[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
PATENT REFORM ACT OF 2009
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
ON
H.R. 1260
__________
APRIL 30, 2009
__________
Serial No. 111-92
__________
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 DANIEL E. LUNGREN, California
MAXINE WATERS, California DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts J. RANDY FORBES, Virginia
ROBERT WEXLER, Florida STEVE KING, Iowa
STEVE COHEN, Tennessee TRENT FRANKS, Arizona
HENRY C. ``HANK'' JOHNSON, Jr., LOUIE GOHMERT, Texas
Georgia JIM JORDAN, Ohio
PEDRO PIERLUISI, Puerto Rico TED POE, Texas
MIKE QUIGLEY, Illinois JASON CHAFFETZ, Utah
LUIS V. GUTIERREZ, Illinois TOM ROONEY, Florida
BRAD SHERMAN, California GREGG HARPER, Mississippi
TAMMY BALDWIN, Wisconsin
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York
Perry Apelbaum, Majority Staff Director and Chief Counsel
Sean McLaughlin, Minority Chief of Staff and General Counsel
C O N T E N T S
----------
APRIL 30, 2009
Page
TEXT OF THE BILL
H.R. 1260, the ``Patent Reform Act of 2009''..................... 2
OPENING STATEMENTS
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, and Chairman, Committee on the
Judiciary...................................................... 1
The Honorable Lamar Smith, a Representative in Congress from the
State of Texas, and Ranking Member, Committee on the Judiciary. 22
The Honorable Howard Berman, a Representative in Congress from
the State of California, and Member, Committee on the Judiciary 24
The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Member, Committee on the Judiciary.. 24
The Honorable Brad Sherman, a Representative in Congress from the
State of California, and Member, Committee on the Judiciary.... 26
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Member, Committee on the Judiciary 26
The Honorable Darrell E. Issa, a Representative in Congress from
the State of California, and Member, Committee on the Judiciary 27
The Honorable Louie Gohmert, a Representative in Congress from
the State of Texas, and Member, Committee on the Judiciary..... 27
The Honorable Zoe Lofgren, a Representative in Congress from the
State of California, and Member, Committee on the Judiciary.... 28
The Honorable Ted Poe, a Representative in Congress from the
State of Texas, and Member, Committee on the Judiciary......... 28
The Honorable William D. Delahunt, a Representative in Congress
from the State of Massachusetts, and Member, Committee on the
Judiciary...................................................... 29
WITNESSES
Mr. David Simon, Chief Patent Counsel, Intel, Inc.
Oral Testimony................................................. 30
Prepared Statement............................................. 32
Mr. Phillip S. Johnson, Chief Intellectual Property Counsel,
Johnson & Johnson
Oral Testimony................................................. 45
Prepared Statement............................................. 47
Mr. John R. Thomas, Professor, Georgetown University Law School
Oral Testimony................................................. 70
Prepared Statement............................................. 72
Mr. Jack W. Lasersohn, Partner, Vertical Group
Oral Testimony................................................. 78
Prepared Statement............................................. 81
Mr. Dean Kamen, Inventor, DEKA Research and Development, Inc.
Oral Testimony................................................. 87
Prepared Statement............................................. 89
Mr. Mark Chandler, Senior Vice President, Cisco
Oral Testimony................................................. 93
Prepared Statement............................................. 96
Mr. Bernard J. Cassidy, Senior Vice President and General
Counsel, Tessera, INC.
Oral Testimony................................................. 101
Prepared Statement............................................. 103
APPENDIX
Material Submitted for the Hearing Record........................ 147
PATENT REFORM ACT OF 2009
----------
THURSDAY, APRIL 30, 2009
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:16 a.m., in
room 2141, Rayburn House Office Building, the Honorable John
Conyers, Jr. (Chairman of the Committee) presiding.
Present: Representatives Conyers, Berman, Boucher, Scott,
Watt, Lofgren, Jackson Lee, Waters, Delahunt, Johnson, Sherman,
Schiff, Sanchez, Smith, Sensenbrenner, Coble, Goodlatte,
Lungren, Issa, King, Franks, Gohmert, Jordan, Poe, and
Chaffetz.
Staff present: Christal Sheppard, Majority Counsel; Blaine
Merritt, Minority Counsel.
Mr. Conyers. Good morning, ladies and gentlemen. The
Committee will come to order. We are here today for the hearing
on H.R. 1260, the ``Patent Reform Act of 2009.''
You will recall that the Judiciary Committee passed this
bill out in July of 2007--passed out of the House in September
of 2007, but it did not receive dispositive action in the other
body. So we continue it.
We welcome the seven witnesses that have joined us today.
In the time of economic crisis, seems to me that we need patent
reform more than ever. And while necessity may be the mother of
invention, invention could be the mother of recovery.
We need a patent system that will help us invent our way
out of recession. Now, we are aware that the Senate has reached
a compromise on a number of issues. This body is no more a
rubber stamp for the Senate than the Senate is a rubber stamp
for the House.
And so it is our intention to look at these issues, of
which there are many, independently and ensure that the bill
that comes out of the Judiciary Committee will be fair to all
parties concerned, or as fair as we can get it, and will also
serve the public interest.
In the last Congress, there was an agreement on
interparties reexamination. Unless something is arrived at, we
expect that that will still be the prevailing way that we move
this bill forward. The United States Patent and Trademark
Office even now doesn't have a director.
We need our leadership to comment on whether this bill has
been drafted in a way that recognizes the challenges that the
patent office faces. And while the bill doesn't currently
contain language on inequitable conduct, we have made an
agreement to work with Senator Hatch on this issue, and that
agreement is still good.
Now the Patent and Trademark Office has incredible
responsibilities and really rather limited authority to meet
them. I think that it may be time that we give them the power
to set their own fees.
And finally, it seems important that we keep our trigger on
first to file language in order to pressure our trading
partners to adopt grace period language that benefits the
United States inventors.
[The text of the bill, H.R. 1260, follows:
HR 1260 IH ___________________________________________________
deg.
I
111th CONGRESS
1st Session
H. R. 1260
To amend title 35, United States Code, to provide for patent reform.
__________
IN THE HOUSE OF REPRESENTATIVES
March 3, 2009
Mr. Conyers (for himself, Mr. Smith of Texas, Mr. Berman, Mr.
Goodlatte, 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 2009''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definition.
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. Preissuance submissions by third parties.
Sec. 10. Venue and jurisdiction.
Sec. 11. Patent and trademark office regulatory authority.
Sec. 12. Residency of Federal Circuit judges.
Sec. 13. Micro-entity defined.
Sec. 14. Technical amendments.
Sec. 15. Effective date; rule of construction.
Sec. 16. Study of special masters in patent cases.
Sec. 17. Study on workplace conditions.
Sec. 18. Study on patent damages.
Sec. 19. Severability.
SEC. 2. DEFINITION.
In this Act, the term ``Director'' means the Under Secretary of
Commerce for Intellectual Property and Director of the United States
Patent and Trademark Office.
SEC. 3. RIGHT OF THE FIRST INVENTOR TO FILE.
(a) Definitions.--Section 100 of title 35, United States Code, 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
the 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 of title 35, United States
Code, 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, on sale, or otherwise
available to the public--
``(A) more than 1 year before the effective filing
date of the claimed invention; or
``(B) 1 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 based upon a
disclosure 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 such disclosure, been
publicly disclosed by the inventor or a joint inventor or
others who obtained the subject matter disclosed directly or
indirectly from the inventor or a joint inventor.
``(2) Derivation, prior disclosure, and common assignment
exceptions.--Subject matter that would otherwise qualify as
prior art only under subsection (a)(2) 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;
``(B) the subject matter had been publicly
disclosed by the inventor or a joint inventor or others
who obtained the subject matter disclosed, directly or
indirectly, from the inventor or a joint inventor
before the effective filing date of the application or
patent set forth under subsection (a)(2); or
``(C) 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 2 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 1 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 of title 35, United
States Code, is amended to read as follows:
``102. Conditions for patentability; novelty.''.
(c) Conditions for Patentability; Nonobvious Subject Matter.--
Section 103 of title 35, United States Code, 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
of title 35, United States Code, and the item relating to that section
in the table of sections for chapter 10 of title 35, United States
Code, are repealed.
(e) Repeal of Statutory Invention Registration.--
(1) In general.--Section 157 of title 35, United States
Code, and the item relating to that section in the table of
sections for chapter 14 of title 35, United States Code, are
repealed.
(2) Removal of cross references.--Section 111(b)(8) of
title 35, United States Code, 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 of title 35, United States Code, 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 of title 35, United
States Code, is amended by striking ``and the time specified in
section 102(d)''.
(2) Limitation on remedies.--Section 287(c)(4) of title 35,
United States Code, 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 of title 35, United States Code,
is amended by striking ``except as otherwise provided in
section 102(e) of this title''.
(4) Publication of international application: effect.--
Section 374 of title 35, United States Code, 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) of title 35, United
States Code, 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) of title
35, United States Code, 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) of title 35, United States Code, 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 of title
35, United States Code, and the item relating to that section in the
table of sections for chapter 29 of title 35, United States Code, are
repealed.
(i) Action for Claim to Patent on Derived Invention.--Section 135
of title 35, United States Code, is amended to read as follows:
``Sec. 135. Derivation proceedings
``(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) 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.
``(3) 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.
``(4) 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 United
States 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 United States Patent and Trademark
Office.
``(b) Settlement.--Parties to a derivation proceeding may terminate
the proceeding by filing a written statement reflecting the agreement
of the parties as to the correct inventors of the claimed invention in
dispute. Unless the Patent Trial and Appeal Board finds the agreement
to be inconsistent with the evidence of record, it shall take action
consistent with the agreement. Any written settlement or understanding
of the parties shall be filed with the Director. At the request of a
party to the proceeding, the agreement or understanding shall be
treated as business confidential information, shall be kept separate
from the file of the involved patents or applications, and shall be
made available only to Government agencies on written request.
``(c) Arbitration.--Parties to a derivation proceeding, within such
time as may be specified by the Director by regulation, may determine
such contest or any aspect thereof by arbitration. Such arbitration
shall be governed by the provisions of title 9 to the extent such title
is not inconsistent with this section. The parties shall give notice of
any arbitration award to the Director, and such award shall, as between
the parties to the arbitration, be dispositive of the issues to which
it relates. The arbitration award shall be unenforceable until such
notice is given. Nothing in this subsection shall preclude the Director
from determining patentability of the invention involved in the
derivation proceeding.''.
(j) Elimination of References to Interferences.--(1) Sections 6,
41, 134, 141, 145, 146, 154, 305, and 314 of title 35, United States
Code, 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 of title 35, United States Code, 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 of title 35, United States
Code, is amended to read as follows:
``Sec. 134. Appeal to the Patent Trial and Appeal Board''.
(4) The section heading for section 146 of title 35, United States
Code, is amended to read as follows:
``Sec. 146. Civil action in case of derivation proceeding''.
(5) Section 154(b)(1)(C) of title 35, United States Code, is
amended by striking ``interferences'' and inserting ``derivation
proceedings''.
(6) The item relating to section 6 in the table of sections for
chapter 1 of title 35, United States Code, is amended to read as
follows:
``6. Patent Trial and Appeal Board.''.
(7) The items relating to sections 134 and 135 in the table of
sections for chapter 12 of title 35, United States Code, are amended to
read as follows:
``134. Appeal to the Patent Trial and Appeal Board.
``135. Derivation proceedings.''.
(8) The item relating to section 146 in the table of sections for
chapter 13 of title 35, United States Code, is amended to read as
follows:
``146. Civil action in case of derivation proceeding.''.
(9) Certain Appeals.--Section 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, interference proceedings
(commenced before the date of enactment of the Patent
Reform Act of 2009), 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 2009), 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;''.
(k) Effective Date.--
(1) In general.--The amendments made by this section--
(A) shall take effect 90 days after the date on
which the President issues an Executive order
containing the President's finding that major patenting
authorities have adopted a grace period having
substantially the same effect as that contained under
the amendments made by this section; and
(B) shall apply to all applications for patent that
are filed on or after the effective date under
subparagraph (A).
(2) Definitions.--In this subsection:
(A) Major patenting authorities.--The term ``major
patenting authorities'' means at least the patenting
authorities in Europe and Japan.
(B) Grace period.--The term ``grace period'' means
the 1-year period ending on the effective filing date
of a claimed invention, during which disclosures of the
subject matter 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, do not qualify as prior art to the claimed
invention.
(C) Effective filing date.--The term ``effective
filing date of a claimed invention'' means, with
respect to a patenting authority in another country, a
date equivalent to the effective filing date of a
claimed invention as defined in section 100(h) of title
35, United States Code, as added by subsection (a) of
this section.
(3) Retention of interference procedures with respect to
applications filed before effective date.--In the case of any
application for patent that is filed before the effective date
under paragraph (1)(A), the provisions of law repealed or
amended by subsections (h), (i), and (j) shall apply to such
application as such provisions of law were in effect on the day
before such effective date.
(l) Review Every 7 Years.--Not later than the end of the 7-year
period beginning on the effective date under subsection (k), and the
end of every 7-year period thereafter, the Director shall--
(1) conduct a study on the effectiveness and efficiency of
the amendments made by this section; 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 recommendations the Director has on
amendments to the law and other recommendations of the Director
with respect to the first-to-file system implemented under the
amendments made by this section.
SEC. 4. INVENTOR'S OATH OR DECLARATION.
(a) Inventor's Oath or Declaration.--
(1) In general.--Section 115 of title 35, United States
Code, 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 has assigned rights in 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).
``(i) Acknowledgment of Penalties.--Any declaration or statement
filed pursuant to this section shall contain an acknowledgment that any
willful false statement made in such declaration or statement is
punishable under section 1001 of title 18 by fine or imprisonment of
not more than 5 years, or both.''.
(2) Relationship to divisional applications.--Section 121
of title 35, United States Code, is amended by striking ``If a
divisional application'' and all that follows through
``inventor.''.
(3) Requirements for nonprovisional applications.--Section
111(a) of title 35, United States Code, 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 11 of title 35, United
States Code, is amended to read as follows:
``115. Inventor's oath or declaration.''.
(b) Specification.--Section 112 of title 35, United States Code, is
amended--
(1) in the first paragraph--
(A) by striking ``The specification'' and inserting
``(a) In General.--The specification''; and
(B) by striking ``of carrying out his invention''
and inserting ``or joint inventor of carrying out the
invention'';
(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 of title 35, United States Code, is
amended to read as follows:
``Sec. 284. Damages
``(a) In General.--Upon finding for the claimant the court shall
award the claimant damages adequate to compensate for the infringement
but in no event less than a reasonable royalty for the use made of the
invention by the infringer, together with interest and costs as fixed
by the court, subject to the provisions of this section.
``(b) Determination of Damages; Evidence Considered; Procedure.--
The court may receive expert testimony as an aid to the determination
of damages or of what royalty would be reasonable under the
circumstances. The admissibility of such testimony shall be governed by
the rules of evidence governing expert testimony. When the damages are
not found by a jury, the court shall assess them.
``(c) Standard for Calculating Reasonable Royalty.--
``(1) In general.--The court shall determine, based on the
facts of the case and after adducing any further evidence the
court deems necessary, which of the following methods shall be
used by the court or the jury in calculating a reasonable
royalty pursuant to subsection (a). The court shall also
identify the factors that are relevant to the determination of
a reasonable royalty, and the court or jury, as the case may
be, shall consider only those factors in making such
determination.
``(A) Entire market value.--Upon a showing to the
satisfaction of the court that the claimed invention's
specific contribution over the prior art is the
predominant basis for market demand for an infringing
product or process, damages may be based upon the
entire market value of that infringing product or
process.
``(B) Established royalty based on marketplace
licensing.--Upon a showing to the satisfaction of the
court that the claimed invention has been the subject
of a nonexclusive license for the use made of the
invention by the infringer, to a number of persons
sufficient to indicate a general marketplace
recognition of the reasonableness of the licensing
terms, if the license was secured prior to the filing
of the case before the court, and the court determines
that the infringer's use is of substantially the same
scope, volume, and benefit of the rights granted under
such license, damages may be determined on the basis of
the terms of such license. Upon a showing to the
satisfaction of the court that the claimed invention
has sufficiently similar noninfringing substitutes in
the relevant market, which have themselves been the
subject of such nonexclusive licenses, and the court
determines that the infringer's use is of substantially
the same scope, volume, and benefit of the rights
granted under such licenses, damages may be determined
on the basis of the terms of such licenses.
``(C) Valuation calculation.--Upon a determination
by the court that the showings required under
subparagraphs (A) and (B) have not been made, the court
shall conduct an analysis to ensure that a reasonable
royalty is applied only to the portion of the economic
value of the infringing product or process properly
attributable to the claimed invention's specific
contribution over the prior art. In the case of a
combination invention whose elements are present
individually in the prior art, the contribution over
the prior art may include the value of the additional
function resulting from the combination, as well as the
enhanced value, if any, of some or all of the prior art
elements as part of the combination, if the patentee
demonstrates that value.
``(2) Additional factors.--Where the court determines it to
be appropriate in determining a reasonable royalty under
paragraph (1), the court may also consider, or direct the jury
to consider, any other relevant factors under applicable law.
``(d) Inapplicability to Other Damages Analysis.--The methods for
calculating a reasonable royalty described in subsection (c) shall have
no application to the calculation of an award of damages that does not
necessitate the determination of a reasonable royalty as a basis for
monetary relief sought by the claimant.
``(e) Willful Infringement.--
``(1) Increased damages.--A court that has determined that
an infringer has willfully infringed a patent or patents may
increase damages up to 3 times the amount of the 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 acting
with objective recklessness--
``(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 1 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) In general.--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) Good faith established.--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) Relevance of not presenting certain
evidence.--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.''.
(b) Report to Congressional Committees.--
(1) In general.--Not later than 2 years after the date of
enactment of this Act, the Director shall report to the
Committee on the Judiciary of the House of Representatives and
the Committee on the Judiciary of the Senate, the findings and
recommendations of the Director on the operation of prior user
rights in selected countries in the industrialized world. The
report shall include the following:
(A) A comparison between patent laws of the United
States and the laws of other industrialized countries,
including the European Union, Japan, Canada, and
Australia.
(B) An analysis of the effect of prior user rights
on innovation rates in the selected countries.
(C) An analysis of the correlation, if any, between
prior user rights and start-up enterprises and the
ability to attract venture capital to start new
companies.
(D) An analysis of the effect of prior user rights,
if any, on small businesses, universities, and
individual inventors.
