heard, appears to be and to some courts already 
is that the State courts are not precluded by 1338 from hearing 
counterclaims under the patent and also under the copyright 
laws.
    I agree with the other witnesses that these outcomes are 
undesirable from a policy standpoint and that Congress should 
take action to reverse that. The question is: How might that be 
done?
    Well, because the Court's holding was predicated on the 
interpretation of the first sentence of section 1338(a), it 
might seem that the logical corrective is to amend that 
sentence. And that, as you've just heard, is the approach 
suggested by the Federal Circuit Bar Association committee, and 
my initial reaction was that was fine. But it does seem to me 
now, having looked at it further, that the seemingly logical 
approach is not the optimal one. The first sentence of 1338 is 
the basic grant of original jurisdiction to the district 
courts. That's language that has remained unchanged for more 
than half a century, and it does seem to me, contrary to Mr. 
Reines, that any alteration in that language runs the risk of 
unsettling the law in ways that no one can fully anticipate.
    I think it's significant in this respect--I've discussed 
some of the possibilities in my statement. I think it's 
significant in this respect that the American Law Institute was 
considering a similar change on a kind of wholesale level--in 
its proposal for revising the Federal Judicial Code from an 
action-based grant of jurisdiction to a claim-based grant of 
jurisdiction. And they decided it was just too treacherous--
that's their word--that there was too great a risk of 
unintended consequences.
    So if I were alone on this and seeing that change as having 
these potential problems, I probably would not be making the 
point so strongly. But it does seem to me that the experience 
of the ALI is quite significant in that respect, and related.
    So, to my mind, it seems to me that Congress should not 
pursue that path if its purposes can be accomplished through 
legislation that is less likely to have ramifications outside 
the immediate context, and I think that you can do that.
    With respect to State court jurisdiction, I think the best 
approach is the most direct. What we want to do is to assure 
that State courts are precluded from hearing claims under the 
patent and copyright laws. It seems to me the simplest way to 
do that is to say that, and the place to say that is in the 
second sentence of 1338(a) that is the exclusive jurisdiction 
provision. And I have suggested a draft. There may be better 
ways of doing it, but it seems to me if you're concerned about 
preserving exclusivity, the place to do it is in the sentence 
that defines exclusivity.
    Now, there is one difficulty with that. If you do that 
alone, a patent or copyright counterclaim brought in State 
court would have to be dismissed, and the defendant would have 
to file a new suit in Federal court. So you end up with the 
parties litigating two suits, even though the claims are 
closely related or perhaps even interdependent. That's just not 
very efficient. To avoid that, Congress could enact a statute 
that would authorize removal on the basis of a patent or 
copyright counterclaim. I have proposed such a statute in my 
testimony. I'd be happy to discuss it.
    That brings me to the holding of Holmes Group itself and 
the appellate jurisdiction of the Federal Circuit when patent 
claims are raised in a responsive pleading. Again, it seems to 
me that the best approach is to say directly what you're trying 
to accomplish. And following that precept, I offer a suggestion 
for revising one sentence of section 1295(a), which is the 
grant of appellate jurisdiction to the Federal Circuit. I might 
add that that has the additional benefit of eliminating what is 
now the circumlocution of 1295(a), which vests a very broad 
jurisdiction in its first clause, only to take some of it away 
in the second part of that same sentence.
    Now, in my statement I've also discussed some of the 
broader issues raised by the Federal Circuit's jurisdiction 
over patent appeals. I'll say right away none of those are 
urgent. None would justify delaying a Holmes fix--I do agree 
with Mr. Reines on that--if the Subcommittee agrees that a fix 
is in order. But this is an oversight hearing, and as your 
initial remarks indicated, Mr. Chairman, we're looking beyond 
the immediate problems.
    And it seems to me the most substantial concern that's been 
raised is that we may be losing the benefits of what's been 
called ``percolation'' on the non-patent issues that typically 
arise in patent cases. And one way of dealing with that would 
be some kind of transfer provision. But that is an idea, I will 
admit, that has not itself had sufficient percolation. So I'm 
not suggesting any immediate action on that.
    In contrast, the unfortunate policy consequences of Holmes 
Group I think are quite clear, and the only question is how to 
go about setting them right.
    Thank you for the opportunity to express my views on that 
subject, and I'll welcome your questions.
    [The prepared statement of Mr. Hellman follows:]

                Prepared Statement of Arthur D. Hellman




    Mr. Smith. Thank you, Professor Hellman.
    Mr. Prasad?

   TESTIMONY OF SANJAY PRASAD, CHIEF PATENT COUNSEL, ORACLE 
                          CORPORATION

    Mr. Prasad. Thank you, Mr. Chairman. Thank you for 
investigating this issue and for the opportunity to testify 
today. Let me include my full testimony as part of the record 
and provide to you a summary of the testimony today.
    Mr. Chairman, Oracle is the world's largest enterprise 
software company, with a portfolio of over 500 patents, and it 
is a world leader in innovative software solutions for business 
and Government. It is my responsibility to advise Oracle on 
patent and other related intellectual property matters.
    As an information age company, Oracle has no factories and 
production lines. All of our revenues derive from the licensing 
of our software and related services. Simply put, our IP is the 
core of our business.
    Mr. Chairman, as you know, patent disputes do not occur in 
a vacuum. Very often such suits are accompanied by trademark, 
trade secret, or contract claims. In these cases, we can be 
either a plaintiff or a defendant, so we cannot be said to be 
either pro-patent or anti-patent. Our goal is to ensure that 
the courts provide a predictable and efficient way to resolve 
patent disputes.
    Patent cases are some of the most complex and expensive 
cases that Oracle litigates, with attorney's fees typically 
running into the millions of dollars for a single case. 
Frequently, the outcome of these cases turn on highly technical 
disputes involving intricate matters of computer science, 
database structures, and other technologies that are difficult 
for a lay audience, including a judge or a jury, to understand.
    A high-technology business such as Oracle's can face 
substantial risks when the court presiding over one of our 
patent cases lacks the time and resources to understand the 
technology at issue.
    The court system that Congress set up in 1982 under the 
Federal Circuit goes a long way to improving patent litigation. 
The Federal Circuit is widely created--credited with 
establishing a unified body of law, which until now has 
governed all patent disputes nationwide. The creation of the 
Federal Circuit has largely eliminated wasteful forum shopping, 
and it has given a higher degree of predictability of patent 
cases. The judges on the Federal Circuit are accustomed to 
resolving technology disputes and have scientifically trained 
clerks and staff.
    As a result, all parties can feel confident that the 
Federal Circuit has the knowledge, willingness, and sense of 
mission to properly understand the technology and law presented 
in its cases.
    Sending all patent appeals to a single court having a basic 
comfort level with technology is essential for a rational 
patent system. This is precisely what Congress intended when it 
created the Federal Circuit in 1982, stating, ``The 
establishment of a single court to hear patent appeals was 
repeatedly singled out as one of the most far-reaching reforms 
that could be made to strengthen the United States patent 
system in such a way as to foster technological growth and 
industrial innovation.''
    Yet the recent jurisdictional changes posed by Holmes 
represent a serious and formidable challenge to the 1982 Act 
and threaten to profoundly undermine the purpose of that Act in 
three ways. Let me address each of those separately.
    First, Holmes undercuts Congress' goal of a single body of 
patent law. With the reversion of patent jurisdiction to the 
regional appellate courts, we are moving backward to a system 
with 13 silos of governing law. In fact, we already have the 
first patent ruling out of a regional appellate court--the 
Eleventh Circuit'S ruling in Telecomm Technical Services versus 
Rolm--which suggests that the Eleventh Circuit will be 
following its own law and not that of the Federal Circuit.
    Mr. Chairman, although in many fields of law it may be 
helpful to have issues percolate through the various regional 
court circuits, it is implausible that such benefits would 
occur in patent cases under Holmes because patent cases will 
reach the regional circuits only on a sporadic basis. Simply 
put, the 20-year gap in the patent law of these circuits would 
inevitably delay the creation of a rational body of patent law.
    Second, Holmes is likely to prompt a renewed emphasis on 
forum shopping. In a single patent case, litigants can consume 
a year, and easily hundreds of thousands of dollars, by 
jockeying to have their case heard in a circuit perceived to 
have more favorable law. We are troubled by the prospect of a 
return to the costly days of forum shopping, with exorbitant 
amounts of time and money spent not on superior innovation, but 
satellite litigation.
    Third, Holmes has been interpreted to extent jurisdiction 
over some patent and copyright cases to State courts. It has 
long been understood that patent infringement cases are within 
the exclusive jurisdiction of the Federal courts. The Federal 
trial courts are accustomed to patent cases; State courts are 
not.
    Moreover, it is an open question whether these State courts 
will be bound to follow Federal Circuit law, as Mr. Reines 
mentioned earlier, or the law of their regional circuit, as it 
was left off over 20 years ago. This, too, has the potential to 
undermine what Congress worked so hard to foster.
    Mr. Chairman, to conclude, the decision by Congress in 1982 
to centralize patent disputes was driven by important public 
policy goals. Holmes undermines those goals by, one, fracturing 
the uniform body of patent law; two, encouraging forum 
shopping; and, three, extending jurisdiction of certain patent 
and copyright cases to State courts. In our view, it only makes 
sense to re-establish what Congress created in 1982, by 
correcting the jurisdiction of the Federal Circuit to cover all 
patent infringement cases nationwide.
    Thank you again, Mr. Chairman, for the opportunity to 
participate in today's hearing, and I would be happy to respond 
to any of the Committee's questions.
    [The prepared statement of Mr. Prasad follows:]

