    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

                           PATENT REFORM ACT OF 2007

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

                                    HEARING

                                   BEFORE THE

                     SUBCOMMITTEE ON COURTS, THE INTERNET,
                           AND INTELLECTUAL PROPERTY

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                   H.R. 1908

                                   __________

                                 APRIL 26, 2007

                                   __________

                               Serial No. 110-65

                                   __________

             Printed for the use of the Committee on the Judiciary

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

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                           COMMITTEE ON THE JUDICIARY

                     JOHN CONYERS, Jr., Michigan, Chairman
    HOWARD L. BERMAN, California         LAMAR SMITH, Texas
    RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr.,
    JERROLD NADLER, New York                 Wisconsin
    ROBERT C. (BOBBY) SCOTT, Virginia    HOWARD COBLE, North Carolina
    MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
    ZOE LOFGREN, California              BOB GOODLATTE, Virginia
    SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
    MAXINE WATERS, California            DANIEL E. LUNGREN, California
    MARTIN T. MEEHAN, Massachusetts      CHRIS CANNON, Utah
    WILLIAM D. DELAHUNT, Massachusetts   RIC KELLER, Florida
    ROBERT WEXLER, Florida               DARRELL ISSA, California
    LINDA T. SANCHEZ, California         MIKE PENCE, Indiana
    STEVE COHEN, Tennessee               J. RANDY FORBES, Virginia
    HANK JOHNSON, Georgia                STEVE KING, Iowa
    LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
    BRAD SHERMAN, California             TRENT FRANKS, Arizona
    TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
    ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
    ADAM B. SCHIFF, California
    ARTUR DAVIS, Alabama
    DEBBIE WASSERMAN SCHULTZ, Florida
    KEITH ELLISON, Minnesota

                Perry Apelbaum, Staff Director and Chief Counsel
                     Joseph Gibson, Minority Chief Counsel
                                     ------

        Subcommittee on Courts, the Internet, and Intellectual Property

                     HOWARD L. BERMAN, California, Chairman

    JOHN CONYERS, Jr., Michigan          HOWARD COBLE, North Carolina
    RICK BOUCHER, Virginia               TOM FEENEY, Florida
    MARTIN T. MEEHAN, Massachusetts      LAMAR SMITH, Texas
    ROBERT WEXLER, Florida               F. JAMES SENSENBRENNER, Jr.,
    MELVIN L. WATT, North Carolina       Wisconsin
    SHEILA JACKSON LEE, Texas            ELTON GALLEGLY, California
    STEVE COHEN, Tennessee               BOB GOODLATTE, Virginia
    HANK JOHNSON, Georgia                STEVE CHABOT, Ohio
    BRAD SHERMAN, California             CHRIS CANNON, Utah
    ANTHONY D. WEINER, New York          RIC KELLER, Florida
    ADAM B. SCHIFF, California           DARRELL ISSA, California
    ZOE LOFGREN, California              MIKE PENCE, Indiana

                         Shanna Winters, Chief Counsel

                        Blaine Merritt, Minority Counsel

                                C O N T E N T S

                                  ----------

                                 APRIL 26, 2007

                                                                       Page

                                  TEXT OF BILL

    H.R. 1908, the ``Patent Reform Act of 2007''.....................     2

                               OPENING STATEMENTS

    The Honorable Howard L. Berman, a Representative in Congress from
      the State of California, and Chairman, Subcommittee on Courts,
      the Internet, and Intellectual Property........................     1
    The Honorable Howard Coble, a Representative in Congress from the
      State of North Carolina, and Ranking Member, Subcommittee on
      Courts, the Internet, and Intellectual Property................    19
    The Honorable Lamar Smith, a Representative in Congress from the
      State of Texas, and Member, Subcommittee on Courts, the
      Internet, and Intellectual Property............................    28

                                   WITNESSES

    Mr. Kevin Sharer, Chairman of the Board and Chief Executive
      Officer, Amgen Incorporated, Thousand Oaks, CA
      Oral Testimony.................................................    32
      Prepared Statement.............................................    34
    Mr. Gary L. Griswold, President and Chief Counsel of Intellectual
      Property, 3M Innovative Properties, St. Paul, MN
      Oral Testimony.................................................    46
      Prepared Statement.............................................    48
    Mr. John R. Thomas, Professor of Law, Georgetown University Law
      Center, Washington, DC
      Oral Testimony.................................................    63
      Prepared Statement.............................................    65
    Mr. William T. Tucker, Executive Director, Research and
      Administration and Technology Transfer, University of
      California, Oakland, CA
      Oral Testimony.................................................    76
      Prepared Statement.............................................    77
    Mr. Anthony Peterman, Director, Patent Counsel, Dell
      Incorporated, Round Rock, TX
      Oral Testimony.................................................    86
      Prepared Statement.............................................    88

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Prepared Statement of the Honorable Howard L. Berman, a
      Representative in Congress from the State of California, and
      Chairman, Subcommittee on Courts, the Internet, and
      Intellectual Property..........................................    17
    Prepared Statement of the Honorable Sheila Jackson Lee, a
      Representative in Congress from the State of Texas, and Member,
      Subcommittee on Courts, the Internet, and Intellectual Property    21
    Prepared Statement of the Honorable Lamar Smith, a Representative
      in Congress from the State of Texas, and Member, Subcommittee
      on Courts, the Internet, and Intellectual Property.............    30
    Prepared Statement of the California Healthcare Institute,
      submitted by the Honorable Darrell Issa, a Representative in
      Congress from the State of California, and Member, Subcommittee
      on Courts, the Internet, and Intellectual Property.............   137
    Prepared Statement of the Honorable Tom Feeney, a Representative
      in Congress from the State of Florida, and Member, Subcommittee
      on Courts, the Internet, and Intellectual Property.............   144

                                    APPENDIX

    Material Submitted for the Hearing Record........................   148

                           PATENT REFORM ACT OF 2007

                                  ----------

                            THURSDAY, APRIL 26, 2007

                  House of Representatives,
          Subcommittee on Courts, the Internet,
                             and Intellectual Property,
                                    Committee on the Judiciary,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 2:06 p.m., in
    Room 2141, Rayburn House Office Building, the Honorable Howard
    L. Berman (Chairman of the Subcommittee) presiding.
        Present: Representatives Berman, Jackson Lee, Watt, Coble,
    Smith and Issa.
        Staff Present: Perry Apelbaum, Staff Director and Chief
    Counsel; Shanna Winters, Subcommittee Counsel; Rosalind
    Jackson, Professional Staff Member; Joseph Gibson, Minority
    Chief Counsel; and Blaine Merritt, Minority Subcommittee
    Counsel.
        Mr. Berman. This hearing of the Subcommittee on Courts, the
    Internet, and Intellectual Property will come to order. I will
    start out and recognize myself for a more lengthy opening
    statement, but I will also give great leeway to my Ranking
    Member and others who would like to make opening statements.
        Let me first--I think we are trying to get an overflow
    room. We have got one. Okay. You will have to find out where it
    is though.
        Let me begin by describing what this hearing is not about.
    This hearing is not about creating a dynamic where all the
    witnesses testifying support the bill H.R. 1908, the Patent
    Reform Act of 2007. In fact, while the witnesses have
    identified some aspects of the bill they like, a majority of
    the witnesses disagree with major portions of the bill. And
    there would have been another witness to raise disagreement
    with the bill, but the independent inventor I invited couldn't
    be here today. My goal is to foster the policy discussion to
    yield the best result.
        This hearing is also not about a perfect bill. I expect
    over the course of the next several weeks, there will be
    numerous changes incorporated into the bill that reflect
    legitimate concerns over unintended consequences as well as
    reforms considered that are not presently included. For
    example, the issues of obviousness and 271(f) are currently
    before the Supreme Court and are not addressed in the bill.
        Furthermore, as to drafting errors, I have already
    identified a number of necessary corrections that will be made.
    For example, the word ``same'' should be changed to ``any'' in
    the prohibited filing section to allow for only one shot at a
    postgrant proceeding. You can't challenge under this bill--as
    it will be corrected to require, that you can't challenge in
    the first window and then challenge in the second.
        This hearing is not about promoting an agenda for a
    specific industry. While the media has portrayed the debate as
    a tech versus Pharma battle, I prefer to see it as the
    inability of current patent laws to accommodate the differences
    of industry business models. For the sectors which rely on
    business method patents or products which incorporate many
    multiples of patents, the proliferation of questionable quality
    patents and the burgeoning of patent speculation prevents the
    system from promoting innovation. It is one system, and it must
    work for everyone.
        It is without doubt that most groups who have a stake in
    the patent system recognize the need for reform, but it should
    be realized that the final makeup of the reforms will certainly
    require compromise by all.
        The intention of this hearing is to move beyond the
    previous rhetoric on patent reform and to address the real and
    serious problems confronting the U.S. patent system. By
    bringing to this hearing the cross-section of past patent
    system users we have here today, I expect the discourse and
    debate on the reforms proposed in the bill to be constructive
    and thoughtful. This bipartisan, bicameral bill draws from many
    of the issues raised by past legislative attempts, multiple
    hearings and a slew of reports on patent reform by entities
    such as the National Academy of Sciences as well as the Federal
    Trade Commission and the United States Patent and Trademark
    Office, among others.
        H.R. 1908 is both long and complex, and, by its terms, not
    particularly interesting. I do not expect that everyone has had
    a chance to fully digest all of the changes proposed by the
    bill. However, the Patent Reform Act of 2007 is effectively now
    our starting point, and this hearing, I hope, will propel
    discussion on where the bill should go. I would like to thank
    the witnesses and especially my Subcommittee Members for
    beginning the process today.
        [The text of the bill, H.R. 1908, follows:]

    HR 1908 IH  ___________________________________________________

    110th CONGRESS
        1st Session

                                    H. R. 1908

    To amend title 35, United States Code, to provide for patent reform.
                                   __________
                        IN THE HOUSE OF REPRESENTATIVES
                                 April 18, 2007
    Mr. Berman (for himself, Mr. Smith of Texas, Mr. Conyers, Mr. Coble,
        Mr. Boucher, Mr. Goodlatte, Ms. Zoe Lofgren of California, Mr.
        Issa, Mr. Schiff, Mr. Cannon, and Ms. Jackson-Lee of Texas)
        introduced the following bill; which was referred to the Committee
        on the Judiciary
                                   __________

                                     A BILL

    To amend title 35, United States Code, to provide for patent reform.

        Be it enacted by the Senate and House of Representatives of the
    United States of America in Congress assembled,

    SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

        (a) Short Title.--This Act may be cited as the ``Patent Reform Act
    of 2007''.
        (b) Table of Contents.--The table of contents of this Act is as
    follows:

        Sec. 1. Short title; table of contents.
        Sec. 2. Reference to title 35, United States Code.
        Sec. 3. Right of the first inventor to file.
        Sec. 4. Inventor's oath or declaration.
        Sec. 5. Right of the inventor to obtain damages.
        Sec. 6. Post-grant procedures and other quality enhancements.
        Sec. 7. Definitions; patent trial and appeal board.
        Sec. 8. Study and report on reexamination proceedings.
        Sec. 9. Submissions by third parties and other quality
    enhancements.
        Sec. 10. Venue and jurisdiction.
        Sec. 11. Regulatory authority.
        Sec. 12. Technical amendments.
        Sec. 13. Effective date; rule of construction.

    SEC. 2. REFERENCE TO TITLE 35, UNITED STATES CODE.

        Whenever in this Act a section or other provision is amended or
    repealed, that amendment or repeal shall be considered to be made to
    that section or other provision of title 35, United States Code.

    SEC. 3. RIGHT OF THE FIRST INVENTOR TO FILE.

        (a) Definitions.--Section 100 is amended by adding at the end the
    following:
        ``(f) The term `inventor' means the individual or, if a joint
    invention, the individuals collectively who invented or discovered the
    subject matter of the invention.
        ``(g) The terms `joint inventor' and `coinventor' mean any 1 of the
    individuals who invented or discovered the subject matter of a joint
    invention.
        ``(h) The `effective filing date of a claimed invention' is--
                ``(1) the filing date of the patent or the application for
            patent containing the claim to the invention; or
                ``(2) if the patent or application for patent is entitled
            to a right of priority of any other application under section
            119, 365(a), or 365(b) or to the benefit of an earlier filing
            date in the United States under section 120, 121, or 365(c),
            the filing date of the earliest such application in which the
            claimed invention is disclosed in the manner provided by the
            first paragraph of section 112.
        ``(i) The term `claimed invention' means the subject matter defined
    by a claim in a patent or an application for a patent.
        ``(j) The term `joint invention' means an invention resulting from
    the collaboration of inventive endeavors of 2 or more persons working
    toward the same end and producing an invention by their collective
    efforts.''.
        (b) Conditions for Patentability.--
                (1) In general.--Section 102 is amended to read as follows:

    ``Sec. 102. Conditions for patentability; novelty

        ``(a) Novelty; Prior Art.--A patent for a claimed invention may not
    be obtained if--
                ``(1) the claimed invention was patented, described in a
            printed publication, or in public use or on sale--
                        ``(A) more than one year before the effective
                    filing date of the claimed invention; or
                        ``(B) one year or less before the effective filing
                    date of the claimed invention, other than through
                    disclosures made by the inventor or a joint inventor or
                    by others who obtained the subject matter disclosed
                    directly or indirectly from the inventor or a joint
                    inventor; or
                ``(2) the claimed invention was described in a patent
            issued under section 151, or in an application for patent
            published or deemed published under section 122(b), in which
            the patent or application, as the case may be, names another
            inventor and was effectively filed before the effective filing
            date of the claimed invention.
        ``(b) Exceptions.--
                ``(1) Prior inventor disclosure exception.--Subject matter
            that would otherwise qualify as prior art under subparagraph
            (B) of subsection (a)(1) shall not be prior art to a claimed
            invention under that subparagraph if the subject matter had,
            before the applicable date under such subparagraph (B), been
            publicly disclosed by the inventor or a joint inventor or
            others who obtained the subject matter disclosed directly or
            indirectly from the inventor, joint inventor, or applicant.
                ``(2) Derivation and common assignment exceptions.--Subject
            matter that would otherwise qualify as prior art only under
            subsection (a)(2), after taking into account the exception
            under paragraph (1), shall not be prior art to a claimed
            invention if--
                        ``(A) the subject matter was obtained directly or
                    indirectly from the inventor or a joint inventor; or
                        ``(B) the subject matter and the claimed invention,
                    not later than the effective filing date of the claimed
                    invention, were owned by the same person or subject to
                    an obligation of assignment to the same person.
                ``(3) Joint research agreement exception.--
                        ``(A) In general.--Subject matter and a claimed
                    invention shall be deemed to have been owned by the
                    same person or subject to an obligation of assignment
                    to the same person in applying the provisions of
                    paragraph (2) if--
                                ``(i) the claimed invention was made by or
                            on behalf of parties to a joint research
                            agreement that was in effect on or before the
                            effective filing date of the claimed invention;
                                ``(ii) the claimed invention was made as a
                            result of activities undertaken within the
                            scope of the joint research agreement; and
                                ``(iii) the application for patent for the
                            claimed invention discloses or is amended to
                            disclose the names of the parties to the joint
                            research agreement.
                        ``(B) For purposes of subparagraph (A), the term
                    `joint research agreement' means a written contract,
                    grant, or cooperative agreement entered into by two or
                    more persons or entities for the performance of
                    experimental, developmental, or research work in the
                    field of the claimed invention.
                ``(4) Patents and published applications effectively
            filed.--A patent or application for patent is effectively filed
            under subsection (a)(2) with respect to any subject matter
            described in the patent or application--
                        ``(A) as of the filing date of the patent or the
                    application for patent; or
                        ``(B) if the patent or application for patent is
                    entitled to claim a right of priority under section
                    119, 365(a), or 365(b) or to claim the benefit of an
                    earlier filing date under section 120, 121, or 365(c),
                    based upon one or more prior filed applications for
                    patent, as of the filing date of the earliest such
                    application that describes the subject matter.''.
                (2) Conforming amendment.--The item relating to section 102
            in the table of sections for chapter 10 is amended to read as
            follows:

        ``102. Conditions for patentability; novelty.''.
        (c) Conditions for Patentability; Non-Obvious Subject Matter.--
    Section 103 is amended to read as follows:

    ``Sec. 103. Conditions for patentability; nonobvious subject matter

        ``A patent for a claimed invention may not be obtained though the
    claimed invention is not identically disclosed as set forth in section
    102, if the differences between the claimed invention and the prior art
    are such that the claimed invention as a whole would have been obvious
    before the effective filing date of the claimed invention to a person
    having ordinary skill in the art to which the claimed invention
    pertains. Patentability shall not be negated by the manner in which the
    invention was made.''.
        (d) Repeal of Requirements for Inventions Made Abroad.--Section
    104, and the item relating to that section in the table of sections for
    chapter 10, are repealed.
        (e) Repeal of Statutory Invention Registration.--
                (1) In general.--Section 157, and the item relating to that
            section in the table of sections for chapter 14, are repealed.
                (2) Removal of cross references.--Section 111(b)(8) is
            amended by striking ``sections 115, 131, 135, and 157'' and
            inserting ``sections 131 and 135''.
        (f) Earlier Filing Date for Inventor and Joint Inventor.--Section
    120 is amended by striking ``which is filed by an inventor or inventors
    named'' and inserting ``which names an inventor or joint inventor''.
        (g) Conforming Amendments.--
                (1) Right of priority.--Section 172 is amended by striking
            ``and the time specified in section 102(d)''.
                (2) Limitation on remedies.--Section 287(c)(4) is amended
            by striking ``the earliest effective filing date of which is
            prior to'' and inserting ``which has an effective filing date
            before''.
                (3) International application designating the united
            states: effect.--Section 363 is amended by striking ``except as
            otherwise provided in section 102(e) of this title''.
                (4) Publication of international application: effect.--
            Section 374 is amended by striking ``sections 102(e) and
            154(d)'' and inserting ``section 154(d)''.
                (5) Patent issued on international application: effect.--
            The second sentence of section 375(a) is amended by striking
            ``Subject to section 102(e) of this title, such'' and inserting
            ``Such''.
                (6) Limit on right of priority.--Section 119(a) is amended
            by striking ``; but no patent shall be granted'' and all that
            follows through ``one year prior to such filing''.
                (7) Inventions made with federal assistance.--Section
            202(c) is amended--
                        (A) in paragraph (2)--
                                (i) by striking ``publication, on sale, or
                            public use,'' and all that follows through
                            ``obtained in the United States'' and inserting
                            ``the 1-year period referred to in section
                            102(a) would end before the end of that 2-year
                            period''; and
                                (ii) by striking ``the statutory'' and
                            inserting ``that 1-year''; and
                        (B) in paragraph (3), by striking ``any statutory
                    bar date that may occur under this title due to
                    publication, on sale, or public use'' and inserting
                    ``the expiration of the 1-year period referred to in
                    section 102(a)''.
        (h) Repeal of Interfering Patent Remedies.--Section 291, and the
    item relating to that section in the table of sections for chapter 29,
    are repealed.
        (i) Action for Claim to Patent on Derived Invention.--Section
    135(a) is amended to read as follows:
        ``(a) Dispute Over Right to Patent.--
                ``(1) Institution of derivation proceeding.--An applicant
            may request initiation of a derivation proceeding to determine
            the right of the applicant to a patent by filing a request
            which sets forth with particularity the basis for finding that
            an earlier applicant derived the claimed invention from the
            applicant requesting the proceeding and, without authorization,
            filed an application claiming such invention. Any such request
            may only be made within 12 months after the date of first
            publication of an application containing a claim that is the
            same or is substantially the same as the claimed invention,
            must be made under oath, and must be supported by substantial
            evidence. Whenever the Director determines that patents or
            applications for patent naming different individuals as the
            inventor interfere with one another because of a dispute over
            the right to patent under section 101, the Director shall
            institute a derivation proceeding for the purpose of
            determining which applicant is entitled to a patent.
                ``(2) Requirements.--A proceeding under this subsection may
            not be commenced unless the party requesting the proceeding has
            filed an application that was filed not later than 18 months
            after the effective filing date of the application or patent
            deemed to interfere with the subsequent application or patent.
                ``(3) Determination by patent trial and appeal board.--In
            any proceeding under this subsection, the Patent Trial and
            Appeal Board--
                        ``(A) shall determine the question of the right to
                    patent;
                        ``(B) in appropriate circumstances, may correct the
                    naming of the inventor in any application or patent at
                    issue; and
                        ``(C) shall issue a final decision on the right to
                    patent.
                ``(4) Derivation proceeding.--The Board may defer action on
            a request to initiate a derivation proceeding until 3 months
            after the date on which the Director issues a patent to the
            applicant that filed the earlier application.
                ``(5) Effect of final decision.--The final decision of the
            Patent Trial and Appeal Board, if adverse to the claim of an
            applicant, shall constitute the final refusal by the Patent and
            Trademark Office on the claims involved. The Director may issue
            a patent to an applicant who is determined by the Patent Trial
            and Appeal Board to have the right to patent. The final
            decision of the Board, if adverse to a patentee, shall, if no
            appeal or other review of the decision has been or can be taken
            or had, constitute cancellation of the claims involved in the
            patent, and notice of such cancellation shall be endorsed on
            copies of the patent distributed after such cancellation by the
            Patent and Trademark Office.''.
        (j) Elimination of References to Interferences.--(1) Sections 6,
    41, 134, 141, 145, 146, 154, 305, and 314 are each amended by striking
    ``Board of Patent Appeals and Interferences'' each place it appears and
    inserting ``Patent Trial and Appeal Board''.
        (2) Sections 141, 146, and 154 are each amended--
                (A) by striking ``an interference'' each place it appears
            and inserting ``a derivation proceeding''; and
                (B) by striking ``interference'' each additional place it
            appears and inserting ``derivation proceeding''.
        (3) The section heading for section 134 is amended to read as
    follows:

    ``Sec. 134. Appeal to the Patent Trial and Appeal Board''.

        (4) The section heading for section 135 is amended to read as
    follows:

    ``Sec. 135. Derivation proceedings''.

        (5) The section heading for section 146 is amended to read as
    follows:

    ``Sec. 146. Civil action in case of derivation proceeding''.

        (6) Section 154(b)(1)(C) is amended by striking ``interferences''
    and inserting ``derivation proceedings''.
        (7) The item relating to section 6 in the table of sections for
    chapter 1 is amended to read as follows:

        ``6. Patent Trial and Appeal Board.''.
        (8) The items relating to sections 134 and 135 in the table of
    sections for chapter 12 are amended to read as follows:

        ``134. Appeal to the Patent Trial and Appeal Board.
        ``135. Derivation proceedings.''.
        (9) The item relating to section 146 in the table of sections for
    chapter 13 is amended to read as follows:

        ``146. Civil action in case of derivation proceeding.''.
        (10) Certain Appeals.--Subsection 1295(a)(4)(A) of title 28, United
    States Code, is amended to read as follows:
                        ``(A) the Patent Trial and Appeal Board of the
                    United States Patent and Trademark Office with respect
                    to patent applications, derivation proceedings, and
                    post-grant review proceedings, at the instance of an
                    applicant for a patent or any party to a patent
                    interference (commenced before the effective date of
                    the Patent Reform Act of 2007), derivation proceeding,
                    or post-grant review proceeding, and any such appeal
                    shall waive any right of such applicant or party to
                    proceed under section 145 or 146 of title 35;''.

    SEC. 4. INVENTOR'S OATH OR DECLARATION.