(E) An analysis of legal and constitutional issues,
if any, that arise from placing trade secret law in
patent law.
(2) Consultation with other agencies.--In preparing the
report required under paragraph (1), the Director shall consult
with the Secretary of State and the Attorney General.
(c) Defense to Infringement Based on Earlier Inventor.--Section
273(b)(6) of title 35, United States Code, is amended to read as
follows:
``(6) Personal defense.--The defense under this section may
be asserted only by the person who performed or caused the
performance of the acts necessary to establish the defense as
well as any other entity that controls, is controlled by, or is
under common control with such person and, except for any
transfer to the patent owner, the right to assert the defense
shall not be licensed or assigned or transferred to another
person except as an ancillary and subordinate part of a good
faith assignment or transfer for other reasons of the entire
enterprise or line of business to which the defense relates.
Notwithstanding the preceding sentence, any person may, on its
own behalf, assert a defense based on the exhaustion of rights
provided under paragraph (3), including any necessary elements
thereof.''.
(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.
(e) Review Every 7 Years.--Not later than the end of the 7-year
period beginning on the date of the enactment of this Act, and the end
of every 7-year period thereafter, the Director shall--
(1) conduct a study on the effectiveness and efficiency of
the amendments made by this section; and
(2) submit to the Committee on the Judiciary of the House
of Representatives and the Committee on the Judiciary of the
Senate a report on the results of the study, including any
recommendations the Director has on amendments to the law and
other recommendations of the Director with respect to the right
of the inventor to obtain damages for patent infringement.
SEC. 6. POST-GRANT PROCEDURES AND OTHER QUALITY ENHANCEMENTS.
(a) Citation of Prior Art.--Section 301 of title 35, United States
Code, is amended to read as follows:
``Sec. 301. Citation of prior art
``(a) In General.--Any person at any time may cite to the Office in
writing--
``(1) prior art consisting of patents or printed
publications which that person believes to have a bearing on
the patentability of any claim of a particular patent;
``(2) written statements of the patent owner filed in a
proceeding before a Federal court, the Patent and Trademark
Office, or the United States International Trade Commission
under section 337 of the Tariff Act of 1930 (19 U.S.C. 1337),
in which the patent owner takes a position on the scope of one
or more patent claims; or
``(3) documentary evidence that the claimed invention was
in substantial public use or on sale in the United States more
than 1 year prior to the date of the application for patent in
the United States.
``(b) Submissions Part of Official File.--If the person citing
prior art, written submissions, or documentary evidence under
subsection (a) explains in writing the pertinence and manner of
applying the prior art or documentary evidence to at least one claim of
the patent, the citation of the prior art or documentary evidence (as
the case may be) and the explanation thereof shall become a part of the
official file of the patent.
``(c) Procedures for Written Statements.--
``(1) Submission of additional materials.--A party that
submits written statements under subsection (a)(2) in a
proceeding shall include any other documents, pleadings, or
evidence from the proceeding that address the patent owner's
statements or the claims addressed by the written statements.
``(2) Limitation on use of statements.--Written statements
submitted under subsection (a)(2) shall not be considered for
any purpose other than to determine the proper meaning of the
claims that are the subject of the request in a proceeding
ordered pursuant to section 304 or 313. Any such written
statements, and any materials submitted under paragraph (1),
that are subject to an applicable protective order shall be
redacted to exclude information subject to the order.
``(d) Identity Withheld.--Upon the written request of the person
making the citation under subsection (a), the person's identity shall
be excluded from the patent file and kept confidential.''.
(b) Request for Reexamination.--The first sentence of section 302
of title 35, United States Code, is amended to read as follows: ``Any
person at any time may file a request for reexamination by the Office
of any claim on a patent on the basis of any prior art or documentary
evidence cited under paragraph (1) or (3) of subsection (a) of section
301 of this title.''.
(c) Reexamination.--Section 303(a) of title 35, United States Code,
is amended to read as follows:
``(a) Within three months following the filing of 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 considered by the
Office.''.
(d) Request for Inter Partes Reexamination.--Section 311(a) of
title 35, United States Code, is amended to read as follows:
``(a) In General.--Any third-party requester at any time may file a
request for inter partes reexamination by the Office of a patent on the
basis of any prior art or documentary evidence cited under paragraph
(1) or (3) of subsection (a) of section 301 of this title.''.
(e) Conduct of Inter Partes Proceedings.--Section 314 of title 35,
United States Code, is amended--
(1) in the first sentence of subsection (a), by striking
``conducted according to the procedures established for initial
examination under the provisions of sections 132 and 133'' and
inserting ``heard by an administrative patent judge in
accordance with procedures which the Director shall
establish'';
(2) in subsection (b), by striking paragraph (2) and
inserting the following:
``(2) The third-party requester shall have the opportunity to file
written comments on any action on the merits by the Office in the inter
partes reexamination proceeding, and on any response that the patent
owner files to such an action, if those written comments are received
by the Office within 60 days after the date of service on the third-
party requester of the Office action or patent owner response, as the
case may be.''; and
(3) by adding at the end the following:
``(d) Oral Hearing.--At the request of a third party requestor or
the patent owner, the administrative patent judge shall conduct an oral
hearing, unless the judge finds cause lacking for such hearing.''.
(f) Estoppel.--Section 315(c) of title 35, United States Code, is
amended by striking ``or could have raised''.
(g) Reexamination Prohibited After District Court Decision.--
Section 317(b) of title 35, United States Code, 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''.
(h) Post-Grant Opposition Procedures.--
(1) In general.--Part III of title 35, United States Code,
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. Settlement.
``333. Relationship to other pending proceedings.
``334. Effect of decisions rendered in civil action on post-grant
review proceedings.
``335. Effect of final decision on future proceedings.
``336. 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 issuance of the patent or a reissue patent, as the case may
be; or
``(2) 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;
``(3) for each claim sought to be canceled, the petition
sets forth in writing the basis for cancellation and provides
the evidence in support thereof, including copies of patents
and printed publications, or written testimony of a witness
attested to under oath or declaration by the witness, or any
other information that the Director may require by regulation;
and
``(4) the petitioner provides copies of the petition,
including any evidence submitted with the petition and any
other information submitted under paragraph (3), 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
section 322 if the petition for cancellation requesting the
proceeding--
``(1) identifies the same cancellation petitioner and the
same patent as a previous petition for cancellation filed under
such section; or
``(2) is based on the best mode requirement contained in
section 112.
``Sec. 325. Submission of additional information; showing of sufficient
grounds
``(a) In General.--The cancellation petitioner shall file such
additional information with respect to the petition as the Director may
require. For each petition submitted under section 321, the Director
shall determine if the written statement, and any evidence submitted
with the request, establish that a substantial question of
patentability exists for at least one claim in the patent. The Director
may initiate a post-grant review proceeding if the Director determines
that the information presented provides sufficient grounds to believe
that there is a substantial question of patentability concerning one or
more claims of the patent at issue.
``(b) Notification; Determinations Not Reviewable.--The Director
shall notify the patent owner and each petitioner in writing of the
Director's determination under subsection (a), including a
determination to deny the petition. The Director shall make that
determination in writing not later than 60 days after receiving the
petition. Any determination made by the Director under subsection (a),
including whether or not to institute a post-grant review proceeding or
to deny the petition, shall not be reviewable.
``Sec. 326. Conduct of post-grant review proceedings
``(a) In General.--The Director shall prescribe regulations, in
accordance with section 2(b)(2)--
``(1) establishing and governing post-grant review
proceedings under this chapter and their relationship to other
proceedings under this title;
``(2) establishing procedures for the submission of
supplemental information after the petition for cancellation is
filed; and
``(3) 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.
In carrying out paragraph (3), the Director shall bear in mind that
discovery must be in the interests of justice.
``(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 provide for publication of notice in the
Federal Register of the filing of a petition for post-grant
review under this chapter, for publication of the petition, and
documents, orders, and decisions relating to the petition, on
the website of the Patent and Trademark Office, and for filings
under seal exempt from publication requirements;
``(4) 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;
``(5) may provide for protective orders governing the
exchange and submission of confidential information; and
``(6) shall ensure that any information submitted by the
patent owner in support of any amendment entered under section
329 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 one motion to amend the patent
in one 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 addressing 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 therefor, before a certificate under subsection (a) of
this section is issued.
``Sec. 332. Settlement
``(a) In General.--A post-grant review proceeding shall be
terminated with respect to any petitioner upon the joint request of the
petitioner and the patent owner, unless the Patent Trial and Appeal
Board has issued a written decision before the request for termination
is filed. If the post-grant review proceeding is terminated with
respect to a petitioner under this paragraph, no estoppel shall apply
to that petitioner. If no petitioner remains in the proceeding, the
panel of administrative patent judges assigned to the proceeding shall
terminate the proceeding.
``(b) Agreement in Writing.--Any agreement or understanding between
the patent owner and a petitioner, including any collateral agreements
referred to in the agreement or understanding, that is made in
connection with or in contemplation of the termination of a post-grant
review proceeding, must be in writing. A post-grant review proceeding
as between the parties to the agreement or understanding may not be
terminated until a copy of the agreement or understanding, including
any such collateral agreements, has been filed in the Office. If any
party filing such an agreement or understanding requests, the agreement
or understanding shall be kept separate from the file of the post-grant
review proceeding, and shall be made available only to Government
agencies on written request.
``Sec. 333. Relationship to other proceedings
``(a) In General.--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 with respect to an application for patent filed
before the effective date provided in section 3(k) of the Patent Reform
Act of 2009), 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.
``(b) Stays.--The Director may stay a post-grant review proceeding
if a pending civil action for infringement of a patent, or a pending
proceeding before the United States International Trade Commission
under section 337 of the Tariff Act of 1930 (19 U.S.C. 1337), addresses
the same or substantially the same questions of patentability raised
against the patent in a petition for the post-grant review proceeding.
``(c) Effect of Commencement of Proceeding.--The commencement of a
post-grant review proceeding--
``(1) shall not limit in any way the right of the patent
owner to commence an action for infringement of the patent; and
``(2) shall not be cited as evidence relating to the
validity of any claim of the patent in any proceeding before a
court or the International Trade Commission concerning the
patent.
``Sec. 334. Effect of decisions rendered in civil action or ITC
proceeding on post-grant review proceedings
``If a final decision is entered against a party in a civil action
arising in whole or in part under section 1338 of title 28, or a
determination made by the United States International Trade Commission
against a party in a proceeding under section 337 of the Tariff Act of
1930 (19 U.S.C. 1337) has become final, establishing that the party has
not sustained its burden of proving the invalidity of any patent
claim--
``(1) that party to the civil action or proceeding (as the
case may be) 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 321,
which that party or the privies of that party raised or could
have raised; and
``(2) the Director may not thereafter maintain a post-grant
review proceeding that was requested, before the final decision
was so entered or final determination was so made (as the case
may be), by that party or the privies of that party on the
basis of such grounds.
``Sec. 335. Effect of final decision on future proceedings
``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 that 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;
``(4) assert the invalidity of any such claim in any civil
action arising in whole or in part under section 1338 of title
28; or
``(5) assert the invalidity of any such claim in defense to
a proceeding brought under section 337 of the Tariff Act of
1930 (19 U.S.C. 1337).
``Sec. 336. 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.''.
(i) Conforming Amendment.--The table of chapters for part III of
title 35, United States Code, is amended by adding at the end the
following:
``32. Post-Grant Review Proceedings
321''.
(j) Repeal.--Section 4607 of the Intellectual Property and
Communications Omnibus Reform Act of 1999, as enacted by section
1000(a)(9) of Public Law 106-113, is repealed.
(k) Effective Dates.--
(1) In general.--The amendments and repeal made by this
section shall take effect at the end of the 1-year period
beginning on the date of the enactment of this Act.
(2) Applicability to ex parte and inter partes
proceedings.--Notwithstanding any other provision of law,
sections 301 and 311 through 318 of title 35, United States
Code, as amended by this section, shall apply to any patent
that issues before, on, or after the effective date under
paragraph (1) from an original application filed on any date.
(3) Applicability to post-grant proceedings.--The
amendments made by subsections (h) and (i) shall apply to
patents issued on or after the effective date under paragraph
(1).
(l) 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 (h) of this section.
SEC. 7. DEFINITIONS; PATENT TRIAL AND APPEAL BOARD.
(a) Definitions.--Section 100 of title 35, United States Code (as
amended by section 3 of this Act), is further amended--
(1) in subsection (e), by striking ``or inter partes
reexamination under section 311''; and
(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 of title 35, United
States Code, 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 Secretary of Commerce. 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;
``(3) conduct 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 Director shall, not later than 2 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 Committee on the Judiciary of the House
of Representatives and the Committee on the Judiciary of 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. PREISSUANCE SUBMISSIONS BY THIRD PARTIES.
Section 122 of title 35, United States Code, 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;
``(C) include a statement by the person making such
submission affirming that the submission was made in
compliance with this section; and
``(D) identify the real party-in-interest making
the submission.''.
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) Notwithstanding section 1391 of this title, in any civil
action arising under any Act of Congress relating to patents, a party
shall not manufacture venue by assignment, incorporation, or otherwise
to invoke the venue of a specific district court.
``(c) Notwithstanding section 1391 of this title, any civil action
for patent infringement or any action for declaratory judgment may be
brought only in a judicial district--
``(1) where the defendant has its principal place of
business or in the location or place in which the defendant is
incorporated or formed, or, for foreign corporations with a
United States subsidiary, where the defendant's primary United
States subsidiary has its principal place of business or is
incorporated or formed;
``(2) where the defendant has committed substantial acts of
infringement and has a regular and established physical
facility that the defendant controls and that constitutes a
substantial portion of the operations of the defendant;
``(3) where the primary plaintiff resides, if the primary
plaintiff in the action is--
``(A) an institution of higher education as defined
under section 101(a) of the Higher Education Act of
1965 (20 U.S.C. 1001(a)); or
``(B) a nonprofit organization that--
``(i) qualifies for treatment under section
501(c)(3) of the Internal Revenue Code (26
U.S.C. 501(c)(3));
``(ii) is exempt from taxation under
section 501(a) of such Code; and
``(iii) serves as the patent and licensing
organization for an institution of higher
education as defined under section 101(a) of
the Higher Education Act of 1965 (20 U.S.C.
1001(a)); or
``(4) where the plaintiff resides, if the sole plaintiff in
the action is an individual inventor who is a natural person
and who qualifies at the time such action is filed as a micro-
entity pursuant to section 123 of title 35.
``(d) If a plaintiff brings a civil action for patent infringement
or declaratory judgment relief under subsection (c), then the defendant
may request the district court to transfer that action to another
district or division where, in the court's determination--
``(1) any of the parties has substantial evidence or
witnesses that otherwise would present considerable evidentiary
burdens to the defendant if such transfer were not granted;
``(2) such transfer would not cause undue hardship to the
plaintiff; and
``(3) venue would be otherwise appropriate under section
1391 of this title.''.
(b) Interlocutory Appeals.--Subsection (c) of section 1292 of title
28, United States Code, is amended--
(1) by striking ``and'' at the end of paragraph (1);
(2) by striking the period at the end of paragraph (2) and
inserting ``; and''; and
(3) 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. The district
court shall have discretion whether to approve the application and, if
so, whether to stay proceedings in the district court during pendency
of the appeal.''.
(c) Technical Amendments Relating to Venue.--Sections 32, 145, 146,
154(b)(4)(A), and 293 of title 35, United States Code, and section
21(b)(4) of the Act entitled ``An Act to provide for the registration
and protection of trademarks used in commerce, to carry out the
provisions of certain international conventions, and for other
purposes'', approved July 5, 1946 (commonly referred to as the
``Trademark Act of 1946'' or the ``Lanham Act'' (15 U.S.C. 1071(b)(4)),
are each amended by striking ``United States District Court for the
District of Columbia'' each place that term appears and inserting
``United States District Court for the Eastern District of Virginia''.
SEC. 11. PATENT AND TRADEMARK OFFICE REGULATORY AUTHORITY.
(a) Fee Setting.--
(1) In general.--The Director shall have authority to set
or adjust by rule any fee established or charged by the Office
under sections 41 and 376 of title 35, United States Code or
under section 31 of the Trademark Act of 1946 (15 U.S.C. 1113)
for the filing or processing of any submission to, and for all
other services performed by or materials furnished by, the
Office, provided that such fee amounts are set to reasonably
compensate the Office for the services performed.
(2) Reduction of fees in certain fiscal years.--In any
fiscal year, the Director--
(A) shall consult with the Patent Public Advisory
Committee and the Trademark Public Advisory Committee
on the advisability of reducing any fees described in
paragraph (1); and
(B) after that consultation may reduce such fees.
(3) Role of the public advisory committee.--The Director
shall--
(A) submit to the Patent or Trademark Public
Advisory Committee, or both, as appropriate, any
proposed fee under paragraph (1) not less than 45 days
before publishing any proposed fee in the Federal
Register;
(B) provide the relevant advisory committee
described in subparagraph (A) a 30-day period following
the submission of any proposed fee, on which to
deliberate, consider, and comment on such proposal, and
require that--
(i) during such 30-day period, the relevant
advisory committee hold a public hearing
related to such proposal; and
(ii) the Director shall assist the relevant
advisory committee in carrying out such public
hearing, including by offering the use of
Office resources to notify and promote the
hearing to the public and interested
stakeholders;
(C) require the relevant advisory committee to make
available to the public a written report detailing the
comments, advice, and recommendations of the committee
regarding any proposed fee;
(D) consider and analyze any comments, advice, or
recommendations received from the relevant advisory
committee before setting or adjusting any fee; and
(E) notify, through the Chair and Ranking Member of
the Committee on the Judiciary of the House of
Representatives and the Committee on the Judiciary of
the Senate, the Congress of any final decision
regarding proposed fees.
(4) Publication in the federal register.--
(A) In general.--Any rules prescribed under this
subsection shall be published in the Federal Register.
(B) Rationale.--Any proposal for a change in fees
under this section shall--
(i) be published in the Federal Register;
and
(ii) include, in such publication, the
specific rationale and purpose for the
proposal, including the possible expectations
or benefits resulting from the proposed change.
(C) Public comment period.--Following the
publication of any proposed fee in the Federal Register
pursuant to subparagraph (A), the Director shall seek
public comment for a period of not less than 45 days.
(5) Congressional comment period.--Following the
notification described in paragraph (3)(E), Congress shall have
not more than 45 days to consider and comment on any proposed
fee under paragraph (1). No proposed fee shall be effective
prior to the end of such 45-day comment period.