                  Prepared Statement of Sanjay Prasad

                              INTRODUCTION

    Mr. Chairman, Ranking Member Berman, members of the Subcommittee, 
my name is Sanjay Prasad. I am the Chief Patent Counsel at Oracle 
Corporation. Thank you for the opportunity to testify today. Both the 
Chair and the Ranking Member of this subcommittee have a strong record 
of leadership on vital issues related to intellectual property, and 
today's hearing on the patent appeals process is both necessary and 
timely.
    Oracle is the world's largest enterprise software company, and a 
world leader in innovative information management solutions for 
business and government. It is my responsibility to advise Oracle on 
patent and other intellectual property matters pertaining to 
technology. This includes managing Oracle's patent portfolio, entering 
into patent licensing agreements with other parties, evaluating patent 
claims asserted against Oracle, and managing outside litigation 
counsel. Oracle has over 500 U.S. patents. Oracle regularly engages in 
technology licensing involving Oracle and third-party copyrighted and 
patented software, and Oracle is regularly involved in patent 
litigation, either as a plaintiff or a defendant.

                               TESTIMONY

    Oracle epitomizes the kind of company that America's patent and 
copyright laws are designed to promote. For example, in 1979 shortly 
after its founding, Oracle introduced the first commercially available 
relational database. In 1996, Oracle was the first software company to 
move all of its business application software to the Internet and 
Oracle's database software continues to be widely recognized as the 
most capable and secure database software available. Oracle software is 
used daily by governments, businesses and educational and other 
institutions around the world to securely and efficiently manage their 
critical data and business processes.
    As an information age company Oracle has no factories and 
production lines. All of Oracle's revenue is derived from the licensing 
of its software and related services. Intellectual property, the 
product of human innovation, is the lifeblood of Oracle's business. 
Copyright law protects expressive content and thereby protects against 
piracy and unlicensed use of Oracle's software. Patent law protects the 
novel and non-obvious techniques embodied in the software. Uniformity 
and balance in both copyright and patent law is necessary to promote 
investment in innovative software products and services. This provides 
a dual benefit. First, it provides greater certainty that the 
substantial investments required to develop innovative software can be 
protected. Second, it provides greater certainty in determining whether 
a product planned for development or distribution infringes any third-
party intellectual property.
    Disputes over intellectual property and particularly patents are 
increasingly common. In 2004 there were over 2800 patent cases filed in 
the U.S. See . Disputes over 
patents do not occur in a vacuum. Very often, patent suits are 
accompanied by trademark, trade dress, trade secret, or contract 
claims. In patent cases, Oracle is both a plaintiff and a defendant, so 
Oracle cannot be said to be either ``pro-patent'' or ``anti-patent.'' 
Oracle's motivation is to ensure that the courts provide a rational and 
efficient way to fairly resolve patent disputes. As either a plaintiff 
or a defendant, Oracle needs certainty and predictability in 
intellectual property law.
    Patent cases are some of the most complex and expensive cases that 
Oracle and other high technology companies litigate. Rivals commonly 
seek to obtain injunctions to shut down integral parts of a company's 
products, or may try to misappropriate key technologies. Attorney fees 
typically run into the millions of dollars for a single patent 
litigation. Frequently, the outcome of these cases turns on highly 
technical disputes, involving intricate matters of computer science, 
database structures, networking systems, and other technologies that 
are difficult for a lay audience, including a judge or jury, to 
understand. A high technology business such as Oracle's can face 
substantial risks when the court presiding over one of our patent cases 
lacks the time and resources to understand the technology at issue.
    The court system that Congress set up in 1982 under the Federal 
Circuit goes a long way to rationalizing patent litigation. The Federal 
Circuit, while imperfect, is widely credited with establishing a 
unified body of patent law. This same body of law, until now, has 
governed all patent disputes nation-wide. The creation of the Federal 
Circuit has largely eliminated wasteful forum shopping, and it has 
given a higher degree of predictability to patent cases. Because the 
judges on the Federal Circuit are accustomed to resolving technology 
disputes, and because they have scientifically trained clerks and 
staff, businesses can feel reasonably confident that the Federal 
Circuit has the faculty and the willingness, and the sense of mission, 
to properly understand the technology presented in its cases. Sending 
all patent appeals to a single court having a basic comfort level with 
technology is essential for a rational patent system. This is precisely 
what Congress intended when it created the Federal Circuit in 1982. 
Indeed, the House Report accompanying the 1982 Act notes that ``[t]he 
establishment of a single court to hear patent appeals was repeatedly 
singled out by the witnesses who appeared before the Committee as one 
of the most far-reaching reforms that could be made to strengthen the 
United States patent system in such a way as to foster technological 
growth and industrial innovation.'' See H.R. Rep. No. 312, 97th Cong. 
1st Sess. (1981) (``House Report'') at 20. Over twenty years later, 
Oracle agrees with those witnesses, and the considered judgment of 
Congress.
    Yet, the recent jurisdictional changes posed by Holmes Group 
represent a serious and formidable challenge to the 1982 Act, and this 
challenge is being launched on three fronts. First, we are in the midst 
of an attack on a single body of patent law. With the reversion of 
patent jurisdiction to the regional circuit courts of appeals, we are 
moving backward to a system with thirteen silos of governing law, 
instead of a single body of patent law, as Congress had envisioned in 
1982. We already have the first patent ruling out of a regional circuit 
court of appeals--the Eleventh Circuit's ruling in Telecomm Technical 
Services Inc. v. Rolm Co., 388 F.3d 820 (11th Cir. 2004), which 
suggests that the Eleventh Circuit will be following its own law, not 
the law of the Federal Circuit. Each case that gets directed to the 
regional circuit courts has the potential to add to this backward 
spiral away from a uniform body of law. It will become harder for 
Oracle to predict the outcome of patent cases when the law is split 
among thirteen circuits.
    The attack on a single body of law is likely to prompt a second 
front: a renewed emphasis on forum shopping. In a single patent case, 
litigants can consume a year, and easily hundreds of thousands of 
dollars, by jockeying to have their case heard in a circuit that they 
perceive has favorable law. Again, Congress in 1982 succeeded in 
eliminating much of this wasteful forum shopping by establishing a 
single court of appeals for patent cases and thereby fostering the 
creation of a unified body of governing law. Oracle is troubled by the 
prospect of yet another backward spiral--a return to the costly days of 
forum shopping, with exorbitant amounts of time and money spent not on 
superior innovation, but satellite litigation.
    The third front created by the challenge of Holmes Group was 
launched when Holmes Group was interpreted to grant state courts 
jurisdiction over some patent and copyright cases. It has long been 
understood that patent infringement cases are within the exclusive 
jurisdiction of the federal courts. The federal trial courts are 
accustomed to patent cases, and generally have adequate time and 
resources to dedicate to patent disputes. But federal courts, even with 
all their experience, are still challenged by patent cases. State 
courts, on the other hand, have not handled patent infringement cases 
in modern times, if at all. The procedures that are specific to patent 
cases (especially claim construction, or ``Markman,'' hearings) are 
simply not done in state courts. This is an entire body of law, 
intertwined with demanding technological facts, that state courts are 
not accustomed to handling. Litigating patent cases in state courts 
would be an unknown. Indeed, it is an open question of whether these 
state courts would be bound to follow Federal Circuit law, or the law 
of their regional circuit, as it was left off over 20 years ago. This 
too, is a backward spiral, but it has the greatest potential to 
undermine what Congress worked so hard to foster 23 years ago.
    Three fronts--three real-world concerns for Oracle. Through no 
fault of its own, Oracle could bring a non-patent claim in federal 
court, perhaps under a contract through diversity jurisdiction, or 
perhaps in a trade dress or trademark matter, and be faced with a 
counterclaim for patent infringement. Under Holmes Group, that claim 
would no longer be appealed to the Federal Circuit, but would instead 
be directed to a regional circuit court of appeals. Similarly, it is 
entirely possible that Oracle could bring a case in state court on a 
matter appropriate for resolution there, such as to seek payment on a 
contract, and become entangled with a counterclaim for patent 
infringement. Under Holmes Group, such a case may never be tried or 
appealed through the federal court system.
    The decision by Congress in 1982 to centralize patent disputes was 
driven by laudable and credible public policy goals. However, I ask 
this subcommittee, and all of my fellow witnesses here: What is the 
public policy benefit to be gained from the re-allocation of patent 
jurisdiction among the regional circuits and state courts? I for one 
believe there is nothing to gain, but much to lose. Although in many 
fields of law, it may be helpful to have issues ``percolate'' through 
the various regional circuits, it is implausible that such benefits 
would occur in patent cases under Holmes Group. The distinction is that 
the majority of patent cases will continue to be appealed to the 
Federal Circuit. It will only be the occasional patent case that is 
appealed to the regional circuits, or that will be tried through the 
state court system. Patent law in the regional circuits will develop, 
at best, in fits and starts. It is hard to conceive how a cohesive body 
of patent law could develop in the regional circuits, given that patent 
cases will reach the regional circuits only on a sporadic basis, in the 
occasional cases when patent claims are first asserted in a responsive 
pleading. Because there is more than a 20-year gap in the patent law of 
the regional circuits, it could take decades for the various regional 
circuits to ``catch up'' to intervening Supreme Court rulings (most 
notably Markman v. Westview Instruments, 517 U.S. 370 (1996)), and 
create a rational body of law around these new developments. Although 
the regional circuits could defer to Federal Circuit precedent, it is 
unlikely that they will do so--indeed, the Eleventh Circuit has already 
suggested that it will not follow this approach.
    Oracle strongly endorses the approach of the Federal Circuit Bar 
Association to restore the Federal Circuit's jurisdiction to its state 
prior to Holmes Group. There is too much at stake to have cases 
sporadically appealed through courts with little or no experience in 
patent law. Rather, it makes complete sense to re-establish what 
Congress created in 1982, by correcting the jurisdiction of the Federal 
Circuit to cover all patent infringement cases nationwide, regardless 
if the patent claim was asserted in a complaint or in a responsive 
pleading. The amendments proposed by the FCBA will properly restore the 
Federal Circuit's jurisdiction, and will help promote Congress' goal of 
creating a unified body of patent law to promote technological progress 
in America.
    Thank you again, Mr. Chairman, for the opportunity to participate 
in today's hearing, and I look forward to working with you and this 
subcommittee to ensure that our nation's patent laws and procedures 
protect and promote innovation.

