[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
SOVEREIGN IMMUNITY AND THE INTELLECTUAL PROPERTY SYSTEM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
COURTS, INTELLECTUAL PROPERTY,
AND THE INTERNET
of the
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 7, 2017
__________
Serial No. 115-46
__________
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
LAMAR SMITH, Texas ZOE LOFGREN, California
STEVE CHABOT, Ohio SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas THEODORE E. DEUTCH, Florida
JIM JORDAN, Ohio LUIS V. GUTIERREZ, Illinois
TED POE, Texas KAREN BASS, California
JASON CHAFFETZ, Utah CEDRIC L. RICHMOND, Louisiana
TOM MARINO, Pennsylvania HAKEEM S. JEFFRIES, New York
TREY GOWDY, South Carolina DAVID CICILLINE, Rhode Island
RAUL LABRADOR, Idaho ERIC SWALWELL, California
BLAKE FARENTHOLD, Texas TED LIEU, California
DOUG COLLINS, Georgia JAMIE RASKIN, Maryland
RON DeSANTIS, Florida PRAMILA JAYAPAL, Washington
KEN BUCK, Colorado BRAD SCHNEIDER, Illinois
JOHN RATCLIFFE, Texas
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona
Shelley Husband, Chief of Staff and General Counsel
Perry Apelbaum, Minority Staff Director and Chief Counsel
------
Subcommittee on Courts, Intellectual Property, and the Internet
DARRELL E. ISSA, California, Chairman
DOUG COLLINS, Georgia, Vice-Chairman
LAMAR SMITH, Texas JERROLD NADLER, New York
STEVE CHABOT, Ohio HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
JIM JORDAN, Ohio THEODORE E. DEUTCH, Florida
TED POE, Texas KAREN BASS, California
JASON CHAFFETZ, Utah CEDRIC L. RICHMOND, Louisiana
TOM MARINO, Pennsylvania HAKEEM S. JEFFRIES, New York
RAUL LABRADOR, Idaho ERIC SWALWELL, California
BLAKE FARENTHOLD, Texas TED LIEU, California
RON DeSANTIS, Florida BRAD SCHNEIDER, Illinois
MATT GAETZ, Florida ZOE LOFGREN, California
ANDY BIGGS, Arizona STEVE COHEN, Tennessee
LUIS GUTIERREZ, Illinois
C O N T E N T S
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NOVEMBER 7, 2017
OPENING STATEMENTS
Page
The Honorable Darrel Issa, California, Chairman, Subcommittee on
Courts, Intellectual Property, and the Internet................ 1
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the
Judiciary...................................................... 5
WITNESSES
Mr. Karl Manheim, Professor of Law, Loyola Law School
Oral Statement............................................... 7
Mr. William Jay, Partner and Co-Chair, Appellate Litigation,
Goodwin Procter LLP
Oral Statement............................................... 8
Mr. Philip Johnson, Principal, Johnson--IP Strategy & Policy
Consulting
Oral Statement............................................... 10
Mr. Christopher Mohr, Vice President for Intellectual Property &
General Counsel, Software and Information Industry Association
Oral Statement............................................... 12
SOVEREIGN IMMUNITY AND THE INTELLECTUAL PROPERTY SYSTEM
----------
TUESDAY, NOVEMBER 7, 2017
House of Representatives
Subcommittee on Courts, Intellectual Property and the Internet
Committee on the Judiciary
Washington, DC.
The Subcommittee met, pursuant to call, at 2:00 p.m., in
Room 2141, Rayburn House Office Building, Hon. Bob Goodlatte
[Chairman of the Subcommittee] presiding.
Present: Representatives Issa, Goodlatte, Smith, Chabot,
Franks, Jordan, Marino, Farenthold, Gaetz, Biggs, Johnson of
Georgia, Jeffries, Lieu, Schneider, and Lofgren.
Staff Present: John Lee, Counsel; Carlee Tousman, Clerk;
Jason Everett, Minority Chief Counsel; David Greengrass,
Minority Counsel; and Rosalind Jackson, Minority Professional
Staff.
Mr. Issa. The Subcommittee on Courts, Intellectual
Property, and the Internet will please come to order. Without
objection, the chair is authorized to declare recess of the
Subcommittee at any time. We welcome everyone here today to a
hearing on ``Sovereign Immunity and Intellectual Property
System.'' I will now recognize myself for a short opening
statement.
The St. Regis Mohawk tribe was invited to testify here
today, but they declined, and so, with that, I will place in
the record in its entirety, some eight pages plus many other
inserts, totaling about 40 pages that came from the St. Regis
Mohawk tribe as their position and testimony.
[The information follows:]
COMMITTEE INSERT
Mr. Issa. I also would place in the record at this time
that the following statements of Dale White, general counsel
for the tribe. When he was asked whether he would consider
doing more sovereign immunity deals, he answered to Bloomberg,
``We will probably take as many as Shore law firm can handle.''