(6) Rule of construction.--No rules prescribed under this
subsection may diminish--
(A) an applicant's rights under this title or the
Trademark Act of 1946; or
(B) any rights under a ratified treaty.
(b) Fees for Patent Services.--Division B of Public Law 108-447 is
amended in title VIII of the Departments of Commerce, Justice and
State, the Judiciary, and Related Agencies Appropriations Act, 2005, in
section 801(a) by striking ``During fiscal years 2005, 2006 and 2007'',
and inserting ``Until such time as the Director sets or adjusts the
fees otherwise,''.
(c) Adjustment of Trademark Fees.--Division B of Public Law 108-447
is amended in title VIII of the Departments of Commerce, Justice and
State, the Judiciary and Related Agencies Appropriations Act, 2005, in
section 802(a) by striking ``During fiscal years 2005, 2006 and 2007'',
and inserting ``Until such time as the Director sets or adjusts the
fees otherwise,''.
(d) Effective Date, Applicability, and Transitional Provision.--
Division B of Public Law 108-447 is amended in title VIII of the
Departments of Commerce, Justice and State, the Judiciary and Related
Agencies Appropriations Act, 2005, in section 803(a) by striking ``and
shall apply only with respect to the remaining portion of fiscal year
2005, 2006 and 2007.''.
(e) Rule of Construction.--Nothing in this section shall be
construed to affect any other provision of Division B of Public Law
108-447, including section 801(c) of title VII of the Departments of
Commerce, Justice and State, the Judiciary and Related Agencies
Appropriations Act, 2005.
(f) Definitions.--In this section:
(1) Director.--The term ``Director'' means the Director of
the United States Patent and Trademark Office.
(2) Office.--The term ``Office'' means the United States
Patent and Trademark Office.
(3) Trademark act of 1946.--The term ``Trademark Act of
1946'' means an Act entitled ``Act to provide for the
registration and protection of trademarks used in commerce, to
carry out the provisions of certain international conventions,
and for other purposes'', approved July 5, 1946 (15 U.S.C. 1051
et seq.) (commonly referred to as the Trademark Act of 1946 or
the Lanham Act).
SEC. 12. RESIDENCY OF FEDERAL CIRCUIT JUDGES.
Section 44(c) of title 28, United States Code, is amended by
striking the second sentence.
SEC. 13. MICRO-ENTITY DEFINED.
Chapter 11 of title 35, United States Code, is amended by adding at
the end the following new section:
``Sec. 123. Micro-entity defined
``(a) In General.--For purposes of this title, the term `micro-
entity' means an applicant who makes a certification under either
subsections (b) or (c).
``(b) Unassigned Application.--For an unassigned application, each
applicant shall certify that the applicant--
``(1) qualifies as a small entity, as defined in
regulations issued by the Director;
``(2) has not been named on 5 or more previously filed
patent applications;
``(3) has not assigned, granted, or conveyed, and is not
under an obligation by contract or law to assign, grant, or
convey, a license or any other ownership interest in the
particular application; and
``(4) does not have a gross income, as defined in section
61(a) of the Internal Revenue Code, exceeding 2.5 times the
median household income, as reported by the Bureau of the
Census, in the calendar year immediately preceding the calendar
year in which the examination fee is being paid.
``(c) Assigned Application.--For an assigned application, each
applicant shall certify that the applicant--
``(1) qualifies as a small entity, as defined in
regulations issued by the Director, and meets the requirements
of subsection (b)(4);
``(2) has not been named on 5 or more previously filed
patent applications; and
``(3) has assigned, granted, conveyed, or is under an
obligation by contract or law to assign, grant, or convey, a
license or other ownership interest in the particular
application to an entity that has 5 or fewer employees and that
such entity has a gross income, as defined in section 61(a) of
the Internal Revenue Code, that does not exceed 2.5 times the
median household income, as reported by the Bureau of the
Census, in the calendar year immediately preceding the calendar
year in which the examination fee is being paid.
``(d) Income Level Adjustment.--The gross income levels established
under subsections (b) and (c) shall be adjusted by the Director on
October 1, 2009, and every year thereafter, to reflect any fluctuations
occurring during the previous 12 months in the Consumer Price Index, as
determined by the Secretary of Labor.''.
SEC. 14. TECHNICAL AMENDMENTS.
(a) Joint Inventions.--Section 116 of title 35, United States Code,
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 of title
35, United States Code, 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 of title 35, United
States Code, 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 of title 35, United States
Code, 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 of title 35, United
States Code, 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 of title 35, United
States Code, 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. 15. EFFECTIVE DATE; RULE OF CONSTRUCTION.
(a) Effective Date.--Except as otherwise provided in this Act, this
Act and the amendments made by this Act shall take effect upon the
expiration of the 12 month period beginning on 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 United States Patent and Trademark Office.
SEC. 16. STUDY OF SPECIAL MASTERS IN PATENT CASES.
(a) In General.--Not later than 1 year after the date of the
enactment of this Act, the Director of the Administrative Office of the
United States Courts shall conduct a study of, and submit to the
Committee on the Judiciary of the House of Representatives and the
Committee on the Judiciary of the Senate a report on, the use of
special masters in patent litigation who are appointed in accordance
with Rule 53 of the Federal Rules of Civil Procedure.
(b) Objective.--In conducting the study under subsection (a), the
Director of the Administrative Office of the United States Courts shall
consider whether the use of special masters has been beneficial in
patent litigation and what, if any, program should be undertaken to
facilitate the use by the judiciary of special masters in patent
litigation.
(c) Factors To Consider.--In conducting the study under subsection
(a), the Director, in consultation with the Federal Judicial Center,
shall consider--
(1) the basis upon which courts appoint special masters
under Rule 53(b) of the Federal Rules of Civil Procedure;
(2) the frequency with which special masters have been used
by the courts;
(3) the role and powers special masters are given by the
courts;
(4) the subject matter at issue in cases that use special
masters;
(5) the impact on court time and costs in cases where a
special master is used as compared to cases where no special
master is used;
(6) the legal and technical training and experience of
special masters;
(7) whether the use of special masters has an impact on the
reversal rate of district court decisions at the Court of
Appeals for the Federal Circuit; and
(8) any other factors that the Director believes would
assist in gauging the effectiveness of special masters in
patent litigation.
SEC. 17. STUDY ON WORKPLACE CONDITIONS.
The Comptroller General shall, not later than 2 years after the
date of the enactment of this Act--
(1) conduct a study of workplace conditions for the
examiner corps of the United States Patent and Trademark
Office, including the effect, if any, of this Act and the
amendments made by this Act on--
(A) recruitment, retention, and promotion of
employees; and
(B) workload, quality assurance, and employee
grievances; and
(2) submit to the Committee on the Judiciary of the House
of Representatives and the Committee on the Judiciary of the
Senate a report on the results of the study, including any
suggestions for improving workplace conditions, together with
any other recommendations that the Comptroller General has with
respect to patent reexamination proceedings.
SEC. 18. STUDY ON PATENT DAMAGES.
(a) In General.--The Director shall conduct a study of patent
damage awards in cases where such awards have been based on a
reasonable royalty under section 284 of title 35, United States Code.
The study should, at a minimum, consider cases from 1990 to the
present.
(b) Conduct.--In conducting the study under subsection (a), the
Director shall investigate, at a minimum, the following:
(1) Whether the mean or median dollar amount of reasonable-
royalty-based patent damages awarded by courts or juries, as
the case may be, has significantly increased on a per case
basis during the period covered by the study, taking into
consideration adjustments for inflation and other relevant
economic factors.
(2) Whether there has been a pattern of excessive and
inequitable reasonable-royalty-based damages during the period
covered by the study and, if so, any contributing factors,
including, for example, evidence that Federal courts have
routinely and inappropriately broadened the scope of the
``entire market value rule'', or that juries have routinely
misapplied the entire market value rule to the facts at issue.
(3) To the extent that a pattern of excessive and
inequitable damage awards exists, measures that could guard
against such inappropriate awards without unduly prejudicing
the rights and remedies of patent holders or significantly
increasing litigation costs, including legislative reforms or
improved model jury instructions.
(4) To the extent that a pattern of excessive and
inequitable damage awards exists, whether legislative proposals
that would mandate, or create a presumption in favor of,
apportionment of reasonable-royalty-based patent damages would
effectively guard against such inappropriate awards without
unduly prejudicing the rights and remedies of patent holders or
significantly increasing litigation costs.
(c) Report.--Not later than 1 year after the date of the enactment
of this Act, the Director shall submit to the Congress a report on the
study conducted under this section.
SEC. 19. SEVERABILITY.
If any provision of this Act or of any amendment or repeals made by
this Act, or the application of such a provision to any person or
circumstance, is held to be invalid or unenforceable, the remainder of
this Act and the amendments and repeals made by this Act, and the
application of this Act and such amendments and repeals to any other
person or circumstance, shall not be affected by such holding.
Mr. Conyers. And now I turn to my friend, the Ranking
Member, Lamar Smith, for his comments.
Mr. Smith. Thank you, Mr. Chairman, and thank you for your
opening statement as well.
Mr. Chairman, our Committee's jurisdiction over patent law
is described in Article 1, Section 8 of the Constitution. The
foresight of our founders, particularly Thomas Jefferson, in
creating an intellectual property system, demonstrates their
understanding of how patent rights ultimately benefit the
American people.
In the previous two Congresses, we laid a substantial
foundation for patent reform by passing bills in the House. We
have continued that momentum this year with the introduction of
H.R. 1260, the Patent Reform Act of 2009. Chairman Conyers and
I have discussed the text of this legislation, and we agree
that modifications need to be made when appropriate, but we do
not want to amend an otherwise sound bill.
We support the core principles that have animated our work
these past 5 years. We must enact a bill that enhances patent
quality, discourages frivolous litigation, harmonizes
international patent principles, and enforces core rights.
Frankly, our bill promotes these goals better than the
Senate version. In terms of individual issues, I am concerned
about the Senate Judiciary Committee's treatment of damages,
post-grant opposition, and venue.
On damages, the key sticking point in our debate during
previous years, the House bill acknowledges the difficulty with
which courts and juries have struggled with evaluating the
actual contributions made by patent holders defending their
rights versus contributions made by other.
The Senate gate keeper treatment needs more review. I am
concerned that it may result in confusion for jurors when
called upon to apportion value fairly when calculating damages.
Concerning post-grant opposition, one of the achievements from
the 110th Congress was the compromise we struck to create a
robust 1-year window of review coupled with an enhanced
interparties reexamination construct that would substitute for
a second window.
I know there are parties who want to jettison reexamine in
favor of a limitless second window. Unless the principles and
the stakeholders can unanimously agree to this change, I think
we may end up going backwards on an issue of significant
importance.
As for venue, many of us are digesting the recent court
cases, especially In re TS Tech, which may obviate the need to
legislate in this area. But TS Tech didn't address a
complicated factual scenario or require highly nuanced legal
reasoning.
Given the simple fact at issue in TS Tech, we may need to
insist on a legislative response that provides greater guidance
and clarity about time, litigant presence, and behavior to a
particular judicial district.
This Committee has taken the initiative because patent law
changes are necessary to bolster the U.S. economy and our
Nation's global competitiveness and to improve the quality of
living for all Americans.
A recent study valued U.S. intellectual property at
approximately $5 trillion or about half of the U.S. gross
domestic product. American IP industries now account also for
over half of all U.S. exports and represent 40 percent of our
economic growth.
These industries provide millions of Americans with well-
paying jobs. This progress will end unless we address frivolous
patent litigation against high-tech companies, which has
doubled in the last 5 years. This bill eliminates the legal
gamesmanship, and it rewards lawsuit abuses over genuine
innovation and creativity.
It enhances the quality of patents and increases public
confidence and their integrity. All industries directly or
indirectly affected by patents including finance, automotive
manufacturing, high tech, bio tech, and pharmaceuticals will
benefit.
H.R. 1260 will help all legitimate enterprises from the
lone inventor in their garage to a high-tech company that files
1,000 patents each year and all business in between.
Mr. Chairman, I look forward to hearing from our witnesses
today and to working with you and others on this legislation in
the weeks ahead, and I will yield back the balance of my time.
Mr. Conyers. Thank you for an excellent statement. Does any
other Member feel the desire to make a brief comment before we
start?
Yes. Well, let me look this side first.
Mr. Berman? Have you an opening comment?
Mr. Berman. If you are going to open it up for comments, I
have an opening comment.
Mr. Conyers. Open for comment.
Mr. Berman. Okay. First I want to thank you really very
much for taking on and leading the effort on this complex and
thorny and not always exciting issue.
Congressman Boucher and I were concerned about poor patent
quality and started some of these reform efforts, we think, 6
or 7 years ago. As we get older, our memory is--well, never
mind.
But we got a lot of bolstering on that notion from the
National Academies of Science report and the FDC report, and as
you said, we think a robust patent protection promotes
innovation, but we want patents to protect only those
inventions that are truly innovative.
If a patent system allows questionable patents to issue and
doesn't provide adequate safeguards about patent abuses, the
system stifles innovation and interferes with the competitive
market forces.
So I felt last year we really tried very hard to find a
compromise on almost every single issue. We addressed an issue
that was pushed by a number of witnesses here, Mr. Johnson, to
deal with what was viewed at--we talk about frivolous
litigation, but you made a case for frivolous defenses and the
inequitable conduct defense and the abuse and the cost.
And I notice in the Senate bill there is not a word of
reform on what for you, at that time, was a huge burden and an
unfair burden. So I wanted that dig. And then I think the
Chairman would like me to close. Mr. Smith, as well as the
Chairman, we have all been heavily involved in all of this.
On the damages issue, I will just say this: There are
problems of overbroad claiming, juries not having adequate
guidance, costs of litigation versus settlement, and the case
for some valuation of the nature of the infringement in the
context of the total product. Is the gate keeper system a way
of dealing with those problems, or is it just simply a
formalized codification of existing law.
I think that is going to be a big issue for our Committee
as we look at it, and I think the Chairman made reference at
the end of his comments, which I just want to reaffirm this
whole notion of the budget deficit at PTO, the backlog, all the
problems caused there, we got to find a way of number one,
insuring against the diversion, and ensuring that that system
is adequately financed to not let our innovation suffer because
of the time it takes for an inventor to get a patent approved.
Thank you.
Mr. Conyers. Thank you.
Bob Goodlatte?
Mr. Goodlatte. Thank you, Mr. Chairman. I want to thank you
and Ranking Member Smith. We have been working for many years
to update our patent laws to ensure that the incentives our
framers envisioned when they wrote Article 1, Section 8 of our
Constitution remain meaningful and effective.
The U.S. patent system must work efficiently if America is
remain the world leader in innovation. It is only right that as
more and more inventions with increasing complexity emerge, we
should examine our Nation's patent laws to ensure that they
still work efficiently, and that they still encourage and not
discourage innovation.
However, it is becoming increasingly clear that current
patent laws and the court's interpretation of those laws do not
sufficiently contemplate the complexities of today's economy.
Cottage industries are springing up that seek to take advantage
of this complexity as well as loopholes in our patent laws to
extort money from companies both large and small.
To be sure, these problems are not limited to the high-tech
industry. Inventors in all industries are increasingly facing
these types of problems. The solutions to these problems
involve both insuring that quality patents are issued in the
first place and ensuring that we take a good hard look at
patent litigation and enforcement laws to make sure that they
do not create incentives for opportunists with invalid claims
to exploit.
H.R. 1260 addresses both of these concerns. It would create
a new post-grant opposition system in which interested parties
would request the U.S. PTO to review the scope and validity of
a patent after its issuance. It also includes provisions to
ensure that patent litigation benefits those valid claims but
not those opportunists who seek to abuse the litigation
process.
The Senate is also working on this issue, and I am
encouraged by the Senate Judiciary Committee's action on patent
reform this year. The Senate Judiciary Committee has reported
out legislation that tackles many big problems that innovators
face in today's economy.
I look forward to seeing the final version that emerges
from the Senate floor. However, I would caution the House
against automatically taking up the Senate bill on the House
floor. While that bill goes a long way, it needs further
improvement.
One area in particular that needs additional work is the
damages section. The Senate legislation takes positive steps
forward by requiring determinations on the record as to the
appropriate methodologies used to calculate damages; however, I
believe further guidance is needed in order to bring more
predictability to the process.
While I am sympathetic to the arguments of those who work
in fields where there are relatively few patents involved in
any one product, I also believe that the advent of products
comprised of hundreds and even thousands of patented inventions
requires that more attention be given to the apportionment of
damages. I look forward to working with all the parties to come
up with language that addresses this issue.
Another issue that is missing in the Senate and House bills
this year is the controversial award of tax strategy patents.
Increasingly, individuals and companies are filing patents to
protect tax strategy. When one individual or business is given
the exclusive right to a particular method of complying with
the tax code, it increases the cost and complexities for every
other citizen or tax preparer to comply with the tax code.
It is not difficult to foresee a situation where taxpayers
are forced to choose between paying a royalty in order reap the
best tax treatment and complying with the tax code in another
less favorable way. These types of disincentives add additional
costs and complications to an already overly complex process.
I play to join Representative Boucher in reintroducing
legislation addressing tax strategy patents, and it is my hope
that this issue can be addressed in H.R. 1260 as well.
Again, I applaud you, Mr. Chairman, and Ranking Member
Smith for holding this important hearing, and I look forward to
working closely with you as we seek to improve our Nation's
patent laws.
Mr. Conyers. Thank you, Mr. Goodlatte.
Brad Sherman?
Mr. Sherman. Thank you, Mr. Chairman. I want to echo the
comments of the gentleman from California that we need the
patent office to be funded properly and without diversion and
echo the comments of the gentleman from Virginia on tax
strategy patents but perhaps with a slightly different
viewpoint.
The purpose of patent law is to encourage useful
innovation. There is some cost to the taxpayer in operating a
patent system. We do that to encourage useful innovation. Why
we should use taxpayer money to encourage the innovation of tax
avoiding strategies is something I have yet to figure out.
And so while there is one circuit court opinion that may
close the door on these absurd tax strategy patents, we ought
to shut the door completely, bolt it, and do it in this bill if
at all possible. I yield back.
Mr. Conyers. Thank you.
Howard Coble?
Mr. Coble. Mr. Chairman, I thank you. I will not take 5
minutes, Mr. Chairman. You and Mr. Sensenbrenner and Mr. Berman
and I have been exposed to this issue for a long, long time,
and I recall, Mr. Chairman, some years ago when we were on the
House floor, we had Democrats fighting Democrats and
Republicans fighting Republicans on this issue.
And I shared this with Howard, a reporter from the west
coast called me, and he said, the law of patents is the most
dull, boring area of the law. He said it induces sleep, but he
said until now it is interesting, because they had each other
fighting one another.