    Mr. Smith. Thank you, Mr. Prasad.
    Ms. Addy?

           TESTIMONY OF MEREDITH MARTIN ADDY, ESQ., 
                 BRINKS, HOFER, GILSON & LIONE

    Ms. Addy. Mr. Chairman, Members of the Subcommittee, thank 
you for the opportunity to present my views today on the 
Federal Circuit and the state of patent appeals. I will present 
my views from the perspective of a practitioner and of a former 
law clerk.
    I will highlight my written testimony and focus on three 
types of comments and criticisms that the Federal Circuit has 
faced regarding patent appeals. The first type is that the 
Federal Circuit is too pro-patent. The second type is that 
patentable subject matter has been expanded. And the third type 
is that the Federal Circuit is in some cases panel-dependent.
    Before talking about the three types, I'd like to talk for 
a minute for context on the state of the law when the Federal 
Circuit started in 1982.
    During the early days of the Federal Circuit, with its 
mandate to increase uniformity and stability and remove forum 
shopping, the Federal Circuit did not start with a clean slate 
for precedent. The Federal Circuit inherited the precedent of 
its predecessor courts, and for patent appeals, that was the 
Court of Customs and Patent Appeals, the CCPA. That court heard 
cases on appeal from the Patent and Trademark Office, so cases 
where an inventor did not get his patent or interferences, that 
court, however, did not hear cases having to do with patent 
infringement. As you know, those cases went to the regional 
circuit.
    So because the Federal Circuit inherited the case law of 
its predecessor court, it had to sit en banc to overrule that 
law. In addition, it had to look at the myriad of different 
regional circuit laws on litigation issues and figure out which 
one, if any, to apply.
    The first part of its existence was spent stabilizing major 
patent doctrines. Today, the Federal Circuit is poise to 
address issues within those doctrines.
    Turning to some of the recent commentary and criticisms, it 
is my position that the Federal Circuit has satisfied its 
mandate to unify and stabilize patent law. But it has done so 
not without criticism. And, in fact, the patent bar has lively 
debates on the state of various intricate patent doctrines and 
how they're fairing at the Federal Circuit. I will not address 
those specific doctrines here, but I will reserve my analysis 
to more general commentary.
    The first issue is the patent--is the Federal Circuit too 
pro-patent? If the Federal Circuit is perceived to be too pro-
patent, it may be in response to the perception that many of 
the regional circuits were anti-patent. However, I believe that 
in recent years, the Federal Circuit has become less pro-
patent, and I think that it is more in the middle of the road.
    However, critics say that its pro-patent stance hurts the 
quality of patents. Bear in mind, however, that only about 1.5 
percent of patents are ever litigated, and only--less than that 
are appealed to the Federal Circuit. So if the quality of 
patents is deteriorating, it cannot be solely the Federal 
Circuit that is responsible for a deteriorating quality of 
patents.
    The FTC has issued a report that is concerned about the 
quality of patents, and it suggests that in order to raise the 
level of the quality of patents, we should lower the standard 
at the Federal Circuit for proving invalidity. However, the 
issues that the Federal Trade Commission raises are problems 
having to do with the PTO, and if those problems exist, I 
believe they should be fixed at the PTO and not at the Federal 
Circuit.
    In fact, if you were to lower the standard for proving 
invalidity at the Federal Circuit, you would inject an 
uncertainty into patent law. The PTO examiners look at the 
prior art, and when a patent issues, it has a presumption of 
validity because of that examination. Without that presumption 
of validity, neither the public nor the patentee would know the 
scope of his patent. It is my opinion that the standards for 
proving invalidity at the Federal circuit are good.
    The second issue is the expansion of the scope of 
patentable subject matter. The court has recognized that 
business methods and computer software are patentable subject 
matter, and critics say that that expansion is not warranted. 
But the patent statute has been construed broadly to include 
anything under the sun made by man. Patenting of business 
methods and software patents has been a positive innovation for 
that industry, positive for that industry because it has 
brought into the public domain documents on that technology 
that were formerly kept as trade secrets.
    And, number three, the third issue I'd like to discuss are 
the perceived panel dependencies at the Federal Circuit. 
Federal Circuit judges respect their unique position as 
basically the sole arbiters of patent law. And they recognize 
the need for uniform application of the law.
    Precedent at the Federal Circuit progresses at light speed 
compared to other circuits, compared to other issues left to 
percolate in the regional circuits. And each Federal Circuit 
judge addresses the same patent doctrines much more frequently 
than regional circuit judges address issues. Because of that, 
we may be more able to spot these perceived inconsistencies. 
But some commentators have said that's a positive thing and 
it's analogous to the percolation in the regional circuits.
    My experience has been that these differing views are 
necessary to identify the true nature of the doctrines and the 
necessity for en banc hearings.
    In conclusion, I believe that the constructive criticism of 
the Federal Circuit is a good thing. It helps us gauge whether 
the Federal Circuit is doing its job, and I believe that the 
Federal Circuit has succeeded in fulfilling its mandate to 
unify and stabilize patent law. The Federal Circuit has 
developed a vibrant body of patent jurisprudence. There is none 
in State court. In the regional circuits, it's 23 years old. 
And because of its unique experience, the Federal Circuit is 
poised to accept plenary authority to hear patent appeals.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Addy follows:]