When asked by MSNBC, he said, ``Yes. Can you put my phone
number in your article?'' We will take that in addition to
their defense of their current position as they have done
these; they want to do more.
[The information follows:]
COMMITTEE INSERT
Mr. Issa. The IP system only works if it strikes the right
balance. We know that we want to, and this Committee is
committed to, reward true innovators for their creative works.
But the IP system must be protected from several types of
wrongful behavior, and I want to make sure that today, because
the subject will come up over and above sovereign immunity,
that we understand those who have tried to use the PTAB program
and try to use it to short funds or essentially, as trolls to
coerce money in lieu of a filing have, in fact, been gaming the
system every bit as much as we may find today from others.
It is important to understand that under the AIA, the
review of patents was intended to end, and in a small way has
succeeded, in finding patents which claim claims that belong to
someone else. The invalidity of claims overwhelmingly comes
from a finding of prior art in which someone else has already
owned that invention.
This would be no different than if, in fact, you claim to
have rights to land and you put a fence on it and later found
out through surveying that somebody else owned four feet of
that land. You would be asked to move your fence and nobody
would view it as anything other than you get to have the land
you truly always had, not the land you may have thought you had
without a proper survey.
Speaking of surveys, 99 percent of all patents are not
being reviewed under this review process and of that less than
one percent that are reviewed, nearly half survive intact.
Well, about half have some or all of their claims reviewed or
eliminated. In other words, you are dealing with--essentially,
a fraction of 1 percent of all patents will be invalidated
under this procedure. And again, approximately half of those
that are considered actually have that happen.
For that reason, it is important to understand that this is
not a large-scale operation, and yet it would, in fact, attract
many companies, not just Allergan--who was asked also to be
here today and declined, but sent a representative through an
association--to put their patents into what I would consider a
sham deal.
The word ``sham'' does not imply illegal. The word ``sham''
simply says that this was not a good-faith sale of their patent
rights, but in fact a sale leaseback for no purpose other than
to evade the kind of patent review that is currently in the law
and for which Allergan and other pharmaceutical companies
regularly find themselves.
One of our challenges here today is that the particular
patents that are in this portfolio represent a drug which has
been on sale for two decades and for whom the original patents
have expired, therefore the companies in this case are not some
troll, as I mentioned could occur. The companies that are
involved in looking at these patents are ones who want to make
what now rightfully would be a generic product. They seek to do
so without falling under new patent claims that they could
either avoid or that may be invalid.
For this reason, we take particular interest not in
Allergan, but in the patents not in suit, so to speak, and in
fact, in what I believe is a sham decision.
I want to make one last statement. I have been an advocate,
as I am required to do under the Constitution, for
constitutional rights, and the right of sovereignty of
government and of their lands to Native Americans without a
doubt will be protected by this committee and by this Congress.
And one of the groups that has talked to me more than any
others are Native American groups concerned that this
commercial activity could somehow cause Congress to restrict
other commercial activity covered by Native American
sovereignty. It is our goal to be very careful in this hearing
and in any legislation so that we not diminish in any way the
earned and constitutional rights of Native American tribes for
their sovereignty, their self-governance, and their own
internal commerce.
And with that, I recognize the ranking member of the
committee, Mr. Nadler, for his opening statement.
[The prepared statement of Mr. Issa follows:]
COMMITTEE INSERT
Mr. Nadler. Thank you, Mr. Chairman. Mr. Chairman, state
sovereign immunity is a well-established concept, enshrined in
our Constitution that generally protects States from being sued
in federal courts without their consent. Similarly, Federal law
generally extends sovereign immunity to Native American tribes
as well. For many years Congress and the courts have wrestled
with numerous questions concerning the appropriate scope and
use of sovereign immunity as it pertains to intellectual
property.
For example, is it fair that States can protect their
intellectual property from infringement by availing themselves
of the legal system, yet they can shield themselves from
liability by invoking sovereign immunity if they are sued for
the same infringing behavior?
What limitations can be placed on sovereign immunity while
staying within constitutional boundaries, and what incentives
could we design to encourage States to waive sovereign immunity
in IP cases? These are all important questions worthy of
careful consideration.
In light of recent events, however, a new set of questions
have arisen: Can sovereign immunity be used as a giant loophole
for private actors to evade legal scrutiny of their
intellectual property and to exploit for their own commercial
purposes? And if so, what can Congress do about it? These
questions arise because of the recent actions by the
pharmaceutical company, Allergan, and its cynical ploy to
shield its patents on a lucrative drug from review at the
Patent and Trademark Office, by taking advantage of a Native
American tribe's sovereign status.
Rather than subject itself to the Patent Office's inter
partes review, IPR process, Allergan transferred the patents on
its highly successful drug Restasis to the same St. Regis
Mohawk Native American tribe, which immediately granted an
exclusive license back to Allergan.