        (a) Inventor's Oath or Declaration.--
                (1) In general.--Section 115 is amended to read as follows:

    ``Sec. 115. Inventor's oath or declaration

        ``(a) Naming the Inventor; Inventor's Oath or Declaration.--An
    application for patent that is filed under section 111(a), that
    commences the national stage under section 363, or that is filed by an
    inventor for an invention for which an application has previously been
    filed under this title by that inventor shall include, or be amended to
    include, the name of the inventor of any claimed invention in the
    application. Except as otherwise provided in this section, an
    individual who is the inventor or a joint inventor of a claimed
    invention in an application for patent shall execute an oath or
    declaration in connection with the application.
        ``(b) Required Statements.--An oath or declaration under subsection
    (a) shall contain statements that--
                ``(1) the application was made or was authorized to be made
            by the affiant or declarant; and
                ``(2) such individual believes himself or herself to be the
            original inventor or an original joint inventor of a claimed
            invention in the application.
        ``(c) Additional Requirements.--The Director may specify additional
    information relating to the inventor and the invention that is required
    to be included in an oath or declaration under subsection (a).
        ``(d) Substitute Statement.--
                ``(1) In general.--In lieu of executing an oath or
            declaration under subsection (a), the applicant for patent may
            provide a substitute statement under the circumstances
            described in paragraph (2) and such additional circumstances
            that the Director may specify by regulation.
                ``(2) Permitted circumstances.--A substitute statement
            under paragraph (1) is permitted with respect to any individual
            who--
                        ``(A) is unable to file the oath or declaration
                    under subsection (a) because the individual--
                                ``(i) is deceased;
                                ``(ii) is under legal incapacity; or
                                ``(iii) cannot be found or reached after
                            diligent effort; or
                        ``(B) is under an obligation to assign the
                    invention but has refused to make the oath or
                    declaration required under subsection (a).
                ``(3) Contents.--A substitute statement under this
            subsection shall--
                        ``(A) identify the individual with respect to whom
                    the statement applies;
                        ``(B) set forth the circumstances representing the
                    permitted basis for the filing of the substitute
                    statement in lieu of the oath or declaration under
                    subsection (a); and
                        ``(C) contain any additional information, including
                    any showing, required by the Director.
        ``(e) Making Required Statements in Assignment of Record.--An
    individual who is under an obligation of assignment of an application
    for patent may include the required statements under subsections (b)
    and (c) in the assignment executed by the individual, in lieu of filing
    such statements separately.
        ``(f) Time for Filing.--A notice of allowance under section 151 may
    be provided to an applicant for patent only if the applicant for patent
    has filed each required oath or declaration under subsection (a) or has
    filed a substitute statement under subsection (d) or recorded an
    assignment meeting the requirements of subsection (e).
        ``(g) Earlier-Filed Application Containing Required Statements or
    Substitute Statement.--The requirements under this section shall not
    apply to an individual with respect to an application for patent in
    which the individual is named as the inventor or a joint inventor and
    that claims the benefit under section 120 or 365(c) of the filing of an
    earlier-filed application, if--
                ``(1) an oath or declaration meeting the requirements of
            subsection (a) was executed by the individual and was filed in
            connection with the earlier-filed application;
                ``(2) a substitute statement meeting the requirements of
            subsection (d) was filed in the earlier filed application with
            respect to the individual; or
                ``(3) an assignment meeting the requirements of subsection
            (e) was executed with respect to the earlier-filed application
            by the individual and was recorded in connection with the
            earlier-filed application.
        ``(h) Supplemental and Corrected Statements; Filing Additional
    Statements.--
                ``(1) In general.--Any person making a statement required
            under this section may withdraw, replace, or otherwise correct
            the statement at any time. If a change is made in the naming of
            the inventor requiring the filing of 1 or more additional
            statements under this section, the Director shall establish
            regulations under which such additional statements may be
            filed.
                ``(2) Supplemental statements not required.--If an
            individual has executed an oath or declaration under subsection
            (a) or an assignment meeting the requirements of subsection (e)
            with respect to an application for patent, the Director may not
            thereafter require that individual to make any additional oath,
            declaration, or other statement equivalent to those required by
            this section in connection with the application for patent or
            any patent issuing thereon.
                ``(3) Savings clause.--No patent shall be invalid or
            unenforceable based upon the failure to comply with a
            requirement under this section if the failure is remedied as
            provided under paragraph (1).''.
                (2) Relationship to divisional applications.--Section 121
            is amended by striking ``If a divisional application'' and all
            that follows through ``inventor.''.
                (3) Requirements for nonprovisional applications.--Section
            111(a) is amended--
                        (A) in paragraph (2)(C), by striking ``by the
                    applicant'' and inserting ``or declaration'';
                        (B) in the heading for paragraph (3), by striking
                    ``and oath''; and
                        (C) by striking ``and oath'' each place it appears.
                (4) Conforming amendment.--The item relating to section 115
            in the table of sections for chapter 10 is amended to read as
            follows:

        ``115. Inventor's oath or declaration.''.
        (b) Filing by Other Than Inventor.--Section 118 is amended to read
    as follows:

    ``Sec. 118. Filing by other than inventor

        ``A person to whom the inventor has assigned or is under an
    obligation to assign the invention may make an application for patent.
    A person who otherwise shows sufficient proprietary interest in the
    matter may make an application for patent on behalf of and as agent for
    the inventor on proof of the pertinent facts and a showing that such
    action is appropriate to preserve the rights of the parties. If the
    Director grants a patent on an application filed under this section by
    a person other than the inventor, the patent shall be granted to the
    real party in interest and upon such notice to the inventor as the
    Director considers to be sufficient.''.
        (c) Specification.--Section 112 is amended--
                (1) in the first paragraph----
                        (A) by striking ``The specification'' and inserting
                    ``(a) In General.--The specification'';
                        (B) by striking ``of carrying out his invention''
                    and inserting ``or joint inventor of carrying out the
                    invention''; and
                (2) in the second paragraph--
                        (A) by striking ``The specifications'' and
                    inserting ``(b) Conclusion.--The specifications''; and
                        (B) by striking ``applicant regards as his
                    invention'' and inserting ``inventor or a joint
                    inventor regards as the invention'';
                (3) in the third paragraph, by striking ``A claim'' and
            inserting ``(c) Form.--A claim'';
                (4) in the fourth paragraph, by striking ``Subject to the
            following paragraph,'' and inserting ``(d) Reference in
            Dependent Forms.--Subject to subsection (e),'';
                (5) in the fifth paragraph, by striking ``A claim'' and
            inserting ``(e) Reference in Multiple Dependent Form.--A
            claim''; and
                (6) in the last paragraph, by striking ``An element'' and
            inserting ``(f) Element in Claim for a Combination.--An
            element''.

    SEC. 5. RIGHT OF THE INVENTOR TO OBTAIN DAMAGES.

        (a) Damages.--Section 284 is amended--
                (1) in the first paragraph--
                        (A) by striking ``Upon'' and inserting ``(a) Award
                    of Damages.--
                ``(1) In general.--Upon'';
                        (B) by aligning the remaining text accordingly; and
                        (C) by adding at the end the following:
                ``(2) Relationship of damages to contributions over prior
            art.--The court shall conduct an analysis to ensure that a
            reasonable royalty under paragraph (1) is applied only to that
            economic value properly attributable to the patent's specific
            contribution over the prior art. In a reasonable royalty
            analysis, the court shall identify all factors relevant to the
            determination of a reasonable royalty under this subsection,
            and the court or the jury, as the case may be, shall consider
            only those factors in making the determination. The court shall
            exclude from the analysis the economic value properly
            attributable to the prior art, and other features or
            improvements, whether or not themselves patented, that
            contribute economic value to the infringing product or process.
                ``(3) Entire market value.--Unless the claimant shows that
            the patent's specific contribution over the prior art is the
            predominant basis for market demand for an infringing product
            or process, damages may not be based upon the entire market
            value of that infringing product or process.
                ``(4) Other factors.--In determining damages, the court may
            also consider, or direct the jury to consider, the terms of any
            nonexclusive marketplace licensing of the invention, where
            appropriate, as well as any other relevant factors under
            applicable law.'';
                (2) by amending the second undesignated paragraph to read
            as follows:
        ``(b) Willful Infringement.--
                ``(1) Increased damages.--A court that has determined that
            the infringer has willfully infringed a patent or patents may
            increase the damages up to three times the amount of damages
            found or assessed under subsection (a), except that increased
            damages under this paragraph shall not apply to provisional
            rights under section 154(d).
                ``(2) Permitted grounds for willfulness.--A court may find
            that an infringer has willfully infringed a patent only if the
            patent owner presents clear and convincing evidence that--
                        ``(A) after receiving written notice from the
                    patentee--
                                ``(i) alleging acts of infringement in a
                            manner sufficient to give the infringer an
                            objectively reasonable apprehension of suit on
                            such patent, and
                                ``(ii) identifying with particularity each
                            claim of the patent, each product or process
                            that the patent owner alleges infringes the
                            patent, and the relationship of such product or
                            process to such claim,
                    the infringer, after a reasonable opportunity to
                    investigate, thereafter performed one or more of the
                    alleged acts of infringement;
                        ``(B) the infringer intentionally copied the
                    patented invention with knowledge that it was patented;
                    or
                        ``(C) after having been found by a court to have
                    infringed that patent, the infringer engaged in conduct
                    that was not colorably different from the conduct
                    previously found to have infringed the patent, and
                    which resulted in a separate finding of infringement of
                    the same patent.
                ``(3) Limitations on willfulness.--(A) A court may not find
            that an infringer has willfully infringed a patent under
            paragraph (2) for any period of time during which the infringer
            had an informed good faith belief that the patent was invalid
            or unenforceable, or would not be infringed by the conduct
            later shown to constitute infringement of the patent.
                ``(B) An informed good faith belief within the meaning of
            subparagraph (A) may be established by--
                        ``(i) reasonable reliance on advice of counsel;
                        ``(ii) evidence that the infringer sought to modify
                    its conduct to avoid infringement once it had
                    discovered the patent; or
                        ``(iii) other evidence a court may find sufficient
                    to establish such good faith belief.
                ``(C) The decision of the infringer not to present evidence
            of advice of counsel is not relevant to a determination of
            willful infringement under paragraph (2).
                ``(4) Limitation on pleading.--Before the date on which a
            court determines that the patent in suit is not invalid, is
            enforceable, and has been infringed by the infringer, a
            patentee may not plead and a court may not determine that an
            infringer has willfully infringed a patent. The court's
            determination of an infringer's willfulness shall be made
            without a jury.''; and
                (3) in the third undesignated paragraph, by striking ``The
            court'' and inserting ``(c) Expert Testimony.--The court''.
        (b) Defense to Infringement Based on Earlier Inventor.--Section 273
    of title 35, United States Code, is amended--
                (1) in subsection (a)--
                        (A) in paragraph (1)--
                                (i) by striking ``of a method''; and
                                (ii) by striking ``review period;'' and
                            inserting ``review period; and'';
                        (B) in paragraph (2)(B), by striking the semicolon
                    at the end and inserting a period; and
                        (C) by striking paragraphs (3) and (4);
                (2) in subsection (b)--
                        (A) in paragraph (1)--
                                (i) by striking ``for a method''; and
                                (ii) by striking ``at least 1 year before
                            the effective filing date of such patent, and''
                            and all that follows through the period and
                            inserting ``and commercially used, or made
                            substantial preparations for commercial use of,
                            the subject matter before the effective filing
                            date of the claimed invention.'';
                        (B) in paragraph (2)--
                                (i) by striking ``The sale or other
                            disposition of a useful end result produced by
                            a patented method'' and inserting ``The sale or
                            other disposition of subject matter that
                            qualifies for the defense set forth in this
                            section''; and
                                (ii) by striking ``a defense under this
                            section with respect to that useful end
                            result'' and inserting ``such defense''; and
                        (C) in paragraph (3)--
                                (i) by striking subparagraph (A); and
                                (ii) by redesignating subparagraphs (B) and
                            (C) as subparagraphs (A) and (B), respectively;
                (3) in paragraph (7), by striking ``of the patent'' and
            inserting ``of the claimed invention''; and
                (4) by amending the heading to read as follows:

    ``Sec. 273. Special defenses to and exemptions from infringement''.

        (c) Table of Sections.--The item relating to section 273 in the
    table of sections for chapter 28 is amended to read as follows:

        ``273. Special defenses to and exemptions from infringement.''.
        (d) Effective Date.--The amendments made by this section shall
    apply to any civil action commenced on or after the date of enactment
    of this Act.

    SEC. 6. POST-GRANT PROCEDURES AND OTHER QUALITY ENHANCEMENTS.

        (a) Reexamination.--Section 303(a) is amended to read as follows:
        ``(a) Within 3 months after the owner of a patent files a request
    for reexamination under section 302, the Director shall determine
    whether a substantial new question of patentability affecting any claim
    of the patent concerned is raised by the request, with or without
    consideration of other patents or printed publications. On the
    Director's own initiative, and at any time, the Director may determine
    whether a substantial new question of patentability is raised by
    patents and publications discovered by the Director, is cited under
    section 301, or is cited by any person other than the owner of the
    patent under section 302 or section 311. The existence of a substantial
    new question of patentability is not precluded by the fact that a
    patent or printed publication was previously cited by or to the Office
    or considered by the Office.''.
        (b) Reexamination.--Section 315(c) is amended by striking ``or
    could have raised''.
        (c) Reexamination Prohibited After District Court Decision.--
    Section 317(b) is amended--
                (1) in the subsection heading, by striking ``Final
            Decision'' and inserting ``District Court Decision''; and
                (2) by striking ``Once a final decision has been entered''
            and inserting ``Once the judgment of the district court has
            been entered''.
        (d) Effective Dates.--Notwithstanding any other provision of law,
    sections 311 through 318 of title 35, United States Code, as amended by
    this Act, shall apply to any patent that issues before, on, or after
    the date of enactment of this Act from an original application filed on
    any date.
        (e) Post-Grant Opposition Procedures.--
                (1) In general.--Part III is amended by adding at the end
            the following new chapter:

                   ``CHAPTER 32--POST-GRANT REVIEW PROCEDURES

        ``Sec.
        ``321. Petition for post-grant review.
        ``322. Timing and bases of petition.
        ``323. Requirements of petition.
        ``324. Prohibited filings.
        ``325. Submission of additional information; showing of sufficient
    grounds.
        ``326. Conduct of post-grant review proceedings.
        ``327. Patent owner response.
        ``328. Proof and evidentiary standards.
        ``329. Amendment of the patent.
        ``330. Decision of the Board.
        ``331. Effect of decision.
        ``332. Relationship to other pending proceedings.
        ``333. Effect of decisions rendered in civil action on future post-
    grant review proceedings.
        ``334. Effect of final decision on future proceedings.
        ``335. Appeal.

    ``Sec. 321. Petition for post-grant review

        ``Subject to sections 322, 324, 332, and 333, a person who is not
    the patent owner may file with the Office a petition for cancellation
    seeking to institute a post-grant review proceeding to cancel as
    unpatentable any claim of a patent on any ground that could be raised
    under paragraph (2) or (3) of section 282(b) (relating to invalidity of
    the patent or any claim). The Director shall establish, by regulation,
    fees to be paid by the person requesting the proceeding, in such
    amounts as the Director determines to be reasonable.

    ``Sec. 322. Timing and bases of petition

        ``A post-grant proceeding may be instituted under this chapter
    pursuant to a cancellation petition filed under section 321 only if--
                ``(1) the petition is filed not later than 12 months after
            the grant of the patent or issuance of a reissue patent, as the
            case may be;
                ``(2)(A) the petitioner establishes a substantial reason to
            believe that the continued existence of the challenged claim in
            the petition causes or is likely to cause the petitioner
            significant economic harm; or
                ``(B) the petitioner has received notice from the patent
            holder alleging infringement by the petitioner of the patent;
            or
                ``(3) the patent owner consents in writing to the
            proceeding.

    ``Sec. 323. Requirements of petition

        ``A cancellation petition filed under section 321 may be considered
    only if--
                ``(1) the petition is accompanied by payment of the fee
            established by the Director under section 321;
                ``(2) the petition identifies the cancellation petitioner;
            and
                ``(3) the petition sets forth in writing the basis for the
            cancellation, identifying each claim challenged and providing
            such information as the Director may require by regulation, and
            includes copies of patents and printed publications that the
            cancellation petitioner relies upon in support of the petition;
            and
                ``(4) the petitioner provides copies of those documents to
            the patent owner or, if applicable, the designated
            representative of the patent owner.

    ``Sec. 324. Prohibited filings

        ``A post-grant review proceeding may not be instituted under
    paragraph (1), (2), or (3) of section 322 if the petition for
    cancellation requesting the proceeding identifies the same cancellation
    petitioner and the same patent as a previous petition for cancellation
    filed under the same paragraph of section 322.

    ``Sec. 325. Submission of additional information; showing of sufficient
                        grounds

        ``The cancellation petitioner shall file such additional
    information with respect to the petition as the Director may require.
    The Director may not authorize a post-grant review proceeding to
    commence unless the Director determines that the information presented
    provides sufficient grounds to proceed.

    ``Sec. 326. Conduct of post-grant review proceedings

        ``(a) In General.--The Director shall--
                ``(1) prescribe regulations, in accordance with section
            2(b)(2), establishing and governing post-grant review
            proceedings under this chapter and their relationship to other
            proceedings under this title;
                ``(2) prescribe regulations setting forth the standards for
            showings of substantial reason to believe and significant
            economic harm under section 322(2) and sufficient grounds under
            section 325;
                ``(3) prescribe regulations establishing procedures for the
            submission of supplemental information after the petition for
            cancellation is filed; and
                ``(4) prescribe regulations setting forth procedures for
            discovery of relevant evidence, including that such discovery
            shall be limited to evidence directly related to factual
            assertions advanced by either party in the proceeding, and the
            procedures for obtaining such evidence shall be consistent with
            the purpose and nature of the proceeding.
        ``(b) Post-Grant Regulations.--Regulations under subsection
    (a)(1)--
                ``(1) shall require that the final determination in a post-
            grant proceeding issue not later than one year after the date
            on which the post-grant review proceeding is instituted under
            this chapter, except that, for good cause shown, the Director
            may extend the 1-year period by not more than six months;
                ``(2) shall provide for discovery upon order of the
            Director;
                ``(3) shall prescribe sanctions for abuse of discovery,
            abuse of process, or any other improper use of the proceeding,
            such as to harass or to cause unnecessary delay or unnecessary
            increase in the cost of the proceeding;
                ``(4) may provide for protective orders governing the
            exchange and submission of confidential information; and
                ``(5) shall ensure that any information submitted by the
            patent owner in support of any amendment entered under section
            328 is made available to the public as part of the prosecution
            history of the patent.
        ``(c) Considerations.--In prescribing regulations under this
    section, the Director shall consider the effect on the economy, the
    integrity of the patent system, and the efficient administration of the
    Office.
        ``(d) Conduct of Proceeding.--The Patent Trial and Appeal Board
    shall, in accordance with section 6(b), conduct each post-grant review
    proceeding authorized by the Director.

    ``Sec. 327. Patent owner response

        ``After a post-grant proceeding under this chapter has been
    instituted with respect to a patent, the patent owner shall have the
    right to file, within a time period set by the Director, a response to
    the cancellation petition. The patent owner shall file with the
    response, through affidavits or declarations, any additional factual
    evidence and expert opinions on which the patent owner relies in
    support of the response.

    ``Sec. 328. Proof and evidentiary standards

        ``(a) In General.--The presumption of validity set forth in section
    282 shall not apply in a challenge to any patent claim under this
    chapter.
        ``(b) Burden of Proof.--The party advancing a proposition under
    this chapter shall have the burden of proving that proposition by a
    preponderance of the evidence.

    ``Sec. 329. Amendment of the patent

        ``(a) In General.--In response to a challenge in a petition for
    cancellation, the patent owner may file 1 motion to amend the patent in
    1 or more of the following ways:
                ``(1) Cancel any challenged patent claim.
                ``(2) For each challenged claim, propose a substitute
            claim.
                ``(3) Amend the patent drawings or otherwise amend the
            patent other than the claims.
        ``(b) Additional Motions.--Additional motions to amend may be
    permitted only for good cause shown.
        ``(c) Scope of Claims.--An amendment under this section may not
    enlarge the scope of the claims of the patent or introduce new matter.

    ``Sec. 330. Decision of the Board

        ``If the post-grant review proceeding is instituted and not
    dismissed under this chapter, the Patent Trial and Appeal Board shall
    issue a final written decision with respect to the patentability of any
    patent claim challenged and any new claim added under section 329.

    ``Sec. 331. Effect of decision

        ``(a) In General.--If the Patent Trial and Appeal Board issues a
    final decision under section 330 and the time for appeal has expired or
    any appeal proceeding has terminated, the Director shall issue and
    publish a certificate canceling any claim of the patent finally
    determined to be unpatentable and incorporating in the patent by
    operation of the certificate any new claim determined to be patentable.
        ``(b) New Claims.--Any new claim held to be patentable and
    incorporated into a patent in a post-grant review proceeding shall have
    the same effect as that specified in section 252 for reissued patents
    on the right of any person who made, purchased, offered to sell, or
    used within the United States, or imported into the United States,
    anything patented by such new claim, or who made substantial
    preparations therefore, prior to issuance of a certificate under
    subsection (a) of this section.

    ``Sec. 332. Relationship to other pending proceedings

        ``Notwithstanding subsection 135(a), sections 251 and 252, and
    chapter 30, the Director may determine the manner in which any
    reexamination proceeding, reissue proceeding, interference proceeding
    (commenced before the effective date of the Patent Reform Act of 2007),
    derivation proceeding, or post-grant review proceeding, that is pending
    during a post-grant review proceeding, may proceed, including providing
    for stay, transfer, consolidation, or termination of any such
    proceeding.

    ``Sec. 333. Effect of decisions rendered in civil action on future
                        post-grant review proceedings

        ``If a final decision has been entered against a party in a civil
    action arising in whole or in part under section 1338 of title 28
    establishing that the party has not sustained its burden of proving the
    invalidity of any patent claim--
                ``(1) that party to the civil action and the privies of
            that party may not thereafter request a post-grant review
            proceeding on that patent claim on the basis of any grounds,
            under the provisions of section 311, which that party or the
            privies of that party raised or had actual knowledge of; and
                ``(2) the Director may not thereafter maintain a post-grant
            review proceeding previously requested by that party or the
            privies of that party on the basis of such grounds.

    ``Sec. 334. Effect of final decision on future proceedings

        ``(a) In General.--If a final decision under section 330 is
    favorable to the patentability of any original or new claim of the
    patent challenged by the cancellation petitioner, the cancellation
    petitioner may not thereafter, based on any ground which the
    cancellation petitioner raised during the post-grant review
    proceeding--
                ``(1) request or pursue a reexamination of such claim under
            chapter 31;
                ``(2) request or pursue a derivation proceeding with
            respect to such claim;
                ``(3) request or pursue a post-grant review proceeding
            under this chapter with respect to such claim; or
                ``(4) assert the invalidity of any such claim, in any civil
            action arising in whole or in part under section 1338 of title
            28.
        ``(b) Extension of Prohibition.--If the final decision is the
    result of a petition for cancellation filed on the basis of paragraph
    (2) of section 322, the prohibition under this section shall extend to
    any ground which the cancellation petitioner raised during the post-
    grant review proceeding.

    ``Sec. 335. Appeal

        ``A party dissatisfied with the final determination of the Patent
    Trial and Appeal Board in a post-grant proceeding under this chapter
    may appeal the determination under sections 141 through 144. Any party
    to the post-grant proceeding shall have the right to be a party to the
    appeal.''.
        (f) Conforming Amendment.--The table of chapters for part III is
    amended by adding at the end the following:

                                        ``32. Post-Grant Review Proceedings
                                                         321''.
        (g) Regulations and Effective Date.--
                (1) Regulations.--The Under Secretary of Commerce for
            Intellectual Property and Director of the United States Patent
            and Trademark Office (in this subsection referred to as the
            ``Director'') shall, not later than the date that is 1 year
            after the date of the enactment of this Act, issue regulations
            to carry out chapter 32 of title 35, United States Code, as
            added by subsection (e) of this section
                (2) Applicability.--The amendments made by subsection (e)
            shall take effect on the date that is 1 year after the date of
            the enactment of this Act and shall apply to patents issued
            before, on, or after that date, except that, in the case of a
            patent issued before that date, a petition for cancellation
            under section 321 of title 35, United States Code, may be filed
            only if a circumstance described in paragraph (2), (3), or (4)
            of section 322 of title 35, United States Code, applies to the
            petition.
                (3) Pending interferences.--The Director shall determine
            the procedures under which interferences commenced before the
            effective date under paragraph (2) are to proceed, including
            whether any such interference is to be dismissed without
            prejudice to the filing of a cancellation petition for a post-
            grant opposition proceeding under chapter 32 of title 35,
            United States Code, or is to proceed as if this Act had not
            been enacted. The Director shall include such procedures in
            regulations issued under paragraph (1).

    SEC. 7. DEFINITIONS; PATENT TRIAL AND APPEAL BOARD.

        (a) Definitions.--Section 100 (as amended by this Act) is further
    amended--
                (1) in subsection (e), by striking ``or inter partes
            reexamination under section 311'';
                (2) by adding at the end the following:
        ``(k) The term `cancellation petitioner' means the real party in
    interest requesting cancellation of any claim of a patent under chapter
    31 of this title and the privies of the real party in interest.''.
        (b) Patent Trial and Appeal Board.--Section 6 is amended to read as
    follows:

    ``Sec. 6. Patent Trial and Appeal Board

        ``(a) Establishment and Composition.--There shall be in the Office
    a Patent Trial and Appeal Board. The Director, the Deputy Director, the
    Commissioner for Patents, the Commissioner for Trademarks, and the
    administrative patent judges shall constitute the Patent Trial and
    Appeal Board. The administrative patent judges shall be persons of
    competent legal knowledge and scientific ability who are appointed by
    the Director. Any reference in any Federal law, Executive order, rule,
    regulation, or delegation of authority, or any document of or
    pertaining to the Board of Patent Appeals and Interferences is deemed
    to refer to the Patent Trial and Appeal Board.
        ``(b) Duties.--The Patent Trial and Appeal Board shall--
                ``(1) on written appeal of an applicant, review adverse
            decisions of examiners upon application for patents;
                ``(2) on written appeal of a patent owner, review adverse
            decisions of examiners upon patents in reexamination
            proceedings under chapter 30; and
                ``(3) determine priority and patentability of invention in
            derivation proceedings under subsection 135(a); and
                ``(4) conduct post-grant opposition proceedings under
            chapter 32.
    Each appeal and derivation proceeding shall be heard by at least 3
    members of the Patent Trial and Appeal Board, who shall be designated
    by the Director. Only the Patent Trial and Appeal Board may grant
    rehearings. The Director shall assign each post-grant review proceeding
    to a panel of 3 administrative patent judges. Once assigned, each such
    panel of administrative patent judges shall have the responsibilities
    under chapter 32 in connection with post-grant review proceedings.''.

    SEC. 8. STUDY AND REPORT ON REEXAMINATION PROCEEDINGS.