               Prepared Statement of Meredith Martin Addy




    Mr. Smith. Thank you, Ms. Addy.
    The problem with listening to four lawyers is that you all 
sound persuasive, and I do want to address some of the larger 
issues. But, Ms. Addy, since you brought up the Federal 
Circuit, let me ask you this question. You may or may not know 
that the last year for which we have figures, 2003, the Federal 
Circuit was affirmed by the Supreme Court less than 30 percent 
of the time. You implied that the Federal Circuit Court was 
doing just fine. Do you see any significance or does the low 
affirmation percentage raise any questions in your mind about 
the Federal Circuit? Or does it raise questions about the 
Supreme Court?
    Ms. Addy. I believe the average for regional circuits as a 
whole is also lower than 30 percent. So I'm not sure that the 
numbers at the Federal Circuit are much different.
    Mr. Smith. Maybe in context. That's interesting.
    Ms. Addy. But at the same time, I think it's a very good 
thing that the Federal Circuit is reviewed by the Supreme 
Court. The Supreme Court is watching what the Federal Circuit 
does. It's taking cases that it thinks maybe the Federal 
Circuit hasn't expressed the doctrine exactly as it should. And 
that is a good thing.
    Mr. Smith. Okay. One other question, and this gets more to 
the general subject. Everyone else was pretty clear. Mr. Prasad 
was clear about supporting the Federal Bar-suggested solution, 
as was Mr. Reines, and Professor Hellman had his own solution, 
which I'm going to ask you about momentarily. You were less 
clear in what you supported. Do you incline toward the Federal 
Bar solution in the way they would amend 1338?
    Ms. Addy. Yes, Mr. Chairman, I do lean toward the Federal 
Circuit Bar Association's proposed amendment.
    Mr. Smith. Okay. Good. Now, that gets into obviously the 
threshold issue today, which is how to amend 1338. Everybody 
agrees that it ought to be amended. Professor Hellman would 
amend a different sentence than the Federal Bar.
    Mr. Reines and Mr. Prasad and Ms. Addy, what do you think 
about Professor Hellman's solution? It sounds like, as I say, 
all the solutions are reasonable. We're trying--we're going to 
have to--I think we need to make some change. What do you think 
about his idea and his point that if you change the sentence of 
1338 that the Federal Bar suggests, that will create confusion, 
we have 50 years of history there and so forth and so on? Let 
me actually start with Mr. Reines and work my way down the 
panel.
    Mr. Reines. Thank you very much----
    Mr. Smith. And then, Professor Hellman, we'll let you 
respond.
    Mr. Reines. Thank you very much, Chairman Smith. My 
analysis is that when you change--if what you're really worried 
about is unintended consequences that you can't foresee--and I 
think we have got a consensus that's really what you're talking 
about--then what you should try to do is change as little as 
you can. And the total rewrite to the second sentence of 1338 
that's been proposed by Professor Hellman and the total rewrite 
of 1295(a), which is a total rewrite, I think leads to the 
potential for more.
    Now, again, our Federal Circuit Bar Association's chief 
interest is in solution, so we would work to help anything that 
we think can address this that doesn't create negative 
consequences elsewhere. But the total rewrite solution creates 
more potential disturbances.
    Mr. Smith. So you actually think Professor Hellman's 
solution would unsettle the law more than the Federal Bar 
solution?
    Mr. Reines. If what you're worried about--and then there's 
one other thing, that--and I mentioned this a little bit in my 
opening comments, which is if you decouple the district court 
jurisdiction versus the appellate court jurisdiction, and you 
now make the exclusive jurisdiction--decouple that from the 
district court, right? So the way it is now, this is the 
district court's original jurisdiction, and that's exclusive. 
All right? That's the way that 1338--and 1295, the appellate 
jurisdiction says--the appellate jurisdiction is from the--is 
for cases that are under the district court jurisdiction. 
They're all tied together. You don't get gaps. You don't have 
disconnects, okay?
    With Professor Hellman's articulated concerns in his 
testimony about, well, if the well-pleaded complaint rule is 
construed differently and now disrupted, you still have that 
because when he says, for example, on the exclusivity, Federal 
exclusivity, he says no State court shall have jurisdiction 
over any claim for relief arising under any Act of Congress. 
There's no telling that someone might say, well, that's not a 
claim for relief or this isn't a claim for relief or whatever 
argument you're making relative to our change would apply to 
the exclusivity provision. But it wouldn't apply to the 
district court original jurisdiction. So you could have a gap 
there.
    And the same with respect to the appellate jurisdiction. 
The way the appellate jurisdiction is is in any civil action in 
which a party has asserted a claim for relief. That's Professor 
Hellman's solution, which maps to what we're proposing 
basically. But if that's different--if he's right that that's 
different from the original jurisdiction of the district court, 
you're going to have a gap. So you might have a case that does 
fall within the original jurisdiction of the district court 
under patents, but doesn't go to the appeal court because of 
his concern that maybe by changing that formulation of language 
you change the scope. So if you keep to all three based on the 
same thing, you don't have those gaps.
    Mr. Smith. Okay. Mr. Prasad?
    Mr. Prasad. Thank you, Mr. Chairman. The principal concern 
really is as Mr. Reines expressed, and Mr. Hellman also, that a 
solution be reached. And so the--I think we have a preference 
for the approach taken by the Federal Circuit Bar Association, 
and I agree that and understand that the only dispute really is 
in some of the unforeseen consequences that may flow from that.
    As a matter of logic, it would seem to me that the fewer 
changes, the better, and that the fewer unforeseen consequences 
that may flow from that.
    Mr. Smith. Okay. Thank you. And, Professor Hellman, what do 
you think of the critiques?
    Mr. Hellman. Well, thank----
    Mr. Smith. And, by the way, in your answer tell me if you 
could live with the Federal Bar solution as well.
    Mr. Hellman. Well----
    Mr. Smith. Which you initially supported.
    Mr. Hellman. Yes, which I initially thought was fine.
    Let me start with Mr. Reines' point about decoupling. It 
seems to me decoupling is in a way what we want to do because 
we don't--there's not a problem with the original jurisdiction. 
The first sentence of section 1338(a) defines the original 
jurisdiction. Nobody is concerned about that. Nobody is 
concerned that the Holmes Group decision narrows or expands the 
original jurisdiction from what we want it to be. Indeed, in 
the ad hoc committee report, they recognized the possibility 
and, indeed, in my view the probability that counterclaims 
would be now within the original jurisdiction and, therefore, 
the removal jurisdiction, but until now that has not been a 
problem for anyone.
    A couple of other comments on this question of 
unanticipated consequences, and I certainly agree that when you 
look at it, the difference between changing a few words and 
changing a lot of words seems to militate in favor of the 
solution that changes fewest words. The question, though, is 
where those words are, and the words that the ad hoc committee 
would change are in a single sentence that has all sorts of 
ramifications.
    I alluded earlier to the American Law Institute 
proceedings, and I'd like to say just one or two more words 
about that because I think it's very instructive. What they 
were considering was revising the statutes that grant original 
jurisdiction to the district courts at the level of the action 
rather than the claim. And that certainly sounds very much like 
the ad hoc committee proposal.
    But they rejected the idea of doing that, after a lot of 
study, and they concluded--and I want to quote their language 
here--that ``A subtle and complex set of secondary meanings now 
govern these statutes,'' and if you try to rewrite them, you 
``proceed at great risk of creating unintended consequences.''
    Now, the American Law--the Federal Judicial Code Project, I 
should say, was not just academicians. I mean, you might think, 
well, academics see these problems where they don't exist, and 
that is part of our stock in trade, I have to admit. But this 
wasn't just academics. This was judges and lawyers, includes 