Allergan paid the tribe $13.75 million upfront as part of
the deal, plus it committed to ongoing royalties of $15 million
a year. In exchange, the tribe needed only to agree that it
would invoke its sovereign immunity if the patents were
challenged in IPR.
According to Allergan, it took this step because it
believes IPR is deeply flawed, unfair to patent holders, and
disruptive to the balanced process established for generic drug
competition under the Hatch-Waxman Act. Moreover, they argue,
their patents could still be reviewed in Federal court, just
not in IPR. I would note here that if they believe that to be
the case their proper recourse is to go to Congress and try to
persuade us to change the law, but they did not choose to do
that.
It is true that Allergan's gambit did not shield the
patents from Federal court review, and in fact, those patents
were recently held invalid by a court in the Eastern District
of Texas.
However, the Court in that case also made clear that it had
``serious concerns about the legitimacy of the tactic that
Allergan and the tribe have employed.'' This deal has been
widely condemned, not just because it is seen as thumbing its
nose at the legal system, but also because if successful, other
drug companies could use the same scheme to protect expensive
brand-name drugs from lower priced generic competition.
IPR was created in the 2011 America Invents Act. It is
intended to be a relatively quick and inexpensive way for the
Patent Office to conduct a second look at an issued patent and
to invalidate patents that should never have been issued in the
first place.
This administrative process occurs separately from, though
often concurrently with, Federal court consideration of the
same patent's validity. The IPR process has many critics, not
just Allergan, and many questions have been raised about
whether it is functioning as intended.
Some stakeholders have complained that it provides
competitors with multiple bites at the apple in challenging a
patent's validity. Others rightly in my view have argued that
it is problematic for IPR proceedings to use a different
standard for evaluating patent validity from the one that is
used in Federal courts. IPR is also criticized by some as being
stacked against the patent holder and as being too likely to
find a patent invalid.
The IPR process also has many defenders, however. They
argue that the patent system is strengthened by having an
efficient system for weeding out invalid patents. They point
out that the stockintrade of patent trolls is weak patents that
never should have been issued, and they argue that IPR has been
invaluable in removing such patents from the market.
They also note that the PTO only institutes an IPR
proceeding when there is a reasonable likelihood that the
patent is invalid. Thus, they argue, it is to be expected that,
once instituted, a significant percentage of proceedings would
result in canceling a patent and that statistics should not be
read to imply that IPR is unfair to patent holders.
The merits of the IPR process should be debated, and if
changes are needed, we should consider them in due course. That
is for Congress to decide, with input from relevant
stakeholders. It is unacceptable, however, for private actors
like Allergan to do an end run around IPR by making use of a
third-party sovereign immunity solely for strategic advantage.
Such behavior makes a mockery of congressional authority and of
the rule of law.
More worrisome is the precedent this transaction sets.
Already, other companies are rushing to make similar deals,
across various industries. Whatever one thinks of IPR, it is
the law of the land, and it is the clear intent of Congress
that it be available to anyone who seeks to challenge a patent
under its rules.
We should not allow gamesmanship to circumvent
Congressional authority. I look forward to hearing from our
witnesses today on their thoughts on the appropriate scope of
sovereign immunity and intellectual property and what we can do
to ensure that it is not abused. I thank the chairman for
holding this important hearing and I yield back the balance of
my time.
[The prepared statement of Mr. Nadler follows:]
COMMITTEE INSERT
Mr. Issa. I thank the gentleman. We now welcome our
distinguished panel of witnesses here today. And if you would
all please rise, and I will issue the oath. I will get to you
in just a second, Chairman.
Please raise your right hands. Do you swear that the
testimony you are about to give will be the truth, the whole
truth, and nothing but the truth? Please be seated.
Let the record reflect that all witnesses answered in the
affirmative. And with that, it is my great pleasure and
responsibility to introduce the Chairman of the full Committee,
Mr. Goodlatte, for his opening statement.
Chairman Goodlatte. Thank you, Mr. Chairman. I thank you
for holding this hearing and for yielding to me. This may be a
case of everything that needed to be said has been said by you
and the Ranking Member, but not everyone who needs to say it
has said it.
Sovereign immunity is a legal doctrine that has existed
since the beginning of our Republic. It is a privilege of
sovereign entities, such as State governments and Native
American tribes, which are responsible for the well-being of
those they govern. In recent years, however, it is become
apparent that in some circumstances sovereign immunity is being
used not on the activities of constituents of State and tribal
governments but in a way that harms the intellectual property
system all Americans depend on.
There is no doubt that the IP system is vital to the health
and competitiveness of the U.S. economy. A strong intellectual
property system helps the U.S. maintain its place as the
world's leader in technological innovation and creative
expression.