Hopefully, we can avoid that this time. But, Mr. Chairman,
as we all know, patent reform is a national priority. It is
important to all aspects of our economy, and we should be
concerned about changing the system without a new captain in
the wheelhouse.
Now, I know that the Obama administration has had a full
plate, but I hope they can fully appreciate the urgency and
importance of installing the new undersecretary at the U.S.
Patent and Trademark Office. It is difficult for us, Mr.
Chairman, in the Congress to bolster our patent system and
address the needs of the patent office without an office to
promote their policies, which its experts believe will best
serve the people.
And I thank you, Mr. Chairman, for calling this hearing and
thank the witnesses for being here. I yield back.
Mr. Conyers. Thanks for all of your work in this, Mr.
Coble.
Darrell Issa?
Mr. Issa. Thank you, Mr. Chairman, and thank you for
leading this bipartisan effort to find the right balance. And I
must admit that I have been a cosponsor of the bill in the past
with Ranking Member Smith, Mr. Coble, yourself, and Mr. Berman.
You have been very generous in allowing me to have positive
input that appears in this bill. I am not a cosponsor in this
Congress not because I lack enthusiasm for the legislation, but
because I am quite concerned that we need to make sure that
there are some honest brokers who have a price that they want
to extract in order to get their vote.
And in this case, the price that I would extract is that it
has to be on the House side something which I believe the
Senate can embrace at least in a conference. And so I will work
with the Chairman and the Ranking Member and Mr. Berman, of
course, to get to that point to make sure that what leaves the
House is something that we have come to an understanding with
the Senate that whether we can come to a full bill or not
always remains to be seen.
But I do not want to have repeat of what we had in the last
Congress where we put together a bill that we knew was not
perfect. We moved it out in a dutiful way, in a bipartisan way,
only to have it languished in the Senate.
So I look forward to finding the best possible bill. I
might note that in the last Congress I encouraged that perhaps
less of a bill would be the better bill to move and things to
come back to. I am pleased to report that in the Senate, they
saw the bill that we passed unanimously on patent pilot as so
good that they included it in their version of the legislation.
So perhaps I will have to consider if it becomes law that
more could be better at times too in addition to less. I thank
the leadership at the dais and yield back.
Mr. Conyers. Thank you.
Judge Gohmert?
Mr. Gohmert. Thank you, Chairman Conyers. And I will
surprisingly be brief as well. Like Ranking Member Smith
indicated, the founders of this country recognized that there
was one area where we felt like monopoly would be okay, and
that would be copyright and patent.
To protect intellectual property, we would give you such
time to recoup all of the ingenuity that went into the design--
to the creation, and so as the patent system has evolved over
the years, and as we look at trying to tweak it further to get
it to where it is even more effective, I just want to encourage
we have got to be careful that we do not hurt the system in our
zealousness to help the system.
We don't need patent trolls gaming the system. At the same
time, we need to be careful on venue, and perhaps the TS Tech
is helpful in this area, but we don't need to force cases to go
to the most reversed circuit in the country where cases may be
drug out for many, many years so that it takes forever to get
to trial, and once you get to trial, you have the best chance
of being reversed and having to retry it again.
We don't need to change damages so substantially that even
after years of litigation in a rifle case, there is no chance
of recovering enough to make it worth while. And then that
would lead to the situation so that the movie ``Flash of
Genius'' would be just that. It would be a flash. There would
be no compensation. It would not be the incentives for people
to create and have that creation protected.
And so I appreciate both sides of the aisle being concerned
about that issue so that we don't have people who created their
inventions, got wealthy, and I am grateful for it, and then
pulled up the ladder behind them so that others could not
follow.
And I appreciate the opportunity to work with others in
getting to that point. Thank you, Mr. Chairman.
Mr. Conyers. Thank you very much, and my appreciation for
not naming the circuit that you had in mind.
Mr. Berman. [Presiding.] Oh, more opening statements.
Judge Poe?
Oh, Ms. Lofgren. Forget everything. We have had a couple of
gentlemen from that side of the aisle.
Mr. Scott? Did you have opening, no?
Ms. Lofgren is recognized.
Ms. Lofgren. I will be brief, because I want to hear from
the witnesses. I think obviously everyone in the room is in
favor of strong patent protections, high quality patents, the
prevention of litigation abuses. The problem is, having agreed
on the details, how do we achieve that? And I think in the end
it is in a way more important where we end up than where we
started.
I think this hearing is certainly a positive step forward
to hear from the various perspectives about what the Senate
did, what the thoughts are in terms of whether we have achieved
that overarching goal. As I look at the witness stand, I think
I am pretty familiar with most of the people here. They are
smart people with great knowledge but in different elements of
the whole issue.
So I am sure that we will know more at the end of this
hearing than we do at the beginning, and I yield back, Mr.
Chairman.
Mr. Berman. Thank the gentlelady.
And the gentleman from Texas is recognized.
Mr. Poe. Thank you, Mr. Chairman. I appreciate the
witnesses that have been here. Patent law is difficult. That is
why like my friend from Massachusetts, we chose criminal law
where things are a whole lot simple, stealing and killing.
But I am concerned about four issues: The small
entrepreneurs who I think have fueled advancement in this
country since our beginning, that we don't kill their work. I
am concerned about the length of time it takes to get a patent.
It takes forever. You know, the OJ Simpson trial lasted a
shorter time than some of these patents do to get a patent.
And thirdly, I am concerned about diminishing the value of
patents to persons who actually have those patents in the
country. For example, and fourthly, I am very concerned about
the transfer of wealth from the United States to other
countries, and I hope that we don't do anything to tinker with
that and make it harder on Americans that have patents by the
wealth going to foreign countries.
So with that, I yield back. Thank you, Mr. Chairman.
Mr. Berman. The gentleman from Massachusetts.
Mr. Delahunt. Yes. Thank you, Mr. Chairman. I just simply
want to associate myself with everything that everybody has
said. With that, I yield back.
Mr. Berman. Is there anything left to say? If not, we will
go to the people who know what they are saying.
I am pleased to introduce the witnesses for today's
hearing. The first is David Simon, who is chief patent counsel
for Intel, where he is involved in running intellectual
property matters. Prior to joining Intel in 1996, Mr. Simon was
in private practice in Los Angeles for 15 years specializing in
intellectual property matters, licensing and high technology
law.
Second is Phillip Johnson, chief intellectual property
counsel for Johnson & Johnson. Mr. Johnson's also president of
the IPO Education Foundation and chairman of the board of
AIPLA's Educational Foundation and heads AIPLA's Patent
Litigation Committee.
We will hear from J. Thomas, once again, professor at
Georgetown University Law School. Professor Thomas served as
the visiting scholar in economic growth and entrepreneurship at
the Congressional Research Service.
His extensive patent experience includes clerking for Chief
Judge Helen Nies at the Federal circuit, teaching at George
Washington University, Cornell, and the University of Tokyo, a
visiting fellowship at the Max Planck Institute in Germany, and
serving as a research scholar at the Institute of Intellectual
Property in Tokyo, Japan. He has also been in private practice
and has published numerous articles and five books on
intellectual property law.
Next will be Jack Lasersohn, a partner with the Vertical
Group, a venture capital fund and here representing the
National Venture Capital Association. Mr. Lasersohn serves on
the board of directors of Kyphon, Incorporated, a NASDAQ listed
medical technology company as well as on the boards of
directors of a number of privately held medical device
companies.
Fifth is Dean Kamen, an inventor and engineer who has
testified 2 years ago whose inventions include the Segway
Electric Transporter, the first portable insulin pump, and a
prototype wheelchair called the iBot that allows users to climb
stairs and raise themselves upright.
He founded and is now president of DEKA Research and
Development Corporation to develop internally generated
inventions and conduct R and D for corporate clients. Mr. Kamen
also founded FIRST, standing for, For Inspiration and
Recognition of Science and Technology.
FIRST is a program to encouraging young scientists and
inventors using wholesale marketing and media techniques to
motivate the next generation to learn about science and
technology. It hosts national robotics championships each year
at Walt Disney World's EPCOT Center that break attendance
records.
Mr. Kamen also served on the Patent Public Advisory
Committee for the U.S. Patent and Trademark Office and has won
numerous awards and honors and been dubbed the pied piper of
technology by Smithsonian Magazine.
Sixth is Mark Chandler, senior vice president and general
counsel and secretary of Cisco Systems. Previously, he was
managing attorney for Europe, the Middle East, and Africa based
in Paris and before that, he was general counselor for
StrataCom, which Cisco acquired in 1996.
Mr. Chandler also serves on the board of visitors of
Stanford Law School and the advisory council of the Woodrow
Wilson International Center for Scholars in Washington.
And last, we will hear from Bernard Cassidy, senior vice
president and general counsel and secretary of Tessera
Technologies. Mr. Cassidy held a similar position at Tumbleweed
Communications Corp, and before that, was in private practice
for 10 years.
Thank you all for being with us today. It is an unusually
large panel, and without objection, your written statements
will be placed in the record. It would be very appreciative if
you would limit your oral remarks to 5 minutes. We have a
lighting system that starts with a green light, at 4 minutes,
it turns yellow, then red at 5 minutes, and then the gavel.
Mr. Simon? Will you proceed with your testimony?
TESTIMONY OF DAVID SIMON, CHIEF PATENT COUNSEL, INTEL, INC.
Mr. Simon. Thank you, Congressman Berman. I would like to
thank the Chairman and Ranking Member Smith and the other
Members of this Committee for this opportunity to come here and
testify on a subject near and dear to my heart, patent reform.
I think you were right, Congressman Berman, that it was
about 6 years ago that you held hearings in this room on
patents, and I think it was like two or three Members of the
Committee, then two or three patent attorneys each trying to
get my business and a bunch of homeless people. Things have
changed a little bit.
So this is a vitally important issue to Intel. We spend
over $5 billion a year on R&D every year. We are currently in
the process of investing over $7 billion in our manufacturing
capacity. In the United States they are--on our new line
products, and these products, which are each the size of
roughly your fingernail, have over a billion transistors in
them.
And you can just imagine how many different parts beyond
those billion transistors are in there. As a result, we had
gone through the exercise some years ago--this isn't even for
our latest product--that one of our then state-of-the-art
processors had over 1,500 patents in it and that wasn't the
limit, we just stopped counting at that point.
We make very complex products, and because of the
complexity of the products, the system creates lots of problems
for us currently. Many of the members write the comment about
some of the difficulties in the patent office and the quality
issues that over the years hampered the patent office.
The Patent and Trademark Office is an extremely difficult
job to deal with the 400,000 plus patent applications they get
a year and the amount of resources that are available to them
to examine those. As a result, even with their best efforts, we
do get many patents that are quite frankly problematic, and
those are the patents that we then see in the litigation system
and then become subject to abuse.
Currently, just to give the Committee some idea of the
amount of money and effort that is pursuing this, there is over
three-and-a-half billion dollars, and I actually believe it is
substantially more than that, of funds being put into the
purchase of patents for licensing and bringing of lawsuits, and
many of those will eventually make their way to Intel.
In 2007 alone, the number of defendants doubled in patent
cases--not the number of cases doubled, but the number of
defendants doubled, because what we now have is a phenomena
with cases having many defendants.
I have a list of cases in my written testimony, which by
the way, for example, in the Odum case, there are 28 software
companies being sued. In the Clearwoods Computers case, there
are, I think, two cases, but there are 52 companies being sued
in one case for a patent.
Now, we all know patents tend to be a very complex, and I
will apologize, sometimes dull subject, but the issue that we
have is that when you have a complex subject matter with lots
of defendants, all of whom do things somewhat differently, this
leads for further complexity in the case.
And then you have the problem that in a typical case, you
have a relatively short time period for actual trial testimony.
Our Federal courts have many other pressing matters that need
to be heard. As much as patents are important to me, I think
one of the congressmen was right to comment that there are
other pressing issues that the courts are faced with.
As a result, there is a limited amount of time that courts
can hear a case, and it is a limited amount of time that the
jury can get educated on the both technical complexity and the
business issues that are involved. And this is further
exacerbated by the current standard that we have for damages,
which is on reasonable royalties, it is the--Georgia-Pacific
factors.
The Federal circuit has made it clear that if you instruct
the jury on those 15 factors, they will not reverse a case on
damages unless the jury verdict is ``monstrous.'' They have yet
to see a verdict that is monstrous.
As a result, we--and although the patent cases themselves
are--actually go through trial and go through--including
damages are relatively small percentage--in most cases settle.
Those jury verdicts do drive the settlement values of the
cases. As a result, this is something that we find increasingly
difficult.
In addition, the other issue that I wanted to touch briefly
on is venue. Many of the members have rightly commented on TS
Tech, but there is another decision that has come down after TS
Tech, a published decision called In re Telular on venue. And
in that case, because there were witnesses in--the parties were
in Illinois, witnesses in Atlanta, the court said, well, it is
not clearly more convenient to be in Illinois than some place
else, so we are going to leave the case where it is.
[The prepared statement of Mr. Simon follows:]
Prepared Statement of David Simon
__________
Mr. Berman. I am sorry. The time has expired.
And, Mr. Johnson, welcome back, and look forward to your
testimony.
TESTIMONY OF PHILLIP S. JOHNSON, CHIEF INTELLECTUAL PROPERTY
COUNSEL, JOHNSON & JOHNSON
Mr. Johnson. Thank you. Distinguished Members of the
Committee, we very much appreciate the opportunity to be here
today on behalf of the 21st Century Coalition.
We strongly agree with the sponsors of H.R. 1260 and many
of the Members who have spoken here today that patent reform is
really all about stimulating our economy through innovation and
the creation and maintenance of jobs.
Within Johnson & Johnson, we conservatively estimate that
60,000 of our 118,000 employees jobs depend on patents. We
estimate that during their 20-year lives, each of our patents
preserves and protects 150 job years. During the past 3 years,
Johnson & Johnson companies have invested an average of $7.5
billion per year in R&D, or about $15 million for each patent
granted.
These R&D expenditures resulted in well-paying jobs for
thousands of people throughout the United States. We want to
preserve and protect the patent systems incentives to invest
heavily in R&D so we can keep these jobs and hopefully create
many, many more.
But to do this in this challenging economic environment, we
need to make it clear to inventors and investors alike that our
patent system will live up to its promise. They need to know
that it will protect the deserving inventions that come out of
the R&D, and that the resulting U.S. patents will serve as a
solid base upon which to build future businesses.
To accomplish these goals, we need to strengthen not weaken
the value of American patents. Now we can do this, as many of
the speakers have already mentioned, by improving the quality
of the original patent examination so that the patents issued
by our patent office are readily and reliably enforceable
against those who don't respect them.
This should be accomplished by immediately harmonizing our
patent system with the rest of the world, not waiting for a
trigger that may never come to pass, and by giving our patent
office a reliable source of adequate funding to get the job
right.
Now H.R. 1260 goes a long way toward reaching these goals
but not yet quite far enough. But we shouldn't stop there. A
balance needs to be struck between the public's interest in
questioning a patents validity, and the public's desire to
induce continued investment in the patented technology.
A system that overly favors continuing third party patent
challenges destroys the quiet title that is needed to stimulate
further investment. Our coalition believes that the post-grant
provisions of H.R. 1260, which are based on the hard work of
the Members of this Committee in this and the last Congress,
comes very close to striking the proper balance.
It allows an initial period of post-grant opposition
followed by life of the patent reexaminations. But contrary to
how H.R. 1260 is now written, the basis under which
examinations may be brought should be limited as they were in
H.R. 1908. The question is based on prior patents and printed
publications not prior uses and sales.
When it comes to patent damages, we do urge the Committee
to adopt the gate keeper compromise that is now included in S.
515 as ordered reported. After years and years of trying, this
damages compromise has the most support of any proposed during
years and years of stakeholder wrangling.
It will provide fairness and uniformity to the way
reasonable royalty damages issues are handled in the courts,
and ensure that orderly development of the case law may
continue on contentious issues such as the proper application
of the entire market value rule, regular and established
royalties, and apportionment.
Most importantly, it will not pick winners and losers among
different stakeholders. All will benefit from the gate keeper
approach. Other patent damages alternatives that at their
hearts rely upon prior--subtraction are ill advised and
politically untenable. It makes no sense to base reasonable
royalty awards on less than all of these elements that were
shown to be required to achieve the patent.
During the original patent examination, opposition,
reexamination and in the validity and infringement phases of
the patent trial, all of the elements of the patents claimed
are deemed essential. Having thus proven entitlement to
protection of the entirety of what is claimed, there is no
justification for awarding damages on anything less.
Valuation that the invention contributes, however, is quite
a different matter. Here the question is what is the invention
worth, and this is best addressed, as the law does, by looking
to a willing licensee, willing licensor model.
My time is up, but I do very much appreciate the
opportunity to testify today as does our coalition, and our
coalition looks forward to working with the Committee in order
to achieve a bill that can quickly be enacted into law.
Thank you very much.
[The prepared statement of Mr. Johnson follows:]
Prepared Statement of Phillip S. Johnson
__________
Mr. Berman. Thank you, Mr. Johnson.
And, Professor Thomas?
TESTIMONY OF JOHN R. THOMAS, PROFESSOR,
GEORGETOWN UNIVERSITY LAW SCHOOL
Mr. Thomas. Distinguished Members of the Committee, I am
grateful to testify today on my own behalf as a concerned
member of the public and as a concerned observer of the patent
system. Allow me to thank you and your staff for your many
years of hard work on patent-related issues.
Expanded efforts to derive value from patents have
increased demand for greater precision in patent law damages
principles. Unfortunately, the perception is widely shared that
the rules pertaining to damages are less certain than many
other patent doctrines. Many observers believe that the
substantive law of patent damages is undisciplined and
indefinite.
The lack of a coherent standard for assessing reasonable
royalties and not leaning toward over compensation are among
the areas of concern. The result has been insufficiently
predictable awards that served the purposes of the patent
system poorly.
To address these concerns, two types of patent damages
reforms have been proposed before the 111th Congress. Proposed
evidentiary reforms, while potentially valuable, appear largely
to focus attention upon existing standards.
Patent trial practice already allows for extensive
discovery into the litigants' theories of damages, the
discovery exchanges of expert reports, depositions of relative
witnesses and experts. Accused infringers may file daubert
motions or a post-verdict motions to the extent they feel there
were evidentiary short comings.
Despite these standards and procedures, many innovative
firms have continued to voice concerns about the state of
patent damages law. So absent reforms of substantive law that
then applies the facts of individual cases, evidentiary reforms
may ultimately work--improvement to the current environment of
patent damages.