people who are very knowledgeable about title 28, people who 
live and breathe it. And I think it's very telling that after 
looking carefully at the idea, they decided that altering the 
language or approach of the statutes defining original 
jurisdiction was treacherous.
    So a final point on that. There may be a lesson from what 
happened with the 1982 statute. If you go back--and I think 
there's some of the material in Mr. Reines' statement, which 
indicates that the people who shepherded that legislation 
through Congress in the early 1980's did think that they were 
including patent counterclaims in the Federal Circuit's 
jurisdiction. They refer to them in some of their discussion. 
And yet they chose to use language, which, based on a century 
of precedents, would allow courts to look only at the 
complaint. And it seems to me there may be something of a 
lesson there that if you want to change the jurisdiction, you 
should do so directly and address the problems. The problems 
are exclusivity. The problems are appellate jurisdiction. They 
are not original jurisdiction, and it seems to me that although 
it is seemingly the simplest solution, it is the one that is 
the riskier.
    Thank you.
    Mr. Smith. Okay. And could you live with the Federal Bar? 
You think it is too dangerous and too risky and too 
treacherous?
    Mr. Hellman. Well, I have to say, frankly, if you propose 
that as a statute, if you write it as a bill, and the Federal 
jurisdiction experts as well as the patent folks look at it and 
nobody else sees this problem, I'm certainly not going to say, 
well, you know, I have a special insight into the particular 
problems. But it seems to me that's the way to do it. Let's 
have some wider circulation, not just among people who are 
experts in patent law, but people who have devoted their lives 
to looking at the Federal jurisdiction statutes and how courts 
construe them. If they don't see the problem, then fine, it is 
a simpler solution. But it seems to me that you cannot assume, 
especially after Holmes Group--I mean, after all, Holmes Group 
is a statute that--excuse me, a case, a case that is based on 
careful parsing of language and is really very self-consciously 
and almost proudly indifferent to whether or not it is 
interpreting the law in a way that fosters the congressional 
policy. It seems to me that calls for some very, very careful 
drafting.
    Mr. Smith. I agree with you, and I also agree with your 
suggestion of wider circulation may not be a bad idea as well.
    That is all very helpful. Mr. Reines, any final comments on 
direction we should go? You are comfortable? Having listened 
and heard from Professor Hellman, are you still as comfortable 
as you were when you arrived with the Federal Bar solution?
    Mr. Reines. Yes, I am, Chairman. I am very appreciative of 
the Committee taking a look and addressing this at this point 
in time. I think it's critical.
    Mr. Smith. Okay. And, Mr. Prasad, are you--has your mind 
been changed at all by hearing Professor Hellman? That puts 
somebody in an awkward position. Maybe it puts you in an 
awkward position, too. I think he made some very good 
suggestions that we'll consider, but what is your view?
    Mr. Prasad. He does make some good suggestions, and I must 
say I'm much more familiar with the Federal Circuit Bar 
Association suggestion than I am with Mr. Hellman's. And so 
without having considered it must further, let me still stay 
with my preference for the Federal Circuit Bar Association's 
proposal, but I am not opposed to considering Mr. Hellman's 
proposal either.
    Mr. Smith. Also, you would probably agree that if we go 
forward with the Federal Bar suggesting for how to amend 1338, 
we ought to go forward slowly and methodically and precisely.
    Mr. Prasad. Well, yes, I agree with the underlying precept 
of that, which is to do no harm and to do it correctly. But I 
would suggest that it be done expeditiously.
    Mr. Smith. Fair enough.
    Ms. Addy?
    Ms. Addy. Thank you, Mr. Chairman. I echo the concerns of 
my colleagues with Professor Hellman's suggestion, except I was 
impressed with it when I read it. My main concern right now is 
that the Federal Circuit Bar Association proposal has been 
around and it's been discussed. It's been thought about quite a 
bit, and I think Professor Hellman's is a new--is a new 
suggestion. So I still support the Federal Circuit Bar 
Association's proposal, but I am happy to hear that if you go 
forward, you're going to take a look at the potential 
ramifications of it.
    Thank you.
    Mr. Smith. You are all very agreeable today. This is an 
unusual panel.
    Well, that concludes my questions. As I say, everything you 
have said has been very helpful. We will move ahead 
expeditiously, but hopefully judiciously as well.
    And so thank you all again. We stand adjourned.
    [Whereupon, at 5 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Howard L. Berman, a Representative 
     in Congress from the State of California, and Ranking Member, 
    Subcommittee on Courts, the Internet, and Intellectual Property
    Mr. Chairman, thank you for scheduling our first patent hearing of 
the year. I hope this is the beginning of a series of hearings designed 
to address problems in Patent Law and the Patent system as a whole.
    Our country's economy thrives because it can rely on strong 
protection for intellectual property. Robust patent protection for 
valid patents promotes innovation. However, I also believe that the 
patent system is strongest, and incentives for innovation greatest, 
when patents protect only truly deserving inventions. When functioning 
properly, the patent system should encourage and enable inventors to 
push the boundaries of knowledge and possibility. If the patent system 
allows questionable patents to be granted and does not provide adequate 
safeguards against patent abuses, the system may actually stifle 
innovation and interfere with competitive market forces. Companies must 
have confidence in the quality of patents and a system that enables 
them to enforce their patents if they are going to continue to invest 
in research and development--to find the next drug to cure cancer, to 
create the newest technology to search the internet, or to develop the 
latest robot to build a car.
    Without stability, uniformity and dependability in the patent 
system, the market will not be assured of the high quality patents 
essential to spurring innovation. It was with this idea in mind that we 
created the Federal Circuit. Before we consolidated the authority for 
patent decisions into one court, the regional circuit decisions were 
all over the map. In one Circuit, the validity of patents was rarely 
affirmed, while in another, patents were rarely declared invalid. 
Patent litigators became the ultimate forum shoppers because the 
Circuit you filed in almost always assured your outcome.
    The creation of the Federal Circuit in 1982 has been a boon to 
innovation. Patentees have been able to rely on the Federal Circuit to 
provide a coherent body of patent law precedent. The judges on the 
court, who are experts in the very complex field of patent law, have 
developed a consistent body of rulings that serve as clear guidance to 
those addressing patent validity and infringement issues. However, 
after almost two decades, some argue that the consolidation of patent 
law in one court has had some downside. Critics contend that with a 
single court handling all appeals in patent cases, patent issues have 
been taken out of the mainstream of legal thought. Another criticism is 
that the Federal Circuit's rulings have been more ``pro patent'' then 
previous courts in that they are statistically more likely to affirm a 
patentee's rights. So the court, in some ways, may be a hinderance to 
efforts by Congress and the Patent and Trademark Office to improve 
patent quality and integrity.
    It is with an eye toward addressing these issues that we are 
delving into the concerns raised by the Holmes decision. The result of 
the Holmes case is that alternative forums, such as the regional 
circuit courts or even state courts, can decide patent appeal issues. 
The re-entry of the Circuits and the entry of state courts into the 
process of deciding patent law issues appears to interfere with the 
policies Congress sought to advance when it created the Federal 
Circuit. In our discussions about this issue, we should keep in mind 
the goal of maintaining the integrity of the patent system.
    I look forward to hearing from the witnesses to further explain 
alternatives to resolving the issues raised by the Holmes case. And I 
hope to work with the Chairman on a possible legislative fix to this 
problem and other matters within the patent system.