The IP system is weakened, however, when some participants
of the IP system do not play by the same rules as the rest. I
share the concern about the recent instances of private
companies paying to rent the sovereign immunity of Native
American tribes to protect their intellectual property. Tribal
sovereign immunity was never intended to serve the interests of
private companies unrelated to the tribes.
If successful, these private companies will be able to
enforce their patents against others while exploiting the
tribe's sovereign immunity to prevent legitimate challenges to
those patents at the Patent and Trademark Office. In effect,
these companies will not be playing on a level playing field.
That is similar to the situation before Congress acted to
restore fairness to the patent system by passing the America
Invents Act, or AIA. This bipartisan measure passed both
chambers of Congress by overwhelming margins because of the
broad recognition that the patent system had become unbalanced
by abusive litigation conduct and low-quality patents issued by
an overworked Patent Office.
Inter partes reviews, or IPRs, are a critical part of the
AIA's reforms because they provide the Patent Office an
opportunity to correct mistakes it made when issuing patents.
IPRs allow the Patent Office to weed out low-quality patents
that should not have been granted in the first place, leaving
in place stronger patents that cover real innovations.
If questionable deals with sovereign entities can extend
immunity to artificially protect low-quality patents, the
entire IP system is harmed. The facts demonstrate that IPRs and
other AIA procedures are effective and accurate.
For example, last year the U.S. Court of Appeals for the
Federal Circuit affirmed decisions of the Patent Trial and
Appeal Board in AIA cases about three quarters of the time,
which was roughly the same affirmance rate as for District
Court patent cases.
In 2015, the affirmance rate was even higher at about 85
percent. As a district court recently noted when considering
the very issues presented at this hearing, the entire system of
AIA post-issuance review may be in peril if the practice of
private companies paying for sovereign immunity continues.
I want to thank Chairman Issa for convening this hearing. I
want to thank former Chairman Smith for his great, outstanding
leadership in getting the America Invents Act passed in the
first place. I thank their witnesses for their participation,
and I look forward to delving further into this very important
and serious issue.
[The prepared statement of Chairman Goodlatte follows:]
COMMITTEE INSERT
Mr. Issa. Thank you, Mr. Chairman. All Members' opening
statements will be placed in the record in written form.
[The information follows:]
COMMITTEE INSERT
Mr. Issa. It is now my honor to introduce our witnesses,
which include Mr. Karl Manheim, professor of law at Loyola--
this is why I did not attend Loyola; I cannot do that; I have
tried--Law School; Mr. William Jay, partner and cochair,
appellate litigation, Goodwin Procter, LLP; Mr. Philip Johnson,
principal, Johnson-IP Strategy and Policy Consulting; and Mr.
Christopher Mohr, vice president of intellectual property and
general counsel at the Software and Information Industries
Association.
Before we begin opening statements, I am also going to
place in the record a letter we received, Mr. Nadler and I,
from Mylan, one of the companies involved in the other side of
litigation. And I will just briefly insert that they assert
that this has been to them 22 billion doses that would have
been available for generic that were not as a result of the
activity we are involved in today, and they put an estimate of
$1.5 billion in revenue that was distorted. So, without
objection, that will be placed in the record. Mr. Manheim.
[The information follows:]
COMMITTEE INSERT
STATEMENTS OF KARL MANHEIM, PROFESSOR OF LAW LOYOLA LAW SCHOOL;
WILLIAM JAY, PARTNER AND CO-CHAIR, APPELLATE LITIGATION,
GOODWIN PROCTER, LLP; PHILIP JOHNSON, PRINCIPAL, JOHNSON-IP
STRATEGY & POLICY CONSULTING; CHRISTOPHER MOHR, VICE PRESIDENT
FOR INTELLECTUAL PROPERTY AND GENERAL COUNSEL, SOFTWARE AND
INFORMATION INDUSTRY ASSOCIATION
STATEMENT OF KARL MANHEIM
Mr. Manheim. Thank you, Mr. Chairman, Chairman Goodlatte,
and Mr. Nadler. I am Karl Manheim, a professor of law at Loyola
Law School in Los Angeles, where I teach constitutional law and
intellectual property. I had the pleasure of serving the
subcommittee as a fellow in 2007 and help with that year's
patent reform legislation. It is an honor to be back.
The matter in front of this committee was prompted by
Allergan, Incorporated's assignment of its patent for
ophthalmic drug to the St. Regis Mohawk tribe. The tribe claims
sovereign immunity from suit, thus immunizing the patent from
challenge at the Patent Office.
This assignment occurred after two generic manufacturers
filed with the FDA an abbreviated new drug application, or
ANDA. ANDA is a mechanism created by the Hatch-Waxman Act to
encourage the entry of generic competition as a means of
lowering drug prices. By law, an ANDA is deemed an infringement
of the drug patent.
After Allergan sued for infringement in Federal court, the
generics filed the petition for inter partes review at the PTO,
pursuant to the America Invents Act. That administrative
proceeding was intended by AIA to provide an expeditious and
less costly mechanism than litigation to challenge poor-quality
patents.