In addition, inherent limitations upon the judiciary appear
to render the legislature the more appropriate venue for
achieving meaningful reforms to damages law. The prominent use
of juries in patent trials, the differential standard of review
that they receive and the limited time one has to state
arguments on appeal don't place the Federal circuit or other
judicial fora in an enviable position to work meaningful
reforms to damages law as compared to other doctrines.
Now prevailing substantive reforms as I have mentioned have
been criticized for their indeterminacy and logical
shortcomings. Experience suggests simply that the Georgia-
Pacific factors are difficult to apply consistently. Although,
the Georgia-Pacific case provides a long list of ingredients,
it provides no recipe, no guiding principle or mechanism for
weighing one of the seemingly randomly ordered elements more
heavily than the others.
Indeed, the laundry list of Georgia-Pacific factors often
include several subcomponents with each factor. They can't
plausibly consider it a standard at all. The result has been a
grab bag of factors that experts may apply with virtually
unlimited discretion.
The hypothetical negotiation framework also possesses
shortcomings, because in theory, two people come to the
bargaining table and both walk away with something valuable.
Yet judicial decisions at times seem to have lost sight that a
bargain for exchange is supposed to offer a benefit to both
negotiating parties.
Several judicial opinions issues quite recently during
discussions on the Hill on this issue of ordered royalties that
are higher than the infringements in that profit margin. So for
these and other reasons, damages rulings are widely viewed as
unpredictable and difficult to review but also as tending
toward overcompensation.
A promising first step toward patent damages reform would
be to replace the hypothetical negotiating issues of Georgia-
Pacific with ostensible rule that tracks real-world decision
making. And in my opinion, that is what the House bill does.
Now faced with the choice of using a proprietary technology
and manufactured to size, what advantage would accrue through
the use of that technology in comparison with the next best
alternative including public domain technology, designing
distinct technology itself or not incorporating that
functionality into the adjudicated infringement at all.
The difference in that value is between the patented
technology and the next best alternative should comprise the
maximum amount of the damages award and the amount that the
patent owner would effectively share through the payment of a
reasonable royalty from one party to the next.
Let me close by noting that patent damages reform is an
important element in ensuring a strong patent system that meets
modern needs and can ensure that the patent system remains
robust but also recognize that in patent law, one person's
incentive is another person's limitation.
I believe that both evidentiary and substantive reforms
would ultimately bring greater rationality and predictability
to the patent system.
Thank you.
[The prepared statement of Mr. Thomas follows:]
Prepared Statement of John R. Thomas
__________
Ms. Lofgren. [Presiding.] Thank you, Professor.
And we would love to hear from you, Mr. Lasersohn.
TESTIMONY OF JACK W. LASERSOHN, PARTNER,
VERTICAL GROUP
Mr. Lasersohn. Distinguished Members, thank you very much
for inviting us to testify.
My name is Jack Lasersohn. I have been a venture capital
investor since 1981 in high tech, clean tech and bio tech. I am
also a board member of the National Venture Capital
Association, the NVCA, which represents over 460 venture firms
across the country.
It is my privilege to be here today to representing the
NVCA to share our views on the patent reform proposals. Venture
backed companies currently account for more than 10 million
jobs and $2.3 trillion dollars in U.S. revenue, representing 10
percent of U.S. sector employment and 20 percent of U.S. GDP.
Most of the semiconductor, networking, personal computer,
software, Internet, medical device, and bio tech industries
were created based upon the support of the venture capital
system. More recently clean tech has become one of the fastest-
growing areas for investment for us.
Many household names including many at this table,
Genentech, AMJEN, Intel, Cisco, Google, Medtronic, Microsoft,
eBay were started with venture capital dollars. Their need for
fundamental breakthroughs is increasing out of the millions of
patents that will be filed, only a few are really going to
affect the future in enormously important ways--inventions to
cure cancer, inventions to address obesity, diabetes, and
Alzheimer's disease; inventions that treat pandemics;
inventions that end our dependence on foreign oil.
If history is any guide, these inventions will likely come
from small venture backed entrepreneurial companies and,
indeed, I can tell you that we are working on all of these
projects right now. All of them are highly dependent on a very
strong U.S. patent system.
This vial contains crude oil made by algae from carbon
dioxide extracted from the atmosphere. It has already powered
an airplane, of course, a very small airplane, but the venture
capital firms that invested more than $150 million in this
project have relied completely on the strength of our patent
system to justify this investment.
It is one of the reasons that the United States has been at
the center of all major technological innovations. And, in
fact, the relatively weaker patent systems in other countries
are an important reason why they lag so far behind us. I would
like to discuss damages in particular.
In general, the venture capital community believes the
current methodology for calculating damages is appropriate and
working. And that patentees are not systematically
overcompensated. I hope that we can all accept the longstanding
principle that an inventor is entitled to the fuel economic
value of his invention and that damages should reflect that.
However, we understand that there have been outlier
infringement cases that have involved excessive damage awards.
However, a large number of larger technology companies have
proposed a change to patent law on damages so that damages will
only reflect the incremental value of an infringement product
that is attributable to specific contribution over the prior
art and not the full economic impact of the invention as under
current law.
NVCA believes that the value of the patent features is
almost always difficult to separate from its impact on the
value of the whole product. Almost all innovation takes place
in small incremental steps and is combined with prior art.
And while the incremental step can appear modest,
especially compared to the complexity of the underlying
product, the change can result in dramatic shifts in market
shares for the combined product, creating much more value than
just the incremental improvement.
A new coating on a solar cell that increases its conversion
efficiency just a little bit can dramatically shift the market
through the entire multi-billion dollar solar energy plant. A
more effective drug on a drug looting stint can shift the
entire stint market. In both cases the question is, who is
entitled to what share of the profits arising from those
shifts, the inventor or the infringer?
As these examples illustrate, there is no simple answer.
Apportioning damages as proposed in the bill appears to be
designed to deprive patent owners of the true full economic
value of their patents and will lead to tremendous uncertainty
about the value of patent. Determining its value is extremely
complicated and manufacturers in circumstances, in fact, need
to be considered.
As Albert Einstein famously said, ``You should make
something as simple as possible but no more.'' We support an
approach to calculating these damages which would maintain the
current Georgia-Pacific multi-factored analysis for the
majority of cases and incorporate language directing an
enhanced gate-keeper function.
We also believe the most important reform we can make is to
improve the quality of patents. If the patent's office
consistently issued high quality patents, many of these
problems would disappear. To this end, we support increased
funding and the end of the diversion. We do support a limited
12-month window after a patent is granted to allow time for
challenges to file opposition, but we must realize that many
large competitors will use this system to delay issuances of
patents by small startups, and the system must avoid these
abuses.
Thank you very much for your attention.
[The prepared statement of Mr. Lasersohn follows:]
Prepared Statement of Jack W. Lasersohn
__________
Mr. Conyers. [Presiding.] Thank you, sir.
Mr. Dean Kamen? Welcome.
TESTIMONY OF DEAN KAMEN, INVENTOR,
DEKA RESEARCH AND DEVELOPMENT, INC.
Mr. Kamen. First, I would like to thank you for
specifically pointing out in your opening remarks that we
should be inventing a way out of problem.
I think this whole debate, sadly, has come to be a
discussion of all of the costs of patents--all of the costs,
some of which everybody, I think, agrees are appropriate, some
of which, in fact, some people think are inappropriate, and
they may be right.
But collectively, the costs of all these patents, I think,
pales in comparison to the value of them, and I don't think
anybody in this room would question that. Look at this country,
look at our wealth, look at the rest of the world. There is a
reason. We have innovators; we have inventors; we take risks,
and I think the founding fathers got it right.
That clause in the Constitution is one of my favorite
things. I hope you guys don't screw it up. So I would just like
to very quickly explain maybe an issue that I first found out
about the first time I was asked to come here.
I listened to a bunch of people speak about this problem,
and I found out that I am a troll, because I heard that the
definition of a troll is somebody who doesn't build and sell
their product. I am happy to hear that phrase has gone away,
but there is a new phrase, which are NPEs, nonpracticing
entities.
I am not sure if becoming an NPE today is going to be a
step up or down from being a troll, but I think I am one of
those two. I will explain to you why I think that is not so
bad, and why I am concerned if you do anything substantial to
further weaken the patent system.
I had a business when I wasn't an NPE. I started it in high
school. I had an older brother who is a brilliant guy, an MD-
Ph.D. student at the time, treating babies with cancer. He
needed ways to deliver drugs to these kids.
I started building on that stuff in the basement of my
parent's house. It turned into a business. I was building these
things mostly for his little research applications, but later
it turned out I had some big applications like treating large
populations of people, for instance, with diabetes.
After a number of years, nearly a decade, it had become a
pretty big business from my perspective, and I realized that 80
or 90 percent of the people involved in that business were
doing manufacturing, marketing, sales, support, purchasing,
worrying about global reach, worrying about supply chain
management. That is not my strength.
I sold that business knowing I probably could have made
more if I held onto it, but I sold it because I thought I
should get back to doing what I do well, work on inventing.
There is no shortage of big problems out there. In fact, I also
got to see the big companies are very good, very good at cost
effectively, efficiently, reaching out, getting products to
people way more than I could with the small product line that
had to support a whole manufacturing operation and a whole
distribution operation.
So I sold that to one of the big medical companies, and
said I am going to go back to doing what I do well then I will
partner up with these guys and make a win-win-win out of it.
And in the last 25 years, my little company, which no longer
does the manufacturing, sales, marketing, distribution has
grown to 300 technology people and engineers, and I am working
in virtually--I don't know this man, but we are working on
diabetes, obesity, energy systems. We work on lots of things
that we hope that these other companies will bring to market to
make the world a better place.
But I have spent on all these products many tens of
millions of dollars, and in the end, all I ever end up with is
a patent, and every once in a while, those patents turn out to
be valuable, because I can show up at the door of these big
companies and say, here it is. I can promise you the exclusive
right to put this in production, which will cost them in many
cases $50 or $100 or $200 million in return for giving us some
royalties.
And oh, by the way, what we use those royalties for is to
go on and invest in the next thing that most of these, in fact,
large companies are sometimes reluctant to do. In the last 7 or
8 years, my little company has invested in excess of $50
million trying to develop systems to deliver water to the
developing world, to develop electricity to the developing
world.
We hope our patents on those will be good. We hope the
products will work, and we hope to go out to some of these big
companies and ask them to put in the enormous amounts of money
it is going to take to bring these things to market.
The only thing I show up with when I sit across the table
from some big company is a patent. And if I can't be sure that
that is going to be reliable, I can't run my business. I can't
get support. I can't sell my ideas to the world, because if you
can have them for free, nobody will pay for them. And you can
do a lot of work to reduce the cost of patents, but when you
finish doing that, you might have protected nothing. There will
be nothing left.
I have to stop.
[The prepared statement of Mr. Kamen follows:]
Prepared Statement of Dean Kamen
__________
Mr. Conyers. Those bells weren't for you.
Mr. Mark Chandler, senior vice president, Cisco.
TESTIMONY OF MARK CHANDLER, SENIOR VICE PRESIDENT, CISCO
Mr. Chandler. Chairman Conyers, Ranking Member Smith,
Members of the Committee, thanks for the opportunity to appear
before you today. Nearly 2 years ago, patent reform legislation
was reported by this Committee and passed by the House with a
strong bipartisan majority.
The bill before you today is very similar to the earlier
bill and should be approved by this Committee. CISCO believes
in a strong patent system, because our success as a company is
a direct result of successful and continuous innovation
starting from two people on a university campus 24 years ago.
Today, we hold over 5,200 U.S. patents, have another 5,000
pending, and we spend $4 billion a year on research and
development.
We have over 14,000 engineers working in the United States
to develop and support new product. The patent law should
ensure that in case of infringement of valid patents, the
inventor should and must receive fair compensation. But by the
same token, those who are developing and manufacturing real
product should not be forced to pay a patent holder if a patent
wasn't properly granted or be forced to pay damages based on
value not commensurate with the innovation described in the
patent.
Yet that is what is happening. At a time of economic
crisis, the flaws in our current patent law drain resources
away from R&D manufacturing and toward defending unjustified
patent suits with overblown damage requests.
I will focus my oral testimony on the importance of
clarifying vague patent litigation damages rules, because
reform in this area is essential to eliminate burdens on
innovation that are preventing job creation. For technology
companies, patent litigation means spending increasing amounts
on increasing number of infringement claims.
I can choose to spend millions of dollars per case on
defense fees, millions of dollars per case on settlement
payments or both, but it is virtually certain that every new
claim whether justified or not will require the expenditure of
millions of dollars.
The number of these claims has been increasing. Royalty
requests are up 650 percent over 4 years. Litigation measured
by total number of patent defendants has increased
significantly in that time as well. Total litigation costs born
by technology companies have doubled in that period to an
estimated $4.6 billion.
In my own company, we have gone from defending three
infringement suits a decade ago, all involving competitors, to
over 30 today with only a small fraction involving companies
that actually produced a product. Patent litigation expenses
are now the single biggest cost in my legal budget. We have got
literally hundreds of royalty demands as well.
Increasingly, our courts have become a magnet for suits by
foreign patent holders who prefer to sue in our courts rather
than in their own countries where the patents were originally
issued. In the last 5 years, French, German, Australian,
Canadian, Finnish, and Israeli patent holders with no products
of their own have broadly sued across the entire industry
including my company draining my company and our country of
important R&D resources.
Why is this happening? The reason is that the imbalance in
patent litigation rules has triggered the creation of well-
funded litigation syndicates that purchase patents not to
develop innovative products but rather to obtain licensing
payments from companies that have brought innovative products
to market.
Fully 88 percent of the patent claims against technology
companies are asserted by folks who don't make any product.
Unlike the typical model for the small inventor, the one that
Mr. Kamen described who seeks to license intellectual property
to those who can develop a product and build a market, these
syndicates typically lie in wait until an industry is
developed, often get going after those who are relying on
established industry standards with far fetched claims that
leverage the uncertainty and the possibility of a jury jackpot
award.
The patent systems litigation rules were designed when
claims typically were filed by manufacturers such as Cisco's
patent for being infringed by a competitor. The built-in
protections that prevented against unjustified opportunistic
claims are not effective against the syndicate.
Just as flaws in financial services regulation led to
financial engineering that lacked economic substance, today's
dysfunctional patent litigation rules have produced a new form
of patent engineering instead of product engineering, which is
a task on those who are actually building products and
employing people.
Key among the culprits is a vague test for calculating
reasonable royalty damages. The litigation syndicates don't
seek lost profits since they don't manufacture a product. They
leverage a vague 15-factor test that threatens large jury
verdicts; they run a volume business suing numerous defendants
at a time as they attack an entire industry.
The threats coerce settlement payments from defendants
unwilling to spend millions in litigation costs and run the
risk of a jackpot verdict.
In conclusion, in our sector alone, reform of the
reasonable royalties standard will create tens of thousands of
jobs over the next 5 years, and if nothing is done, research
shows our economy can lost tens of thousands of jobs from
continued adverse effect of the legal standards.
We have this effect in Cisco today. But this issue is not
simply about jobs, it is about our continued technological
leadership. Less resources for research and development at
Cisco in the U.S. means the next key innovation is more likely
to come from a competitor in Europe, in India, in China, not in
our country.
Thank you, and I look forward to answering the Committee's
questions.
[The prepared statement of Mr. Chandler follows:]
Prepared Statement of Mark Chandler
__________
Mr. Conyers. Before we go for a vote on the rule on the
credit card bill, we will hear from the senior vice president
and general counsel of Tessera, attorney Bernard Cassidy.
TESTIMONY OF BERNARD J. CASSIDY, SENIOR VICE PRESIDENT AND
GENERAL COUNSEL, TESSERA, INC.
Mr. Cassidy. Thank you, Chairman Conyers, Ranking Member
Smith and distinguished Members of the Committee.
Tessera is a high-tech company, nearly 300 of our 400
employees are engaged in research and development. We develop
innovative technologies to make consumer products faster,
better, and cheaper. If you have a cell phone that fits in your
pocket, you are using our technology.
Rather than talk about damages, I will defer to the
testimony of Mr. Johnson, Mr. Lasersohn, and Mr. Kamen and my
written testimony. I would like to take up the lonely and
perhaps painful task of addressing post-grant review.
I understand the Congress, the House at least, has done a
lot of hard work on this topic and may not wish to reopen it,
but notwithstanding that hard work, we urge Congress to look at
post-grant review with a fresh eye.
The reason is the slew of cases from the Supreme Court and
Federal circuit that have come down since those provisions were
drafted that have significantly tilted the balance in favor of
patent users rather than patent holders.
At a policy level, patent reexamination and other forms of
post-grant review are designed as a limited safety valve to
catch and repair the agency level patents that were
inadvertently or improvidently granted.
The idea is similar to en banc review by a court of
appeals. In neither case is the extra review process designed
to be a lengthy or a disdainful reaction to the initial review
process that preceded it.
The epilog should not be longer than the book. In practice,
however, even the current re-exam process has become an
instrument of abuse and patent nullification. Patents, of
course, are time bound property rights. Specialist law firms
have emerged to brag about their ability to use the re-exam
process to nullify patents.
Let me offer you two quotes from a white paper one such law
firm in California has published. The firm can proceed
anonymously to ``create a simulated swell of opposition to the
patent. This can hide your identity and even draw the patent
owners higher toward your competitors.''
Secondly, ``By creating uncertainty about a patent and
tying it up in a long re-exam process, the firm can effectively
nullify the patent.'' That is the system today without the
bill. At a high level, the cumulative effect of the bill's
proposed procedures would be to create a post-grant review
system that heavily favors the interest of the challenger
regardless of the challenger's motives.
A challenger would be permitted to initiate a PGO
proceeding with no meaningful evidence of invalidity to attack
the patent's validity on any ground, to tie up the patent
holder in expensive discovery and evidentiary proceedings, and
to invalidate the patent according to a very low evidentiary
standard of proof.
And after a patent holder manages to survive this
unbalanced system, she will remain vulnerable to successive
attacks by the same challengers and different ones as well.
So specifically, we oppose the bill's expansion of
reexamination to permit challengers based on prior public use
or sell. This provision is unfair to patent holders. The prior
use and sell language was not part of the compromise bill that
this House passed in the last Congress and has been deleted
from the compromised Senate bill reported out of the Senate
Judiciary Committee. We urge the same here.
Second, the bill should preserve the existing estoppel
effect applicable to interparties reexamination. Estoppel is
necessary to encourage efficient and proper use of the limited
reexamination proceedings and to prevent serial attacks against
the patent.