                               __________
Prepared Statement of the Honorable John Conyers, Jr., a Representative 
                 in Congress from the State of Michigan

    I understand the need and desire for uniformity in patent cases, 
but I am concerned about proposals that would render the regional 
circuit courts of appeals virtually meaningless.
    We all know that one of the Federal Circuit's primary 
responsibilities is hearing patent appeals. When we created the court, 
we did it to ensure uniformity in that area of law. In 2002, however, 
the Supreme Court held the Federal Circuit did not have jurisdiction 
where patents were merely a counter-claim, as opposed to one of the 
plaintiff's original claims.
    So now there are proposals to say that any case with patent issues 
arising at any stage would be appealed directly to the Federal Circuit. 
I have two major concerns with this idea. First, any party wishing to 
go to the Federal Circuit instead of a regional appellate court could 
merely include a frivolous patent argument. The regional circuits would 
be stripped of any responsibility.
    Second, the proposal could fundamentally alter other areas of law. 
Cases mainly about antitrust law or contracts could end up in the 
Federal Circuit by virtue of one patent-related counter-claim. The 
Federal Circuit would thus become the de facto court of jurisdiction 
for any business-related lawsuit, and that is not the system we 
envisioned.
    Having said that, I am open to hearing what problems exist within 
the Federal Circuit and what we can do to allow it to function better.

                               __________
 Prepared Statement of Joshua D. Sarnoff, on behalf of the Electronic 
                          Frontier Foundation

    On behalf of the Electronic Frontier Foundation (EFF), I thank you 
for the opportunity to submit this testimony on the recent Supreme 
Court decision in Holmes Group, Inc. v. Vornado Air Circulation 
Systems, Inc., 535 U.S. 826 (2002), and whether to consolidate 
appellate jurisdiction over all patent law issues in a single federal 
Court of Appeals. I teach patent law at the Washington College of Law 
(WCL), American University, and through the Glushko-Samuelson 
Intellectual Property Law Clinic at WCL have represented EFF and other 
organizations as amici curaie in Supreme Court and Federal Circuit 
patent cases. My testimony is submitted in a personal capacity and on 
behalf of EFF, and thus does not necessarily reflect the views of 
American University. In Holmes Group, the Supreme Court held that 
Congress intended for appellate jurisdiction in patent cases to conform 
to the ``well pleaded complaint rule,'' and thus did not vest exclusive 
appellate jurisdiction in the U.S. Court of Appeals for the Federal 
Circuit (but rather retained jurisdiction in other Courts of Appeals to 
decide patent law issues raised as counterclaims). There is no 
constitutional hurdle to legislating a different result. Thus, my 
comments address only the purported wisdom of vesting exclusive 
jurisdiction over patent law issues in a single appellate court.
    EFF is a nonprofit, membership-supported civil liberties 
organization working to protect consumer interests, innovation and free 
expression in the digital world. EFF and its 15,000 dues-paying members 
are concerned to preserve the public benefits that result from 
innovative efforts and social activities that are unencumbered by 
patent litigation and licensing threats. EFF and its members have an 
interest in the development of patent laws and of their interpretation 
by the federal courts in a manner that reflects these concerns. In this 
regard, EFF believes that judicial competition in developing the patent 
law is a better long-term strategy than an improperly constrained 
uniformity.
    I have three basic points to make today. First, although uniformity 
in patent law is desirable, it is desirable only as the product of a 
process in which the relevant policies are properly analyzed and 
competing concerns are adequately considered. Vesting exclusive 
jurisdiction over all patent law issues in a single appellate court may 
impose uniformity before better interpretations of the law can be 
developed and may result in inadequate consideration of competing 
interests. By limiting legal interpretation to a single Court of 
Appeals, the relevant policy decisions (and alternatives) also are 
deprived of the chance for empirical validation before a unitary 
interpretation is imposed. Congress should therefore reject this 
particular means of achieving uniformity in patent law, and should 
preserve appellate court competition in developing interpretations of 
the patent law.
    Second, vesting exclusive jurisdiction in a single appellate court 
may result in a systematic bias that favors patent holders, but more 
importantly will preclude the most effective remedy for any such bias 
that does result. There are reasons to be concerned that the Federal 
Circuit reflects such a ``pro-patentee'' bias, and one of its members 
has recently admitted as much (at least in regard to willful 
infringement law). But whether or not the perception of bias is 
accurate, the potential for bias reinforces the wisdom of the Holmes 
Group decision. Patent law issues that are improperly decided by the 
Federal Circuit may be revisited by the regional Circuit Courts of 
Appeals if and when the issues arise through counterclaims. Congress 
thus should discourage rather than codify the Federal Circuit's recent 
efforts to informally aggrandize its jurisdiction so as to become the 
sole appellate patent court.
    Third, legal interpretation within appellate jurisdictions is path 
dependent. Such path dependence makes it more difficult to develop 
alternative interpretations, as well as to reverse erroneous decisions, 
within that jurisdiction. Litigants are unlikely to raise issues that 
have already been adversely decided within a jurisdiction. The path 
dependence of interpretation reinforces the importance of assuring 
appellate competition to permit development of legal interpretations. 
Interpretation across appellate jurisdictions follows the persuasive 
weight of the legal reasoning of the earlier decisions, and litigants 
remain free to raise issues and judges to develop better 
interpretations of the law. Vesting exclusive jurisdiction in a single 
appellate court will not provide a process that promotes the reasoned 
development of patent law, and will impede or delay efforts to fix the 
law.

    UNIFORMITY AND THE NEED FOR COMPETITIVE DEVELOPMENT OF THE LAW.