In the Allergan case, the company had assigned its patent
to the tribe, making them an indispensable party in any patent
challenge. My testimony will focus on the tribe's claim for
sovereign immunity, which is still pending before the Patent
Office.
As a related matter, States also have sovereign immunity.
They are far more active in the patent enterprise through
research universities and faculty and other commercial
activities. State sovereign immunity, however, is grounded in
the 11th Amendment.
Tribal immunity, in contrast, is a product of common law
and statutory recognition, thus it is easier for Congress to
address abuses of the system in situations like this, where a
patent holder assigns its rights to a Native American tribe in
order to insulate the patent from challenge. However, solutions
do exist for similar abuses by States, and I discuss several of
those in my written testimony.
Indian tribes are considered domestic dependent nations. As
with other nations, tribes enjoy a degree of sovereignty. The
Supreme Court has questioned the wisdom of continuing tribal
immunity, but has yet to overrule it. But because the doctrine
is grounded in common law and not in the Constitution, it may
be set aside by Federal statute. Doing so, either in general or
in specific cases such as patent immunity, raises no
constitutional questions, in my opinion.
Senator McCaskill has introduced a bill in the Senate to
abrogate tribal immunity in IPR cases. Some rights
organizations argue that singling out tribes for adverse
treatment discriminates against Native Americans in violation
of the equal protection principle in the Fifth Amendment. I do
not agree with that argument. Tribes enjoy a privilege that no
other entity except States have: immunity from suit. Abrogating
and limiting that immunity is not a discriminatory act; rather,
its purpose is to restore balance to patent and competition
policies.
As the Supreme Court said in Bonito Boats v. Thunder Craft
Boats, the patent clause reflects a balance between the need to
encourage innovation and the avoidance of monopolies which
stifle competition without any concomitant advance in the
progress of science and the useful arts. That balance is
maintained on the one hand by awarding patents to innovative
technologies, and on the other hand by facilitating challenges
to poor-quality patents. The Hatch-Waxman Act is a prime
example of this balance. It encourages generic companies to
enter the market and thus to lower drug prices through
competition, but they first have to successfully challenge an
existing patent. That is made more difficult when the patent
holder or assignee has immunity.
Sovereign immunity, whether asserted by a tribe or a State,
has the potential of disrupting this finely crafted balance
between U.S. innovation and competition policies. I believe
Congress has the tools to preserve that balance. On the one
hand, it can narrow tribal immunity; on the other, it can
condition the grant or assignment of a patent to a sovereign
entity by requiring that entity to waive its immunity in patent
litigation and IPR proceedings. Those, and other solutions,
will likely survive constitutional scrutiny and would benefit
the public welfare. Thank you. I will be happy to answer
questions later.
[The prepared statement of Mr. Manheim follows:]
INSERT 1
Mr. Issa. Thank you. Mr. Jay.
STATEMENT OF WILLIAM JAY
Mr. Jay. Thank you, Mr. Chairman. Thank you, Ranking Member
Nadler and members of the subcommittee. I would like to thank
the subcommittee for its attention to these important issues,
and I appreciate the opportunity to participate today.
I am a partner at the law firm Goodwin Proctor, where I
litigate constitutional cases and issues of Federal
jurisdiction, and also patent cases. I have been asked to
testify today on behalf of the Association for Accessible
Medicines, which represents companies that develop and bring to
market generic and biosimilar medicines. Those products saved
the U.S. healthcare system $1.7 billion over the last 10 years,
and we are concerned that the rental of sovereign immunity
tactic that Allergan has pioneered will put those savings at
risk.
Why is Allergan renting sovereign immunity for tens of
millions of dollars a year? It is looking for protection from
competition for a product that brings in billions of dollars.
And Allergan had a period of patent protection on this product
which was coming to an end in 2014, so Allergan went and got a
second generation of patents, more patents on the same product,
just as its patent monopoly was about to expire. And those new
patents do not expire until 2024.
Allergan had reason to be worried that those patents would
be subject to challenge under the procedures that Congress
created in the Leahy-Smith America Invents Act, so it sought to
put its patents beyond the reach of the Patent Office.
Effectively, it sought asylum for its patents in Indian
country. On the eve of the hearing before the PTO, Allergan did
this multimillion-dollar deal with the tribe and within hours
the tribe had stepped forward to demand that the PTO stop
reviewing these patents and to decide whether these are patents
that never should have been issued.
If every company with enough money could use that tribal
tactic to block their patents from review, the result will be
to leave more bad patents on the books for longer, and that
problem is not limited to bad pharmaceutical patents. The St.
Regis Mohawk tribe has also apparently already done a deal to
rent immunity to a patent troll that is suing Apple. These
deals would be bad for the patent system, for competition, and
for consumers. And in the healthcare pharmaceutical context,
that means patients who need access to medication. It would cut
against the very reason why Congress created IPR review in the
Leahy-Smith American Vance act just a few years ago.