Third, the bill should establish a firm 12-month deadline
for completion of interparties proceedings. Current average is
about 33 months. Without a firm statutory deadline, the
interparties reexamination process will subject the patent
holders to a lengthy and costly proceeding and serve, in
effect, as a rolling nullification of legitimately issued
patents.
Fourth, the bill should impose a more rigorous threshold
test for initiating interparties and post-grant opposition
challenges. The current threshold, ``a substantial question of
patentability,'' sounds impressive, but it is not meaningful in
practice.
The PTO grants an estimated 97 percent of reexamination
requests based on this test. A higher standard is necessary.
Fifth, the bill should affirm that a patent is presumed valid
when challenged in a post-grant proceeding.
It is completely unreasonable to strip an issued patent of
its presumption of validity by merely filing a piece of paper.
A system that creates such a whimsical vulnerability would
immediately devalue all U.S. patents as an asset class, whether
or not a particular patent is challenged.
And finally, the bill should explicitly allow the PTO to
extend the patent term of a challenge patent simply out of
fairness to the patent holder.
In short, the current proposal is troubling. It would allow
repeated frivolous challenges to U.S. patents resulting in
increased costs, decreased certainty and lower value patents
for the entire asset class. That, in turn, will undermine
patent rights, threaten the jobs that depend upon them, and
discourage investment in new technology.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Cassidy follows:]
Prepared Statement of Bernard J. Cassidy
__________
Mr. Conyers. Thank you. We will examine the credibility of
your persuasiveness when we return.
Thank you all. We will immediately return after this one
vote. There are cafeterias and feeding places on the B level if
you think you can grab a sandwich in the next 20 minutes or so.
The Committee stands in recess.
[Recess.]
Mr. Conyers. The Chair recognizes Lamar Smith for
questions.
Mr. Smith. Thank you, Mr. Chairman. Mr. Chairman let me
direct my first question to Mr. Chandler, and also ask Mr.
Simon, Mr. Johnson, and Professor Thomas if they would respond
very briefly as well.
This goes to the subject of damages, no surprise. And what
I want to mention, Mr. Chandler, to you is that a compromise
has been proposed, and it would define a reasonable royalty as
an appropriate share of the value of the patented technology
over the next best alternative.
I am not necessarily promoting it, I just want to put the
idea and see what kind of a response we get for that kind of a
compromise.
Mr. Chandler. Thanks. The Senate bill is an important but
not a sufficient step to address what is going on with the
damage awards, and we are real concerned that the gate keeping
provision while advising the judge to take a more active hand--
fixes some of the procedural problems in the way things are
given to the jury but doesn't really help in setting a
substantive standard that would be available for appeal and put
some certainty into the system.
We also think that that gate keeper function should occur
earlier in the litigation. The Senate bill says it should occur
no later than the final pre-trial order, but we would like to
move it forward. In terms of nearest not available alternative,
I will just say intuitively to me, one of the problems that
that potentially raises is the number of cases that we have
that are based on industry standards where it is unclear how
you do an alternative.
What I would say though is there is a--I think David Simon,
who you mention in your question, will do a better job on that.
There is a good reason that my title is general and his is
intellectual.
Mr. Smith. Okay. Thank you.
The compromise I mentioned is actually not in the Senate
bill. That is it is a new concept that--Mr. Simon? Real
quickly.
Mr. Simon. Thank you. I would like to echo Mr. Chandler's
comments on the importance of more than a gate keeper. If I
may, the issue you get into is really fundamentally an issue of
complexity.
From my view, you would have to do this at the time the
design is occurring, and if you--in other words, you know, once
we have already designed something into the product and it is
out there, and sometimes we get sued on a patent that issues
years after our products have first embodied whatever we are
being sued on. It can, you know, taking it out of products, and
particularly if there are other products that rely on it, is
very difficult.
So you really have to go back in time to look at when it
was designed in. And then you get into some other issues such
as, you know, at that time, nobody is sure which technique is
going to work. And you get into--I have sat in design
meetings----
Mr. Smith. More complicated than we might think.
Mr. Johnson? Real quickly.
Mr. Johnson. Georgia-Pacific factor number nine already
relates to the--advantages of the patented property over the
old modes or devices if any that have been used for working out
similar results. So it is a factor, and it is a good factor.
But whether how important the factor is depends upon the
circumstances between the parties. Are they competitors, you
know, what is the impact of infringing and so on?
Mr. Smith. Okay.
Professor Thomas? Any thoughts?
Mr. Thomas. I favor that approach, because I believe it
best mimics what happens in the real world when technologists
make decisions about whether these are proprietary rights or
not.
Mr. Smith. Okay. That is helpful. Thank you. Next question,
Mr. Cassidy, you mentioned this in your testimony, the post-
grant opposition system. Just a real practical question, do you
think PTO is able to handle a post-grant opposition system?
Mr. Cassidy. I believe we have been told by the PTO that
they are overburdened already, and this is a very serious step
to create another layer of administrative patent judges and so
forth. I think it is with great caution the Congress should go
ahead and create a new system.
Mr. Smith. My time couldn't possibly be up, Mr. Chairman.
Mr. Kamen? Real quickly, and I am going to sneak in one
more question if I can to Professor Thomas. Do you think they
could--PTO can handle--do you agree with Mr. Cassidy on that?
Mr. Kamen. As a former member of the PPAC, I can tell you
we spent a lot of time there trying to figure out how to deal
with all the strains their under now. They have a pendency of
three-quarters of a million patents. Some of them are 4 years
old. The last thing we need to do is give them another burden.
Mr. Smith. Okay.
Mr. Kamen. So I would say no.
Mr. Smith. And that is not a surprising answer. Thanks.
Professor Thomas? Last question for you real quickly. A lot
has been made about the excessive royalties, the unfair
damages, some people claim that is exaggerated. What do you
think about it? And Mr. Chandler, you did a lot in your
testimony to answer the question as well, but I wanted to see
what Professor Thomas had to say.
Mr. Thomas. I believe that the uncertainty may be the
biggest problem at this point. However, I believe that there is
a tendency toward overcompensation. The average award--but are
reported are high, and when rates are rewarded in court rooms
that are higher than our--would be bargained for in board
rooms, it promotes speculation and litigation.
Mr. Smith. Okay. Thank you. Thank you, Mr. Chairman.
Mr. Conyers. Thank you very much, Lamar.
Zoe Lofgren?
Ms. Lofgren. Well thank you, Mr. Chairman. I just have a
couple of questions, and as I said in my brief opening remarks,
this has been an interesting process over the past, I think it
is almost 10 years now of sorting through these issues, and the
frustrating thing, I think, for all of us is that there are--
all the witnesses said some things that were actually in
conflict with each other, and how do we get to a point that
really works for the American economy in a very vigorous way.
Along those lines, Mr. Simon, you talk about non-practicing
entities and the meritless litigation brought by some of them
that weakens the patent system. And I know that in some cases
that is correct, and yet, we also know that there are non-
practicing entities that license--that are legitimate
businesses, and so how do you make that distinction if you are
trying to approach this in a legislative way?
Mr. Simon. Well, I frankly don't think that you can make
that distinction in a legislative way of saying these non-
practicing entities are good other than that their leader's
name starts with Dean, and these others are not so good.
I think what you really have to do is you have to have,
from my view, some objective standards that remove uncertainty,
and if you do that, I think you go a long way to helping the
system.
A big part of the problem is that just the cost are so
tilted to one side in a patent litigation today with
contingency fee cases that, you know, we have had instances
where it has cost us $10 million just to produce the electronic
documents. And, you know, the other side doesn't bare any of
those----
Ms. Lofgren. No, I am aware of that.
Mr. Simon [continuing]. And that creates--you know, that is
part of it. And there is----
Ms. Lofgren. Well, it pushes to settle whether it is
meritorious or not just because of the cost of litigation.
Mr. Chandler? Do you have any thoughts on that same
subject?
Mr. Chandler. I think that we need to recognize that
liquidity in the patent system is very important. People need
to be able to enter into transactions to license their patents,
and I think Dean Kamen's stories of his creative activity and
invention and the way he has helped bring those products to
market by being able to do transactions with companies that can
then do that for him in terms of marketing and sales and all
the other things that go into it----
Ms. Lofgren. Yes, legitimate.
Mr. Chandler. Legitimate and critical, and it is also
critical that if others try to piggyback on that without the
right to do so under his patent that there be an ability to
stop them or to force them to pay compensation. So that is
purely legitimate.
What we are the issue is uncertainty. And I don't think
that--I can't speak for Mr. Kamen, but I don't get any sense
that he benefits from uncertainty in being able to value patent
rights. I think we all do. I think there are people who want to
enforce patents who think that the biased toward
overcompensation that comes from uncertainty is people will pay
a premium to avoid risk is what is the issue in the system.
And those who like the idea that the idea that--like a
hiker on a trail who makes himself very large to scare off the
bear, people who are doing that like the idea that they may
seem larger than they really are, and yet, there is a huge
economic impact when we allow the law to let people look larger
than they really are.
And I think the problem will be solved in a way that
protects people like Mr. Kamen who are doing what they are
doing and eliminate the people who are leveraging the system if
we simply come up with a clearer set of rules. The non-
practicing entities are a symptom. They are not the disease.
Ms. Lofgren. Mr. Kamen? Do you have opinions on that?
Mr. Kamen. I violently agree with everything. Uncertainty
is the biggest issue. The reason I am sitting here today is if
the uncertainty that already exists, which is problematic some
of if it due to the you wait 5 years to get your patent. So I
would urge you whatever you do, make sure the patent office has
the resources to respond quickly.
We couldn't run banks where they wait 5 years to tell you
where your money is or you couldn't build houses if you needed
5 years to get your title to your deed or that if you had after
your deed a post-deed review where they said, after you build
your house, we will come back in a year or 2 with some
different rules, and maybe the deed's good and maybe we will
take your land away. Your deed has to have certainty.
The timing has to be efficient. The certainty is critical
to me, and one of my concerns is, well intentioned as they are,
some of these things that we are talking about in perhaps
unintended consequences are going to add uncertainty. The
second window adds uncertainty. Some of these issues add
uncertainty.
I would ask you to think about the fact that right now you
may be trying to solve an insoluble problem if you want a one
size fits all. I really do believe that if you have got billion
dollar investments and making a dive, it takes 5 years to do,
you have got 1,500 patents, clearly, people have demonstrated
and everybody is sympathetic to the fact that people are gaming
the system. We ought to go after the bad actors.
But when you have got a great system, and you have got a
few bad actors, the goal should be take out the bad actors,
don't bring down the system. And right now, we see that there
is real issues here. We have got a fire in a wastebasket and it
is blazing. But you don't flood the house to put out that fire.
I would say, as the Chairman said, we need invention here.
Maybe the invention is a fire extinguisher. You ought to find a
way to deal with the specific problems that exist without
taking some of the fundamental systems and making them more
uncertain and putting them into a system where there is more
change especially at a fragile time like this.
Ms. Lofgren. Mr. Chairman, I know my time has expired. I
don't know if there is going to be a second round, but I guess
I have to yield back.
Mr. Conyers. If you have a last final urgent question, we
will entertain it. Well, I had two, but maybe I will have to
choose between them.
Let me just ask this: Mr. Johnson, you have spoken
favorably of the first to file concept. Mr. Kamen has expressed
grave reservations about that system. I wonder if the two of
you could address whether it is possible to reconcile those
competing points of view.
Mr. Johnson. I think it is, because I think Mr. Kamen's
concerns relate as much as to an orderly transition to first to
file as to an objection to first to file itself. I see he is
nodding yes, so I will yield my time to Mr. Kamen.
Mr. Kamen. I would agree with that. Of all the issues out
there now, that one if it is carefully implemented, if the
transition is well taken care of, but I would point out that
you have some of the icon of the tech industry, of the bio
tech, of the medical products companies of the world here, I
think the individual inventors, rightly or wrongly, the
inventors around the country have a knee-jerk reaction by which
they are very concerned.
And in some cases, I think, appropriately concerned that
unless some accommodation is made, the individual inventor is
going to see that I have got to run to the patent office every
time I have a good idea, because if it is first to file, I am
in trouble, and the little inventor then is going to (A) swamp
the patent office with marginally prepared patents, it is going
to cost them a fortune.
So even though I might admit I could deal with some of
this, I think dealing with your real small individual
inventors, they ought to have a voice.
Ms. Lofgren. The other question I was going to ask and
maybe I will just have to ask for--I don't know if there is
time, but----
Mr. Issa. I guess we continue enjoying her second round,
right?
Ms. Lofgren. Bilski. You know, there was discussion had--
some of the Members talked about patenting, you know, tax
preparation. I mean, there is a lot of angst about some of the
stupid stuff that is going on here, honestly. But there still
is, in my judgment--well, I mean, take a look at Oracle, I
mean, there is a role for patents in the software arena.
I think Bilski moves us in a direction but it is still a
little spongy, and it has been suggested that perhaps we might
use this opportunity to put a little more certainty onto
Bilski. I am not sure that is correct, and I am wondering if
anybody has a firm view on that?
Mr. Johnson. I think that the nature of case law is when
you make a major change, which Bilski is that good case law
develops by not trying to decide everything in one decision,
because we have a very complex technological landscape here,
and I think as the case law goes on, these individual issues
will come up to the courts and be handled appropriately.
It is quite different, of course, in legislation where you
have to do one rule and that is it, and you are done. So I
would agree with you. Spongy isn't the word I would have used,
but not completely defined is probably better. But I do have
great faith that as the courts then take up individual
additional cases in that framework that we will have
substantial improvement in the area.
Mr. Lasersohn. Just one aside, not directly on the question
of methods for tax preparation, but the whole business method
question is a very important question and the method question
is a very important question and so, I can tell you that many,
many patents that the venture capital community relies on in
starting companies are based on methods.
Some of them begin to spill over to business methods, and
drawing those lines about what is a business method versus say
a technical method can be very difficult. I will point out in
Europe, where method patents are just generally not allowed,
many industries don't exist for that reason.
And so we have to be very, very careful not, again, to draw
those lines very carefully.
Mr. Conyers. Darrell Issa?
Mr. Issa. Thank you, Mr. Chairman. I make note that our
unwillingness to properly protect designer dresses and suits in
our patent law has been a source of problems for us and not the
French.
Mr. Kamen. And not for me.
Mr. Issa. Dean, I must say that when you wear timeless
clothes, you know, no one need question that.
First of all, I would like to say although I saw this is as
a hearing about what we had already all heard about it, it is
never a bad idea to have a gathering of brain trusts in one
room that is this great to bounce ideas off of, particularly
since Thomas Jefferson is long since dead, you are the next
best thing. Perhaps with Dean here maybe the same thing.
The questions that come today, particularly as to the gate
keeper--I think, Mr. Chandler, I will lead off with you.
Knowing that Markman decisions are supposed to be decided early
but not always decided early, and since they are something with
a judge much comes to grips with and most often, a good Markman
causes both sides to see their product and patent and dispute
differently.
Should we consider linking those two inseparably in the
discovery process so that both are encouraged by the judge so
that then a potential quiet period of reflection could lead to
settlement often?
Mr. Chandler. Moving that function earlier in the process
than, for instance, is reflected in the Senate bill as reported
by the Judiciary Committee, would be positive. The Markman is
one possible place to link it, but I wouldn't necessarily adopt
the word ``inseparably'' that you posed in the question----
Mr. Issa. Well I posed it for a reason----
Mr. Chandler [continuing]. To do it.
Mr. Issa. If there is no Markman, can you really--if you
have not yet defined the patent and the product, then without a
Markman, can you do the gate keeper?
Mr. Chandler. I certainly think it would be hard to do
before the Markman. I just would need to think about it some
more to decide whether the word ``inseparably'' should be part
of that.
But certainly the goal of having decision making as early
in the case that give guidance to the parties as to the factors
that are going to be relevant in determining damages, will then
remove the jackpot element and allow the parties to have a
successful negotiation, and that is what we believe the patent
system should aim to look like a good functioning commercial--
system where people can negotiate to transfer rights at prices
they can agree on.
Mr. Issa. Okay.
Mr. Johnson? You clearly want to weigh in on this.
Mr. Johnson. Thank you. I wouldn't link them because I
think that the Markman frequently would be earlier than you
could do the gate keeper. The nature of the development of a
pretrial action requires the fact discovery to be completed
before the experts can really opine on what the evidence is,
and the gate keeper really comes as a pretrial procedure.
You need the experts testimony that would then be
challenged in gate keeper. So you are pretty far down the line,
and so----
Mr. Issa. So you buy them as sequential but not
inseparable?
Mr. Johnson. No, because what you would be doing is you
would be delaying the Markman, and I don't think you want to
delay the Markman.
Mr. Issa. I do not ever want to delay the Markman, trust
me.
Mr. Johnson. So I think you shouldn't link them.
Mr. Issa. Okay. The question came up on the post-grant
review, and this whole window and whether the PTO was equipped
to handle it.
What I heard and, Mr. Kamen, I think I will choose you. You
often are very smart at showing why people throwing a lot of
money at something do not necessarily reach the conclusion that
somebody throwing a better idea at is does.
So let me pose it this way: Since we generally only throw
money at things and perhaps some rules of the road that help
from time to time, if, in fact, the money were made available
either through the fee process, eliminating fee diversion
completely or through additional fees, is there any reason to
believe that the PTO could not develop the ability to be the
best place should this law pass as it is to do it rather than
some other entity, whether it be modeled after the ITC over at
Commerce or men and women in black robes.
Is there any inefficiency that you see there, because
wherever we put this, we want to fund it, but also wherever we
put this, I am sure we want to make sure we put it in the most
efficient place.
Mr. Kamen. I can't comment on all the other places you
could put it and what would be the intended and unintended
consequences. I could say as a general statement, I just
believe that whenever you have a problem of any kind--instead
of putting Band-Aids on it or patches over it, you ought to
first--and it is generally the hardest part of solving any
problem is defining it well.
And if we absolutely believe that we could give the patent
office right up front the best resources, the best technology,
the best training, the incentives to keep their people--up
until a few years ago, the turnover among young people there
was so extraordinary that you would see why they have such
great pendency now.
If the pendency has left the problem, if the quality has
left a sea of problems, trying to put other systems around is
putting Band-Aids on there. You go back, and you say, let's
make sure that they have the right tools, they have a right
amount of time, they are trained properly, and they give you a
good patent quickly.