    As Ralph Waldo Emerson famously stated many years ago, ``A foolish 
consistency is the hobgoblin of little minds, adored by little 
statesmen and philosophers and divines.'' Although Emerson did not 
describe how to distinguish between a foolish and a wise consistency, 
the basic idea can be readily applied to the issue of federal appellate 
court jurisdiction. We should seek to impose uniform interpretations of 
the law only if they are the product of well reasoned elaboration. 
Following this principle, the Supreme Court typically rejects petitions 
for certiorari unless and until the Circuit Courts of Appeals in a 
number of cases have elaborated the basic legal principles at issue and 
have generated a conflict of sufficient importance that an imposed 
uniformity is deemed to be warranted. Significantly, the Supreme Court 
frequently lets inter-Circuit conflicts linger, either to determine 
before intervening the effects over time of the various rules adopted 
by the Circuit Courts or to allow the so-called problem of lack of 
uniformity to resolve itself through private action that adjusts to the 
differing conditions in the various jurisdictions.
    Because patent rights are exclusively federal and have effect 
throughout the territory of the United States, such inter-Circuit 
conflicts in patent law are presumptively undesirable. But the question 
for this Committee is not whether to promote greater uniformity of 
patent law, but at what cost. Although I support the goal of achieving 
greater patent law uniformity, I believe that the benefits of achieving 
greater uniformity by eliminating inter-Circuit conflicts would be 
outweighed by the costs of eliminating the development of reasoned 
alternative interpretations of the law. This is not merely because I 
disagree with many of the interpretive choices of the Federal Circuit 
(even though the existing jurisprudence of the Federal Circuit provides 
ample grounds for such a position). Rather, I believe that patent law 
is sufficiently important that reasoned elaboration of patent law 
should draw on the collective wisdom of appellate jurists throughout 
the nation, and that there needs to be an institutional mechanism to 
counter-balance initial appellate decisions that are wrongly decided or 
that reflect bad policy choices. I hold this view even though I 
recognize the highly technical nature of patent litigation and the 
concomitant need for federal appellate courts to develop specialized 
expertise.
    Congress has enacted the basic requirements of patent law in Title 
35 of the United States Code, but has left the vast majority of patent 
law jurisprudence to judicial elaboration through statutory 
construction on a common-law development model. Such development 
benefits from the collective wisdom of more minds and perspectives, 
rather than fewer, and from the evaluation of prior experiences when 
applying varying interpretations of the law. Thus, I support the 
development of greater uniformity in patent law only following the 
reasoned articulation of competing patent law policies by the various 
Courts of Appeals. The Supreme Court has been showing a greater 
interest in patent law issues over the last three years, which is an 
encouraging development and will help to further develop its expertise. 
There is no question that the Supreme Court would benefit from the 
reasoned consideration of patent law issues by additional Circuit 
Courts of Appeals before seeking to impose uniformity in patent cases. 
As Justice Stevens noted in concurrence in Holmes Group, ``[a]n 
occasional conflict in decisions may be useful in identifying questions 
that merit this Court's attention.'' 535 U.S. at 839.
    Further, consolidating review of all patent law issues within a 
single Court of Appeals simply may not result in the desired 
uniformity. Instead of so-called ``circuit-splits,'' the pressure on 
the Federal Circuit to resolve conflicting policy issues has led to 
``panel-splits.'' And unlike in copyright or trademark, the business 
community cannot adopt different approaches depending on the 
geographical jurisdiction in which the relevant activities are 
conducted. For example, in Phillips v. AWH Corp., Nos. 03-1269, 03-
1286, the Federal Circuit has recently sought to clarify the applicable 
rules for claim construction, which are widely perceived to be 
inconsistently applied and in need of greater specification. I 
submitted an amicus brief on behalf of EFF and other organizations in 
the Phillips case, encouraging the Federal Circuit to adopt claim 
construction rules that impose greater interpretive uniformity on its 
own panels, the district courts, and society at large. But it is widely 
feared that the Federal Circuit will not provide the patent bar with 
sufficient guidance, and that panels of the Federal Circuit will 
continue to apply the interpretive rules in an unpredictable fashion.
    If, however, the Federal Circuit does provide sufficiently clear 
guidance and panels of its judges scrupulously follow that guidance, 
there remains the concern that the Federal Circuit in the Phillips case 
will impose a foolish consistency that outweighs the benefits of 
achieving uniformity. Although I believe this outcome is much less 
likely than the failure to provide adequate guidance, given the 
substantial social costs of the existing lack of predictability, it may 
be very difficult to reverse such Federal Circuit rules if they prove 
unworkable or undesirable over time. The rules would need to be changed 
en banc, stare decisis will exert pressure to stick with the rules, and 
as discussed below litigants may be reluctant to challenge the clearly 
established precedent. This result is particularly likely given the 
Federal Circuit's perceived institutional competence.
    Given these concerns, the Committee should evaluate whether too 
great an emphasis already has been placed on achieving a constrained 
uniformity of patent law through the current jurisdictional 
arrangements, which provide the Federal Circuit with exclusive 
appellate jurisdiction over all cases that ``arise under'' patent law 
pursuant to 28 U.S.C. Sections 1295(a)(1) and 1338(a). Even following 
Holmes Group, other jurisdictions may follow the lead of the Federal 
Circuit's more developed jurisprudence. As a practical matter, 
competitors and the public routinely conform their conduct to Federal 
Circuit law, as they cannot reasonably rely on the low likelihood that 
patent law issues will arise only as counterclaims in litigation. This 
deprives patent law of the ability to obtain empirical validation that 
the interpretive choices of the Federal Circuit impose good policies, 
as there is no set of alternative interpretations with which to compare 
the results. Similarly, it deprives patent law of the development of 
those alternatives in the first instance.
    Further, even without legislative authority to do so, the Federal 
Circuit has been seeking to arrogate to itself the role of establishing 
uniform patent law interpretations in all instances. For example, in 
Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc., 375 F.3d 1341, 1355 
n.3 (Fed. Cir. 2004), the Federal Circuit recently encouraged other 
federal Appellate Courts to defer to the Federal Circuit's choice of 
law principles when determining when a patentee's behavior strips it of 
antitrust immunity, removing any questions of patent law from (and 
leaving only antitrust law to) the regional Circuit Courts of Appeals. 
The Federal Circuit characterized its choice of law rule as ``a 
sensible approach to preserving the uniformity of patent law without 
regard to the appellate forum.'' But this rule is sensible only if the 
desired outcome is to assure that Federal Circuit law (or any single 
Circuit's law) prevails on patent law issues. This concrete example 
provides a good illustration of why such constrained uniformity may not 
be desirable. The Federal Circuit simply may not have the best insight 
into the proper balance between the antitrust law and patent law, and 
there are reasons to think that obtaining the insights of distinguished 
jurists of antitrust law and economic theory in other Circuits (e.g., 
the ``Chicago-School'' jurists of the 7th Circuit) would be beneficial.

       BIAS AND THE NEED FOR COMPETITIVE DEVELOPMENT AS A REMEDY.

    For many years, the Federal Circuit has been criticized for being 
biased in favor of patentees, particularly in its early years.\1\ When 
it was created, the Federal Circuit was vested with jurisdiction over 
appeals from other administrative and specialty courts so as to reduce 
the likelihood of becoming too narrowly specialized and of developing 
an institutional bias.\2\ Although I share these concerns about bias 
without here putting my concerns to the proof, it is more important to 
relate what one of the Federal Circuit's own judges has said and to 
focus on providing a remedy against the potential for such bias. Again, 
as Justice Stevens noted when concurring in Holmes Group, ``occasional 
decisions by courts with broader jurisdiction will provide an antidote 
to the risk that the specialized court may develop an institutional 
bias.'' 535 U.S. at 839.
---------------------------------------------------------------------------
    \1\ See, e.g., Mark D. Janis, Reforming Patent Validity Litigation: 
The Dubious Preponderance, 19 Berkeley Tech. L.J. 923, 928 (2004); 
Allan N. Litmann, Restoring the Balance of Our Patent System, 37 IDEA 
545, 552-70 (1997); Lawrence M. Sung, Intellectual Property Protection 
or Protectionism? Declaratory Judgement Use by Patent Owners Against 
Prospective Infringers, 42 Am. U. L. Rev. 239, 248 n.47 (1992); 
Rochelle C. Dreyfuss, The Federal Circuit: A Case Study in Specialized 
Courts, 64 N.Y.U. L. Rev. 1, 26-30 (1989); Eric Schmitt, Judicial Shift 
in Patent Cases, New York Times, Jan. 21, 1986, at D2.
    \2\ See, e.g., William H. Burgess, Simplicity at the Cost of 
Clarity: Appellate Review of Claim Construction and the Failed Promise 
of Cybor, 153 U. Pa. L. Rev. 763, 764 (2004).
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    In the recent case of Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH 
v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004) (en banc), the Federal 
Circuit reconsidered en banc its prior rules for willful patent 
infringement law. The Court of Appeals apparently took the case because 
of the clamor from the bar that the law was out of touch with existing 
practices and because the Federal Circuit's earlier rules unduly 
penalized alleged infringers and encouraged disingenuous legal 
opinions. What is significant about this case is the self-perception of 
the Federal Circuit's role that was articulated during oral argument by 
Judge Pauline Newman, who is likely the most respected living patent 
jurist. Judge Newman stated from the bench words to the effect that the 
Federal Circuit had self-consciously adopted its rules on willful 
infringement because the public was not paying enough attention to 
patent rights in the early 1980s, that times have since changed and 
patent rights are now better respected, and thus that the earlier rules 
are no longer needed. It would be difficult to find a clearer statement 
that the Federal Circuit views its role as protecting the interests of 
patentees. Further, it took the Court over twenty years to reach an en 
banc decision to reverse the excesses of its earlier rules, and then 
did so only because it thought that circumstances had changed and thus 
that its earlier rules were now unnecessary to protect patentees.
    Although Judge Newman's statement was limited to the particular 
context of willful infringement law, it raises serious concerns 
regarding institutional bias on the Federal Circuit. Further 
consolidating appellate jurisdiction over patent law in the Federal 
Circuit would reinforce any institutional bias that exists and would 
preclude any meaningful remedy for such bias. The most significant 
remedy for bias is to assure judicial competition in the development of 
patent law, so that the Federal Circuit does not develop exclusive 
competence and an unwarranted monopoly of legal interpretation. For 
example, the Federal Circuit decided Mallinckrodt, Inc. v. Medipart, 
Inc., 976 F.2d 700 (Fed. Cir. 1992), in which ``a century of law under 
the [patent] exhaustion doctrine was abruptly swept away.'' \3\ So long 
as other appellate jurisdictions are competent under the Holmes Group 
to decide patent law issues by developing their own circuit patent law, 
the potential remains to achieve a more reasoned and balanced approach. 
EFF thus has submitted an amicus brief in the Ninth Circuit Court of 
Appeals in Arizona Cartridge Remanufacturers Assoc., Inc. v. Lexmark, 
No. 03-16987, seeking to restore the patent exhaustion law that the 
Federal Circuit unilaterally removed. But given the current 
jurisdictional arrangements, it has taken over a decade to get to 
another circuit to review this issue.
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    \3\ Richard H. Stern, Post-Sale Patent Restrictions After 
Mallinckrodt: An Idea in Search of a Definition, 5 Alb. L.J. & Sci & 
Tech. 1, 6 (1994).
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    PATH DEPENDENCE REINFORCES THE NEED FOR COMPETITIVE DEVELOPMENT.