        The Under Secretary of Commerce for Intellectual Property and
    Director of the Patent and Trademark Office shall, not later than 3
    years after the date of the enactment of this Act--
                (1) conduct a study of the effectiveness and efficiency of
            the different forms of proceedings available under title 35,
            United States Code, for the reexamination of patents; and
                (2) submit to the Committees on the Judiciary of the House
            of Representatives and the Senate a report on the results of
            the study, including any of the Director's suggestions for
            amending the law, and any other recommendations the Director
            has with respect to patent reexamination proceedings.

    SEC. 9. SUBMISSIONS BY THIRD PARTIES AND OTHER QUALITY ENHANCEMENTS.

        (a) Publication.--Section 122(b)(2) is amended--
                (1) by striking subparagraph (B); and
                (2) in subparagraph (A)--
                        (A) by striking ``(A) An application'' and
                    inserting ``An application''; and
                        (B) by redesignating clauses (i) through (iv) as
                    subparagraphs (A) through (D), respectively.
        (b) Preissuance Submissions by Third Parties.--Section 122 is
    amended by adding at the end the following:
        ``(e) Preissuance Submissions by Third Parties.--
                ``(1) In general.--Any person may submit for consideration
            and inclusion in the record of a patent application, any
            patent, published patent application or other publication of
            potential relevance to the examination of the application, if
            such submission is made in writing before the earlier of--
                        ``(A) the date a notice of allowance under section
                    151 is mailed in the application for patent; or
                        ``(B) either--
                                ``(i) 6 months after the date on which the
                            application for patent is published under
                            section 122, or
                                ``(ii) the date of the first rejection
                            under section 132 of any claim by the examiner
                            during the examination of the application for
                            patent,
                    whichever occurs later.
                ``(2) Other requirements.--Any submission under paragraph
            (1) shall--
                        ``(A) set forth a concise description of the
                    asserted relevance of each submitted document;
                        ``(B) be accompanied by such fee as the Director
                    may prescribe; and
                        ``(C) include a statement by the submitter
                    affirming that the submission was made in compliance
                    with this section.''.

    SEC. 10. VENUE AND JURISDICTION.

        (a) Venue for Patent Cases.--Section 1400 of title 28, United
    States Code, is amended by striking subsection (b) and inserting the
    following:
        ``(b) Any civil action arising under any Act of Congress relating
    to patents, other than an action for declaratory judgment or an action
    seeking review of a decision of the Patent Trial and Appeal Board under
    chapter 13 of title 35, may be brought only--
                ``(1) in the judicial district where either party resides;
            or
                ``(2) in the judicial district where the defendant has
            committed acts of infringement and has a regular and
            established place of business.
        ``(c) Notwithstanding section 1391(c) of this title, for purposes
    of venue under subsection (b), a corporation shall be deemed to reside
    in the judicial district in which the corporation has its principal
    place of business or in the State in which the corporation is
    incorporated.''.
        (b) Interlocutory Appeals.--Subsection (c)(2) of section 1292 of
    title 28, United States Code, is amended by adding at the end the
    following:
                ``(3) of an appeal from an interlocutory order or decree
            determining construction of claims in a civil action for patent
            infringement under section 271 of title 35.
    Application for an appeal under paragraph (3) shall be made to the
    court within 10 days after entry of the order or decree, and
    proceedings in the district court under such paragraph shall be stayed
    during pendency of the appeal.''.

    SEC. 11. REGULATORY AUTHORITY.

        Section 3(a) is amended by adding at the end the following:
                ``(5) Regulatory authority.--In addition to the authority
            conferred by other provisions of this title, the Director may
            promulgate such rules, regulations, and orders that the
            Director determines appropriate to carry out the provisions of
            this title or any other law applicable to the United States
            Patent and Trademark Office or that the Director determines
            necessary to govern the operation and organization of the
            Office.''.

    SEC. 12. TECHNICAL AMENDMENTS.

        (a) Joint Inventions.--Section 116 is amended--
                        (1) in the first paragraph, by striking ``When''
                    and inserting ``(a) Joint Inventions.--When'';
                        (2) in the second paragraph, by striking ``If a
                    joint inventor'' and inserting ``(b) Omitted
                    Inventor.--If a joint inventor''; and
                        (3) in the third paragraph, by striking
                    ``Whenever'' and inserting ``(c) Correction of Errors
                    in Application.--Whenever''.
        (b) Filing of Application in Foreign Country.--Section 184 is
    amended--
                (1) in the first paragraph, by striking ``Except when'' and
            inserting ``(a) Filing in Foreign Country.--Except when'';
                (2) in the second paragraph, by striking ``The term'' and
            inserting ``(b) Application.--The term''; and
                (3) in the third paragraph, by striking ``The scope'' and
            inserting ``(c) Subsequent Modifications, Amendments, and
            Supplements.--The scope''.
        (c) Reissue of Defective Patents.--Section 251 is amended--
                (1) in the first paragraph, by striking ``Whenever'' and
            inserting ``(a) In General.--Whenever'';
                (2) in the second paragraph, by striking ``The Director''
            and inserting ``(b) Multiple Reissued Patents.--The Director'';
                (3) in the third paragraph, by striking ``The provision''
            and inserting ``(c) Applicability of This Title.--The
            provisions''; and
                (4) in the last paragraph, by striking ``No reissued
            patent'' and inserting ``(d) Reissue Patent Enlarging Scope of
            Claims.--No reissued patent''.
        (d) Effect of Reissue.--Section 253 is amended--
                (1) in the first paragraph, by striking ``Whenever'' and
            inserting ``(a) In General.--Whenever''; and
                (2) in the second paragraph, by striking ``in like manner''
            and inserting ``(b) Additional Disclaimer or Dedication.--In
            the manner set forth in subsection (a),''.
        (e) Correction of Named Inventor.--Section 256 is amended--
                (1) in the first paragraph, by striking ``Whenever'' and
            inserting ``(a) Correction.--Whenever''; and
                (2) in the second paragraph, by striking ``The error'' and
            inserting ``(b) Patent Valid if Error Corrected.--The error''.
        (f) Presumption of Validity.--Section 282 is amended--
                (1) in the first undesignated paragraph, by striking ``A
            patent'' and inserting ``(a) In General.--A patent'';
                (2) in the second undesignated paragraph, by striking ``The
            following'' and inserting ``(b) Defenses.--The following''; and
                (3) in the third undesignated paragraph, by striking ``In
            actions'' and inserting ``(c) Notice of Actions; Actions During
            Extension of Patent Term.--In actions''.

    SEC. 13. EFFECTIVE DATE; RULE OF CONSTRUCTION.

        (a) Effective Date.--Except as otherwise provided in this Act, the
    provisions of this Act shall take effect 12 months after the date of
    the enactment of this Act and shall apply to any patent issued on or
    after that effective date.
        (b) Continuity of Intent Under the Create Act.--The enactment of
    section 102(b)(3) of title 35, United States Code, under section (3)(b)
    of this Act is done with the same intent to promote joint research
    activities that was expressed, including in the legislative history,
    through the enactment of the Cooperative Research and Technology
    Enhancement Act of 2004 (Public Law 108-453; the ``CREATE Act''), the
    amendments of which are stricken by section 3(c) of this Act. The
    United States Patent and Trademark Office shall administer section
    102(b)(3) of title 35, United States Code, in a manner consistent with
    the legislative history of the CREATE Act that was relevant to its
    administration by the Patent and Trademark Office.

        Mr. Berman. In brief the bill contains the following
    changes: Section 3, in accordance with a number of
    recommendations, moves the U.S. from a first-to-invent system
    to a first-inventor-to-file system. The U.S. stands alone in
    the world in awarding patents on the basis of first to invent.
    In making this change, we harmonize this aspect of U.S. patent
    law with other countries, thereby making it easier for U.S.
    inventors to navigate international protection for their
    patents.
        Section 5 contains two important provisions relating to
    damages: (1), apportionment; and (2), willfulness. In order to
    prevent excessive damages, as some have characterized the
    damages awarded in the Alcatel v. Microsoft case and a number
    of other cases that came down before that case, the
    apportionment language is designed to ensure that in most cases
    a reasonable royalty will reflect the value of the underlying
    invention.
        As to willfulness, in order to discourage nuisance
    licensing letters that trigger treble damages, the bill
    requires that a notice be clear about the patent and what acts
    allegedly infringe the patent before the infringement can be
    considered willful.
        Section 6 establishes what will hopefully be a meaningful
    postgrant opposition proceeding. Postgrant will operate as a
    check on the quality of patents issued from the USPTO and will
    provide a less costly and more efficient alternative to
    litigation. Postgrant provides the ability to challenge the
    validity of a patent and provides mechanisms to prevent
    harassment. The goal is to provide one petitioner one shot at
    one patent. A drafting error, as I mentioned earlier, allows
    multiple windows to be opened, but once amended, if a
    petitioner opts to institute a postgrant proceeding, the
    petitioner may not later opt to utilize the postgrant
    proceeding again for the same patent. The USPTO Director must
    prescribe regulations to provide for the Board to issue
    sanctions for abuse of process. During this process, the
    Subcommittee may want to consider providing additional
    statutory guidance for the Director of the USPTO on the
    structure of the postgrant proceeding.
        This is the loudest I ever spoke. I will speak louder.
        Section 8 contains a requirement for the Director to
    conduct a study about the interplay and the efficacy of the
    various reexamination procedures so that Congress will be able
    to make an informed decision on which proceedings should be
    phased out or eliminated.
        Section 9 permits third parties a limited amount of time to
    submit to the USPTO prior art references relevant to a pending
    patent application. Allowing such third-party submissions will
    increase the likelihood that examiners have available to them
    the most relevant prior art, thereby constituting a front-end
    solution for strengthening patent quality.
        Section 10 tightens up the venue statute for patent cases
    and offers the ability to appeal claim construction before a
    trial is over.
        Section 11 grants the PTO regulatory authority commensurate
    with other agencies. Taken together, and as stated earlier,
    these provisions represent the starting point for this
    discussion.
        The reason Congressman Rick Boucher and I got involved in
    this issue over 5 years ago was because we identified a number
    of needed reforms to address patent quality concerns. For me,
    patent reform is about finding the right balance and
    maintaining good public policy. Clearly robust protection
    should be provided for intellectual property, but only for
    inventions that are truly inventive and deserving protection.
        While this bill is based on former iterations of bills I
    sponsored and supported, some with Mr. Boucher, some with the
    Ranking Member of the full Committee Mr. Smith, I am not wedded
    to every word of my proposal; however, I am wedded to finding a
    solution that works.
        It is easy for groups to support parts of the bill they
    like or are unaffected by; however, the most controversial
    parts of the bill are those that seek to address the most
    serious weaknesses in our patent system that we began to
    identify years ago. For any other reforms to move forward, the
    different industry sectors would be best served by coming
    together to resolve the hard issues. Change is always
    difficult, but I would hope that those with the most inventive
    spirit will be able to focus on productive ways to address the
    problems.
        I now conclude my statement and would recognize our
    distinguished Ranking Member, who is not unfamiliar with patent
    reform battles in the past, my friend and colleague Howard
    Coble, for his opening statement.
        [The prepared statement of Mr. Berman follows:]
    Prepared Statement of the Honorable Howard L. Berman, a Representative
    in Congress from the State of California, and Chairman, Subcommittee on
                Courts, the Internet, and Intellectual Property
        Let me begin by describing what this hearing is NOT about.
        This hearing is not about creating a dynamic where all the
    witnesses testifying support this bill. In fact, while the witnesses
    have identified some aspects of the bill they like, a majority disagree
    with major portions of the bill--(and there would have been another
    witness to raise disagreement with the bill but the independent
    inventor I invited couldn't be here today). My goal is to foster the
    policy discussion to yield the best result.
        This hearing is not about a perfect bill. I expect over the course
    of the next several weeks there will be numerous changes incorporated
    into the bill that reflect legitimate concerns over unintended
    consequences as well as reforms considered not presently included. For
    example, the issues of obviousness and 271(f) are currently before the
    Supreme Court are not addressed in the bill. Furthermore, as to
    drafting errors, I have already identified a number of necessary
    corrections that will be made (i.e. the word ``same'' should be changed
    to ``any'' in the Prohibited Filings section to allow for only one shot
    at a post-grant proceeding--you can't challenge in the 1st window and
    then challenge in the second).
        This hearing is not about promoting an agenda for a specific
    industry. While the media has portrayed the debate as a tech vs. PhRma
    battle--I prefer to see it as the inability of current patent laws to
    accommodate the differences of industry business models. For the
    sectors which rely on business method patents or products which
    incorporate many multiples of patents--the proliferation of
    questionable quality patents and the burgeoning of patent speculation
    prevents the system from promoting innovation. It is one system and it
    must work for everyone. It is without doubt that most groups who have a
    stake in the patent system recognize the need for reform. But it should
    be realized that the final make up of the reforms will certainly
    require compromise by all.
        The intention of this hearing IS to move beyond the previous
    rhetoric on patent reform and to address the real and serious problems
    confronting the US patent system. By bringing to this hearing the cross
    section of patent system users we have here today, I expect the
    discourse and debate on the reforms proposed in the bill to be
    instructive and thoughtful.
        This bi-partisan and bicameral bill draws from many of the issues
    raised by past legislative attempts, multiple hearings, and a slew of
    reports on patent reform by entities such as the National Academy of
    Science as well as the Federal Trade Commission, and the United States
    Patent and Trademark Office, among others.
        H.R. 1908 is both long and complex. I do not expect that everyone
    has had a chance to fully digest all of the changes proposed by the
    bill. However ``The Patent Reform Act of 2007'' is effectively now our
    starting point and this hearing I hope will propel discussion on where
    the bill should go. I would like thank the witnesses and especially my
    subcommittee members for beginning the process today.
        In brief, the bill contains the following changes:
        Section 3, in accordance with a number of recommendations, moves
    the US from a ``first-to-invent'' system to a ``first-inventor-to-
    file'' system. The U.S. stands alone in the world in awarding patents
    on the basis of first to invent. In making this change, we harmonize
    this aspect of U.S. patent law with other countries, thereby making it
    easier for US inventors to navigate international protection for their
    patents.
        [Section 4, probably the least controversial portion of the bill,
    is designed to simplify the process for providing an inventor's oath.]
        Section 5 contains two important provisions related to damages; 1)
    apportionment and 2) willfulness. In order to prevent excessive
    damages--as some have characterized the damages awarded in the Alcatel
    v. Microsoft case and a number of other cases--the apportionment
    language is designed to ensure that in most cases a reasonable royalty
    will reflect the value of the underlying invention. As to willfulness,
    in order to discourage nuisance licensing letters that trigger treble
    damages, the bill requires that a notice be clear about the patent and
    what acts allegedly infringe the patent before the infringement can be
    considered willful.
        Section 6 establishes what will hopefully be a meaningful post-
    grant opposition proceeding. Post-grant will operate as a check on the
    quality of patents issued from the USPTO and will provide a less costly
    and more efficient alternative to litigation. Post-grant provides the
    ability to challenge the validity of a patent and provides mechanisms
    to prevent harassment. The goal is to provide one petitioner one shot
    at one patent (a drafting error allows multiple windows to be opened--
    but once amended--if a petitioner opts to institute a post-grant
    proceeding, the petitioner may not later opt to utilize the post-grant
    proceeding again for the same patent.) Furthermore, the USPTO Director
    must prescribe regulations to provide for the Board to issue sanctions
    for abuse of process. During this process, the Subcommittee may want to
    consider providing additional statutory guidance for the Director of
    the USPTO on the structure of the post-grant proceeding.
        Section 8 contains a requirement for the Director to conduct a
    study about the interplay and the efficacy of the various re-
    examination procedures so that Congress will be able to make an
    informed decision on which proceedings should be phased out or
    eliminated.
        Section 9 permits third parties a limited amount of time to submit
    to the USPTO prior art references relevant to a pending patent
    application. Allowing such third party submissions will increase the
    likelihood that examiners have available to them the most relevant
    ``prior art,'' thereby constituting a front-end solution for
    strengthening patent quality.
        Section 10 tightens up the venue statute for patent cases and
    offers the ability to appeal claim construction before a trial is over.
        Section 11 grants the PTO regulatory authority commensurate with
    other agencies.
        Taken together and as stated earlier, these provisions represent
    the starting point for this discussion.
        The reason Congressman Rick Boucher and I got involved in this
    issue over 5 years ago was because we identified a number of needed
    reforms to address patent quality concerns. For me, patent reform is
    about finding the right balance and maintaining good public policy.
    Clearly, robust protection should be provided for intellectual property
    but only for inventions that are truly inventive and deserving
    protection.
        While this bill is based on former iterations of bills I sponsored
    and supported, I am not wedded to every word of my proposal. However, I
    am wedded to finding a solution that works. It is easy for groups to
    support parts of the bill they like or are unaffected by. However, the
    most controversial parts of the bill are those that seek to address the
    most serious weaknesses in our patent system that we began to identify
    years ago. For any of the reforms to move forward, the different
    industry sectors would be best served by coming together to resolve the
    hard issues.
        Change is always difficult but I would hope that those with the
    most ``inventive'' spirit will be able to focus on productive ways to
    address the problems.

        Mr. Coble. Thank you, Mr. Chairman. Someone said you are
    having difficulty hearing. Can you hear in the back okay?
        Thank you, Mr. Chairman.
        I, too, remember the patent wars we fought together during
    the late 1990's that actually took about 5 years, you will
    recall, Mr. Chairman, to pass the last omnibus reform measure
    in 1999, entitled the American Inventors Protection Act. It was
    a good bill and improved patent practice in this country. And
    if you all will pardon my modesty, Chairman Berman and I and
    several in the audience were instrumental in getting that law
    passed.
        Early on, Mr. Chairman, you will recall we had Democrats
    fighting Democrats, Republicans fighting Republicans, and, of
    course, that created much interest. I received a call from a
    reporter in San Francisco who said to me, I have been covering
    patent law matters for 13 years. He said, it is the most dull,
    boring, esoteric assignment I have ever had until now. Keep the
    fighting going, he said. I hope, Mr. Chairman, there will be
    more harmony in the early days this time.
        Some of the issues we attempted to address then were not
    politically ripe for reform. Nearly 8 years later, as you
    pointed out, I think we are better positioned to review these
    matters again and evaluate other problems that have since
    evolved in the patent world. I will not attempt to provide an
    abridged description of every topical issue that is addressed
    in H.R. 1908, we would be here until suppertime if I did, but I
    would comment on what I believe is a sticking point to the
    debate.
        Different individuals and companies use the patent system
    in differing and varied ways. They have different business
    models that occasionally clash. This has engendered a
    discussion on whether too many patents of poor quality are
    circulating in the economy today, which in turn has generated
    questionable lawsuits governing infringement.
        None of us wants to support a system that rewards legal
    gamesmanship over true creativity, but in our zeal to weed out
    bad lawsuits, I think we need to avoid proceeding on the
    assumption that every patent holder who wants to license an
    invention or enforce his or her property rights is ill-
    intentioned. This is a standard and time-honored component of
    the patent system and should be preserved.
        Mr. Chairman, we had scant time to review the text of the
    bill, but when it was introduced--and I think it speaks well
    for you and for the Subcommittee that we have five Republican
    cosponsors at this early stage, at this early time, and
    sometimes unusual on this Hill, but not so on this
    Subcommittee. And I share your concern about wanting to enact
    reform if we can prior to the close of the calendar year. As we
    do this, and as we strive to do it, we should probably heed the
    admonition of John Wooden, the great basketball coach at your
    alma mater, UCLA, who exhorted his players to move quickly
    without hurrying. This is an important bill, Mr. Chairman, and
    I look forward to working with you and many in the audience and
    Members of the Subcommittee to its fruition, and I yield back.
        Mr. Berman. I thank the gentleman. I think Florida
    perfected that this year.
        In the interest of proceeding to our witnesses, and mindful
    of our busy schedules, I plan to recognize the Ranking Member
    of the full Committee Lamar Smith for an opening statement, and
    then ask other Members to submit their statements for the
    record, to be submitted by the close of business Wednesday. And
    without objection, all opening statements will be placed in the
    record.
        [The prepared statement of Ms. Jackson Lee follows:]
           Prepared Statement of the Honorable Sheila Jackson Lee, a
        Representative in Congress from the State of Texas, and Member,
        Subcommittee on Courts, the Internet, and Intellectual Property

        Mr. Berman. I recognize the gentleman from Texas, the
    Ranking Member of the Judiciary Committee.
        Mr. Smith. Thank you, Mr. Chairman. First of all, I want to
    say it is a credit to you that you have invited the witnesses
    and the Ranking Member have invited the witnesses that we have
    here today. As you pointed out earlier, they are not
    necessarily all enthusiastic supporters of every component of
    the piece of legislation that we are considering; however, they
    are all credible, and all have legitimate points of view, which
    we look forward to hearing.
        I would like to single out one individual, Mr. Peterman,
    just because he represents a constituent firm--I guess
    technically it is a former constituent firm since I no longer
    represent the county that the firm is located in, but
    nevertheless those are still, as far as I am concerned, strong
    ties.
        I would also, speaking to people who are present, like to
    compliment our colleague from California Mr. Schiff for
    doubling his representation today and for being a good father.
    My only question is is it permissible under our rules for a
    daughter to yield her father her 5 minutes of time for
    questions?
        Mr. Schiff. She would never yield to me.
        Mr. Smith. The response was she would never yield to her
    dad. So anyhow, I appreciate his efforts to include other
    members of the family here.
        Mr. Chairman, our Subcommittee is one of the few whose
    jurisdiction is specifically defined in the Constitution,
    article I, section 8. This passage empowers Congress, quote, to
    promote the progress of science and the useful arts by securing
    for limited times to authors and inventors the exclusive right
    to their respective writings and discoveries, end quote.
        The foresight of the Founders in creating an intellectual
    property system demonstrates their understanding of how patent
    rights ultimately benefit the American people. Nor was the
    value of patents lost on one of our greatest Presidents,
    Abraham Lincoln, who actually filed a patent himself. As a
    young man, Lincoln took a boatload of merchandise down the
    Mississippi River from New Salem to New Orleans. The boat slid
    onto a dam and was dislodged only by heroic efforts. A few
    years later while crossing the Great Lakes, Lincoln's ship ran
    afoul of a sandbar. These two similar experiences led him to
    invent a solution to the problem. The invention consists of a
    set of bellows attached to the hull of the ship just below the
    water line. When a vessel is in danger of getting stuck in
    shallow water, the bellows are filled with air, and the vessel
    that is buoyed floats clear of the obstacle.
        Although Lincoln never profited from his invention, he was
    a strong supporter of the patent system, saying it, quote,
    added the fuel of interest to the fire of genius in the
    discovery and production of new and useful things, end quote.
        It is important to remember the origins of our patent
    system as we deliberate the latest potential addition to it,
    H.R. 1908. Last year we laid a substantial foundation for
    patent reform, and I am pleased that we have continued that
    momentum this year with the introduction of H.R. 1908. The need
    to enact patent reform in the 110th Congress is great. This
    bill represents a good starting point for us to work through
    the remaining issues to complete that task. Chairman Berman,
    Ranking Member Coble and I have talked about the text of the
    legislation, and we agree that modifications will be made as
    needed and where appropriate.
        At this time we should focus our discussion on the elements
    of the bill, not other issues that might be the subject of
    either a Supreme Court decision or, in its absence, another
    hearing. As we proceed in the coming weeks and months, we must
    also strive to create a transparent and inclusive process for
    Members as well as those affected by our work.
        This is the most significant, comprehensive update to
    patent law within the past decade. Arguably it represents the
    biggest change since the 1952 act was written. This
    Subcommittee has undertaken such responsibility because the
    changes are necessary to bolster the U.S. economy and improve
    the quality of living for all Americans.
        A recent study valued U.S. intellectual property at
    approximately $5 trillion, or about half of U.S. gross domestic
    product. American IP industries now account for over half of
    all U.S. exports and represent 40 percent of our economic
    growth. These industries also provide millions of Americans
    with well-paying jobs. When IP industries benefit, so do
    Americans.
        This bill will eliminate from the current system the legal
    gamesmanship that awards lawsuit abuses over creativity. It
    will enhance the quality of patents and increase public
    confidence in their integrity. This will encourage individuals
    and companies to engage in research, commercialize their
    inventions, grow their businesses, create new jobs and offer
    the American public an array of products and services that
    makes our country the envy of the world. All businesses, small
    and large, should benefit. All industries directly or
    indirectly affected by patents, including finance, automotive,
    manufacturing, high tech and pharmaceuticals, can also profit.
        I am confident that by moving ahead, we will produce a bill
    that protects intellectual property, generates jobs, increases
    productivity, enhances patent quality and curtailing frivolous
    lawsuits. H.R. 1908 can potentially, as we proceed along the
    process, benefit almost everyone, from the lone inventor in the
    garage to a high-tech company that files 1,000 patents each
    year, and most businesses in between.
        I look forward to working with you, Mr. Chairman, and the
    Ranking Member and others on this legislation in the weeks
    ahead. Thank you for recognizing me, and I will yield back the
    balance of my time.
        [The prepared statement of Mr. Smith follows:]
     Prepared Statement of the Honorable Lamar Smith, a Representative in
     Congress from the State of Texas, and Member, Subcommittee on Courts,
                    the Internet, and Intellectual Property

        Mr. Berman. I thank the gentleman.
        And now the introduction of witnesses. Our first witness
    will be Mr. Kevin Sharer, who is coming from Thousand Oaks, CA.
    He is chief executive officer and chairman of the board of
    directors of Amgen. Before joining Amgen in 1992, Mr. Sharer
    served in a variety of executive positions for MCI and General
    Electric. And in addition to his duties at Amgen, he serves on
    the board of directors for some major companies and also on the
    Board of the U.S. Naval Academy Foundation. He received his
    bachelor's degree in aeronautical engineering from the U.S.
    Naval Academy, a master's degree in aeronautical engineering
    from the U.S. Naval Postgraduate School, and a degree in
    business administration from the University of Pittsburgh.
        Our next witness is Mr. Gary Griswold, president and chief
    intellectual property counsel of 3M Innovative Properties
    Company. He has practiced intellectual property law at 3M and
    DuPont for over 30 years. He is past president of Intellectual
    Property Owners and the American Intellectual Property Law
    Association, holds a B.S. In chemical engineering from Iowa
    State and M.S. In industrial administration from Duke
    University, and a J.D. From the University of Maryland.
        Our third witness will be Professor Jay Thomas, who, I
    might add, has been an often-used resource by this
    Subcommittee. Professor Thomas is a professor of law at
    Georgetown University. He recently received a grant from the
    MacArthur Foundation that will allow him to continue to work as
    a visiting scholar for the Congressional Research Service.
    Professor Thomas has published five books pertaining to patent
    law, intellectual property law and pharmaceutical patent law.
    He also previously served as law clerk to Chief Judge Helen
    Nies of the U.S. Court of Appeals for the Federal circuit.
        Dr. William Tucker will be our fourth witness. He is
    executive director of the Office of Technology Transfer, for
    Research, Administration and Technology Transfer for the
    University of California. Dr. Tucker's career has focused
    primarily on agricultural biotechnology research and licensing.
    Prior to joining the University of California, Dr. Tucker
    worked for a number of biotechnology firms including Paradigm
    Genetics, Celera Genomics, and Applied Biosystems; holds a B.S.
    And Ph.D. in microbiology from Queensland and an B.A. From St.
    Mary's College.
        Our last witness is Anthony Peterman. Mr. Peterman is legal
    director of patents for Dell, where he is responsible for
    overseeing all patent-related legal issues for the company.
    Prior to joining Dell, Mr. Peterman was with the law firm Baker
    Botts, where he handled a variety of intellectual property
    litigation and transactional matters. Mr. Peterman has a B.S.
    Degree in electrical engineering and a J.D., both from the
    University of Texas--well, one of the degrees is socially
    useful.
        It is good to have all of you here, and we will be--your
    entire statements will be included in the record. We ask you to
    summarize, keep it within the 5-minute time limit.
        And, Mr. Sharer, why don't you--well let me just mention
    initially, Mr. Sharer does have to leave in about 45 minutes.
    So if there is an urgent--in the questioning, if there is some
    urgent need to ask him a question before he has to leave, after
    the witnesses have finished testifying, we would be willing to
    entertain that question. But I think by 3:15 or so or soon
    thereafter he will be gone.
        Mr. Sharer, good to have you here.