Now, Congress has set out very clear rules for issuing
patents, and one of the clearest is that a patent cannot be
issued on something that is just existing knowledge or an
obvious variation on existing knowledge. That knowledge might
belong to another patent owner, or it might belong to the
public because it is out in the public domain. And the authors
of the AIA understood all too well that the patent examination
process does not always uncover all of the flaws in a patent
application, all of the ways in which it duplicates or is just
an obvious variation on existing knowledge.
The incredible volume of patent applications makes that an
incredibly difficult process for examiners. They often do not
even see all of the published papers and other writings that
set out what is in the public domain. That is where IPR comes
in. IPR is a reform that allows third parties to participate
and allows more information to come to light before the Patent
Office.
It is one of the most important reforms because it helps to
screen out bad patents while bolstering valid ones, and it
ensures that poor-quality patents can be weeded out through
administrative review rather than costly litigation. It is
faster, it is time-limited, it is more efficient, and they just
focus on one thing. They focus on whether this is a patent that
never should have been issued because it was already in the
public domain in the prior art, or it was obvious all along.
Now, IPR co-exists with litigation in court, but it is
different, and it is complementary. Now, while some interested
parties have criticized IPR as a form of double jeopardy, that
is a completely inaccurate criticism. Patent owners get to file
multiple lawsuits on the same patent, and it is not surprising
that there could be multiple different challenges to the
validity of a single patent. But it is important to note that
Congress wrote a protection into the AIA that once the PTAB
takes up a challenge in an IPR or a similar proceeding and
decides on the merits, if the challenger loses, that is it. The
challenger cannot relitigate that in court. That is hardly
double jeopardy.
But whatever criticisms some people might make of Congress'
work in the AIA, what Congress adopted is a set of rules that
applies to everybody. Nobody is entitled to a patent on
something that is obvious. Since Congress created re-
examinations back in 1980 every patent owner has understood
that the issuance of the patent does not necessarily mean the
last word.
Mistakes can be fixed, but the Allergan strategy of renting
sovereign immunity would set up a different set of rules for
patent owners with enough money and enough gall to enter into a
transaction like this one. That is why we urge Congress to give
this problem its close attention and to use its power to
regulate the common-law principle of tribal immunity; to
restrict that immunity to what its true purpose is: to protect
Native American sovereignty, to protect the sanctity of tribal
land, to protect the businesses that tribes may run on that
land--but not to rent out their sovereign immunity in a way
that is going to interfere with not just the patent system but
the healthcare system as well.
I thank the subcommittee and I look forward to answering
your questions.
[The prepared statement of Mr. Jay follows:]
INSERT 2
Mr. Issa. Thank you. Mr. Johnson.
STATEMENT OF PHILIP JOHNSON
Mr. Johnson. Thank you, Chairman Issa, Ranking Member
Nadler----
Mr. Issa. Would you pull the mic a little closer, please?
Would you turn it on, please? Thank you. That helps.
Mr. Johnson. Thank you, Mr. Chairman, Ranking Member
Nadler, and distinguished Members of the committee. In my
written statement I have detailed three issues relating to this
topic that should be of concern to the subcommittee: why patent
owners now feel it is necessary to assign their patents to
sovereigns to aid in their patents enforcements; why sovereigns
prefer to have issues relating to their patents adjudicated in
the Federal courts rather than in the Patent Office; and what
reforms would eliminate any advantage to be gained from
assigning patents to sovereigns. All three of these problems
are symptoms of the flawed implementation of the inter partes
reviews, IPRs, first authorized by the America Invents Act.
Former Chief Judge Michel was right when he testified to
you earlier that these IPR proceedings are now doing more harm
than good. Because they were not conformed to the validity and
due process standards traditionally used in the courts, they
are now fueling a myriad of abuses based on arbitraging the
differences in cost and outcomes between IPRs and court
proceedings. These include a number of forms of reverse or IPR
trolling, as well as disruptions of other time-honored patent
challenge frameworks, such as Hatch-Waxman patent proceedings.
Many patent owners now see IPRs is grossly unfair, and
therefore prefer to have their patents subjected to challenge
in the Federal courts, which they view as more likely to reach
just outcomes. While most patent owners can't avoid IPRs,
sovereigns may and increasingly are preferring to have all
issues relating to their patents, including validity, decided
by the courts. Federal court litigation, unlike IPRs, is one-
stop shopping.
Federal courts address all issues that could arise
concerning the patent's validity and infringement and set the
gold standard for fairness, impartiality, and due process.
Appellate reviews of district court judgments are also more
robust. In appeals from the district court, the Federal Circuit
is not usually restricted to a review using only the
substantial evidence standard. Especially now that fees are
being more routinely shifted to losing parties in district
court cases, sovereigns and others are not unreasonable in
wanting to have their patent infringement claims assessed
there, which is, in the case of the sovereigns, their right to
do so.