    Legal interpretation is path dependent. At the most basic level, 
the principle of stare decisis requires some reason to adopt a 
different interpretation or principal of law in subsequent cases. At 
the level of institutional design, decisions of an initial panel of an 
appellate court are supposed to be binding on subsequent panels of the 
same court, unless and until the entire court revisits and revises the 
issue en banc. In contrast, initial panel decisions of one appellate 
court are not binding on the panels of other appellate jurisdictions, 
which are then free to develop their own interpretations or principles 
guided by the strength (or lack thereof) of the reasoning of the 
earlier decisions from the initial jurisdictions. This means that 
initial decisions within any particular appellate jurisdiction attain 
much greater significance in determining what rules gets adopted and 
how difficult it is to revise those rules. In contrast, decisions among 
multiple appellate jurisdictions develop based on the competitive 
strength of judicial reasoning. The latter form of developing the law 
is much to be preferred.
    The recent case of Merck KGaA v. Integra LifeSciences I, Ltd., 331 
F.3d 860 (Fed. Cir. 2003), further demonstrates the difficulty of 
correcting bad initial decisions of a single appellate court, even when 
potentially subject to review in the Supreme Court. Although Judge 
Newman issued a blistering dissent that excoriated her colleagues for 
severely constraining the scope of the historic experimental use 
exception to patent infringement and would have held that the exception 
applied to the conduct at issue, see id. at 873-75, the Petitioner in 
that case studiously refused to assert that the exception applied to 
the conduct at issue on appeal. As noted by various law professors as 
amici in the Supreme Court, litigants are extremely reluctant to 
challenge current Federal Circuit precedents (or those of any specific 
appellate court) for fear of being sanctioned or of undermining the 
perceived strength of other challenges they might make. See, e.g., 
Brief of Intellectual Property Professors as Amici Curiae in Support of 
Neither Party. Merck v. Integra, No. 03-1237 (citing Allen Eng'g Corp. 
v. Bartell Indus., 299 F.3d 1336, 1356 (Fed. Cir. 2002)).
    I have submitted on behalf of EFF and other organizations an amicus 
curiae brief urging the Supreme Court to reach the experimental use 
issue in the Merck case, notwithstanding Petitioner's refusal to rely 
on it. In this way, the Court might revise the Federal Circuit's 
constricted interpretations of this critically important patent law 
doctrine, which is causing adverse effects. But the Supreme Court may 
not do so in this case, and may never be presented with a case that 
clearly presents the issue. Correction of the law then would be denied 
or delayed unless and until Congress codifies a revision. For this 
reason, the National Academy of Sciences, the American Intellectual 
Property Law Association, and the American Bar Association have all 
proposed that Congress act to reverse the Federal Circuit's erroneous 
interpretations of this patent law doctrine.
    The path dependence of legal interpretation reinforces the need to 
assure that exclusive jurisdiction over patent law issues is not vested 
in a single appellate court. As demonstrated above in regard to willful 
infringement, exhaustion, and experimental use issues, the effective 
monopoly of Federal Circuit jurisdiction over patent law interpretation 
has delayed and may prevent correction of erroneous interpretations of 
patent law. Congress should seek to encourage such correction by making 
it easier to revise judge-made patent law interpretive rules over time. 
Further consolidating patent law interpretive jurisdiction by vesting 
it exclusively in a single Court of Appeals will not accomplish this 
beneficial objective. To the extent that this corrective function can 
more readily be accomplished by delegating substantive lawmaking 
authority to the U.S. Patent and Trademark Office, which is subject to 
political processes, Congress should consider that alternative 
(although it would simultaneously need to impose substantial measures 
to prevent agency capture and to correct any institutional bias within 
the PTO \4\).
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    \4\ See, e.g., Orin S. Kerr, Rethinking Patent Law in the 
Administrative State, 42 Wm. & Mary L. Rev. 127, 188 (2000); Craig A. 
Nard, Deference, Defiance, and the Useful Arts, 56 Ohio St. L.J. 1415, 
1502-03 (1995).
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                               CONCLUSION

    Congress should seek a wise, not a foolish, consistency in the 
development of patent law by the federal Courts of Appeals. There is no 
need to revise the rule of Holmes Group by vesting exclusive 
jurisdiction over patent law issues in the Federal Circuit, and doing 
so is likely to cause affirmative damage by precluding the development 
of reasoned alternative interpretations of patent law. Given the 
potential for institutional bias on the Federal Circuit, moreover, 
Congress needs to preserve some remedy that permits alternative 
interpretations of the law to be developed. Congress also may wish to 
consider whether to terminate its twenty-year experiment with vesting 
``arising under'' jurisdiction for patent law exclusively in a single 
Court of Appeals. Finally, Congress should seek to minimize the path 
dependence of patent law, so that interpretive errors are more easily 
corrected and so that the law can more readily respond to changed 
circumstances.
    I thank you again for the opportunity to submit this testimony, and 
I would be happy to provide additional testimony on this issue and on 
other patent law reform issues that the Committee may address, such as 
the need for legislation to codify a broader experimental use exception 
if the Supreme Court does not revise the Federal Circuit's improper 
interpretations.
  Letter from James B. Kobak, Jr., to the Subcommittee on Courts, the 
                  Internet, and Intellectual Property



Letter to the Honorable Lamar Smith, and the Honorable Howard L. Berman 
    from Michael K. Kirk, Executive Director, American Intellectual 
                    Property Law Assocation (AIPLA)



   Status Report on Developments Relating to the Jurisdiction of the 
United Sates Court of Appeals for the Federal Circuit submitted by the 
 Holmes Group Task Force, Intellectual Property Committee, Section of 
  Antitrust Law, American Bar Association, and a Report on the United 
  States Court of Appeals for the Federal Court, Section of Antitrust 
                     Law, American Bar Association




Letter from Meredith Martin Addy, Esq., Brinks Hofer Gilson & Lione to 
   Blaine Merritt, Esq., Chief Counsel, Subcommittee on Courts, the 
   Internet, and Intellectual Property, Committee on the Judiciary, 
      regarding corrections to written statement of March 17, 2005



                                 
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