      TESTIMONY OF KEVIN SHARER, CHAIRMAN OF THE BOARD AND CHIEF
       ELeeECUTIVE OFFICER, AMGEN INCORPORATED, THOUSAND OAKS, CA

        Mr. Sharer. Thank you, Mr. Chairman. It is a real pleasure
    to be here today, and I got the audio-visual system or the mic
    anyway.
        Amgen is the world's largest biotechnology company, and we
    look forward to working with the Committee and you, Mr.
    Chairman, to reform the patent laws. We support patent reform.
    We are committed to working to find a consensus to move ahead.
    And I think in your opening statement you rightly state that
    there are different issues among the various industry groups,
    and we are committed to working with our colleagues in industry
    and with Congress to try to come out with a bill that works
    best for everyone.
        I think the Committee has a set of slides that my staff has
    provided that I am going to refer to, and I title the slide or
    the talk Patent Reform and Its Impact on Future Cures.
        I think it is worth noting that what we do at Amgen and our
    brethren in the biotechnology industry is invest huge amounts
    of at-risk capital to try to advance biology to cure the
    scourges of our time, the very worst diseases. Alzheimer's,
    Parkinson's, cancer, diabetes, we are trying to move science
    and medicine ahead for the good of our fellow citizens.
        The second slide says, Why Does the U.S. Lead the World in
    Biotechnology? This isn't very well known, but, in fact, as
    much as 90 percent of the world's efforts in biotechnology are
    concentrated in the United States, and that is not because we
    only are trying to develop biotechnology. Every advanced
    country in the world would like to have our position. There are
    a few reasons for that. We have access to capital here, both
    venture capital as well as capital markets. They are the envy
    of the world. Government, industry, academia all work together
    in their support of research and development. The Congress has
    funded the NIH at high levels. We support--we appreciate that.
    We have sound, science-based regulation in the FDA. The
    coverage and reimbursement policies of both the Government and
    insurance companies reward innovation. But foundationally, and
    perhaps most importantly, we have a reliable intellectual
    property protection system. That is the foundation upon which
    all of this risk is taken.
        The next slide talks about patents and why they are so
    important to us, and it kind of refers to the next slide as
    well. Our industry model is not like the industry model of some
    of our colleagues in the technology industry. It can cost as
    much as $1.2 billion to develop a drug. In fact, the leading
    drug in our pipeline right now, which we think holds real
    promise for osteoporosis and also bone cancer, is going to cost
    us more than that to develop. It is going to take more than 15
    years for that product, and we are proud to say we invented the
    science or discovered the science and have the intellectual
    property behind it.
        The other thing to point out is that most of what we do
    results in failure. This year Amgen will invest 22 percent of
    our revenues, or $3.4 billion, in basic and clinical research,
    and I fully expect most of those things to advance science, but
    very, very few of them ever to reach the market.
        I pointed out that there are different business models
    between the software technology and the biopharmaceutical
    industry, and I think those are at the root of some of the
    industry different points of view on what is the right way
    forward. I would only offer that our patents are relatively few
    for a product. Technology have many, many. Our product R&D
    cycle is very long, and the products last a long time.
        As I said, we do support patent reform. There are statutory
    changes that you propose that we fully support. I have listed
    them on the slide. In the interest of time, I won't repeat them
    here.
        We also urge some thought about some additional changes:
    diversion of PTO fees, limit inequitable conduct defenses to
    clear offenses, and eliminate the best mode requirement.
        As the Chairman said, we do have some views on some
    elements of the bill that concern us. There are two. One is
    postgrant opposition. It expands dramatically the ability to
    invalidate patents. We understand the logic behind it, but we
    seek a clear and quiet title that we can rely on going forward.
    We are also concerned about the ability of the PTO to deal with
    it.
        Also apportionment of damages as written is of concern to
    us. The right to exclusive use is fundamental to the value of
    the patent, and with the recent Supreme Court decision in the
    EBay case, the value of damages to us as a defense is very,
    very important.
        And finally, I would just like to say, we really, really
    appreciate your leadership, and we look forward, Mr. Chairman
    and Members of the Committee, to work with you and our industry
    colleagues to advance this important bill. Thank you.
        Mr. Berman. Mr. Sharer.
        [The prepared statement of Mr. Sharer follows:]
                       Prepared Statement of Kevin Sharer

        Mr. Berman. And Mr. Griswold.

     TESTIMONY OF GARY L. GRISWOLD, PRESIDENT AND CHIEF COUNSEL OF
     INTELLECTUAL PROPERTY, 3M INNOVATIVE PROPERTIES, ST. PAUL, MN

        Mr. Griswold. Yes. Thank you, Chairman Berman, Ranking
    Member Coble and Members of the Subcommittee. I am pleased to
    have the opportunity to present the views of the Coalition for
    21st Century Patent Reform on H.R. 1908. The coalition's
    members share an interest in strengthening the country's
    competitive position by strengthening the patent system, both
    in regard to obtaining high-quality patents and providing for
    their enforcement.
        While I have heard the patent reform debate only involves
    two industry sectors, let me assure you this is wrong. As you
    noted, Mr. Chairman, patents matter to all companies,
    investors, and institutions involved in R&D.
        H.R. 1908 and all of a number of measures that could
    improve the U.S. patent system, first inventor to file,
    expanding prior art submission to patent examiners, limiting
    willful infringement and extending prior user rights.
        There are several aspects of the bill, however, that we
    believe need to be improved. I will address three: section 5 on
    apportionment damages; 6 regarding the availability of the
    second window; and the postgrant oppositions in the absence of
    provisions relating to inequitable conduct.
        While we are pleased that a reasonable royalty remains as a
    floor for reasonable damage awards, we are troubled by the
    proposal to change the law because some believe that the awards
    against adjudicated patent infringers are excessive. Limiting
    damages tilts the balance in favor of infringers at the expense
    of American researchers and innovators, and it has a profound
    implication on our system of intellectual property law.
        We are particularly troubled by the language in section 5
    requiring a court to exclude or subtract from the award the
    economic value which is properly attributable to prior art.
    When damages are being determined, the defendant has already
    been held to have infringed, and the patent owner is entitled
    to be made whole. If the test for damages becomes one in which
    the defendant can chip away at its liability for infringement
    by showing that the individual features of the invention were
    publicly known, the patent that needs remedy for infringement
    will be severely diminished.
        Most of you are familiar with these guys. In fact, we saw
    some calls on them the other day when we were talking to you.
    They include paper adhesive, both of which are known at the
    time of the invention. These Post-it notes, under the proposed
    prior art subtraction method for apportioning damages, an
    infringer of the Post-it note patent would be permitted to
    argue that the value of the paper and the adhesive, which are
    both known, should be subtracted from the value of the
    infringing notes, leaving essentially nothing on which to base
    the calculation of damages. In fact, this would be true of most
    inventions because individual elements of almost any invention
    are present somewhere in the world today, but it is the
    creative combination of those elements that results in
    invention. If damage apportionment is codified, it will not
    allow for fair compensation for inventors.
        Turning now to postgrant, the coalition supports an early
    opportunity for the public to weed out invalid patents, but we
    oppose allowing third parties unlimited second window
    opportunities to challenge patents. 3M has had firsthand
    experience with several attacks on its patents. In 2005, after
    we won a patent lawsuit on all issues at trial, the defendant
    initiated a reexamination on three references that had been
    known to the defendant before a trial. Six months later it
    initiated the second reexamination on other prior art that it
    had known before trial. We are not alone. Procter & Gamble won
    a patent infringement lawsuit on the elastic leg cuffs on the
    original Luvs diaper. The defendant did not appeal the
    decision; however, they filed four reexaminations, lost all of
    them, and it cost P&G a lot of money to defend those
    reexaminations.
        Although the bill would limit somewhat the opportunity to
    challenge patents and reexamination, it would allow new
    opportunities to challenge patents and postgrant proceedings
    throughout the life of the patent. Providing these repeated
    opportunities to challenge patents is expensive for large
    companies; can be devastating for small companies and start-
    ups.
        Reform of the law on inequitable conduct is not in the
    bill, but it should be, because incentives in the current
    system reduce patent quality rather than increase it. Today
    applicants have an incentive to submit every conceivable
    relevant piece of prior art and PTO to avoid a later charge
    that the applicant failed to disclose a relevant document.
    Applicants also have an incentive not to discuss any of this
    information with the examiner for fear of a later charge that
    somehow they misled the examiner. As a result the examiner is
    forced to sort through mountains of references without the aid
    of the applicant.
        We advocate adopting a ``but for'' test as a safe harbor.
    The patent is enforceable unless the defendant can prove that
    the PTO would have rejected the patent or claim but for the
    applicant's knowing and willful--but for the applicant's
    knowing and willful misconduct. This would properly limit the
    defense, and applicants would be freed to work openly with
    patent examiners to promptly issue high-quality patents.
        With regard to four other important issues, best mode,
    venue, interrogatory appeals and authorize the expanded PTO
    rulemaking, I refer you to my testimony.
        Thank you for the opportunity to express my views--the
    views of our coalition.
        [The prepared statement of Mr. Griswold follows:]
                      Prepared Statement of Gary Griswold

        Mr. Berman. Professor Thomas has been here before and, I
    might point out, has recently finished a paper on apportionment
    of damages, which, if you start in California on the airplane,
    you can finish by about Kansas.

       TESTIMONY OF JOHN R. THOMAS, PROFESSOR OF LAW, GEORGETOWN
                 UNIVERSITY LAW CENTER, WASHINGTON, DC

        Mr. Thomas. Thank you, Chairman Berman, Ranking Member
    Coble and Members of the Subcommittee. I am grateful to have
    the opportunity to come before you today to discuss the Patent
    Reform Act of 2007, and, of course, I testify here on my own
    behalf only.
        Allow me first to thank each Member of the Subcommittee and
    their staff for their continued travails within the murky world
    of the patent system. I recently attended talks by Chairman
    Berman and Ms. Lofgren on immigration reform that reminded me
    of the breadth and depth of topics that each Member of this
    Committee must address, and all of us in the patent community
    are grateful for your continued efforts here.
        My testimony is going to focus today on two aspects of this
    bill; first, a renewed emphasis upon market-based patent
    damages, which goes under the heading of apportionment; and
    also postgrant opposition proceedings, and in particular the
    emphasis upon the second window.
        Turning first to damages, the fundamental premise of the
    patent system is that the market is the best evaluator of the
    worth of inventions. Reliance upon market mechanisms allows the
    Government to promote innovation with relatively modest effort
    and expense, particularly in comparison to a prize-based
    system, which is the chief alternative to a patent regime. The
    patent law, therefore, aspires to award damages for
    infringement based on market-based rates that are intended to
    be compensatory, not punitive.
        Evidence is mounting, however, that judicial determinations
    of damages for patent infringement have begun to exceed market
    rates, and that is a trend that is in part due to, first, the
    increasing popularity of the patent system, we have more extant
    patents today than ever before; and also the notion that even
    everyday consumer products are increasingly high-tech, they
    embody not a dozen, not 20 patented inventions, but sometimes
    hundreds or thousands of them. So in this milieu the prospect
    that a high-technology firm must obtain some sort of license
    from multiple patent holders in order to market is a virtual
    certainty. Yet, the case law and empirical evidence alike
    suggest the courts are inclined to award damages that far
    exceed an individual patent's contribution to that particular
    product.
        I have gathered case law in my written statement. I also
    cite an empirical study by Lemley and Shapiro suggesting that
    the award rate on average exceeds 13 percent of the total
    market price. As Lemley and Shapiro suggest, that figure seems
    pretty high.
        Damage awards that dramatically exceed the commercial
    patented invention lead to a number of deleterious practical
    consequences. First, excessive damage awards may promote patent
    litigation, and they make litigation hard to settle because the
    parties are very far apart on exactly what the value of that
    infringement is. Second, it may promote speculation and
    entrepreneurship within the patent system. It may also cause
    patent protection to routinely extend beyond the scope of the
    patent claims, and all of these lead to the final concern, the
    imposition of unreasonable royalty burdens upon high-technology
    manufacturers.
        As currently worded, the damages reform of the Patent
    Reform Act appear to apply to both measures of damages in the
    patent law, reasonable royalties and lost profits. Because I
    believe the identical concerns over apportionment apply to both
    manner of damages calculations, I believe that application--
    that methodology, I should say, of apportionment to each
    methodology is appropriate.
        Let me turn quickly to the Patent Reform Act's provisions
    on postgrant administrative revocation proceedings, which are
    commonly called oppositions. Though a lot of benefits are said
    to flow from oppositions, concerns nonetheless have been
    expressed that they would inject a great deal of uncertainty
    into patent title, and this is a concern that is especially
    directed at the second window.
        Let me remind Members of the Committee that there are
    current postgrant proceedings in place that can take place at
    any time during the life of the patent. One of those, of
    course, is the reissue proceeding that is effectively as old as
    the patent system in this country, and under that proceeding
    any patent holder can go back to the Patent Office and seek a
    tune-up or tighten up the claims at any time. They can cancel
    claims. They can add new claims again throughout the life of
    the patent. So it is with the reexamination proceedings. Any
    member of the public, the Commissioner, the patentee itself can
    go back to the office and amend the claims. There are other
    provisions such as disclaimers that can occur at any time
    during the life of the patent.
        So I think it is important to the Committee as it hears
    concerns about stability of the right to recognize that the
    patent instrument is already somewhat fluid. There are already
    opportunities to amend claims. Oppositions, in my view, don't
    represent a sea change, but rather a marginal change to
    existing patent practice.
        Thank you very much, Mr. Chairman.
        Mr. Berman. Thank you very much, Professor.
        [The prepared statement of Mr. Thomas follows:]
                      Prepared Statement of John R. Thomas

        Mr. Berman. Mr. Tucker?

     TESTIMONY OF WILLIAM T. TUCKER, EXECUTIVE DIRECTOR, RESEARCH
       AND ADMINISTRATION AND TECHNOLOGY TRANSFER, UNIVERSITY OF
                        CALIFORNIA, OAKLAND, CA

        Mr. Tucker. Good afternoon, Chairman Berman and Ranking
    Member Coble and Members of the Subcommittee. I thank you for
    the opportunity to appear before you today and discuss patent
    law reform and offer the university's preliminary analysis of
    H.R. 1908, the Patent Law Reform Act of 2007. We thank you for
    your leadership on intellectual property matters and your
    desire to assure that the U.S. patent system is updated and
    performs well to create robust and reliable patents.
        UC looks forward to working with you and the rest of the
    Committee as you consider H.R. 1908. As executive director of
    UC's Office of Technology Transfer, I oversee functions that
    coordinate and support patenting and licensing activities
    across UC's 10 campuses and 5 medical centers. For 5
    consecutive years, UC has lead the Nation in the number of
    patents issued to universities. In the past 25 years our
    technology has resulted in over 700 new products being
    introduced in the market and spawned over 300 start-up
    companies. Over 80 percent of these companies are founded on UC
    technology, remain in business in some form today. These
    companies are the engines for economic development in
    California and across the Nation.
        Part of our mission as a university is to transfer
    knowledge created by our faculty, staff and students to benefit
    the public, and the Bayh-Dole Act has been incredibly
    successful in spawning technology-based companies and creating
    a return to the taxpayer for the Nation's investment in basic
    research at our universities.
        Now let me turn to our initial observations about H.R.
    1908. The university has some concerns that the proposed
    changes to the U.S. patent system in H.R. 1908 will diminish
    our ability to protect university-created inventions or
    leverage the economic value of these assets to ensure our
    Nation's technological leadership.
        UC understands that there are challenges with the U.S.
    patent system and appreciates that this legislation is intended
    to correct some of these difficulties. UC recognizes that many
    elements of H.R. 1908 encourage stronger and better-quality
    patents including the first window in the new postgrant
    opposition procedure, the new derivation procedure, the ability
    of third parties to submit prior art to the Patent Office, and
    especially the retention of the CREATE Act, which encourages
    research collaborations. We also thank the Committee for not
    including a loser pays attorneys' fees system and language to
    repeal 271(f).
        However, UC believes some elements of H.R. 1908 weaken our
    ability to achieve the public service mission, especially the
    transition from first-to-invent to first-inventor-to-file and
    expanded postgrant opposition. We believe that the proposed
    change from a first-to-invent to a first-inventor-to-file
    system has the potential of depriving the U.S. public from the
    benefit of groundbreaking research carried out at universities.
    Without patent protection, these breakthroughs may simply
    become publications in journals on dusty library shelves. The
    broad patent coverage for breakthrough discoveries creates
    intellectual property assets that secure the financial
    investment needed to transform early-stage research into
    products and services.
        Unlike our scientific colleagues and companies, university
    research is operated in an open environment where dissemination
    and sharing of research results is encouraged. In the publish
    or perish university environment, if a first-inventor-to-file
    system is not adequately mitigated with an effective grace
    period, it could result in the loss of patent protection for
    our inventions. We appreciate the inclusion of a grace period
    language in H.R. 1908, but have concerns it may not adequately
    address the reality of the academic university environment.
        Also, the rush to the Patent Office mentality created by a
    first-inventor-to-file system may force researchers to delay
    publication after a patent application is filed. This would
    slow the public reporting of scientific advances which is
    antithetical to the fundamental principle of academia and the
    intent of the patent system.
        We also see a risk that the first-inventor-to-file system
    could deprive the true inventor of his or her constitutional
    benefit.
        Now, turning to the new postgrant opposition procedure,
    while UC supports the first window of postgrant review within
    12 months of a patent's issuance, UC is concerned the second or
    third window included in H.R. 1908 will leave a patent holder
    open to repeated challenges to the validity of an issued patent
    over its lifetime. UC is concerned that the additional
    postgrant challenges will weaken the strength of issued patents
    and change the risk-reward relationship so that inventors will
    shy away from companies based on university-derived early-stage
    research.
        Unquestionably the vibrancy of the U.S. economy derives
    from the contribution of small businesses, and our technology-
    driven industries often begin with start-up companies founded
    on university-based discoveries. If changes in patent law
    create roadblocks to the formation of such businesses, I fear
    that the Nation's technology leadership position will be
    threatened. I have outlined some of our concerns and welcome
    the opportunity to work with the Committee as the legislation
    proceeds.
        Again, I thank the Chair, the Ranking Member and Members of
    the Committee for your leadership in the matter of patent
    reform and for the invitation to present to you this afternoon.
    I look forward to answering any of your questions. Thank you.
        Mr. Berman. Thank you very much.
        [The prepared statement of Mr. Tucker follows:]
                    Prepared Statement of William T. Tucker
        Good afternoon, Chairman Berman, Ranking Member Coble and members
    of the Subcommittee. My name is William (Bill) Tucker and I serve as
    the Executive Director for Research Administration and Technology
    Transfer in the University of California's Office of the President. I
    am here to testify on behalf of the University of California. Thank you
    for the opportunity to appear before you today to discuss the very
    important issue of patent law reform and specifically to offer our
    preliminary analysis of H.R. 1908, the ``Patent Reform Act of 2007.''
    The University of California (UC) appreciates the leadership of the
    House Judiciary Committee on the issue of Patent Reform, particularly
    in examining improvements that would best serve the nation's continued
    success at developing inventions that benefit the American public. UC
    looks forward to working with the Committee as it considers patent
    reform legislation.
        My career has spanned both the academic and industrial sectors,
    starting with a postdoctoral research fellowship at Stanford University
    under Professor Stanley Cohen, one of the inventors of gene splicing
    methods that launched the biotechnology industry, then as part of one
    of the first companies to explore opportunities for commercial
    applications of genetic engineering to agriculture. After working as a
    bench scientist during which time I was an inventor on two issued
    patents, I moved into technology management and business development
    working at various technology-based companies before joining UC's
    Office of Technology Transfer, where I focused on licensing plant
    varieties bred by UC faculty. I am now the Executive Director
    overseeing the administration, coordination, and support of technology
    licensing activities throughout the UC system. My experiences within
    both academia and industry have helped me appreciate the power of the
    U.S. patent system as a catalyst for creating technological change and
    economic value.
        I should mention that UC is a member of several higher education
    associations such as the Association of American Universities (AAU),
    the American Council on Education (ACE), the Association of American
    Medical Colleges (AAMC), the Council on Government Relations (COGR) and
    the National Association of State Universities and Land Grant Colleges
    (NASULGC), all of which have been actively reviewing patent reform
    legislation on behalf of universities. UC concurs with these
    organizations' recent joint statement on S. 3818, the ``Patent Reform
    Act of 2006,'' which was submitted to the House and Senate Judiciary
    Committees. To the extent that the provisions of H.R. 1908 are similar
    to the provisions in S. 3818, the comments offered today by UC are in
    large measure reflective of the higher education associations'
    statement.
        In view of the short time frame between the introduction of H.R.
    1908 last week and today's hearing, UC understands that the higher
    education associations as well as individual universities will need to
    undertake a more thorough review of H.R. 1908 before reaching any final
    position on the legislation. My comments today on behalf of UC are
    preliminary; we are continuing our review of the legislation.
        In evaluating H.R. 1908, UC's perspective is informed by its
    position in the patent community as a leader in technology transfer
    between academia and private industry, serving companies ranging from
    start-up ventures to Fortune 500 companies, and across all the industry
    groups who benefit from the innovative work done throughout our
    university system. It has been UC's experience that the U.S. patent
    system has worked well to foster innovation and to allow University-
    developed inventions to reach the marketplace for the benefit of the
    public.
        UC supports many of the patent reform proposals in H.R. 1908, but
    is also concerned with changes to the U.S. patent system which could
    weaken the ability of patent holders to protect the rights to their
    inventions, or which could harm university technology transfer efforts.
              i. background about uc's technology transfer program
        UC is comprised of ten campuses, including five medical schools,
    and participates in the management of three national laboratories, with
    over 170,000 faculty and staff serving 200,000 undergraduate and
    graduate students. Our many scientists and engineers conduct basic and
    applied research, collaborate with other research partners to build on
    the nation's scientific knowledge base, educate and train students at
    all levels, and make discoveries that can be transferred to industry
    and translated into products that benefit the general public. UC's
    technology transfer program is at the heart of this transition from
    promising early stage research to products and applications that
    benefits the public.
        UC established its first technology transfer office in the 1970's
    and since then has played an instrumental role in growing the
    California and national economy by leveraging the U.S. patent system to
    transform the technologies created by our faculty and staff into
    patented technologies that become the basis for new companies and
    industries. UC technology transfer encompasses a range of activities
    carried on throughout the system to facilitate this commercialization,
    including not only through traditional patenting and licensing efforts,
    but also through the development of relationships with businesses,
    industry, and government, in order to enhance the research and
    education missions of UC and contribute to the economic prosperity of
    California and the nation.
        For twelve consecutive years, UC has led the nation in the number
    of patents issued by the U.S. Patent and Trademark Office (USPTO) to
    universities, receiving 390 patents during 2005 alone (the latest date
    for which we have information). Indeed, in the recent Milken Institute
    report ``Mind to Market: A Global Analysis of University Biotechnology
    Transfer and Commercialization,'' UC was listed as one of the top
    universities in the world for successful technology transfer efforts.
    UC expends more than $4 billion on research activities, two-thirds of
    which comes from the federal government through contracts and grants.
    UC faculty disclosed a total of 1,314 inventions to UC in 2005. Since
    the inception of UC's technology transfer program, over 700 inventions
    have been translated into products with many more in the pipeline, and
    the ensuing royalties have been distributed to investors and the
    campuses to be reinvested in education and research. The American
    public reaps the benefits of the federal investment when products reach
    the marketplace for general use.
        UC's technology transfer successes contribute to important advances
    in scientific research and have a significant impact on the quality of
    lives of people in the U.S. and worldwide. Among UC's inventions that
    have been successfully commercialized are:

              a vaccination for the potentially-fatal Hepatitis B
            disease;

              the Cohen-Boyer recombinant DNA patent held jointly
            by UC and Stanford University that helped to spawn the
            development of the biotechnology industry;

              lung treatments for respiratory problems associated
            with premature births;

              a laser/water Atomic Force Microscope that helps
            scientists to better view and analyze different properties of
            matter at the nanoscale;

              a dynamic skin cooling device that allows more
            effective laser surgery with less pain and less post-operative
            scarring;

              the minimally invasive Guglielmi Detachable Coil used
            to treat brain aneurysms;

              the Cochlear Ear Implant to assist those with hearing
            loss;

              glucose monitoring techniques useful for diabetics;
            and

              the Nicotine Patch that assists smoking cessation,
            among many others.