After that, to the extent that there needs to be something
done, I think it should be done by those people in one place,
cost effectively and quickly, and I would beg you all to make
sure whatever you have them do it is--that is such a rigid
timeframe on it, and it has got such a clear definition to it
that we don't make it a source of more mischief and more cost
and more uncertainty.
Until you deliver the guy his patent or the woman her
patent that says, it is real, I can count it, you are adding
tremendous problems to the system, and adding other agencies, I
don't think----
Mr. Issa. Thank you, Mr. Chairman. I have just 35 more
questions, but I will limit it to one, if I may?
Mr. Conyers. You always do.
Mr. Issa. Thank you, Mr. Chairman.
And, Dean, by the way, I spoke to two graduating classes at
the PTO on Monday, and you said it better than I did, but mine
was a prepared speech.
The earlier comment on--and I think rightfully so--on
people who invest tens or hundreds of millions or even billions
of dollars in a new product go along, produce the product and
then intrinsically in this product and follow ons become some
feature which is later claimed successfully in a patent.
Do you believe--and it is not in the legislation--do you
believe that as we look at the history of laches developing,
that we should put into this legislation some sort of
protection for--and some has been done by eBay but for the
threat of a injunctive relief being limited when, in fact, by
definition, these known technologies have been allowed to
develop, investments made, and they have gone a very far along,
because today, as we all know, you can sit on your rights a
substantial period of time, then make the claim and have little
or now harm done to the moving party.
Well, many of you know that you can be in a jackpot when
they make the claim. So is that something that is not in the
legislation that should be spoken to above or below the line in
order to provide further guidance to the courts?
Yes, Mr. Lasersohn?
I will let you all answer if the Chairman will.
Mr. Lasersohn. I would say that we would have to be very,
very careful about a system like that. I think the key question
is did the inventor, in fact, invent it or not?
And if the inventor, in fact, really did invent it, there
are many reasons, as you know even better than I, why it may
not be in the first issued patent or why the patent may take
time to issue.
As Dean points out, the issuance of the patent, the timing
of the issuance is not within our control. And so, I think the
operative question gets back to the main point, which is who
really invented it? If the inventor, in fact, did invent that,
he or she is entitled to the economic value of that.
Mr. Issa. And I want you all to be able to answer, but I
want to make sure the question is properly narrowed. I am only
speaking to the injunctive relief further guidance. There is no
question that we must make sure the actual inventor is entitled
to fair compensation. What we are speaking of is the Intel
chip, for example, that is 4 years down the road and second
generation and somebody gains a patent on it, and a whole
industry and even standards have been built on that technology.
Is it a reasonable royalty as a matter of law or is
injunctive relief an appropriate hammer, and like I say, the
court's been deciding some, should we weigh in because we have
further guidance that we might need to give.
Mr. Lasersohn. I would just say injunctive relief is a
major, major question for us and for our companies. eBay has
already created a high level of uncertainty about when we are
entitled to injunctive relief. And very often, that is in fact
the bargaining chip that allows an inventor----
Mr. Issa. And now from the other side, a little bit,
please.
Mr. Lasersohn [continuing]. The economic benefit.
Mr. Simon. If I may? The specific issue brought to mind an
incidence of a few years ago, Congressman Issa, where we were
presented with a pending application that had been filed over a
decade before, never claimed anything like what they were
claiming, and then, very late in the process, stuck in a claim
even though the patent was going to expire not that far into
the future if these claims would have issued on fundamental
memory technology that was used in every single computer.
We solved the problem. We bought the patent. It took care
of it, and we have never asserted it either.
Mr. Issa. By the way, a problem is defined as something
which money cannot solve. So you solved it, it must not have
been a problem, it was a business decision.
Mr. Simon. My boss doesn't quite view that the same way.
Certainly not my CFO. There is a problem here. I am not sure
that the injunction is necessary the right way. There used to
be a doctrine in some circuits before the advent of the Federal
circuit called the doctrine of late claiming, which is--and
disfavored for a variety of reasons.
Whether that might be a solution, whether there might be
some other laches type solution, all of them should be
considered. I mean, there is an evidentiary issue of how do you
show, did they really claim this when they filed the
application or did they later on say, we didn't reclaim
something here, but you know, we have seen what industry has
done.
If they have done it 10, 15 years after the fact, I don't
think they invented it, quite frankly.
Mr. Issa. Mr. Cassidy?
Mr. Cassidy. Congressman, I think the eBay case does solve
a great deal of the problems, especially the prong of the
equitable test of does this harm the public interest. If
something is placed in the commerce and the public is largely
dependent upon it, it is very difficult for a court today,
after eBay, to enjoin the use of that product.
Mr. Issa. Thank you very much, Mr. Chairman. I would say
that we have jurisdiction over the courts, and they agree with
us mostly. We do not have jurisdiction over the ITC, and they
do not yet agree with us.
Thank you.
Mr. Conyers. Thank you.
Sheila Jackson Lee?
Ms. Jackson Lee. Thank you very much, Mr. Chairman. As
usual, I appreciate, I think, what is certainly a detailed
hearing and, Mr. Chairman, I hope that we will make a home run
this session with respect to, I think, helping to ensure the
inventiveness of America.
I would like to focus my questions on this concept of
reasonable royalty damages. And I would appreciate comments
from a willing witness that wants to make the argument that
there needs to be a more definitive language and possibly a
language that suggests Federal damages and/or in another form.
So that is my first question.
I would like to pointedly ask Mr. Lasersohn the question
dealing with the apportionment of damages based on a patent-
specific contribution over the prior art. It is suggested that
you feel that that would encourage infringement rather than
licensing arrangements for the product. So it would not do what
I think we would want it to do.
And then to Dean Kamen, forgive me for approving of your
comfortable attire, you give off the signals of an inventor.
And we need more of you. I would appreciate your sort of ending
your testimony--and you thought the bell ended--but I would
like you to give one addition to this legislation that would
create the vast or the more attractive atmosphere.
I think we have a very solid document here, but that would
open up even more for our inventors. And I will just end on
this note as I offer--I would like some volunteers on my first
question on the reasonable damages. But I think in the light of
the economy that we have now, and this whole opportunity of
turning around the economic engine.
It will be based upon the next generation of inventions,
and I want to see as vast an opportunity as possible and as
fair an opportunity as possible, and I do think we are on a
very positive track with the underlying bill, H.R. 1260.
Mr. Simon, and others? Would you like to comment on this
reasonable damage question, please?
Mr. Simon. Sure. Thank you. So I do think there is
something that we clearly need to do on having a meaningful
damages standard rather than to say, here is the key factors.
When I was at the FDC hearings a few weeks ago, they had five
economists who basically all said the same thing. I can reach
any result you want from the 15 factors.
As to the idea of treble damages, their currently is a
provision in the law about the treble damages, as I think you
are aware, but that is for really bad conduct--infringement.
You have to be careful in sending the appropriate remedies.
If you make patent damages too low, you have the problem
that you are not protecting invention, but if you make it too
high, you stifle innovation because people will not invent
around patents or avoid patents or try to come up with their
own inventions for fear that if they didn't do it well, they
are going to get hit with a punitive type damage.
Ms. Jackson Lee. So you argue for tightening the language?
Mr. Simon. Yes.
Ms. Jackson Lee. Okay.
Mr. Johnson. Johnson.
Ms. Jackson Lee. Johnson, everybody is seated in a
different--Mr. Johnson, thank you.
Mr. Johnson. The problem when you talk about damages is
that it is a very complex business world out there, and Mr.
Simon, in his written testimony, for example, has spent a lot
of time explaining to us the particular circumstances of his
business and what they face when they receive charges, but that
is only one business. That is only one setting.
And there are literally millions of settings out there, and
when you come down and try to write one rule, one rule that
will fit everything, what we found in years of trying is it is
difficult to impossible to write a rule for patent damages that
will fit everybody is business circumstance.
Yet, I think most of the witnesses on this panel would
agree that it should be business appropriate what the damages
are. Mr. Simon just said it. Others have said it that it should
be market based, and so right now, we do have 15 factors.
I don't agree with the people Mr. Simon mentioned who say
they can come out anywhere, because the one thing that
businesses are really good at is figuring out how much they are
likely to make by selling a product and how much they are
making if they sell a product, and if somebody comes in and
interferes with that, and they infringe the patent, they are
also pretty good at figuring out how much they really lose from
it.
And that is with the current flexibility in the law, which
is, indeed, using the Georgia-Pacific factors. You can take
into account all these business realities and come up with, I
think, the overwhelming number of cases, you come up with a
pretty fair result. And I think there is actually pretty
widespread agreement to that.
Ms. Jackson Lee. Mr. Lasersohn? Thank you.
Thank you, Mr. Chairman, for letting them answer the
questions.
Mr. Lasersohn. With respect to your specific question, I
think my answer is that our understanding is that an
apportionment of damage type test as the only test would reduce
damage awards, and that would lower the cost of infringement,
and therefore, there would be more infringement.
In fact, we were very surprised to see an article last year
in the middle of this debate coming from the head of the
Chinese patent court who wrote a paper reviewing the
legislation--this particular idea--suggesting that that would,
in fact, be the case. That is, it would enable Chinese
companies to infringe with much less risk.
With respect to the broader question, the answer really is
that Georgia-Pacific is complicated because the question is
complicated. You can't make it any less complicated than it
actually is. Figuring out when I negotiate patent royalties or
patent arrangements or deals between a small company and a
large company, this goes on for weeks and months, and it is an
enormously complicated negotiation where all of these factors
in Georgia-Pacific, in fact, come into play.
This isn't a hypothetical case at all. They actually enter
into our negotiations almost every single one of them. We weigh
them, and sometimes, one is more important than the other.
Sometimes five are more important than three, but it is simply
that complicated, because it is that complicated.
Ms. Jackson Lee. Mr. Kamen? Thank you.
Mr. Kamen. You asked a couple of things. I thank you for
that, by the way. One of them, you asked what are we going to
do to ensure the next generation of great innovators and
inventors, and I think that is the only real solution this
country is going to count on.
I did deliver to the counsel to the Chairman a bunch of
pieces of data, Congresswoman Lofgren, actually, hopefully will
be a supporter here, but we started an organization, a not-for-
profit, 16 years ago with 20 some odd of these companies
sponsoring high schools around the country to help teach them
how to be inventive and creative.
It has grown such that this year we have 16,000 schools. We
took over the Georgia Dome for our finals last week. That is
what this is. But I can tell you that women and minorities in
the United States are not underrepresented; they are virtually
unrepresented in the world of patents, and it is really quite
outrageous to me. And 39 percent of the kids we have on these
teams doing science and technology are women. So we are working
on that separately.
To your other question, what one thing would I do? I think
it is sort of what I would say to Congressman Issa, let's get
back to the basic problem. If we don't trust the patents that
we get--if they are going to be attacked, and sometimes rightly
so, if people are going to act inappropriately, the first thing
we got to do is make sure that the patent office is properly
equipped to deal, frankly, with the good news that so many
people are filing so many patents.
Again, as Congressman Issa pointed out, we ought to run
this thing like a business. Not too many businesses out there
would be saying, whoa is me; what am I going to do? I have got
750,000 orders I just can't ship. I think GM and Ford would
love to have that problem today.
But the patent office is sitting there now saying we have a
problem. We have pendency. Well, if we know that there are more
and more patents being filed, and we know people are willing to
pay to get these things done, the idea that they have got a
backlog of 700,000 of them is hurting everybody everywhere.
It is hurting the people that need to know what they got to
protect against. It is hurting the people that could be adding
these great solutions to the economy. So I would say, no matter
what else you put in this reform bill, let's add some stuff to
make sure that the patent office gets all the resources it
needs to make the highest quality patents and reject all the
crummy ones, but make the highest quality patents as fast as
you can. Get them out there, but then leave us with something
we can trust when we are done.
And, you know, I really have to continue to say, I am
genuinely sympathetic to unique problems, but they are unique
problems. If you got a fire in that waste basket, let's not
assume that we got to write a law that floods the building to
put it out, and let's focus on solving the problem.
And, again, this might sound a little callous, but if those
industries are now so big that somehow even your own numbers
point out it is a few billion dollars, and trust me, I know
that is a lot of money--never have that kind of money--but in
context, of all the other places our economy is dealing with
money, if somebody said to you, our $16 trillion economy now
has $3 billion that has gone out in these kinds of cases, let's
say 50 percent of which might not have gone out appropriately,
you got a billion or $2 billion that people are gaming the
system of which we have a national economy of $15 trillion or
$16 trillion, 60 percent of which is purely based on
innovation.
I am not sure I would put at risk the large part of that
$16 trillion to try to make this other thing perfect. We got to
deal with this situation in context and innovation and finding
ways to keep creating more incentive for innovation and
rewarding it is more important than ever and solving this
little problem by destroying a magnificent process and model we
have in this country.
I would just ask you to focus more on the value than on the
cost.
Mr. Conyers. Mr. Kamen? Were you a salesman before you were
an inventor? Or are you a salesman and an inventor?
Mr. Kamen. Both. Mr. Chairman, I am just afraid that my
ability to continue to keep 300 people working on projects
could be dramatically reduced or eliminated if I can't go out
to these companies and say, here, I have got something that is
going to be valuable to you.
Ms. Jackson Lee. Very crucial issue, Mr. Chairman. I don't
know if Mr. Chandler wanted to answer the treble damages or the
reasonable damages really quickly if the Chairman will indulge?
Mr. Chandler. Sure. Thank you for the question. We
certainly support----
Ms. Jackson Lee. Thank you----
Mr. Chandler [continuing]. The treble damages in cases of
willfulness, and that is a very important part of the law. It
is a strong disincentive to infringement. I think we have to
remember that patent infringement does not require any kind of
copying.
One infringes simply by doing something that someone is
able to prove to a jury looks enough like what is in the patent
that a finding is made of infringement. What we do need is to
have that willfulness standard so that people who set out to
infringe someone else's intellectual property will be made to
stop.
And we support that. We view that as a separate question
from figuring out what the appropriate damages should be for
nonwillful infringement.
Ms. Jackson Lee. Thank you.
Mr. Cassidy? Do you have any comments?
Mr. Cassidy. Thank you, Congresswoman. Yes, I think it is
important to focus on the data. The data that we have is over
the last 5 years, there is about 100 cases per year that go to
conclusion and patent arena. Those are resolved at an average
price when there is a grant of an award of $5 million. If you
include cases where the plaintiff loses, it is $2 million.
So that is the data. It is not a national calamity that 1
percent of our Federal cases deal with patent issues. It is not
a calamity that the average award at the end of those cases is
$2 million. The cost is $5 million. So we need to keep that in
mind and not just the giant figures that the other witnesses
are tossing around.
Thank you.
Ms. Jackson Lee. You want to quickly?
Mr. Chandler. If I might. I think that looking at the cases
that are in court that result in judgment is looking at the
very tip of an iceberg and trying to define what the iceberg
looks like. There is a huge amount of settlement activity that
is based on threat and leverage.
And in the case of my own company, that amounts to hundreds
and hundreds of millions of dollars from situations where you
are trying to avoid a jackpot situation. You can't. This is a
very real and significant problem with these syndicates that
have set up that leverage uncertainty in the system.
And I think it is a complete red herring to look only at
cases that are reported in court and ignore the rest of the
environment that we are all trying to operate in today.
Ms. Jackson Lee. Thank you very much, Mr. Chairman. My last
word in concluding is of the Mr. Lasersohn's comment about a
very large competitor of sorts, China. And whatever we do in
this bill, I hope that we will protect the ingenuity and the
inventiveness of America as we share it with the world.
I yield back, Mr. Chairman.
Mr. Conyers. Mr. Brad Sherman?
Mr. Sherman. Thank you, Mr. Chairman. I believe I am last.
I am certainly least in my knowledge of patent law. I know as
much about patent law as the average tax attorney.
So I may be asking questions that are just kind of
discordant with the way people who do know about patent law
think about these issues.
First, Mr. Chairman, the one thing everybody seems to agree
on is that the patent office be adequately funded. And I hope
that we pass full patent reform soon, but perhaps we want a
separate piece on that to go through more quickly, and I know
the appropriators love the opportunity, or at least some of
them, to steal money from the patent fees.
I can't think of anything stupider to do. We spend tens of
billions of dollars having an investment tax credit that may or
may not generate patents and, you know, I think it does, but to
underfund the patent office in order to allow the appropriators
to spend $5 or $10 or $50 million dollars more is--I mean, it
is tough to do the absolute stupidest thing that is done in
Washington to the economy, but that might be it.
So perhaps a bill that allows the patent office to set fees
and prohibit those feels from being stolen could be passed
expeditiously.
Mr. Issa. Would the gentleman yield?
Mr. Sherman. I will yield.
Mr. Issa. The gentleman, I don't know was on the Committee
the last time we dealt with this. We are less stupid than we
used to be, because we used to just divert, and in the
beginning of the Bush administration, they asked for huge
increase, all of which would have been diverted.
But the Senate is----
Mr. Sherman. So that is the inventor tax. Any country that
has an investment tax--no, not investment tax, excuse me, an
R&D tax credit. I was referring to the R&D tax credit earlier.
But, yes.
Mr. Issa. For the gentleman's edification, the Senate is
working, and we will be working with them and the appropriators
to find a fix for this backlog and the shortage of funds the
PTO now has and possibly we can use the remaining fee
diversion, because there is some that is legacy in order to do
it.
But the amazing thing is you should have been here in 2000
when we found out how dumb we used to be.
Mr. Sherman. Well, I am grateful for the improvement, and I
would point out I think we ought to have a patent office that
has speakers going out to colleges saying, we are waiting for
more applications rather than the other way around.
There has been discussion here of, in effect, our trade
deficit and how this affects American jobs as opposed to
others. And it seems to me that there are kind of three
elements here.
You have got invention, marketing integration, and
manufacturing. We are pretty good at invention, perhaps even
better at marketing and integration, and manufacturing, we have
pretty much figured out a way to destroy in this country.
Likewise, we have a lot of assets in invention. Americans
own a lot of patents. We own a lot of trademarks and marketing
machines, and if we have any manufacturing plants, we are in
the process of dismantling them.
So I can see how protecting patents is in our interest vis
a viz other countries, but is there anything in our law that
gives ore of an incentive to a guy in a basement in the United
States versus tin the basement of Calcutta?
Is there anything we could do in our patent law that would
help us vis a viz our trade deficit and the rest in the global
system other than just recognize that at least at this stage,
we are better at inventing than we are at this other stuff so,
we better protect invention one way or the other?
Does anybody have a comment?
Yes, Mr. Lasersohn?