The solution of these concerns is to remove any meaningful
advantage from sovereign patent ownership by revising Patent
Office post-grant procedures to conform them to the substance
and outcome of the Federal courts, thereby removing any
incentive to arbitrage differences between the two, which are
now fueling the abuses I mentioned.
What is at stake here is the confidence of investors and
their investors in the Constitution's promise that Congress
will encourage innovation by securing for limited times to
Inventors the exclusive Right to their Discoveries. At present,
even fully and fairly litigated court judgments are not being
respected as final resolutions. They do not provide quiet title
to patents because they may be challenged over and over again
by the same or different persons in IPRs, thereby thwarting our
Constitution's promise that inventors' patent rights will be
secured.
Fortunately, the problems with IPRs are now widely
recognized within the IP community and their fixes are well
within this subcommittee's purview. But time is of the essence,
as the same recognition is now rapidly eroding confidence in
our patent system. Since the implementation of IPRs just 5
years ago, the U.S. patent system has dropped in the U.S.
Chamber of Commerce's ranking from first to 10th place, due
largely to the impact of IPRs on patent reliability.
Moreover, the ability of infringers to invalidate U.S.
patents, seemingly at will before the PTAB, is emboldening
foreign competitors to copy U.S. technology just when their
home countries are strengthening their patent systems for more
likely use against U.S.-originated imports. To attract more
investment and innovation in this country, enhance our
productivity, create more well-paying U.S. jobs, and increase
our GDP, we must act now to strengthen the reliability and
enforceability of U.S. patents.
To do this, we must not only provide fair and consistent
for determining validity and infringement, but also ensure that
patent owners may enjoy quiet title to their patent properties
without fear from unfair IPRs. If we are successful in
accomplishing these goals, patentees would not need to assign
their patents to sovereigns as there would be nothing to be
gained by doing so. Thank you, and I look forward to answering
any questions you might have.
[The prepared statement of Mr. Johnson follows:]
INSERT 3
Mr. Issa. Thank you. Mr. Mohr.
STATEMENT OF CHRISTOPHER MOHR
Mr. Mohr. Chairman Issa, Ranking Member Nadler, and Members
of the committee, on behalf of the Software and Information
Industry Association and its members, thank you for this
opportunity to share our views.
SIAA is the principal trade association for the software
and information industries and represents over 700 companies
that develop and market software and digital content for
business, education, and consumers. Our members range from
startup firms to some of the largest and most recognizable
corporations in the world. SIAA has long viewed assertions of
sovereign immunity from suit as out of place in the modern
intellectual property system, and we commend the committee for
both its past actions on and its continuing interest in this
subject.
The doctrine prohibits governments from being sued without
their consent, but it is important to understand that it is a
procedural, not a substantive, doctrine. It renders the
sovereign immune procedurally from being involuntarily hauled
into court to answer for its actions without its consent. It
does not render the sovereign's actions substantively lawful.
And that immunity is necessary when those governments are
involved in their core governmental functions. That immunity is
out of place when the State participates in a modern and
national intellectual property marketplace.
For example, as the committee is well aware, States are
active owners and users of intellectual property, engaging in
sports broadcasting, merchandising, and a variety of research
and licensing activities. In SIAA's view, when they, or any
other entity acting as a commercial participant, engage in that
federally created sphere the law should require them to play by
the same set of rules as anyone else. This committee has
historically agreed with that premise.
In 1990, and again in 1992, Congress passed legislation
making States liable for damages and intellectual property
suits in the same way as other commercial participants. The
Supreme Court held the patent version of that legislation
constitutionally insufficient to abrogate sovereign immunity.
What we face now is different, a situation in which a sovereign
has rented out its immunity for the benefit of a private
company to avoid inter partes review under the AIA.
There are already patent infringement suits filed by Native
American tribes against members of the technology industry, and
patent trolls are approaching State universities and tribes,
looking to make similar arrangements. Our members are concerned
that immunity for hire could undo much of the committee's
success in improving patent quality. This committee spent years
crafting the AIA and its IPR provisions in response to serious
and widespread concerns over the quality of patents issued by
PTO, and now IPR is successfully improving patent quality,
giving the PTO a chance to reexamine past decisions.
Sovereign immunity should not be used, much less rented, to
undermine the committee's hard work and frustrate the Federal
scheme. Our members are deeply concerned that this practice
will proliferate to impact all industries plagued by bad
patents, which certainly includes the software industry. That
result should cause concern to everybody concerned about a
strong, balanced, and uniform patent system. Even some
pharmaceutical companies have publicly stated that they are not
supportive of the sovereign immunity argument presented in the
Allergan case. Judge Bryson was right to characterize immunity-
for-hire transactions as a sham.
