[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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