Mr. Lasersohn. I think it is a very, very important
question, and I think part of the answer is that, in fact,
those inventors--and there are clearly issues around this, but
many of those inventors in Calcutta and China where there are,
in fact, extraordinarily weak patent systems where they cannot
protect their inventions come here and start----
Mr. Sherman. Well, yes, they don't have to come here, they
just have to send their patent application here.
Mr. Lasersohn. Well in many cases, at least in Silicon
Valley and the companies that we finance, I can tell you many
of those entrepreneurs today are, in fact, coming here and
starting companies. They are not just sending their patents.
They are coming here and starting companies.
One reason is that they find starting the company in their
home territories won't necessarily give them the patent
protection that they----
Mr. Sherman. But wouldn't it be just as perfectly fine
business plan to say we are going to have a Calcutta based
research company who is going to get all its money by filing
patents in the United States?
Mr. Lasersohn. You would think so, but it doesn't work that
way.
Mr. Sherman. There is just a tendency for people who view
the U.S. market and the U.S. patent system as their revenue
source.
Mr. Lasersohn. And it is an echo system, so I don't mean to
suggest the only factor, obviously, the patent. But it is a
major factor. The whole echo system--the fact that we have
Silicon Valley, that we have a venture capital industry, that
we support and frankly honor inventors in ways here that they
don't necessarily in other places. All of that goes into that
decision.
Mr. Sherman. The boogey man here is the outfit that buys a
patent or even the inventor that develops a patent never
intending to do anything with it except hope that somebody else
invents something pretty much along the same lines and then sue
them.
Can we add something to our patent laws that just says, you
get far less in damages? We will let Mr. Simon write the damage
provision calculation and the venue provision for any inventor
or patent holder who has failed diligently to try to exploit
their inventions?
Yes, Mr. Johnson?
Mr. Johnson. I would redefine who that boogey man is, and I
would say it is people who collect patents to assert not
because of the merits of the patent but simply to trigger the
tremendous cost on defendants that comes for defending against
those claims.
Mr. Sherman. Well, are you saying that a Chinese should
have less rights than----
Mr. Johnson. No, not at all. I think that, in fact, it
might be that Mr. Kamen could have an excellent invention, and
that he may need to sell it to Mr. Lasersohn who may need to
enforce it, because he raises the venture capital to make it a
business, and I don't want to see Mr. Lasersohn not be able to
give Mr. Kamen what is fair, because I want Mr. Kamen to come
up with more inventions.
Because sitting at this table, J&J may be the party----
Mr. Sherman. So the boogey man would be an assignee who has
no intention to exploit except through the court system?
Mr. Johnson. I would say it would be anyone who is gaming
the litigation system when they have a frivolous suit----
Mr. Sherman. You are using pejorative terms like gaming and
frivolous----
Mr. Johnson. Okay, I will----
Mr. Sherman. I mean we could just say low damages to bad
plaintiffs.
Mr. Johnson. No.
Mr. Sherman. That doesn't----
Mr. Johnson. I would say it is someone who brings a suit
not intending to have that suit decided on the merits of their
rights, but rather one who intends to use it to settle out at
less than the cost of litigation cost, which is what I
understand happens about 75 percent of the time in some----
Mr. Sherman. I don't know how we could write a statute that
focused on what was going on in the mind of the plaintiff,
because I guarantee you every plaintiff will put in their
pleadings, we are bringing this lawsuit for the purpose of
winning. And a few of the times, they will win.
If they had no chance of winning, you guys wouldn't settle.
Mr. Johnson. When they bring a claim against us for $50
million----
Mr. Sherman. Right.
Mr. Johnson. And then, when you sit down to talk about
settlement, and they say, well, it is going to cost you $5
million to defend, we will settle this lawsuit for $2 million;
pay us $2 million, and we will be on our way, one does--no
matter how----
Mr. Sherman. Let's put it this--I don't think a statute
that prohibits plaintiffs from telling you in negotiations what
your cost of defense is going to be----
Mr. Johnson. No, no----
Mr. Sherman [continuing]. Is going to make your lives any
easier.
Mr. Johnson. And I wasn't suggesting any of that.
Mr. Sherman [continuing]. And they will all be able to----
Mr. Johnson. I was suggesting what the problem is that we
perceive.
Mr. Sherman. Yes. Obviously, in any kind of lawsuit,
somebody brings a frivolous lawsuit for the purpose of
collecting not based on the merits of the lawsuit but based on
the cost of defense. I if there was a way to stop that, we
would want to stop it.
Mr. Johnson. But it is a uniquely difficult problem as Mr.
Simon points out, because it can cost the defendant $20 million
or so to defend.
Mr. Sherman. Does anyone else have a way to define the kind
of plaintiff who should be getting lower damages because, while
they do own a patent, they can show infringement. They were not
doing anything to allow--I mean, the purpose of the patent is
to encourage people to do things that are going to be useful.
So if you put the patent in the drawer, maybe you are
entitled to far less ownership. Does anyone else have a
comment?
Yes, Mr. Lasersohn?
Mr. Lasersohn. I would just suggest, I mean, the one
problem is what if the invention really matters?
So if Dean Kamen invents something extraordinarily
important but for whatever set of reasons he chooses that he
doesn't want to pursue it as a development project, and he
licensed it to somebody else----
Mr. Sherman. Well, I am not--I mean, there are many ways to
exploit an invention--licensing, trying to license are all ways
to exploit an invention. I mean Kamen here may never invent
anything. I mean, correction, he may never manufacture
anything, but he is going to invent an awful lot of things and
work very hard to exploit them.
Mr. Lasersohn. Right.
Mr. Sherman. But what we are talking about here is the
person who owns a patent and has no intention of having that
patent be useful to the manufacturing process.
Mr. Lasersohn. But he is interested in making money, and to
make money----
Mr. Sherman. But, yes, one way to make money is to invent
something and then to have all your inventive work be
absolutely useless to society. To take your invention, put it
in a drawer, do nothing to exploit it, and then wait and hope
that somebody else invents it, and then you can sue them.
And the question is, should that person get the same level
of damages as someone who invents something and diligently
tries to get it manufactured one way or another.
Mr. Lasersohn. I am just pointing out that the problem with
looking at the nature of the entity that is bringing the
lawsuit is that, I think, what really ultimately matters is the
value of the patent.
So there can be cases where the value is enormous, but you
don't--there is all sorts of reasons the inventor has chosen
not to pursue the development of it--has chosen, for example,
to want to license it to somebody----
Mr. Sherman. I am including people who diligently try to
get it licensed. I am talking about the inventor who puts it in
the drawer, doesn't go around trying to find somebody to buy
it, license it, manufacture it or uses it--who has as only one
business plan, and that is to wait for somebody else to invent
the same thing, and then sue them.
What do we do with that business plan.
Mr. Lasersohn. I am just pointing out that these
organizations in many cases are, in fact, attempting to get the
economic value of the invention through a negotiation with
these companies who are using--they didn't invent it; Dean
invented it first, so he is the inventor.
They are using the invention, and these organizations are
simply trying to get the economic value. All of these
discussions--what the other side forgets to tell you, is that
these discussions start with the licensing negotiation. The so-
called trolls go to these organizations and say, will you
please license this for whatever----
Mr. Sherman. Right, but will you license something--will
you pay us for a license on an invention where our inventive
efforts have done nothing to help society, because, in fact,
while we invented something useful, upon inventing it, we put
it in a drawer. We told no one. We made no effort to license it
to anyone. We waited for years.
Mr. Johnson?
Mr. Johnson. Well, when you apply for a patent, it becomes
public knowledge, and in fact, the reason that a patent is
granted is because you make your invention known. And depending
on what the invention is, it could be the invention of the
laser. People read patents. They come out. They are available
on the Internet.
They may then rush to their laboratory and build them. They
may build plants, and so on, taking advantage of someone's
invention. The patent system doesn't require that the inventor
become the manufacturer, and he is not putting it in a drawer.
He is putting it up for the world to see.
Mr. Sherman. Maybe just filing for the patent is a
marketing plan, although, not a very aggressive one.
Mr. Johnson. He could invent the laser and, indeed, stick
it in a drawer and keep it secret, and that would be terrible
for society because we wouldn't get it, and the original
historical foundations of the patent system came from exactly
that in medieval Europe with the guilds where they would not
share information.
So the basis of patents is the public disclosure of
information.
Mr. Sherman. Okay. I think I am well over time--questions.
Thank you.
Mr. Conyers. Thank you very much.
The Chair recognizes the gentlelady from California, Linda
Chavez who, as the most imminent mother in the Congress, has
all of us on pins and needles for these last 2\1/2\ weeks.
Ms. Sanchez. Thank you, Mr. Chairman. I have been following
the discussion with some degree of interest also in the back
room, and I appreciate all of our panelists for being here and
the different perspectives that you lend to this complex issue.
I am sort of going to go off in a different direction here,
because I know that, sort of, the emphasis in trying to reform
patents is to trying to keep innovation alive and well in the
United States and trying to make sure that American innovation
and technology leads in the world.
But, sort of, scratching the surface, one thing that I have
become aware of and this is what I specifically want to ask all
of our panelists about, is--and in particular, I am concerned
about business methods patents, especially because of late, it
has been brought to my attention that there are business method
patents that are being awarded for tax strategies, some of
which don't even comply with U.S. tax law, which I find highly
amusing.
So I am interested in knowing from our panelists, and I am
just going to have each of you respond, in kind, what your
thoughts on business method patents are, generally speaking,
whether or not you that there are patents that are too broad
for business methods that are being issued? How would each of
you address those kinds of patents in a less costly and more
effective and efficient alternative to legislation?
I am just, sort of, trying to get, generally speaking, all
of your thoughts on that, and we can just go down the line.
Mr. Simon. Thank you. So briefly, I just want to be very
careful here. For example, the way that you would tune a radio
used to be with physical components called resisters,
capacitors, inductors. That has all now changed to, in almost
all instances, to what you, in essence, call a software
patent--computer implement invention--called filtering
electronically. Filtering is done mostly on computer these
days. And so we want to be very careful that we don't take out
areas of things that I think most people would agree should be
patentable.
If it is purely, gee, how you feel out the form, I think
the Bilski decision goes a long way to fixing that problem. but
you have to be careful if you know--and I think there is some
other cases that have said, or at least suggested that all you
have done is computerize something that was already out there.
That is not good enough to be patentable from an obvious
standard.
But I think we want to be very careful about how we deal
this, because it is very--and you can actually find instances
where filtering functions can be used in taxes as bizarre as
that may seem. So we need to be somewhat careful about that.
And with that, I apologize, Mr. Chairman, I am under strict
orders from the chairman of my household to be home tonight. I
have to leave--if I may leave?
Mr. Conyers. Of course.
Mr. Simon. Thank you.
Mr. Johnson. I think the Bilski decision went along way
toward solving some of the concerns, many of the concerns,
about business method patents. I would comment on the tax
strategy part that I think there is a long tradition that the
patent office can deny the grant of a patent if it is not in
the public interest. You, for example, can't get patents on
ways to commit crimes and the like.
Mr. Thomas. Congresswoman, I share your concerns about
business method patents. Patents on marketing, finance,
insurance, sports methods have clogged up the patent rules.
They have made the United States look like a laughing stock
compared to our trading partners. They have been inflicted upon
industries with no grace period.
The patent office just grants patents that pertain to these
fields, and there is no waiver or notice. We just do it. That
is the way we roll in the patent system. I am less confident
than some that the Bilski opinion has taken care of all of
these problems.
Because I believe the Bilski opinion still leaves room for
clever patent drafters--you don't have to be that clever simply
to draft something that looks more machine based, that looks
more apparatus oriented even though what you have truly done is
invented something that lies with outside traditional
technological areas.
So I believe there is still room for legislation, and
particularly in targeted areas like tax legislation or tax
patent legislation. Thank you.
Mr. Lasersohn. I am very happy to be able to agree with Mr.
Simon on something, and that is, obviously, patents that are
illegal, that practice in something that is illegal, we should
just throw out, and the obviousness test is critical here.
Again, filling out a form is obvious and should be able to be
thrown out on that basis.
However, it is complicated. I am sorry?
Ms. Sanchez. I don't think--oh, there we go. Sometimes,
though, that can take a lot of litigation before something that
is clearly obvious to most people like peanut butter and jelly
sandwiches without the crust, you know, gets litigated to the
point where they say, oh, this was pretty obvious.
Mr. Lasersohn. And that is, I think, exactly where I was
going here, which is one of the way we do support post-grant
review. There really is a need to improve the quality of
patents that are issued.
We should do something, and I think if we had more money
for the patents office, we all are in favor of that, and some
type of a limited carefully managed post-grant review that many
of these really silly patents would never really see the light
of day, but we have to be very careful about throwing out the
method concept as a whole.
It is really very critical and gives us a competitive
advantage in many industries versus, for example, Europe and
countries that do not have method patterns.
Ms. Sanchez. Okay.
Mr. Kamen. All I would say, not to risk sounding like the
broken record, but get the quality up. Obviously, I include in
that package of quality, as you were saying, overly broad
claims. I mean, speaking against my own interests here, every
time I try to get a patent, I think I have invented something
great, and they keep coming back at you with this and this and
this, and as long as everybody is judged the same way, and as
long as when you finally get it in the end, it shouldn't be
overly broad.
So it will be not that--it shouldn't be obvious. It
shouldn't be not in the best interest of the--it should meet
all those standards, but all of those standards are encompassed
in give us the capability to get smart people on the other side
to grant a high quality patent, and I think all those issues
really will dramatically, dramatically fade.
Mr. Chandler. I agree with everybody else.
Ms. Sanchez. I think I found common ground among all of our
panelists. Do I get a gold star for that, Mr. Chairman?
Mr. Cassidy. We propose a gold star for the congresswoman.
We agree Bilski was an important step in the direction of
avoiding ridiculous patents. Personally, I would favor that
this not be a subject of legislation. The courts have this well
in hand and should be allowed to develop this in the case law
arena rather than trying to get it right on the legislative
front and possibly not getting it right----
Ms. Sanchez. So if I am hearing you correctly, you trust
the judiciary more than you do your Members of Congress?
Mr. Cassidy. I trust the judiciary to resolve problems that
it has created, which it did in----
Ms. Sanchez. Very diplomatically put. I yield back, Mr.
Chairman.
Mr. Conyers. Thank you very much, Ms. Sanchez.
Howard Coble?
Mr. Coble. Mr. Chairman, I apologize to you and to the
witnesses. I had three previously scheduled hearings today. I
am late getting here, but I have four very short questions, Mr.
Chairman, if I may?
Mr. Cassidy? I am a longtime opponent of diversion of
patent fees from the patent office. Application filings have
decreased, as we all know, because of the soft economy. And now
the office must deal with pending applications and close this
new funding gap.
Should we include a provision in H.R. 1260 to prevent the
diversion of patent fees from the patent office? Mr. Cassidy? I
looked at the wrong end of the table.
Mr. Cassidy. I have a simple answer, absolutely, if the
appropriators will allow you to include it----
Mr. Coble. That is the problem. I concur with you.
Mr. Johnson? Your testimony raises a number of concerns
with the bill as introduced specifically with the damages
provision. Is there language that you would support, and how
does it differ from what is in the present bill?
Mr. Johnson. We would support the language which is in S.
515 as ordered reported, which is the gate keeper solution. And
it differs from the language in the bill in that the language
in the bill relies on a prior art subtraction approach and
forces a methodology that steps through that would not allow
people to rely on the existing breadth of the case law to
handle individual circumstances to get to the right result.
Mr. Coble. I thank you, sir.
Mr. Chandler? Has the best mode requirement outlived its
efficacy, and should it be left alone, amended, or eliminated?
Mr. Chandler. I believe the best mode is a useful way to
ensure that patents are granted with the inventor having to
show why the invention is useful and the best way that it can
be applied as part of the teaching process of patents to
explain to the world why it is a valuable invention and how to
use it. So that when it does expire, it can be best exploited.
Certainly, that is an area where I think there is room for
discussion as we move the bill forward. There are a number of
defenses that those accused of patent infringements have
available to them that have taken on a life of their own
through judicial decision making, where as part of a
comprehensive patent reform, it is worth looking at them and
figuring out what really makes sense.
And there are other areas in addition to best mode that we
could look at modifying to achieve that end of a more rational
patent system. Right now, we have a system where each side
tries to amass as many nuclear weapons as it can instead of
trying to rationally function like a commercialized system
would to encourage trading of rights and economic development,
which is what our patent system should be about.
Mr. Coble. I thank you, sir.
And, Mr. Chairman, one final question to Mr. Kamen.
Mr. Kamen? You invent things. You are an inventor and
hopefully that, in turn, creates jobs. In your opinion, which
provisions of H.R. 1260 will encourage innovation?
Mr. Kamen. Sadly, I think, this bill in its entirety is
focusing on getting rid of problems, some of which to some
extent are real and people can vary on how real they are, but I
think what this bill in its entirety is missing is the other
half, and I said a couple of times today, they are focusing on
the cost of patents, and some of them are unreasonable and bad
costs.
There is nothing in that bill that recognizes or focuses on
the value of the system that drives innovation in this country.
A simple one that somebody recommended, Congressman
Sherman, that I think everybody agreed with was at the very
least let's make a bill or even go so quickly make it a
separate bill that we fund the whole patent office.
And frankly, while they are down now in new applications,
don't let them let some of their workforce go. They have 1,200
or 1,500 examiners, use this golden opportunity to quickly get
rid of all this pendency, and bring them to a new standard
where nothing takes more than a year or at most 2 years to
review.
None of you would live in a place where you wait 2 years to
find out whether there is a deed for that lot you want to build
your house on.
But then I would say to each and every provision in this
bill, if you could make sure when you step back and look at it,
did it add certainty so that at least when you got your patent,
it is something that we know how to value and move into
commerce. So if there is a second window, make it clear, make
it short, make it once. If there is issues about the damages--
if anything you do, in any way, can encourage somebody to make
the rational business decision that the penalties aren't so bad
for essentially infringing, I will just do it and as
Congressman Issa said, it is the cost of business.
It is going so far in the wrong direction, it will
instigate more lawsuits. It will burden the system even more.
It will take good actors and put them in a suit with bad
actors, and I think all the stuff about damages is adding more
uncertainty and less clarity to something that is desperately
in need----
Mr. Coble. Well, Mr. Kamen, I want to beat that red light
before the Chairman gets on me. I want to thank the Chairman
for having called this hearing and thank you all for
participating.
Thank you, Mr. Chairman.
Mr. Conyers. And I thank the witnesses for their intellect
and their stamina, and we declare this hearing adjourned.
[Whereupon, at 1:05 p.m., the Committee was adjourned.]
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