        Inventions developed at UC and other U.S. universities have
    provided significant benefit to society, improving the health of people
    throughout the world. Some of these discoveries from universities are
    highlighted in a recent report from the Association of University
    Technology Managers (AUTM), the ``Better World Project,'' which is
    available at:  http://www.betterworldproject.net/.
        A university's ability to ensure that these technologies are
    successfully translated into useable products is predicated on having
    strong, reliable patents that encourage industrial partners and private
    equity funding sources to invest resources and commit to moving a
    laboratory-based discovery through the arduous and often risky
    development and commercialization process. Having a strong U.S. patent
    system where patent holders can depend on the certainty of their
    patents helps to ensure that technology transfer can occur.
                        ii. university patent licensing
    A. The Bayh-Dole Act and University Technology Transfer
        To understand UC's view of patent reform legislation, some
    background on university patent licensing is helpful. Before 1980,
    approximately 25 universities across the nation had established
    technology transfer offices. These offices were granted only a handful
    of patents and the ability to assert title to these patents was
    hampered by the uncertainty surrounding the timing and scope of agency
    approvals. There was no uniform federal patent policy at the time. In
    addition, universities were forced to file patent applications before
    their value could be assessed, and before they knew if they would be
    permitted to own the patent at all. Companies were disinclined to
    license these technologies given their uncertain legal status, and as a
    result, many potentially-promising inventions were left to languish.
        Today, more than 230 U.S. universities have technology transfer
    offices, evidence of the success of the groundbreaking Patent and
    Trademark Amendments Act, commonly known as the ``Bayh-Dole Act,''
    legislation passed in 1980 under the leadership of the House Judiciary
    Committee and the House Science Committee. The ``Bayh-Dole Act'' allows
    universities to retain title to patents made under federal funding in
    exchange for their commitment to work diligently with private industry
    to develop those inventions into useful products for the U.S. economy.
    The Bayh-Dole Act has been called one of the most successful pieces of
    legislation of the twentieth century and has been instrumental in
    furthering universities' paramount goal of creating and disseminating
    knowledge in an open academic environment while ensuring that the
    benefits of that research can be shared by the public.
        UC appreciates the Committee's continued commitment to preserving
    the Bayh-Dole Act with the Sense of Congress Resolution to honor the
    25th Anniversary of the Bayh-Dole Act, which passed in the House of
    Representatives on December 6, 2006.
    B. Small Businesses Need Strong Patents to Thrive in the U.S. Economy
        Universities are engines for innovation, but must rely on
    industrial partners to bring early stage ideas to the marketplace. As
    this Committee considers patent reform legislation, it is critically
    important to consider the implications such legislation will have on
    start up companies, other small businesses and the nation's economy. In
    particular, startup companies depend on strong patent protection to
    attract the venture capital and other financing necessary to launch a
    new enterprise.
        As encouraged by the Bayh-Dole Act, UC honors a preference to
    license its federally-funded inventions to small businesses. For
    example, in 2005, UC ranked second only to MIT in the number of
    licenses entered into with new startup companies during 2003-2005, as
    reported by the AUTM U.S. Licensing Survey (http://www.autm.net/
    surveys/dsp.Detail.cfm?pid=194). UC's licensed technologies can be
    linked to approximately 300 existing startup companies which use
    technology ranging from medical compounds and devices to electronics to
    biotechnology to semiconductors/nanotechnology. (See Figure 1.)
        Over the past 20 years, on average over 80 percent of companies
    founded based on a license to UC technologies are still in operation,
    either as stand-alone entities or through merger and acquisition. This
    observation is not unique to UC, but common among university based
    startups. These resilient university-based startup companies create
    long-term jobs and lead to sustainable regional economies. (See Figure
    2.)
        Such an innovation ecosystem, in which the universities, inventors,
    entrepreneurs and investors interact, has the potential to reinvent
    local economies. By way of example, such an innovation ecosystem helped
    the San Diego economy transition to one of the nation's leading high
    tech and biotechnology centers after the downsizing of the U.S.
    military presence there.
        The types of relationships and the stimulation of the regional
    economy exemplified by San Diego's example are replicated throughout
    the nation with many other universities. University research and
    licensing programs touch various aspects of the economy and it is
    extremely important that universities continue to play an instrumental
    role in supporting and growing the economy, creating jobs, encouraging
    American ingenuity and entrepreneurship, and making discoveries that
    are transferable to companies that are able to translate them into
    useful products.
     iii. uc preliminary analysis of h.r. 1908, the ``patent reform act of
                                     2007''
        UC applauds Chairman Berman, Ranking Member Coble and all of the
    Members of the Committee for their leadership on intellectual property
    matters, their stewardship of the intellectual property system and
    their care and concern for ensuring that the U.S. patent system is
    updated and performs well.
        UC understands there are challenges with the current U.S. patent
    system and appreciates that patent reform legislation is intended to
    correct some of these difficulties, especially as they relate to patent
    quality and patent validity. In making changes to the U.S. patent
    system, however, UC urges the Committee to pay careful attention to the
    unintended consequences that could negatively impact the technology
    transfer efforts of universities.
        In moving toward a more robust patent system, it is critical for
    Congress to ensure that the U.S. Patent and Trademark Office (USPTO)
    will have the sustained and sufficient fiscal resources to allow the
    USPTO to continue to provide timely and high quality service to
    American innovators while implementing any changes resulting from the
    legislation. It is also important to consider whether any reforms will
    add additional burdens to the USPTO's workload that would lead to
    delays in the already lengthy patent pendency process. The escalating
    workload at the USPTO demonstrates the high rate of American innovation
    and inventiveness. However, the USPTO has been challenged both
    financially and administratively, resulting in increased pendency of
    applications and perceived lapses in the quality of examination.
    A. UC Supports Many of the Proposed Reforms in H.R. 1908
        Upon an initial review of H.R. 1908, UC supports many provisions,
    including:

              the proposed new derivation proceedings to determine
            appropriate inventorship in proceedings before the USPTO;

              the creation of a procedure for third parties to
            submit prior art to the USPTO concerning pending patent
            applications;

              changes to the patent venue and jurisdiction
            procedure statutes;

              the creation of a Patent Trial and Appeal Board;

              a review of the existing reexamination procedure to
            determine its effectiveness;

              some of the language to create a new Post Grant
            Opposition procedure;

              the retention of the ``best mode'' requirement;

              that the legislation does not change the current
            state of the law on patent unenforceability;

              the retention of the CREATE Act, an important bill
            which encourages research collaborations in academic settings;
            and

              the retention of many provisions of the current prior
            art rules.

        Many of these provisions of H.R. 1908 will help to encourage the
    issuance of stronger and better quality patents from the USPTO.
        UC also wishes to thank the drafters for not including:

              a ``loser pays'' attorneys fee system for patent
            cases which had been included in S. 3818;

              language to repeal 35 U.S.C. Sec. 271(f); or

              additional restrictions on injunctions or the filing
            of continuation applications.

        UC would also have supported the inclusion of several additional
    provisions in H.R. 1908, including:

              a requirement that all patent applications be
            published after 18 months of their filing with the USPTO, and

              language to change the inequitable conduct defense so
            that findings are made by a court and only on appropriately-
            limited grounds of truly severe misconduct before the USPTO.

        While UC supports many elements of H.R. 1908 as outlined above, UC
    remains concerned about certain other elements of H.R. 1908 as
    currently drafted.
    B. The Impact of the First-Inventor-To-File Proposal on University
            Technology Transfer Programs (Section 3)
        H.R. 1908 would require the U.S. to shift its patent system to
    award patents not to the first person to invent a new invention, but
    rather, to the first person who filed a patent application with the
    USPTO for that invention. This is unprecedented in American history,
    though consistent with patent law in Europe and Asia.
        UC believes that the strength of the U.S. patent system has in
    large part been the result of the existing patent rules, including the
    current first-to-invent system. In reviewing the situation, it is not
    unreasonable to posit that the first-to-invent system, with its public
    policy intent to reward innovation, collaboration and public discourse,
    is at least partly responsible for the historical strength of the U.S.
    commitment to the individual inventor.
        UC is continuing to review the first-inventor-to-file system.
    However, we are in agreement with the points made in the statement of
    the higher education associations on S. 3818, that encouraged the
    Committee to ensure that any first-inventor-to-file system includes an
    effective grace period, a robust provisional patent application
    procedure, and a strong Inventor's Oath requirement.
                1. The First-Inventor-To-File System Proposed by H.R. 1908
                        Is Likely To Heavily Burden Academic Licensors and
                        Researchers
        UC's primary concern with the proposed first-inventor-to-file
    system is that it will reward with a patent the person who has the
    means and ability to file patent applications as quickly as possible
    over the first person to conceive a groundbreaking idea and realize it
    in a working invention. UC strongly believes that this is likely to
    have a profound adverse impact on university technology transfer
    offices.
        Under the current first-to-invent system, researchers at American
    universities have had the ability to develop their ideas, and have a
    one year grace period to get to the USPTO to file a patent application
    after disclosing their idea. This one-year grace period has allowed
    universities the time to evaluate the commercial potential and
    patentability of an invention and allowed universities to focus on
    locating the best licensing partner to develop the technology.
        In a first-inventor-to-file system, inventors would not have rights
    to their inventions until they file a patent application with the USPTO
    before another party filed. There would be no one year grace period
    available with regard to third party publications and past patent
    filings. The result may be that university researchers lose their
    ability to obtain patents for inventions. In a first-inventor-to-file
    system, universities would have to act quickly to file applications in
    order to preserve their inventors' rights, often before conducting a
    reasoned analysis of the merits of an invention. Unless a quick filing
    occurs, a university could risk losing rights to those inventions
    altogether. And because research universities like UC receive such a
    large number of inventor disclosures in a wide variety of fields, this
    would be a huge burden for universities to undertake.
        The first-inventor-to-file system may also create an incentive for
    others to profit at the expense of universities. Because university
    researchers typically publish the results of their research as soon as
    possible, others could theoretically review publications, speed up
    their own efforts to develop similar technology based on the ideas
    generated by research institutions, and then file with the USPTO as the
    first inventor to file. This situation is at odds with the university's
    goals of creating an open academic environment, which emphasizes the
    publication of research results in journal articles and the sharing of
    information with scientific colleagues. To date, universities have been
    able to do so without the fear of losing the right to protect an
    invention if the invention is not first registered and filed with the
    USPTO before it is disclosed to anyone else.
        It has been UC's experience that the interference proceeding
    available under current law has provided an important safeguard to
    ensure that only a true inventor gains patent rights. The interference
    procedure would be repealed by H.R. 1908. UC suggests that any patent
    reform legislation continues to provide a strong mechanism to allow
    true inventors to challenge an earlier filing by another party. The new
    derivative procedure created by H.R. 1908 may help to fill such a void.
    C. The Potential Problems For Academia Created by a First-Inventor-to-
            File System May Be Compounded by the ``Absolute Novelty''
            Requirements and Lack of Broad One Year Grace Period in H.R.
            1908 (Section 3)
        UC thanks the Committee for including some form of grace period in
    H.R. 1908, under the proposed first-inventor-to-file system. While we
    are carefully evaluating the new language, we are concerned that it may
    be insufficient to effectively replace the protections of the one year
    grace period available under current law.
                1. ``Absolute Novelty'' May Impair the Public Disclosure of
                        Inventions
        As discussed previously, public disclosure and collaboration are
    crucial in the academic setting, where, unlike in the private sector,
    the emphasis is on publishing and sharing research results to advance
    the science rather than keeping new developments secret until patent
    applications can be filed. As UC interprets the legislation, under the
    ``absolute novelty'' proposal, if anyone other than the inventor
    discusses the proposal in public before a patent application is filed,
    the inventor would lose the right to obtain a patent on the invention
    because the public disclosures of any party other than the inventor
    would be considered prior art.
        The removal of the current one-year grace period in conjunction
    with the first-inventor-to-file system will essentially force
    universities to either move immediately to file patent applications
    before a researcher's articles can be published or even discussed in
    public (causing potential delay to the researcher's work as a result),
    or to simply risk losing the right to patent the invention at all.
    While private companies can bind their employees to confidentiality
    agreement to avoid this risk, such an arrangement would be unacceptable
    to researchers working in academia, and thus places them at a
    disadvantage in terms of the potential commercialization of their work.
        Rather than remove the current grace period, UC recommends that
    Congress retain the current grace period law and encourage other
    countries to adopt a similar grace period in their patent systems,
    consistent with the recommendation included in the National Academies'
    National Research Council report, a ``Patent System for the 21st
    Century.''
        While UC has not taken a final position on switching to a first-
    inventor-to-file system, UC has concerns and is not certain that the
    benefits of switching to a first-inventor-to-file system would outweigh
    the potential negative consequences.
    D. The Patent System Must Be Supported by a Strong Inventor's Oath
            Requirement (Section 4)
        UC is in agreement with the higher education associations'
    statement on S. 3818 which asks for a strong inventor's oath
    requirement to be included in any patent reform bill. At the heart of
    the U.S. patent system historically is the certainty that the named
    inventor is the one that truly made the invention, not someone who has
    learned of it from someone else. An oath requirement also favors the
    independent inventor and the open environment of universities by
    encouraging honesty and full disclosure in the patent process.
        A first-inventor-to-file system should be contingent on the law's
    continued requirement for a strong and mandatory inventor oath, to
    ensure that inventors are encouraged to disclose the full extent of
    their inventions to the public and that they are bound by the
    statements they have made.
        However, as currently drafted, H.R. 1908 would permit a would-be
    inventor to avoid the requirement of attesting under oath that they
    truly invented the invention in question by submitting a ``substitute
    statement'' instead, which does not need to be made under oath. This
    further endangers inventors' rights. UC looks forward to working with
    the Committee to strengthen the inventor's oath requirement.
    E. Courts Should Be Given Discretion to Determine the Apportionment of
            Damages in Litigation (Section 5)
        UC is in agreement with the higher education associations'
    statement on S. 3818 which suggested that trial judges already have
    ample discretion under Georgia-Pacific and the current case law to
    assess the relative economic value of a patented technology in
    determining damages for patent infringement, and thus does not believe
    that any statutory language is necessary to codify the apportionment of
    damages available for infringement. Since damages calculations in
    particular must be based on the circumstances between the parties in
    the lawsuit and the marketplace in which they operate, UC believes it
    would be best to continue to allow judges and/or juries to make these
    determinations on a case-by-case basis instead of introducing a new
    process for calculating the apportionment of damages.
    F. UC is Concerned that the Prior User Rights Expansion in H.R. 1908
            May Be Too Vague (Section 5)
        Under current law, ``prior user rights'' provides a limited defense
    from infringement for a party who actually ``commercially uses'' a
    patented technology before a patent application is filed by another
    party. By contrast, Section 5(d) in H.R. 1908 would significantly
    expand the ``prior user rights'' defense to include ``substantial
    preparations for commercial use'' of an invention, prior to the filing
    of a patent application. UC, consistent with the higher education
    associations' statement on S. 3818, opposes the expansion of ``prior
    user rights'' included in H.R. 1908.
    G. UC Believes One Post-Grant Cancellation Procedure is Sufficient
            (Section 6)
                1. UC is Concerned that the Two Additional Windows of Post-
                        Grant Review May Lead to Gamesmanship
        H.R. 1908 sets forth three ``post-grant review'' procedures, known
    as ``cancellations,'' by which a petitioner can move to cancel a patent
    after it has been issued:

            1)  within 12 months of the patent's issuance (the ``first
            window''),

            2)  upon a showing of ``substantial economic harm'' caused by
            the patent, at any time (the ``second window''), and

            3)  upon the receipt of notice of a possible claim of patent
            infringement under the patent (the ``third window'').

    While UC, consistent with the higher education associations' statement,
    supports the ``first window'' of post-grant review, UC opposes the
    ``second'' and ``third'' window proposals as potentially burdensome to
    legitimate patent holders seeking to enforce their legitimate rights.
        As currently drafted, the open-ended nature of the ``substantial
    economic harm'' opening of the ``second window'' may lead to strategic
    challenges to legitimate patents by free-riding competitors in an
    attempt to hamper a patent holder's ability to ascertain certainty that
    their patents are valid. This would be especially problematic for
    patent holders with limited resources. It could also lead to
    gamesmanship by parties with no real concern about the patent's
    validity but rather, simply wishing to impede the true inventors
    ability to enforce that patent against them. In addition, because the
    patent grant of exclusivity is only for a limited amount of time, abuse
    of the ``second window'' process would hamper the value of
    legitimately-obtained patents in the marketplace.
        All of these concerns loom even larger in the new ``third window''
    cancellation proposed in H.R. 1908. As a matter of practice, UC only
    notifies parties of infringement or files patent litigation as a last
    resort when UC's rights under a strong patent have been egregiously
    violated. Under the ``third window,'' a patent infringer could then
    place UC's patent into post-grant review, not because of any real
    concern over the validity of the patent, but rather, simply to delay
    the enforcement of UC's valid patent rights and to buy itself more time
    to infringe in the marketplace. Given the very high stakes in patent
    enforcement and litigation, UC fears that the ``third window'' will
    simply become another way for parties who do not respect intellectual
    property rights to abuse the system.
                2. Any Post-Grant Review Process Must Ensure Validity and
                        Promote Finality
        UC is concerned about the addition of language in H.R. 1908 which
    appears to leave a patent holder open to repeated challenges over the
    validity of an issued patent over the lifetime of a patent based only
    on a ``preponderance of the evidence'' standard presumption that a
    patent is valid. Such open ended opposition procedures could discourage
    companies, especially startups from investing in university
    technologies because they could not rely on a strong patent to protect
    their position in the marketplace. By weakening the presumption of
    validity, fewer university technologies will be licensed and developed
    into products that can be made available to the general public.
        The new Post-Grant Opposition procedure also appears to operate
    separately from the existing challenges available through the USPTO and
    through litigation. UC believes that these existing procedures plus a
    first window of post-grant review would provide sufficient
    opportunities for opposers to challenge a patent and that allowing
    opposers to challenge a patent throughout its life undermines the
    economic usefulness of the patent. In order to give patent holders,
    such as UC, confidence in the validity of their properly-reviewed
    patents, there must be some assurance that once the patent has survived
    a rigorous post-grant review process, it would not be subject to
    repeated attacks by the same party solely for strategic purposes.
    G. UC Suggests Minor Changes in the Venue and Jurisdiction Proposals
            (Section 10)
        While UC generally supports the proposed amendments to the patent
    venue and jurisdiction statutes, the Committee may wish to consider
    adding a separate venue provision for nonprofit educational
    institutions. A provision allowing nonprofit educational institutions
    to file suit in patent litigation in any district in which the
    defendant is subject to the personal jurisdiction of the court would be
    a helpful addition to H.R. 1908.
        In addition, H.R. 1908 permits parties in a patent litigation to
    file an immediate appeal to the Federal Circuit appellate court of any
    order from the district court that construes the claims of the patent
    as a matter of law, known as a ``Markman order,'' and requires in such
    cases that the trial court's proceedings be stayed while the appeal is
    pending. UC agrees that permitting interlocutory appeals of claim
    construction rulings to the Federal Circuit could be potentially useful
    to litigants, and could serve to preserve judicial economy and
    encourage the strength of issued patents. However, UC is concerned that
    the interlocutory appeals process could also be used as a delay tactic
    in the litigation process, and proposes that the stay of the district
    court's ruling be made discretionary with the trial court judge.
    H. UC Does Not Believe the USPTO Needs Additional Regulatory Authority
            (Section 11)
        H.R. 1908 would provide the USPTO the ability to engage in
    substantially broader substantive rule making than provided under
    current law. UC, along with the higher education associations'
    statement on S. 3818 expressed concern about granting the USPTO
    expanded rule making authority since this could lead to opportunities
    for the USPTO to act beyond the scope of what Congress intends through
    the statutory process. The USPTO already holds fairly broad rule making
    authority that should be sufficient to engage in the rule making
    process.
    I. UC Requests that H.R. 1908 Not Apply Retroactively (Section 13)
        UC is concerned that the ``effective date'' in Section 13 would
    make H.R. 1908 applicable to any patents issued after the effective
    date. UC is concerned that the effective date in H.R. 1908 could be
    made to apply retroactively to patent applications that are still
    pending at the USPTO at the time the effective date occurs. UC would
    appreciate it if the drafters would revisit the language of the
    effective date in H.R. 1908 to specify that it would not to be applied
    retroactively. The USPTO should also be given adequate time to
    implement the legislation in an effective and thoughtful manner.
        Conclusion
        Chairman Berman, Ranking Member Coble and members of the
    Subcommittee, thank you again for your leadership, time and attention.
    We appreciate the opportunity to provide our preliminary comments on
    H.R. 1908 and look forward to working with the Committee as it
    considers the legislation.

                                   ATTACHMENT

        Mr. Berman. Mr. Peterman.

     TESTIMONY OF ANTHONY PETERMAN, DIRECTOR, PATENT COUNSEL, DELL
                      INCORPORATED, ROUND ROCK, TX

        Mr. Peterman. Mr. Chairman, Members of the Committee, my
    name is Anthony Peterman. I am the legal director for patents
    at Dell, and I really appreciate the opportunity to be here and
    talk about this important issue today. Most importantly, on
    behalf of Dell, the Business Software Alliance and all the
    members of the Coalition for Patent Fairness, we want to thank
    all of you who have sponsored and introduced this bill. You,
    Mr. Chairman, Ranking Member Coble, Chairman Conyers, and
    Ranking Member Smith and Representatives Boucher, Goodlatte,
    Jackson Lee, Schiff, Cannon, Issa and Lofgren, we thank each of
    you for your work in this area. We hope that the other Members
    of the Subcommittee and of the full Committee will come to join
    and support this legislation.
        Dell and our coalition supports H.R. 1908 because it
    addresses the major areas where we believe reform is needed,
    and that is improve quality in the Patent Office and an
    improved balance of fairness for all litigants in patent
    litigation. While to some this may seem like an obscure issue,
    enactment of this patent reform legislation is needed, and it
    is needed now, to help sustain America's growth and vitality.
    At first this need was probably noticeable only to those of us
    dealing with patents and patent law every day, but over the
    last 5 years, even neutral observers, including the National
    Academy of Sciences and the Federal Trade Commission, have all
    noted that our patent system needed attention and
    modernization.
        How do we get to this point? Two reasons, we believe.
    First, the number of patent applications have soared, and the
    PTOs, hard-working patent examiners, are doing their best to
    keep up. But the result is that a greater number of lower-
    quality patents are slipping through the system.
        Second, plaintiffs are exploiting litigation rules and
    seeking artificially high damages. It is litigation as a
    business, and these cases cost a lot, and they take a long time
    to resolve, even when the defendant has a straightforward
    defense. Businesses faced with these claims have two options:
    defend the patent in court, agree to pay settlement fees. And
    with the cost of legal defense significant, the risk of
    irrational damage high, a growing number of companies agree to
    settle even when they believe they would have won on the
    merits.
        But this harm is not about any one company. The problem
    hurts American competitiveness and the U.S. economy.
    Fundamentally, businesses have to stop innovating, absorb the
    increased costs or pass the cost onto customers. Either way we
    all lose.
        Let me be clear in this: We support a strong patent system,
    and we support the inventor's right to assert its patents and
    get a reasonable compensation for any infringement. Dell itself
    is a market innovator. We have lots of patents. Many of the
    members of our BSA and our coalition are very significant
    patent holders. We want a strong patent system, but we think
    these changes are needed as well.
        Specifically, this bill will promote the issuance of
    higher-quality patents. It increases the ability of examiners
    to consider prior art, and it enables third parties to share
    vital information with the examiner. The bill also establishes
    a postgrant process after a patent has been issued and gives a
    PTO a second chance to apply its expertise. And as part of
    this, we believe that the second window, based on the showing
    of economic harm, is very important to a meaningful postgrant
    process.
        Secondly, the bill makes key changes to restore the balance
    in patent litigation. The bill clarifies that a patent holder
    is entitled to claim damages based on their specific
    contribution. Today too many plaintiffs are claiming and too
    often getting excessive damages based on the value of an entire
    product line.
        Let me give you an example that Dell has faced. Many of our
    LCD monitors have a music stand feature where you can lift them
    and tilt them. We faced a patent litigation on that feature.
    The damages that were alleged were not based on the music stand
    feature, not even based on the monitor, but based on the entire
    revenue from our systems and the monitor. And we believe this
    bill will refocus that analysis back on the music stand feature
    where it should be.
        In addition, this bill provides that punitive damages for
    willful infringement should apply only to truly reprehensible
    conduct, and it won't be asserted in every situation like it is
    now.
        The bill also attempts to address the venue problem. This
    is the problem of making sure patent suits are brought in
    courts that have some nexus to the parties and their business
    and not in courts that are chosen simply for an advantage. Now,
    we would, from our perspective, like a few changes to the venue
    provision. We would also like the 271(f) provision addressed if
    the Supreme Court doesn't fix that.
        In conclusion, let me say that we truly appreciate all the
    effort on this Committee that went into developing this bill.
    We know that it was a balance of interests. We strongly support
    the bill. We think its introduction will help American
    innovation and competitiveness. And we appreciate your
    leadership and your guidance in this area. Thank you.
        [The prepared statement of Mr. Peterman follows:]
                     Prepared Statement of Anthony Peterman

                                   ATTACHMENT

        Mr. Berman. Thank you all very much. Very interesting. We
    have a lot of issues to follow up on.
        If it is all right with the Subcommittee, what I would like
    to do is initially just recognize myself to ask Mr. Sharer a
    question, because he does have to leave in 15 minutes. I know
    at least two other Members of the Subcommittee want to ask him
    a question, anybody else who wants to as well, and then we will
    go back to a more regular process.
        Mr. Sharer, you acknowledge that the software and financial
    services industries have raised legitimate problems in the way
    the system impacts business activities in those sectors. Since
    the system has to work for all industries, could I have your
    commitment as CEO of Amgen, as an active participant, both
    pharma and bio, to work with us in addressing their concerns,
    especially as related to challenging validity for patents
    already issued, the second window, and excessive damage awards,
    the apportionment issue?
        Mr. Sharer. Yes, sir, Mr. Chairman. I think it is incumbent
    upon industry leaders to come together and try to resolve our
    differing views for the good of all. I happily commit to you
    that I will and am pursuing that course now. We seek to have
    conversations, and I am sure we will soon, with leaders in
    other industries to try to find common ground here. I know they
    have legitimate issues. I think we do, too, but I look forward
    to finding common ground.
        Mr. Berman. Very good.
        I now recognize Mr. Coble for a question to Mr. Sharer.
        Mr. Coble. Thank you, Mr. Chairman. And again, good to have
    all of you with us this afternoon.
        Mr. Sharer, as you know, the bill extends additional
    rulemaking authority to the Director of the PTO. Is it your
    belief that we may be ceding excessive authority to the
    executive branch to create or make patent law?
        Mr. Sharer. I am not a patent lawyer, sir. I am not
    specifically familiar with that provision. If you would allow
    me, I would like to ask my colleagues to be able to submit a
    written testimony on that point.
        Mr. Coble. I could ask subsequently after you leave to the
    other Members.
        Mr. Sharer. Yes, sir.
        Mr. Berman. I know that the gentleman from California Mr.
    Schiff has a question for Mr. Sharer.
        Mr. Schiff. Thank you, Mr. Chairman. I will be very quick.
        Mr. Sharer, I am inclined to think there is a lot of force
    and validity behind the proposal that you and others have made
    to add a ``but for'' provision to deal with the inequitable
    defense doctrine, inequitable conduct doctrine. But you also
    suggest in your written testimony that the standard be changed
    to require one or more patent claims to be declared invalid by
    the court prior to the use of this doctrine.
        I am not sure exactly what you are proposing there. Are you
    proposing that there be other patents in other cases that have
    been held to be invalid with respect to that party? Are you
    proposing there has to be with respect to the same case or
    invention? How would that work? And would those have to be
    other cases of invalidity because of some kind of inequitable
    conduct, or would the fact that maybe there was prior art or
    rather problems with the patent be sufficient to constitute a
    prior strike?
        Mr. Sharer. That is a level of detail that I am not
    prepared to answer today, Congressman. I would like to let our
    patent counsel give you and the Committee written testimony
    that more expansively defines that and specifically answers the
    question. What I can say is for us, what is really, really
    important is once the patent is issued, we can have confidence
    that it is going--issued, have confidence it is going to
    persist, and that when we have a case where an infringer is
    found to infringe, we can get appropriate claims and damages. I
    am concerned in some parts of the bill, particularly
    apportionment of damages, that it is going to be less expensive
    for infringers. That worries me.
        Mr. Schiff. Well, if you could have somebody provide some
    further information, I am interested in knowing what that
    means.
        Mr. Sharer. We will.
        Mr. Schiff. And also there was a suggestion that the
    standard be raised for making that claim. I didn't know if that
    was separate and apart from ``but for'' causation or whether
    you are referring to the ``but for'' causation by that, but
    thank you.
        Thank you very much, Mr. Chairman.
        Mr. Berman. Thank you.
        Another question for Mr. Sharer. Mr. Issa.
        Mr. Issa. This is truly California day. You are getting it
    from the dais. And thank you for coming from California.
        Mr. Sharer, you talked about specifically your quiet title,
    how important that was to your investment, both from those who
    invest in your company, but also from your investment in the
    product. That is kind of one of those elements that is a line
    in the sand for you, isn't it?
        Mr. Sharer. Yes, sir, Congressman. We have to have
    confidence in the patent to invest the amount of money over the
    years, and with the uncertainty, I am really concerned about
    that.
        Mr. Issa. So as the postgrant has something piled on to or
    in addition to the historic reexamination, looking at all the
    other items we can talk about and perhaps the others as well,
    that is the item that keeps you from sleeping at nights in this
    proposal to a certain extent, doesn't it, the idea that you
    would have bite after bite after bite in trying to invest while
    knowing your patent is continually being attacked outside the
    court process?
        Mr. Sharer. If that provision were to go into effect in
    kind of our worst concern way, you are right, Congressman, that
    we would be concerned that we would never really have a quiet
    title. I am optimistic and hopeful, though, that we can find
    common ground and find a way to meet the needs of all the
    parties. But you are right, that general area does concern us.
        Mr. Issa. And I am concerned about this because I think it
    cuts badly on both your industry and on the tech industry, so
    perhaps that is the one place in which this isn't going to be
    characterized as a battle between bio and tech. If we were--and
    this is certainly up to the Chairman to first think of--if we
    were to say there is only one bite, period, only one postgrant,
    period, new invention, but that it did two things, one, we left
    in place some sort of a reexamination as it currently is known,
    that being the second bite, but it is a bite you have lived
    with for a long time; and two, if that postgrant raised your
    likelihood of willfulness as a matter of having to go through
    that examination of the most unpleasant type, would those be
    balances that you believe from your business model would be
    well worthwhile to both narrow the claims, make the patent
    stand on its own better, and at the same time have a benefit
    for having gone through the process, perhaps--in my opinion,
    willfulness now being much more in play because, quite frankly,
    a neutral third party other than the PTO has now looked at your
    patent, and the world has had an opportunity to pile on, and
    two, because that window has closed. Would that work for you?
    And really I would like to focus on you and your industry.
        Mr. Sharer. I think, Congressman, that anything we can do
    to absolutely limit, make very specific and define if there is
    going to be another look, that would be much preferable to some
    continuous look, and that may be a compromise that we have to
    make. I am not prepared to say that today, but it certainly
    goes in the right direction, and we would be willing to talk
    about that for sure. It would be helpful.
        Mr. Issa. The last thing, which is strictly reexamining,
    this is the if, if, if. If postgrant is a single window, if
    there is under the same basic principles today, do you believe
    reexamination needs to be improved; that inherently it has not
    served your industry, to be honest, on either side well, and
    that is why it is not used except in some of the--I think we
    are almost pejorative in the way they had been used--meaning of
    that reexam, is that something we should consider in this
    legislation?
        Gaming of that reexamine, is that something we should
    consider in this legislation.
        Mr. Sharer. I can't specifically comment on that in a broad
    way. I can say from an Amgen point of view we have certainly
    benefited from the current patent system and have been able to
    found a company 27 years ago and grow because of it.
        I don't know of any cases in our experience where that has
    been a problem. But again I don't have comprehensive knowledge
    about our entire patent experience.
        Mr. Issa. Thank you. And thank you for your continuing
    investment in California. I yield back.
        Mr. Berman. Thank you.
        The unfairness of this aspect is, there are other views on
    the issue discussed, but the rest of the process will give you
    a chance, without Mr. Sharer up there to hear them, so you can
    even be more aggressive in your response to his comments.
        We want to you sleep well at night, and my guess is--or you
    wouldn't go so far as to say a good night's sleep is worth
    eliminating the ability of someone to challenge the validity of
    an patent in an infringement lawsuit, would you?
        Mr. Sharer. No, sir.
        Thank you for hosting me today. And I look forward to
    working with you and other Members of the Committee and my
    industry colleagues to get a good bill that will serve the
    whole country.
        Mr. Berman. Thank you for being here.
        All right. We will start the 5-minute rule on questions.
        Mr. Griswold, let me tell you the problem I have initially
    with sort of your opposition to this second window and get your
    response. What prompted me to get into this issue was a glut of
    questionable quality patents issued, a lot of them, from about
    1998 through 2003; patents that wouldn't qualify for the first
    window now if we eliminated this second window.
        How would you address those patents in a less costly and
    more efficient alternative to litigation?
        Mr. Griswold. Well, one of the opportunities that is
    provided is opening up post, the reexamination process.
        Mr. Berman. What do you mean ``opening up''? It is open. No
    one uses it.
        Mr. Griswold. Yes, but the inter partes' reexamination
    process. One of the reasons was because of the estoppel
    language in that process, so that is one of the pieces of that
    that would be used more. And that is the idea of making it
    better, by reducing the estoppel.
        Mr. Berman. Would you go along with more robust discovery
    in the inter partes reexam process, so that people can actually
    get some information to utilize in reexamine?
        Mr. Griswold. Relative to postgrant oppositions, as you
    know, relative to the postgrant opposition, which we support,
    which is a first window----
        Mr. Berman. But these are patents for which the first
    window is gone. They have already been issued. I am talking
    about that----
        Mr. Griswold. The existing body of patents.
        Well, one question you have there, one of the issues on
    that is, do we change all the rules forever to put--to allow
    for these continual attacks on patents--another--throughout the
    life of the patent to accommodate to a concern relative to an
    existing body of patents? That is a question.
        Mr. Berman. It is a question. Is your answer to that
    question, we don't change any rules, notwithstanding?
        Mr. Griswold. We have made proposals relative to that that
    would provide an integrated system relative to postgrant, that
    would provide an opportunity after the initial opportunity that
    would--but it would be limited so that you wouldn't have--so
    you--so Mr. Sharer could sleep better at night, but--not
    probably as nice as he would like, but it would help him.
        Mr. Berman. But with the clear and convincing standard that
    you recommend for that window, what is the incentive for a
    person to take advantage of--who first learns about the claim
    of a patent long after either an existing patent, or long after
    the first window has been shut by virtue of the passage of
    time, he first learns of it with a clear and convincing
    standard to upset the validity of that patent? Why not just go
    to court?
        Mr. Griswold. Well, I guess there are two questions there.
    One is, if we are talking about patents that are--where there
    would have been a first window, then we would like--our view
    is, we should be driving people to the first window for newly
    issued patents.
        If you are talking about patents that are in existence
    today, then that is a different question, and as I said before,
    a proposal we put together, which is very--which is integrated
    between postgrant as well as reexamination; it brings it all
    together--would provide an opportunity.
        Mr. Berman. Thank you.
        Let's just turn, still with Mr. Griswold. I do intend to
    have a second--I intend to be here for as many windows as I can
    open; and when all the Members and witnesses have left, I will
    probably close the last window.
        But--so there are a number of questions of other witnesses
    as well, but just on the last time, remaining time, on
    inequitable conduct, I understand the concern. And we have to
    think about addressing that issue here. But what about a little
    quid pro quo?
        Would you be prepared to endorse or get those changes in
    the inequitable conduct sort of defense that you want with a
    requirement that mandates that applicants for patents conduct a
    search for prior art, submit the search statement and any prior
    art found with a list of relevance and meaning of the prior
    art? In other words, the applicant, do more to help bring
    information to the examiner that ensures that only things that
    should be patented are patented?
        Mr. Griswold. Well, the answer to that is, if the hovering
    of inequitable conduct ceases or is substantially diminished,
    the willingness of applicants to focus in on prior art, and
    talk about the prior art will be substantially enhanced. That
    is the question and----
        Mr. Berman. What if we codify that substantial enhancement
    with a requirement?
        Mr. Griswold. We need to take a hard look at that. That, we
    would take a very hard look at.
        Mr. Berman. My time has expired. I recognize the Ranking
    Member of the Subcommittee, Mr. Coble.
        Mr. Coble. Thank you, Mr. Chairman. And, gentlemen, I will
    put the same question, if you will permit me to, directed to
    Mr. Sharer, regarding the bill extending additional rule-making
    authority to the director of PPO.
        Does either of you have any heartburn about that, that we
    may be ceding excessive authority to the executive branch to
    create or make patent law?
        Anybody want to weigh in on that?
        Mr. Peterman. I will just say quickly, we don't--I think
    the patent office needs that rule-making authority and can
    handle it.
        Mr. Coble. Mr. Griswold.
        Mr. Griswold. My concern is that, as we know from the last
    number of years, when we have been trying to change the laws
    here, there has been tremendous debate involving people from
    all sorts of industries. And we think that kind of debate needs
    to take place in this kind of a forum, as opposed to the PPO.
        So we would be concerned about expanding the rule-making to
    get into substantive rights in the way that this could with the
    Chevron deference, I believe, that would be provided by that
    activity to that activity.
        Mr. Coble. Professor? Dr. Tucker?
        Either of you?
        Mr. Thomas. Thank you. The USPTO stands among the oldest
    administrative agencies in this Republic, and when I first
    learned that the USPTO was not considered a full-fledged agency
    that enjoyed regulatory authority, I was rather surprised. The
    USPTO has already promulgated a number of rules, such as rule
    56 pertaining to inequitable conduct, that arguably are
    substantive patent law rules.
        I also believe that there is no complaint that the USPTO
    has gone beyond the notice of opportunity for comment rule-
    making procedures of the APA, and in fact, has been very
    outgoing with town hall meetings soliciting input ad nauseam
    from a patent bar, which you have probably become aware is not
    shy about commenting upon proposals.
        So I certainly would have no problems with the USPTO being
    formally granted to some degree what it has already assumed.
        Mr. Coble. Dr. Tucker.
        Mr. Tucker. From the university's perspective, we think the
    USPTO has sufficient rule-making authority already, and that to
    grant extra rule-making authority would take away from the role
    of the Congress. And we are very much aligned with Mr.
    Griswold's position on this.
        Mr. Coble. Let me ask you a very general question prior to
    the illumination of the red light. How does H.R. 1908 benefit
    the public? I am sure there is benefit.
        Dr. Tucker.
        Mr. Tucker. We see it as benefiting the public if it
    creates stronger patents and it doesn't take away from our
    ability as a university, as the research engine of this Nation
    in general, to create the inventions that lead to new
    companies. Anything that happens in 1908 that puts a road block
    in the way, as I said, of us creating companies and creating
    inventions is going to do a disservice to the U.S. economy.
        We would like to see strong patents. We want to see robust
    patents. We understand problems exist with certain business
    method patents that are obvious on their face to us in the
    working world, so to speak, but somehow manage to get too
    obvious in the standards of the USPTO; and we would like to
    have mechanisms in place that either improve the examination or
    give the ability for people to comment and have those patents
    not issued.
        But--so that is my comment. Thanks.
        Mr. Coble. Thank you, Dr. Tucker.
        Mr. Griswold.
        Mr. Griswold. There are certain pieces of the 1908--you
    were asking generally if--are there pieces in 1908 generally,
    or parts of it, that would be very helpful?
        Mr. Coble. ``Generally'' was my question.
        Mr. Griswold. Generally, I guess I have to go from
    generally to specifically.
        There are pieces that I mentioned, like first inventor to
    file, expanding prior arts submissions and limiting willful
    infringement, extending prior user rights, those would be
    positive. Having a one-window opposition could be positive to
    weed out patents. So that would help the public because the
    public would not have to live with those patents for their
    entire term if we had a single window opposition system.
        Mr. Coble. I thank you, sir. I see my yellow light, Mr.
    Chairman, so I yield back.
        Mr. Berman. The other gentleman from North Carolina.
        Mr. Watt. Thank you, Mr. Chairman.
        I don't have the benefit of being as conversant with this
    subject as my colleague from North Carolina since this is my
    first term on this Subcommittee. But I want to start by doing a
    couple of things, first of all, by applauding your effort to
    bring together--I just noticed for the first time today the
    divergent cosponsors of the bill that you adopt. It is a broad,
    broad cross-section of----
        Mr. Berman. Of the universe.
        Mr. Watt [continuing]. Of the intellectual property
    universe of this House. And I know, having worked with some of
    those folks, that if you have that many people on a bill at its
    inception and they are already working together, that is a
    wonderful, good start. So I want to applaud that first.
        And then, second, I want to applaud that notwithstanding
    that, in your opening statement you made it absolutely clear
    that you don't perceive this to be the final product. It is a
    work in progress, despite the broad bipartisan and broad bi,
    tri, philosophical cosponsorship that you have. So I think this
    is great.
        And I am happy to be a part of the process and I hope none
    of my questions seem so basic as to embarrass myself.
        Third, I want to just say to Mr. Peterman, because this is
    the first opportunity I have had--the opportunity in public to
    say, since the death of your colleague and my wonderful friend,
    Thurman Woodard, I want to extend my personal condolences to
    you. I know that was a tremendous loss to your corporate
    family.
        And for those who us who believe in really, really true
    diversity in the corporate community, it is a tremendous loss
    to all of us because we know that he stood for that, first and
    foremost--well, not first over at Dell, but it was a high
    priority.
        Now, having said all of that, let me ask a couple of
    questions because I am in only the first window. Some of us
    have to get on an airplane and so--and I am approaching that
    time, so I won't be around for the second window.
        This is strange to me that we are talking about first and
    second windows here.
        I come from a legal background that has statutes of
    limitation on everything, and I am wondering--maybe this is
    such a basic, stupid question: What would be the problem of
    establishing some kind of reasonable statute of limitation on
    first and second windows with exceptions for people who have
    gamed the system to get their patents--or maybe that is what
    the first and second windows already do, and I just don't know
    enough about it.
        Perhaps I could have you all comment on just that basic,
    elementary, perhaps stupid question, why this part of the law
    is so different that it has to have an almost totally separate
    set of rules for us?
        Mr. Thomas. Mr. Watt, as you know, statutes of limitations
    serve the notion that quiet and tranquility from litigation is
    also a just solution in many cases. But statutes of limitations
    in many circumstances are based upon knowledge of a wrong. So
    knowledge that crimes have been committed, that is when the
    statute of limitation is triggered.
        Mr. Watt. Wouldn't it be just as reasonable to think about
    when a person knew or reasonably should have known--which is a
    standard proposition. I mean, that would be consistent with
    what you just said, wouldn't it?
        Mr. Thomas. It is certainly an alternative solution.
        I think that the current proposals have decided to have set
    periods of time based on the period the patent grants, and then
    other set periods based on knowledge of the patent or awareness
    of the patent will have commercial significance.
        One thing to remember, Mr. Watt, is that the value of many
    patent inventions is not realized until many years after the
    patent issues. So, although the patent has come out, its
    commercial value is not implicated until much later down the
    road. So if we impose short second windows----
        Mr. Watt. I am not talking about--I didn't say anything
    about short, because I think you will find that my definition
    of a statute of limitation might be a lot longer than--so don't
    impute the word ``short'' to me. I am just trying to figure out
    philosophically why some different system that puts some
    reasonable time limits on this won't be a reasonable
    proposition.
        Mr. Thomas. I think everybody is in agreement, reasonable
    time limits are appropriate, but we may differ on what is
    reasonable.
        Mr. Watt. I am sorry, Mr. Chairman. I ran out of time and I
    never got to do anything, other than praise you, so----
        Mr. Berman. The gentleman is given an additional minute.
        Mr. Watt. Well, I will use that 1 minute to raise the
    second issue that I have, rather than belaboring this one.
        The race to the patent office argument, the grant to the
    first person to file obviously has some appeal to it, but I
    could see how it might have some substantial problems for a
    small, noncorporate university--although I suspect most of them
    are getting a lot more sophisticated in this area, also.
        Does the current system or does this bill provide enough
    protection in either first, second window or even under the
    theory that I was talking about, for that kind of just totally
    unsophisticated inventor?
        Mr. Tucker. Certainly, from the university's perspective,
    yes, the race to the patent office is a problem. We generally
    are not as well resourced as perhaps a corporation, and it is
    an incredible burden on us.
        But I think one of the issues is getting the patent right,
    and a race to the patent office may, in fact, end up getting a
    less well-crafted patent, which gives less protection for the
    invention and, therefore, less ability for people to get to
    invest in it.
        So, I mean, the race to the patent office, in my belief, is
    that we should--we need to really think about it and especially
    the university where the invention is so early staged that it
    takes a little bit of time to understand what, indeed, the
    invention is and how best to leverage that and how best to
    protect it to get the advantage we need.
        Mr. Watt. Mr. Griswold, I think you would have the opposite
    side of that coin. I suspect so.
        Mr. Griswold. We support first-inventor-to-file, but
    because I am part of a coalition with many large companies
    doesn't mean we are the fast--we have the fastest hounds in the
    race, I can tell you. Oftentimes somebody else is there first.
        But we believe that--and actually there are studies done by
    a former Commissioner of Patents Gerry Mossinghoff which shows
    that interference--today, it is first-to-invent, whoever is the
    first to invent is supposed to get the patent, but the party
    who was first to file is presumed to be the first inventor.
    They have an inference process that determines that, and as it
    turns out, the first inventor, first to file, typically wins
    those cases. So we are, in effect, on a first-to-file system
    anyway, and the rest of the world is on a first-to-file system.
        One of the things that is really discouraging for people
    like us, for us, is if we have someone who operated on a
    different basis and they come to us and they haven't protected
    themselves relative to filing outside the United States, they
    work in a different system which is on a first-to-file--first-
    to-file basis. So we think first-to-file is the best system for
    the world, actually.
        Mr. Berman. The time of the gentleman has expired.
        Mr. Watt. Thank you, Mr. Chairman.
        Mr. Berman. I might add, apart from the notion of how you
    can get extra time around here, on the statute of limitations
    problem--I guess we could have this as a private conversation.
    But I don't know that Professor Thomas got into the limitations
    on how far back you can go for damages. You can't file near the
    end of the patent period and then collect lost profits or
    damages from the day that your patent was infringed. In that
    sense there are some limits.
        And on the first-to-file issue, torn between the loyalty to
    my home State university and alma mater and the fact that no
    other university is as resistant to my bill as the University
    of California, I think you will find that the inclusion of the
    grace period in the first-to-file and the maintenance of the
    CREATE Act, which Mr. Tucker did reference, many of the
    universities don't feel quite as passionately about this as the
    University of California seems to feel.
        I recognize the gentleman from, okay, gentleman from Ohio
    then, yielded by the gentleman from California.
        Mr. Chabot. Thank you, Mr. Chairman. And sorry I was a
    little bit late. I am Ranking Member of the Small Business
    Committee, so--we had a hearing going on and so I missed a
    little of the testimony and apologize for that.
        In that capacity, Professor Thomas, we did have the
    opportunity to hear you testify there, and I want to thank you
    for that testimony. We thought you did a very good job there.
        Let me ask one question, and I will just go down the panel
    and you can all take a shot at it. Could you comment on whether
    or not H.R. 1908 encourages innovation and investment that
    businesses, particularly small businesses--and as I mentioned
    we have a particular interest in that on the Small Business
    Committee--need in order to grow in the future, as many of the
    companies represented here have already experienced? And will
    the changes proposed by H.R. 1908 provide the quality of
    patents in certainty and predictability needed across all
    industry sectors?
        And, Mr. Griswold, if you want to go first, please.
        Mr. Griswold. Yes. Well, there are pieces, as I said
    earlier, to 1908 that I think would do that. There are pieces
    that would stimulate invention and assist in the process for
    more high-quality patents. There are other pieces, however--for
    example, if compensatory damages are reduced, I don't think
    that is a stimulus to invention; I think that is a negative. I
    think if you open up an opportunity, another opportunity for
    serial attacks on patents, I don't think that is a positive
    either for promoting invention.
        When we are talking about innovation, sometimes in this
    discussion about innovation, we hear different groups talking
    about innovation promoting innovation. Innovation that was
    constitutionally supported with the patent system is the kind
    which incents people because of the period of exclusivity to
    invest and make inventions. And that is the kind of innovation
    and investment that the patent system is supposed to protect.
        So when you do things like reduce the compensation, or
    reduce the ability to get an injunction or any of the other
    rights, or somehow diminish the patent right, then that reduces
    that type of innovation. So you have to be really careful to
    mess with the system because at the end of the day you may be--
    and we won't know right away.
        See, one of the things that bothers me and one of the
    things I talk to people in our company about is that we are the
    stewards of the patent system. We are the stewards of how
    things operate today in our company today relative to the
    patent system. And I am really concerned that if you make
    changes that are too dramatic, you will wind up effecting
    something that we will see the impact on 15 years from now
    because that is the way these things play out.
        Mr. Thomas. Thank you.
        I think it is certainly important to be mindful of concerns
    that might arise in the future. I think it is also important to
    address existing concerns that are very prevalent right now.
    And in that vein, I believe that this bill has a number of
    features that are in the interests of small businesses.
        The oppositions we have talked about, one thing to
    remember, the patent that is one person's incentive is another
    person's limitation. So it will also give the ability of small
    firms to challenge patents of their competitors without having
    to pay the extraordinary resources that patent litigation will
    consume.
        Obviously, the grace period is perceived as favoring small
    business. Assignee filing will make a more streamlined process
    for all firms, including small businesses, to obtain patent
    rights.
        Venue reform would prevent small businesses from being
    hauled in in far reaches of the country in order to defend
    themselves from charges of patent infringement.
        And, finally, having a better base of damages, a more
    defined sense of what damages are, rather than very divergent
    figures based either on one feature or the whole system, I
    think will promote efficient bargaining in the shadow of the
    law, which also will benefit small business. Thank you.
        Mr. Chabot. Mr. Tucker.
        Mr. Tucker. Congressman Chabot, when I sit in my office at
    the university and we think about, you know, what we do, and as
    we start to form companies, you know, some of the people that
    we talk to very early on are the first-stage investors in
    technology; and one of the things they need from us to do a
    deal, to put their first one--$5, $10, $15 million--is, they
    come to us and ask about the intellectual property, because
    they need that to ensure that investment. So anything in the
    bill that takes away from their ability to enjoy that
    intellectual property asset is going to impact the startup of
    businesses. And that is where we see it.
        Bryan Lord from AmberWave, who was a licensee of the
    University of California, testified quite eloquently, I
    believe, at the Small Business subcommittee hearing about the
    impact of changes in the patent law on small businesses. And
    we--I would like to reiterate his testimony. And I think he
    very aptly stated the concerns that universities have with
    regard to changes.
        That being said, as Mr. Griswold said, there are lots of
    things in this legislation that we believe will help to create
    stronger patents. And in that sense, that is why we are here.
    We want to cooperate with the Subcommittee to get to
    legislation that will work for us as universities and for
    businesses. And we know we are all very different.
        Mr. Chabot. Mr. Peterman.
        Mr. Berman. Time is almost expired, so finish your answer--
    start your answer.
        Mr. Peterman. In terms of promoting innovation, I don't
    think the intent here is to harm patents or to weaken the
    patent system. We all still want a strong patent system. The
    targeted changes that would improve litigation, I think are
    beneficial for small business. They are more susceptible to
    patent attacks. They have few resources to defend themselves
    against these expensive litigations.
        I think there is a letter from several farmers groups that
    this Committee has received that sort of express that concern.
        The second thing on the quality of patents, I agree there
    are things in here that will improve the quality of patents. I
    think one of the things that small businesses would need is
    this second window. If we are going to have postgrant
    opposition, they are not going have to have the resources to
    attack every patent they see coming out of the patent office.
    They will need the second window to attack those that come up
    and may be asserted against them.
        Mr. Berman. The gentleman from Tennessee has returned. Mr.
    Cohen.
        Mr. Cohen. Thank you, Mr. Chairman. I will ask the panel,
    what is not in this bill that you think ought to be in it?
        Mr. Griswold. A couple of things that I mentioned. One is a
    fix on inequitable conduct. And the Chairman and I had a
    discussion about--he was trying to negotiate a deal here, and
    since he has all the power, I don't know that I want to do
    that.
        But anyway, that is something that is missing, a fix on
    inequitable conduct, which at the end of the day, leads to
    lower-quality patents because of the failure--the inability of
    the applicant and the patent office to have the kind of open
    communication you would like to have without the hovering of
    inequitable conduct.
        Another thing is elimination of the best-mode requirement,
    which is kind of a duplicative requirement which is--a
    litigation reform that was recommended by the National Academy
    of Sciences report, that we eliminate the best-mode
    requirement. That is not in the bill.
        Those are a couple of key pieces that are not in the bill.
        Mr. Cohen. Let me ask the other three panelists.
        Do you all agree those components should be in the bill? Or
    do you disagree?
        Mr. Thomas. I agree with Mr. Griswold.
        Mr. Tucker. I agree with Mr. Griswold with respect to
    inequitable conduct, but we prefer to have the best-mode in. We
    believe it is incumbent on the person disclosing invention to
    disclose the best way to do it.
        We would like to see a requirement that all patent
    applications get published after 18 months. Right now, this
    legislation doesn't include language that was present, I
    believe in other versions, that allows--so that, now, you are
    allowed to exempt certain applications from publication; and we
    believe that making that consistent for all applications is
    important.
        Mr. Berman. Just to interject on that point. If it is the
    way you say it is, it isn't the way we intended it. In other
    words, the bill calls for publication of all patents in 18
    months.
        Mr. Peterman. I guess I will be the only one to disagree on
    the three features that Mr. Griswold mentioned.
        We think it is very important to have rules in place that
    encourage inventors to be as honest as possible to the patent
    office. And we think changes to those would need to be looked
    at very carefully.
        The two things, I guess, we would see changed: We like the
    venue provision, but we think it could be improved and we would
    like to work on that. And I mentioned, although the Supreme
    Court is addressing the 271(f) issue, if that is not fixed, we
    would like to see that there as well.
        Mr. Cohen. Tell me about the venue portion. I understand
    this is going be greatly damaging to the prosperity of
    Marshall, Texas.
        Mr. Peterman. I like Marshall, Texas. I am from Texas.
        Mr. Cohen. You have been there, I take it. I haven't. Not
    on my list.
        Mr. Peterman. You know, in the way it is written now, it
    allows the plaintiff to incorporate or to sue where the
    plaintiff resides. So that is one issue.
        We have many cases where there is certainly a shell entity
    and a storefront that is located in one of these districts, and
    that is the basis for the venue there. There may be others. I
    don't want to get into a lot of it, but I think one of the ones
    that is fairly apparent is that one where it says the plaintiff
    can sue where it resides.
        And we see shell corporations who acquire patents and sue,
    and they will just incorporate in that city and sue there.
        Mr. Cohen. And Marshall, Texas, is the place they do this?
        Mr. Peterman. It is one of the places. There are others.
        Mr. Cohen. What are the others?
        Mr. Peterman. I think there is a court in Minnesota, maybe
    the Central District, but there are other courts where
    plaintiffs sue in order--because they think they have an
    advantage, and they will get moved quickly to trial without
    seeing anything finished on summary judgment.
        Mr. Cohen. How does the bill improve upon that?
        Mr. Peterman. I think the bill is the start. It starts by
    saying, first of all, you can only sue where the plaintiff or
    defendant resides. Currently, the law is pretty much anywhere a
    product is sold, they can be sued. So that is, for most of us,
    anywhere in the U.S.
        The second feature is that it would say that you can
    otherwise sue where the defendant has, I think, business
    contacts and some nexus there. And I think that also limits to
    some extent where you can sue. Many companies, certainly
    Internet companies, don't have a business presence in many
    places.
        Mr. Cohen. And are there parties that should be represented
    here with issues that are not?
        You don't think so? Yes, sir. Doctor? Professor?
        Mr. Griswold. I am not a professor, but I am from
    Minnesota, so I am a little nervous.
        Mr. Cohen. You read your paper like you are.
        Mr. Griswold. Well, that is all right. If that is good
    then, I am a professor.
        The problem with venue is this. Yes, there are concerns
    with where lawsuits are brought. One of the--it is one of the
    overall issues with trying to get legislation together.
        If you go too far to do some of the things that my
    colleague on the end here would like to do, you really harm
    other people because they can't--like us, we spend a billion
    and a half dollars on R&D, you get patents on the fruits of
    that investment, and we want to be able to bring patent
    litigation to prevent infringement where we would like to bring
    patent infringement litigation. And I don't think he wants to
    impact that.
        But what he does, but any fix that we talk about does and
    will impact our ability to sue and that is a big issue for us.
    So that is a problem.
        The other problem with it is, I don't think--I don't think
    I am clever enough, and maybe everybody else is, but I don't
    think we are clever enough to figure out how to write something
    that will work for people like us, but will not be avoidable--
    or, well, our friend from Dell--and not be avoidable by people
    that want to avoid it.
        There are different ways to do it. For example, as he
    pointed out, if you want to set up a company around one patent,
    people do that. So whatever rules you set up, you will find--
    people find a way to move around it.
        So I think venue is one that is probably something that
    should be left out of the bill totally. That is our view.
        Mr. Cohen. Thank you, sir.
        And thank you, Mr. Chairman.
        Mr. Berman. Thank you.
        The gentleman from California, Mr. Issa, a cosponsor of the
    bill and a holder of patents, high-quality patents.
        Mr. Issa. They were the earlier ones, before it was so busy
    at the patent office, which unfortunately means they are
    starting to expire.
        Why are you laughing? I am crying. You know, in 1994 in
    order to deal with GAAP, we said, well, we are going to make
    our patents 20 years from application. So at least there is one
    Member on the dais who was once sued on a patent that had never
    been litigated until it was in the extension period; and then
    only against me, even though it was one of my customers, for
    more than a decade, but he had then retired and decided this
    patent that was 17, 18, 19 years old, was suddenly valuable.
        I tend to have a little trepidation when people say, do it
    like Europe. Just so you understand.
        Mr. Griswold, when you talk about the harm we could do with
    a second window for everything to deal with the body of
    existing patents, if we had a single postgrant window that
    began after enactment of this, would you think that we should
    do something rather than just ignore the thousands of--millions
    of patents that are out there now? Or could we have,
    realistically, two standards, one for patents about to be
    granted, one which would allow for the use of postgrant on a
    much more limited basis for those patents that are already out
    there, recognizing that there is no court, no patent office,
    that can handle 2 million claims in 1 day if we said, you know,
    you have 90 days to deal with every patent out there?
        Do you see that as something that we can finesse? Or do you
    say--do you see that as some problem that is bigger than what
    you talked to me about before?
        Mr. Griswold. I would be concerned with setting up a
    special program for a certain body of patents. I think that
    there are a couple of things, one I had mentioned already, that
    reexam, because of the change in inter partes reexam that is
    more likely to be used, at least with the proposal on the
    table.
        Mr. Issa. Are you talking about the boards they are going
    to do, taking it away from----
        Mr. Griswold. And making the estoppel provisions less
    onerous. That is one piece.
        And the other piece would be this, that the proposal that I
    mentioned earlier in my response to a question--it is called a
    ``postissuance revocation proposal''--would help in this
    regard. It is not in this bill, but it is something that we
    have put together that would bring together----
        Mr. Issa. I appreciate that.
        But in the 5 minutes-plus, whatever time, I commend the
    Chairman for bringing this fine piece of legislation to the
    forefront. And as I continue adding time, Mr. Chairman, thank
    you so much; this really was wonderful of you to do and
    particularly today.
        But in your opinion, the body of existing--if for a moment
    we just left it alone and only concentrated on the new, you
    would be more or less happy with a single postgrant window at
    this point as part of the enactment language?
        Mr. Griswold. Yes, we would be fine with A because we think
    the number one thing is to weed out patents shortly after they
    are granted----
        Mr. Issa. I will tell you, in my notes the number one thing
    is, do no harm because--that is why I asked the question. This
    would assure less harm then hypothetically dealing with the
    body of millions that were out there under another system.
        The conversion to first-to-file seems to be more
    controversial than I would have expected. I am somebody--I am
    an old guy. I am used to--I grew up in this whole thing of 1
    year and swear behind and reduction to practice, but
    realistically aren't we sort of in a position where the
    transition to first-to-file is pretty inevitable, and we just
    have to decide the terms under which we want to do it?
        Is there anyone that sees that as somehow not something
    that if we don't deal with it now, we are going to deal with it
    in all likelihood in the future?
        I guess I will go the grand State of Texas.
        Mr. Peterman. Thanks. I would like to say, you know, maybe
    that is right. I think one of the important things in first-to-
    file, though, is that we maintain protection rights which I
    believe this bill does for first-user and first-to-market in
    terms of prior art, but we wouldn't want to see that go away in
    terms of a first-to-file system.
        Mr. Issa. Okay, I appreciate that.
        Last, the last in my time: The Georgia Pacific, 15 points
    of tests that have historically led to a big factor in
    determining the importance of a patent, et cetera, the damages,
    in your opinion, if we are able to capture that accurately as
    uniform guidance to the courts, is that a meaningful goal when
    we are trying to--and I will use the word one more time--
    ``finesse'' the differences in opinions on this issue?
        Can I get somebody that hasn't answered?
        Mr. Thomas. Mr. Issa, I believe that the case law and
    empirical evidence show that courts are having a very difficult
    time reliably measuring damages in apportionment situations.
    And because, both theoretically and practically, the patents
    damage system should be based upon the market measure of
    damages, I believe it is a reform very much worth pursuing.
        Mr. Issa. And then, as to Georgia Pacific, as to that
    standard, that is the standard most are trying to come to,
    right?
        Mr. Thomas. Yes, I think Georgia Pacific has, one of those
    15 factors has reflected that concern----
        Mr. Issa. The 13?
        Mr. Thomas. Yes, the 13th factor reflects the concern that
    courts are encountering today.
        Mr. Issa. Thank you, Mr. Chairman. I hope for a second
    round. Yield back.
        Mr. Berman. The gentleman from Georgia, Mr. Johnson.
        Mr. Johnson. Thank you, Mr. Chairman.
        Mr. Peterman, we have heard from the other witnesses that a
    postgrant review process with a second window would be harmful.
    And you state in your testimony that such a second window is
    essential. Why is it essential for Dell?
        Mr. Peterman. Sir, for a postgrant opposition proceeding to
    be helpful just having it be within, say, the first year after
    a patent grant, if there are too many patents, it is not
    possible to really oppose all the patents.
        The other thing I would like to highlight is, there are
    situations where the way a patent comes out of the patent
    office, if we were to look at it that day, it wouldn't look
    like one that would ever be an issue for us. And then, maybe
    later, maybe 6 years later or further down the line in the life
    of the patent, something changes and/or--and now, today, what
    is happening is, sometimes litigants will get a hold of these
    patents and look at them creatively.
        We have an example--and I don't want to say too much about
    this case because it is still pending--but we have a situation
    where there is a patent that has been asserted against us for
    any Internet transaction that crosses an international border.
    As we looked at the patent when we were sued, if we had had
    this short postgrant opposition period, we wouldn't have
    opposed the patent, because it didn't look like anything we
    did. Yet this patent later was asserted against us.
        I think in situations like that, where the patent is
    asserted later and it is not something you could have thought
    of opposing in that first period, I think we all believe there
    needs to be that second window for challenging the patent or,
    otherwise, the postgrant procedure is not that helpful.
        Mr. Johnson. Let me ask Mr. Griswold, are there any
    industries where it would be appropriate to have more than a
    12-month period?
        Are there any industries that you----
        Mr. Griswold. The problem with a second window, as we talk
    is, it gives just another opportunity for a patent to be
    attacked, which is a major, major concern. So you can wind up
    with--I gave some examples on reexamination, how it was used
    serially, inappropriately in our opinion.
        And so I think, generally speaking, it is not good to have
    a patent owner be subjected to a continuous attack.
        Mr. Johnson. Generally speaking, there may be some
    instances where there should be more than a 12-month window of
    opportunity?
        Mr. Griswold. I wouldn't say that. I would say that if--as
    I mentioned before, there may be, if you integrated all of the
    reexamine and postgrant into one process and then put a lot of
    limits on it, it may be possible to come up with a system that
    would approach something that would give the patent owners some
    peace in the valley while giving another opportunity.
        Mr. Johnson. I notice that Dell's position on patent reform
    is supported by a broad array of industries, including media
    companies that own movie studios and publishing, financial
    service companies, and energy companies and farmers.
        What brings all of these diverse industries together on the
    patent issue?
        Mr. Peterman.
        Mr. Peterman. I would say it is the two things we believe
    this bill addresses. And one is that all these industries are
    seeing problems with quality patents, and we believe the bill
    goes a long way to helping us have more quality patents.
        I think the other is that all these industries are seeing
    problems with speculative patent litigation, litigation just
    for the sake of litigation. And we believe this bill does a lot
    to help with that problem as well.
        Mr. Johnson. Mr. Griswold, why shouldn't the Patent and
    Trademark Office, which, quite frankly, has the best expertise
    in both law and technology, in that area where they examine
    these processes, why shouldn't they be given broad rule-making
    authority over patent matters?
        Mr. Griswold. Well, the concern is--as I was mentioning
    earlier, was the concern with setting standards on what is or
    is not patentable, basically getting into what you can patent
    or not patent. Rules like that we are real concerned with,
    because we will not have the opportunity for this kind of
    debate, and eventually they can directional process to decide
    whether or not that is the best direction.
        There are, as was pointed out by Professor Thomas, some
    hearings and things like that. But it is not the same process.
    At the end of the day, they decide and it is not a vote of over
    400 people to make this decision, so that is a concern. And
    they have--and they carry a lot of weight if they have
    substantive rule-making authority.
        Mr. Johnson. All right. But now the fact that you have got
    a 435-person Congress to vote on these, I guess you could say
    micro issues versus a Federal agency that deals in this area of
    the law day in, day out, 24/7.
        But you would hold that it would be better for the entire
    legislature to make those kinds of decisions?
        Mr. Griswold. The kind of rules we are talking about, they
    really have substantial impact on the basic rules around rice.
    We believe that is correct.
        Mr. Johnson. Doesn't the Administrative Procedure Act
    enable you to be able to challenge the rule-making authority or
    the rule-making of the agency? Wouldn't that be sufficient?
        Mr. Griswold. I don't think it would be sufficient, but I
    will say that I am not an expert in that area of the law, the
    Administrative Procedure Act.
        But I don't believe so. I think we have to force the kind
    of debate like we are having here. And I think Chairman Berman
    is doing a good job of forcing that kind of debate, as we
    speak.
        Mr. Berman. He would like not to do it every month for the
    rest of his congressional life.
        The gentleman from Virginia, Mr. Goodlatte.
        Mr. Goodlatte. Thank you, Mr. Chairman. And thank you for
    holding this hearing and for introducing this legislation,
    which I am pleased to cosponsor and glad to see you are forcing
    this debate. I think it is a good thing.
        And I might focus in again on the second window. That
    seemed to be--since the courts took care of, for the most part,
    the injunctive issue that held us all up last year, second
    window seems to be the number one issue that we are all looking
    at at this time.
        And, Mr. Peterman, if I might just characterize--and
    correct me if I'm wrong--the difference between you and Mr.
    Griswold is in the companies that you are working for. Dell
    manufactures and sells products that contain many different
    patents, many of which I assume you license from other people;
    and when you put that product on the market, you don't know
    whether there is a challenge to any of what could be hundreds
    of patents in a particular product that you are offering.
        And Mr. Griswold, 3M manufactures--is that your company,
    3M?
        Mr. Griswold. Yes.
        Mr. Goodlatte. You are a major company that invents and has
    a long history of inventing a lot of innovative products, and
    often manufactures the same products that you invent. And they
    often do not contain hundreds of patents, but a more limited
    number. And your concern in moving forward here is that when
    you develop a product and put it on the market, you want to
    make sure you have the ability to protect it, enforce it all
    the way through. And the less often you have to do that, the
    better off you are.
        So, Mr. Peterman, let me--if I have characterized that
    correctly, Mr. Griswold--let me ask you to tell us how you
    would address Mr. Griswold's concerns that you face, moving
    forward. What do you say to him in terms of the problems that
    he has presented to us?
        And I am going to do the same thing to you, Mr. Griswold,
    with his problem.
        Mr. Peterman. Yes. I would say--and it is our position that
    if we are going to have--I have said this, if we are going to
    have postgrant, we don't see that it makes sense to stop it at
    a year, that it ought to be the life of the--there ought to be
    a second window.
        I guess my response is that there are already several
    procedures that put a patent at risk or, you know, avoid quiet
    title during the life of the patent--the reexamine process,
    which they have talked about, the fact that any time you assert
    in litigation it is open to a validity challenge.
        I think where we struggle is understanding how this
    postgrant procedure is so different from the existing reexam--
    --
        Mr. Goodlatte. What is the issue with preponderance of the
    evidence with--this new second window that has been proposed
    uses a preponderance of the evidence standard; and you are in
    favor of that standard, is that correct?
        Mr. Peterman. We are in favor of that standard, and
    certainly the difference is that, currently, in patent
    litigation, the standard for proving invalidity is clear and
    convincing. That is certainly a difference.
        Preponderance is a lower----
        Mr. Goodlatte. Why do you favor that difference?
        Mr. Peterman. We believe in challenging a patent. And
    typically this would be a challenge over something that wasn't
    fully considered, or considered at all, by the patent office,
    that there shouldn't be a presumption of validity in that case.
        Mr. Goodlatte. Do you have any words of comfort for Mr.
    Griswold?
        Mr. Peterman. I am not sure that I do, unless I have said
    them already.
        Mr. Goodlatte. Let's see if he can do a better job for you.
        Mr. Griswold, first of all, where are you on this
    preponderance-of-the-evidence issue? And secondly, how would
    you solve their problems since you don't like the solutions in
    the bill?
        Mr. Griswold. Actually, we share some--and we have some
    software businesses, so you characterized us, maybe, not quite
    the way we are.
        Mr. Goodlatte. But you have at least part of a foot in one
    camp and part of it in the other.
        Mr. Griswold. Not only us, but remember I am here for the
    Coalition of 21st Century Patent Reform, which is 42 companies
    that all over the place, diverse companies from every industry.
    And our company is a very diversified technology company.
        So let me address a couple of your questions. The first one
    is relative to clear-and-convincing versus preponderance.
        If you want people to come into a first window and go after
    a patent to weed it out early on, if you have a preponderance
    of the evidence, later on, they are not going to do that. So if
    you are going to drive them to a first window, you need to have
    a clear-and-convincing standard. Otherwise, they are better off
    going to the patent office at a lower standard than district
    court. So that is one piece of the equation.
        Another thing that I would say relative to Peterman's
    business, or Dell's business versus ours and how we operate, we
    have historically been comfortable with clearing our products
    no matter what they--no matter what is in them. We clear
    products before we put them on the market.
        We also file oppositions against patents in other
    countries. We also look at patents to see what they might cover
    versus what they say they do cover. And we take all that into
    account. And that is the kind of--that is the way we operate.
        I can't give him comfort that he should do that. But I can
    tell you that is how we operate relative to our overall
    businesses, no matter what industry we are in. And I have
    discussed this kind of issue with the rest of the people--some
    of them; not everybody here, of course, but a number of the
    companies--and that is the process they use.
        So they would be trying to weed out patents early on in
    their life during the first window. They would also be clearing
    their products to make sure they didn't have problems before
    they put them on the market.
        Mr. Goodlatte. And do you think that is as easy to do when
    you have a product that has hundreds of licensed patents
    involved, as opposed to one that has fewer? Do you have very
    many products on the market that contain hundreds of patents?
        Mr. Griswold. We have products that have many--we have tens
    of patents, hundreds of patents; I have to go down the list.
    Probably if you talk to a lot of people, we do, but we have
    very complicated----
        Mr. Goodlatte. Do you have greater difficulty clearing
    those than you do one that just has a few patents attached to
    it?
        Mr. Griswold. It is more of a challenge if you have a more
    complex product or that could implicate a number of different
    types of patents. But we do it anyway.
        Mr. Goodlatte. Thank you, Mr. Chairman. And I apologize to
    the other two gentlemen for leaving you out of that discussion,
    but----
        Mr. Berman. I thank the gentleman.
        The gentlelady from Texas.
        Ms. Jackson Lee. Thank you very much.
        I will take a moment and pause to reflect upon what I hope
    will be a continued discussion. I hope the Chairman will hold
    additional hearings. I think in order for us to get our hands
    around the many, many issues, and frankly, to create a
    legislative document that answers the Chairman's questions and
    many of our own--even though I think we have a very good
    vehicle to operate from, I am pleased to have been able to join
    Chairman Berman on this thoughtful journey including the
    legislation that is partly underlying this particular hearing.
        But probably representing many innovative countries--
    companies, rather, in Houston and claiming Dell, I am
    interested in making sure that this is the kind of vehicle that
    does what we would like it to do and continues to put America
    at the cutting edge of invention and technology.
        This past week we passed legislative initiatives dealing
    with teaching math and science and engineering, providing
    scholarships, getting people back into the creativity that
    creates work.
        I am going to start with you, Professor Griswold, because
    it is interesting that I am an original cosponsor of this
    legislation, and I am pleased to be so. But as my good friend
    from North Carolina said, there are a lot of us who are like
    apples and oranges on this bill. And when I hear some of the
    commentary about stymieing--stymieing litigation, closing the
    courthouse door, you sort of raised the hairs on back of my
    neck. I happen to believe in the opportunity of the small guy
    to get in the door.
        But at the same time I think what we are trying to
    accomplish is to ensure some safeguards so that innovativeness
    and the inventiveness that creates the churning of the economy
    and jobs and prominence for this economic aspect of this
    country goes fairly smoothly. So I want to try to explore this
    issue of the unlimited time period for filing postgrant
    proceedings, because I assume what that means for some is that
    the door is not closed on what they have been awarded.
        Professor Griswold, what does that mean, and what is the
    basis, if I am correct, of your opposition? What does that mean
    to the smaller entity that maybe does not have a period of
    closure around the grant that they have received.
        Mr. Griswold. Excuse me. So your question relates to a
    small entity who is a patent owner and what will happen. Well,
    what happens is that this will give--a second window would give
    the people that want to take on the validity of that patent, or
    challenge the validity of that patent, another opportunity to
    attack the patent. And so there would be another opportunity--
    another situation where that small business would have to
    defend itself in the Patent and Trademark Office.
        Ms. Jackson Lee. How would you fix that?
        Mr. Griswold. Well, our fix is to have a single window so
    that you have one chance right after the patent issues and that
    is when we do the weeding process with the postgrant opposition
    system. There would still be the reexamination opportunities,
    both ex parte as well as inter partes reexamination that would
    still be available for people to attack the individual, the
    small business patents. They exist today. Frankly, under this
    bill, they would be more available. I know parties would be
    more available, because of the estoppel would be less onerous.
        Ms. Jackson Lee. Thank you, Mr. Tucker.
        How does this bill impact university inventors and
    scientists? You obviously are doing a lot of research in the
    pharmaceutical industry. What does this bill do in its overall
    perspective?
        Mr. Tucker. I think for us the biggest change that this
    bill brings into place is the change from first-to-invent to
    first-inventor-to-file. And for us that is the biggest issue
    that we really face from a practical standpoint. Our open
    academic environment has--as I said, the pressure to publish is
    intense. So faculty members are out there talking about their
    inventions. They are publishing their inventions. It is the way
    they get recognition. It is the way they get more grants.
        You know, as a practical matter, they don't all come up to
    the technology transfer office in their university before they
    go out there and describe their next fabulous invention. And we
    have to--you know, in the current system, we are able to seek
    patent protection for that disclosure because we have that 1-
    year grace period after the filing.
        Ms. Jackson Lee. So would you go back to the present system
    or would you see a fix in the present bill?
        Mr. Tucker. We are not formally opposed to the change, and
    we respect the Committee's and the drafters' attempt to create
    this grace language. We don't--we are still analyzing the grace
    language, and we would like to be able to work with the
    Committee to get grace language that gives us the protections
    that we have today in the first-to-invent system. So, you know,
    it depends how that grace language looks. It depends on the
    stance the University of California would take.
        And we know, and the Chairman has pointed out, we are
    perhaps more aggressive on this matter than some of our other
    colleagues. We have been involved in the patenting and
    licensing of technology for a very long time. So our opinion is
    colored by our experiences, and so that is it.
        Ms. Jackson Lee. Well, let me if I might, Mr. Chairman, ask
    a question to Mr. Peterman. I know my time has elapsed. Could I
    ask an additional 1 minute?
        Mr. Peterman, first of all, welcome; and we proudly say
    welcome to a wonderful civic and corporate friend of Texas and
    obviously our neighbor.
        Let me add my same deep sympathy to the loss of Thurman and
    to his family for what he has represented to many of us on
    promoting diversity but also promoting technology.
        And I have had the opportunity to visit Dell. At the same
    time, I know that Michael Dell could be considered an inventor.
    We all start somewhere. I still hear the legions of tales, if
    you will, tall tales or short tales, about Bill Gates at
    Harvard; and I think every Harvard student and every other
    student thinks they are on the verge of doing the same thing as
    probably Bill and Michael did at one time.
        You are now a big company and you have indicated that this
    legislation, as many of us wanted to consider, restores a
    balance in the litigation and a balance between defendants and
    plaintiffs and it limits the punitive damages. But why don't
    you try to project yourself and answer the question, do you
    think it damages too much, not renders damages, that
    innovativeness that is important, and how do you see that the
    bill balances your concerns as a large company and the concerns
    of what had to be the beginnings of your company?
        Mr. Peterman. Thank you.
        First, I would like to thank you for your condolences and
    also Mr. Watts. We really appreciate that.
        I think that it is our view that this bill strikes the
    right balance, that it establishes a more fair process. I
    mean--and I guess the damages issue is the one we have talk
    about the most. We certainly do not intend to take away
    anybody's access to the courts or take away their right to a
    decision on the merits and adjust rewards for their patents.
        I think that the changes in this bill will not impact
    somebody like Mr. Dell in the way he started his business. I
    think that it will actually in some ways help that innovation.
    It will clear up any chances or help some of the chances that
    those small companies if they are attacked on patents can
    defend them properly and that if there are damages that the
    damages are appropriate.
        Ms. Jackson Lee. Thank you, Mr. Chairman. I just want to
    thank you, and I hope as you continue--and I apologize for
    having to leave--that we will possibly be able to have another
    hearing and we might be able to listen to inventors--and I know
    there may be some here--but inventors who will be, from
    whatever range, be impacted by the legislation. I think we are
    on the right direction, going in the right direction, and I
    think look forward to going to a good legislative initiative.
        I yield back.
        Mr. Berman. Thank you. That could be requested. It
    conflicts with a good night's sleep, but certainly we are going
    to discuss collaboratively what more we need to do.
        I have a couple questions. But let me just say initially,
    Mr. Tucker, I appreciated your comments in response to the
    gentlelady from Texas' question. Because if we start focusing
    on what the grace period protects and what it needs to protect,
    perhaps there is some useful language--a look at this that can
    deal with the university's problem in this area, and not
    particularly right now but between now and the signing
    ceremony, we should----
        Mr. Tucker. Well, yeah, Mr. Chairman, we are committed to
    work with you and the Committee on crafting language; and my
    esteemed colleagues in the room here, my attorneys, et cetera,
    are looking at how best to look at the language that is in the
    bill and how we might be able to work with you on getting
    something that supports university innovation.
        Mr. Berman. And just to my questions, Professor Thomas, you
    wrote a paper that I referenced earlier which--part of why I
    actually finished it was because it was well written--I almost
    understood it--and had wonderful examples.
        Now, take Mr. Griswold's example, the Post-It. You had
    paper, and you had adhesives, and they just combined these two
    items which were both prior art and patented something. Now
    they are in court against someone who has infringed that
    patent, and the defendant says paper, adhesive--they get a
    little bit for the idea of thinking of sticking the adhesive on
    the paper. But how would you address that in terms of them
    getting some value for an idea that I happen to like a lot? I
    use them all the time.
        Mr. Thomas. Well, I have observed that Mr. Griswold is more
    than capable of defending himself and would probably be able to
    do so in a courtroom.
        Mr. Berman. What would he say, though? Because he
    apparently thinks under our apportionment language he is out of
    the ballpark, right?
        Mr. Griswold. Right.
        Mr. Thomas. I would respectfully agree with Mr. Griswold.
        Mr. Berman. Be his lawyer for a second.
        Mr. Thomas. I would certainly argue that it is the synergy
    of those two ingredients placed together. Obviously, there were
    paper clips, there were glues that would attach paper to
    objects. But they would have a fixed attachment, not a
    removable attachment, as patent lawyers who draft claims like
    to say. So that is not a feature presented by the prior art and
    not in that combination.
        I believe the bill language as it exists is flexible enough
    to account for both situations, situations where there is one
    patented invention that is part of a larger system, that has
    other unrelated components. On the other hand, inventions that
    rely really on that combination--the example I give in my paper
    is a combination therapy for the pharmaceutical industry,
    claiming that should not be apportioned because it is the
    aggregation of those two medicines.
        Mr. Berman. That produces the cure.
        Mr. Thomas. That is correct.
        Similarly, it is the aggregation of the paper and that
    particular adhesion that produces.
        So I agree with you and with Mr. Griswold. Those are
    situations where apportionment would not be appropriate. And I
    also find nothing in the language of this bill that actually
    says you must subtract everything that existed in the prior art
    and leaving essentially no damages for any of that to work.
        Mr. Berman. I would like to say case matter over, but you
    sound like you want rebuttal time.
        Mr. Griswold. Well, I don't think that is the way our
    opponents would say somehow in this language. I think what they
    would say, they would go to that language and the provision
    that says ``shall exclude what is in the prior art,'' and they
    would exclude my piece of paper and my releasable adhesive. So
    that leaves us with nothing.
        So I am happy to hear Professor Thomas--and, Professor, I
    will call you Professor--Professor Thomas say that there should
    be no apportionment in that situation, but I don't think it is
    clear at all that that would be the outcome if you had a bill
    and a piece of legislation like this, no way.
        Mr. Berman. Well, now that issue is framed, isn't it? We
    just have to look at that language.
        Mr. Griswold. Yeah. And what I would say, that is exactly
    right, Mr. Chairman, and that is what we should do if we are
    going to talk about damages legislation and look at the
    language.
        Mr. Berman. All right. This may not be the perfect place to
    get terribly more detailed in dissecting the language.
        So let me go to another question, to Mr. Griswold. National
    Academy of Sciences says--first, you accept our new postgrant
    within the certain number of days after the issuance of the
    patent, and you say you actually think it might be helpful in
    strengthening patent quality, right? It is the second window
    that is the focus of your concern.
        Mr. Griswold. Conceptually, a postgrant opposition system
    that had a single window right after grant, that had a very
    carefully laid out process, including limitations on discovery
    and all those things, would be a system that we have supported,
    yes.
        Mr. Berman. All right. ``like'' is too strong a word.
        Mr. Griswold. Okay. Well, we have to define ``like,''
    because we have to be cautious.
        Mr. Berman. All right. Ah, yes. You don't concede much in
    these exchanges.
        What about a second window that would only be triggered--or
    maybe we would call it a second trigger--where an infringement
    case is brought and the district court has the ability, if the
    validity of the patent becomes an issue, to refer back to this
    existing postgrant procedure as a quicker, cheaper more
    efficient way of determining validity?
        Mr. Griswold. The way the----
        Mr. Berman. As sort of like the National Academy of
    Sciences report recommended.
        Mr. Griswold. Yeah. I don't think that actually that works
    that well for this reason, at least the way it is laid out in
    this bill, because of the openness of the discovery. It is
    cheaper and quicker in some courts that were referred to in
    previous dialogue, are as fast or fast as this postgrant
    procedure we are talking about. You can get to trial, you can
    get a judgment as fast as you could in postgrant. So that is
    one piece.
        Another thing is----
        Mr. Berman. What is the open review proceeding that the
    National Academy of Sciences made reference to in making this
    recommendation?
        Mr. Griswold. Yeah. They were focused on----
        Mr. Berman. They didn't say it was just the existing
    reexamine procedure?
        Mr. Griswold. No. They were talking about a----
        Mr. Berman. More robust.
        Mr. Griswold. They were talking about a more robust. I
    don't know the metes and bounds of robust, but our view is that
    in your hypothetical, for example, that you would have a whole
    bunch of issues that come up, one--with this proposal, for
    example, you have preponderance of the evidence is a standard.
    That is a different standard than is used in the district
    court. So people would go--may want to go to the patent office
    because they have a lower standard on validity.
        Mr. Issa. Would the Chairman enter into a colloquy on that
    point?
        Mr. Berman. Scary thought, but----
        Mr. Issa. Mr. Chairman, this is the first you brought that
    idea up; and, to continue my earlier statements, I think it is
    brilliant. I think it hits on exactly the point many of us have
    been wrestling with, which is if we eliminate the second window
    except as to certain circumstances--and I might add that your
    concept with the caveat that a first window never was opened
    would clearly allow one window in that first year unless at a
    later date, as Dell was speaking, Mr. Peterman was saying,
    unless later on, 10 years later, somebody asserts a patent has
    never gone through a postgrant.
        Your way of finessing it may make this new right more
    palatable to everybody, since one of my concerns is this is a
    new tool and how big do you have to make a new tool that never
    existed in American law before? But I think it is brilliant,
    Mr. Chairman.
        Mr. Berman. Well, in order to avoid any problems of
    inequitable conduct, I should say there was prior art on that
    ingenious idea. But if you are talking about patents already
    issued--boy, we are changing procedures here, aren't we? If we
    are talking about patents already issued, should the guy have
    to wait until he is sued to get that review?
        I was more thinking of this--the issue of already issued
    patents that were never tested is one group of things. But the
    notion of the referral by the Federal judge in an infringement
    case on the validity issue--I guess it is worth more thought.
        Mr. Issa. Thank you, Mr. Chairman.
        Mr. Berman. Thank you for opening up the issue.
        All right, my friend from North Carolina.
        Mr. Coble. Thank you, Mr. Chairman.
        I think it has been a productive hearing, and I have just
    one question. My friend, Mr. Griswold, mentioned peace in the
    valley; and hopefully at the end of this exercise--not today of
    course, Mr. Berman--we will all realize at least some fragment
    of peace in the valley. And I want to ask a question just for
    my edification, admitting that I don't know.
        The Eastern District of Texas was mentioned earlier, and I
    think that district is popularly known as a rocket docket
    district, so named because of the accelerated pace by which
    patent cases flow or move along very quickly. And it was
    mentioned earlier that this is not the only rocket docket
    district. How many rocket docket districts are there? Mr.
    Griswold?
        Mr. Griswold. I can't say with certainty how many, but
    there are a couple of others that people would indicate are
    rocket dockets. Perhaps Professor Thomas may have studied this
    more than I have, would say so, but I know there are at least
    two more besides Texas that are rapid.
        Mr. Coble. Are you comfortable in identifying them, Mr.
    Griswold?
        Mr. Griswold. Well, somebody said Minnesota.
        Mr. Coble. I heard that earlier.
        Mr. Griswold. But it is not Minnesota. But that is what
    happens with people from Texas sometimes.
        Mr. Coble. Okay.
        Mr. Griswold. They confuse people from Minnesota with
    people from Wisconsin. And what happens is--I really confuse
    people because I work in Minnesota, but I live in Wisconsin,
    and that rocket docket we are talking about is in Wisconsin.
        Mr. Berman. Now that I know Dell is in Houston and
    Minnesota is in Wisconsin.
        Mr. Griswold. Yes. That is more than the other--the other--
    by the way, we have one of our headquarters in Texas. So
    everybody who was giving all the accolades to Texas, we have a
    southern headquarters in Texas. So thank you for not mentioning
    that. But we appreciate--well, we like being in Texas, too.
    But, anyway, the other one would be Virginia.
        Mr. Coble. Which district?
        Mr. Griswold. The Eastern District of Virginia.
        Mr. Coble. I am asking just for my information.
        Mr. Griswold. These guys may have more on that.
        Mr. Coble. Anybody know any additional information on this?
    I am asking just for my own information.
        Mr. Chairman, thank you for a good hearing. Thank you all
    for being with us.
        Mr. Berman. Thank you all, Mr. Coble. Some of us think it
    is not only a rocket docket but that the rocket only points one
    way.
        Mr. Issa.
        Mr. Issa. Thank you, Mr. Chairman. And I know Judge Ellis
    will be happy that you did get to the Eastern District of
    Virginia. He is very proud of the work they have done there,
    and their rocket points many ways--they believe always the
    right way--as to the successful and appropriate decisions.
        Mr. Chairman, I would like to ask unanimous consent the
    statement from the California Health Care Institute be included
    in the record in its entirety.
        Mr. Berman. Sure. It is included.
        Mr. Issa. Thank you.
        Mr. Berman. Assuming it is about patent reform.
        Mr. Issa. Don't we have need for extraneous?
        Yes, it is their statement to the Committee relevant to
    today's hearing.
        [The information referred to follows:]
    Prepared Statement of the California Healthcare Institute, submitted by
    the Honorable Darrell Issa, a Representative in Congress from the State
     of California, and Member, Subcommittee on Courts, the Internet, and
                             Intellectual Property

        Mr. Issa. Could you restart my time now?
        Mr. Peterman, I think that you can see that the Chairman
    has been thinking and trying to find ways to make this work. I
    don't want this hearing to be all about postgrant, but wouldn't
    you agree that postgrant by definition--because we are not
    eliminating reexamination as it currently existed in this bill.
    Postgrant is a new right by those who want to reduce or
    eliminate claims of a patent that does not exist in law today.
        Mr. Peterson. Yes, that is true.
        Mr. Issa. And if it is a new--by the way, you do really
    well if you just make short quick answers, because then I look
    like I knew what I was asking. But if you add a new right and
    you are up here on the dais and you want to do no harm, isn't
    it reasonable that one of the goals we have--and you can see
    the Chairman struggling for it--is to make sure that right is
    narrow enough or small enough that if it fails or it doesn't
    accomplish what we want, we haven't been too expansive?
        And isn't that one of the reasons that, on one hand, you
    want to deal with 10 years down the road when some guy who had
    a patent that didn't look at all like what you are doing
    asserts it, you want to have this capability, but you don't
    want to simply throw mountains of paperwork at every new patent
    simply for the sake of trying to protect your rights. Is that
    about where I see Dell's position?
        Mr. Peterson. Yeah, I think that is true. I think,
    actually, it is one concern that we have that, if we only have
    a short window, that it would only be used to throw mounds of
    paper at patents and it wouldn't really be that helpful.
        Mr. Issa. So if we assume for a moment that Mr. Griswold
    takes advantage of company Lee 1 year for postgrant and if you
    would be barred from later bringing it, we are not going to
    give you a second window, if there is a first window used in
    the first year, that you would then be a little more willing to
    look at the details of ones that seemed extraneous and take
    advantage of that. In other words, would you be more
    comfortable than you presently are if you were eclipsed once
    there was a postgrant?
        But if nobody submitted a postgrant, it was never
    published, your patent counsels didn't say, here is the 175 for
    this month that are up here to look at and we are going to go
    over them, would you be comfortable if that was the only
    universe you had to worry about? Such that the unproven,
    untested patent by the inventor who just did it because he had
    an idea, Abe Lincoln sounding a little bit that way since he
    never made the product, would you be comfortable instead of
    looking at a hundred thousand you are only looking at 175 that
    are up for postgrant, that is that middle ground that your
    company in the abstract would be more comfortable with?
        Mr. Peterson. I think I will first say that I think we are
    hoping and looking at any proposals, and I don't want to
    foreclose anything.
        Mr. Issa. But look at mine most favorably, please.
        Mr. Peterson. We will certainly do that.
        I am not sure--I am sorry. I am not sure I understand the
    proposal. But I think what you are saying is that there will be
    sort of a rolling window of the patents that are sort of up in
    the first grant.
        Mr. Issa. Well, basically, we are only talking for a moment
    about new patents being granted tomorrow. Tenthousand new
    patents are granted tomorrow. Mr. Griswold would like to have
    one shot and then quiet title. You would like to have a shot 10
    years from now when it is asserted against you. If I see the
    middle ground to be discussed in this legislation, there is
    only one shot, but if it is not asserted in that first year,
    then the patent is then asserted 10 years later, it triggers
    that window. If it is----
        And, conversely, if it is triggered, even if it is
    triggered to be honest by 3M, they have a patent and they go
    ahead and throw it into the postgrant themselves with some
    information that was sent to them by somebody, then you are on
    constructive notice that you are not going to get a second
    window. Will you use this window? Does that give you a middle
    ground where your company would not be burdened by every
    patent, only those that were going through a postgrant?
        Mr. Peterson. Yeah. I understand what you are saying. I
    think we would be concerned about that.
        I think one reason would be----
        Mr. Issa. But less concerned than you----
        Mr. Peterson. Well, I think one of the difficulties with
    this is that----
        Mr. Issa. Can I make you less unhappy, is what I am asking.
        Mr. Peterson. I guess it concerns me that one party could
    trigger this opposition and might foreclose challenge later by
    all parties. And if that party doesn't do a good job or doesn't
    put its full effort into it, perhaps it is too much of an
    advantage for the patent holder.
        Mr. Berman. Would the gentleman yield?
        Mr. Issa. Of course, Mr. Chairman.
        Mr. Berman. But given the hypothetical you used where 3M or
    its agent could trigger that first window on its own in order
    to stop any future challenge, isn't that a little bit like the
    presiding officer of the House after a bill that he or she
    supported has passed saying, and the motion for reconsideration
    is laid upon the table? In other words, stopping the ability to
    come back to that bill sometime in the future. Is that prone to
    a kind of setup which sort of undermines the--it allows sort of
    a fake opposition to--even where you are dealing with companies
    that are aware of what patents are being issued today?
        Mr. Issa. You know, Mr. Chairman, I am very aware of that;
    and that was one of the challenges that we were both facing,
    both of us, in the last Congress. The concept being, though,
    that the vast majority of patents, many of them are the ones
    that really hook companies 10 years later. They are thrown out
    there. They really don't want to notify the world that they are
    out there, and this is what they mean, and they don't want it.
    So many patents would never get looked at as a result in a
    postgrant because companies--it would be burdensome to go after
    all of them.
        Dell has put out a good point, which is what happens if it
    isn't re-examined? I look and say--and if Amgen were still
    here, they would be the first to say, but, my goodness, you
    know, we can't be hit five times. The idea of postgrant, as I
    understand it in your legislation, is once a postgrant is
    opened, it is not opened as to one party. Everybody gets to
    pile on.
        So the fair notice that there is a postgrant, and
    therefore, you look at it and you see if you have anything in
    your library of information would appear to be part of the
    process.
        And from my history of reexamination, that is what was
    wrong with reexamination in the current, is that it wasn't open
    enough and people didn't gather their information, and it is
    one of the reasons that sequential reexaminations occur, is
    that you can have five different companies each submit slightly
    different information over a period of time to the PTO.
        Mr. Berman. Professor Thomas, what do you think about this?
        Mr. Thomas. I continue to prefer a symmetry of access to
    the patent office between the patentee and concerned members of
    the public.
        Many of the firms that are coming to you now and telling
    you that they will be severely disadvantaged if their patent
    instruments are changed or modified through an opposition
    process of course are the ones who are filing reissue
    applications at any time during the life of the patent, are
    filing any number of continuation applications which seems to
    have virtually no time limit and there is an infinite number
    apparently available.
        Now that latter situation might change. But, again, I think
    it is important to use the door analogy. To open the door to
    the patent provider itself throughout the entire term, it seems
    unjust to allow members of the public not to have the same
    access to the expertise of the patent office to the same term.
    In my opinion, the debate should not be whether we have a
    second window. The debate should be why are we having just a
    second window and not allowing the symmetry of access to
    members of the public throughout the entire life of the patent.
        Thank you.
        Mr. Issa. Yeah. Mr. Chairman, the only question that brings
    up is, since your bill does not eliminate the reexamination
    process and even though I have said I would like to have us
    make it a little more robust, ultimately that is the public's
    access for the life of the patent is the current PTO
    reexamination process.
        Mr. Berman. Well, since we are just talking among friends--
    --
        Mr. Issa. Since we have asked unanimous consent, at least
    the votes on the dais.
        Mr. Berman. You are right, and we made the reexamine
    process a little better by getting rid of this estoppel. But
    should it be more robust?That is all we have done to make it
    better. The whole issue of gathering information, limited forms
    of discovery, other things like----
        I mean, in a way, if we are trying to achieve the same
    goal, I am open to a lot of different ways of skinning the cat;
    and so I think we should take seriously what you are throwing
    out here as a more robust reexamine that could be used at any
    time. I mean--yeah.
        Mr. Issa. I look forward to working with this, Mr.
    Chairman.
        Mr. Berman. Anybody else? Mr. Coble, do you have more
    questions?
        Mr. Coble. Mr. Chairman, I have a very belated request. Mr.
    Feeney, the distinguished gentleman from Florida, whose
    schedule precluded him to be here, wanted to ask unanimous
    consent to have his statement entered into the record.
        Mr. Berman. It will be included in the record.
        [The prepared statement of Mr. Feeney follows:]
      Prepared Statement of the Honorable Tom Feeney, a Representative in
    Congress from the State of Florida, and Member, Subcommittee on Courts,
                    the Internet, and Intellectual Property

        Mr. Berman. I think we will close this.
        I just want to ask--it is the Chair's intent to talk with
    the Subcommittee, apart from the substantive questions of what
    we go forward with, about whether there should be a second
    hearing, whether there should be some informal discussions, a
    working group thing with people, a little flexibility on what
    we might do. But, at this point, it is my notion to try and
    move to a mark-up mid-May, something like that; and I think the
    parties should think of that as the time frame for a mark-up,
    subject, of course, to the will of the Subcommittee.
        So if there is nothing else, then the hearing is adjourned.
    Thank you all very much. You really were a great help, I
    thought.
        [Whereupon, at 4:38 p.m., the Subcommittee was adjourned.]
                                A P P E N D I X

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                   Material Submitted for the Hearing Record