The Patent Office, the courts, and, ultimately, you have
the ability to prevent this sham. There is no sovereign right
to a bad patent, and there is no sovereign right to stop the
Patent Office from reconsidering a decision to issue a bad
patent. There are good arguments that sovereign immunity should
not apply to IPR, which is a procedure by which the Patent
Office reconsiders its decision to make a patent grant, albeit
with input from the public. IPR does not impose legal liability
or determine rights between adverse litigants. Instead, it is a
procedure by which PTO reconsiders its decision to grant a
public franchise.
Moreover, as I mentioned earlier, the immunity is
procedural not substantive. Thus, there are narrow procedural
ways for the courts to solve this problem in the context of IPR
proceedings that do not involve sovereign immunity at all. For
example, as Judge Bryson suggested, it is not at all clear that
the assignment necessary to create immunity for hire is legally
valid, nor is it clear that the sovereign is a necessary and
indispensable party in such cases; thus, even though the
sovereign cannot be required to appear in an IPR proceeding,
the PTAB may well still be able to conduct its review.
If, of course, the courts permit the subterfuge, or the
problem becomes widespread before it reaches a proper
resolution, Congress will have to act. The tools available to
Congress differ depending on which kind of sovereign it is
dealing with. There is a difference between the nature of the
immunity afforded to Native American tribes and that afforded
to the States. In any event, thank you for considering our
views, and I look forward to answering the committee's
questions.
[The prepared statement of Mr. Mohr follows:]
INSERT 4
Mr. Issa. Thank you. I recognize myself for a round of
questions. Mr. Mohr, I am going to take your very last
statement first. Under the Constitution, the Federal Government
does have treaties with tribes and has the exclusive right to
do those. So, when there is a treaty, there is, in fact, a very
similar right, a constitutional right, enshrined in the
Constitution that would make whatever that was essentially the
same as a State. In the famous Andy Jackson Trail of Tears, I
think that was well decided that you cannot trump that, if you
will. Would that be your understanding?
Mr. Mohr. Well, the question to me is a little bit
different, so I am not sure I completely understood.
Mr. Issa. Well, the idea that on Federal lands----
Mr. Mohr. Yep.
Mr. Issa [continuing]. That are held in trust for tribes:
all their governance and activities are exclusively regulated
by the Federal Government, and that under treaties, which
essentially that land in trust is part of a treaty process,
they have rights that are protected by the Constitution that
are every bit as strong as a state. Would not you agree?
Mr. Mohr. Sure, under the treaties, yes.
Mr. Issa. So, we are really talking not about all of the
various sovereign things enshrined in the Constitution. We are
limited to the other part of the statement you made, and I am
going to come back to you, because you made the best statement
of the whole crowd, and they were all good. I am going to come
back to you after I asked two simple questions of all the
witnesses.
Does anyone see anything wrong with Allergan trying to get
additional patents on this drug, making those applications, and
initially being granted them? Is there anything wrong that
Allergan did by getting those patents?
Hearing no noes, I will take that every inventor, every
company, has a basic right to try to write up a new patent with
some additional claims, and if the Patent Office gives it to
you, good on you.
And would everyone agree that since a court has held that
those patents were obvious, they were not new, that in fact
there was an inherent process that had to happen somewhere to
bring justice to the process of determining whether or not they
would be able to further restrict the production of this very
profitable drug? Anyone disagree on that? Mr. Johnson, briefly.
Mr. Johnson. This is a technicality, but they may have been
new, but still been obvious.
Mr. Issa. Well, but I mean, a court struck down the
patents, right?
Mr. Johnson. A court has struck down the patents as
obvious, but it does not mean that what they had was not new.
It meant that----
Mr. Issa. Right.
Mr. Johnson [continuing]. If it were new it did not reach--
--
Mr. Issa. Right.
Mr. Johnson [continuing]. The standard.
Mr. Issa. Mr. Johnson, that is the point I want to make,
that no wrongdoing was done in asking for the patents and no
wrongdoing is implied by the striking down of those patent, as
the examiner got it wrong, basically, when it was fully
disclosed. And that was not, in fact, the Trade Patent Office
doing it, it was an Article III judge, right?
So, the odd thing is we are dealing here with--I think it
is five patents in the portfolio--we are dealing with patents
that were adjudicated at a high cost in Federal court that
could have gone through the other process but were stayed as a
result of the claim of sovereign immunity. So, now I am going
to go to Mr. Mohr.
You made a point that is so good that I hope we can flesh
out here to turn it into legislation and save litigation. The
patent, itself, is what is being adjudicated in the Patent
Office. Let me ask you a couple of easy questions; hopefully,
they are easy. One, did the Indian tribe have to show up at all
in this process?
Mr. Mohr. Arguably, no.
Mr. Issa. Did Allergan have to show up at all?
Mr. Mohr. No.
Mr. Issa. If this were in an ex parte reexamination, and it
went back through the normal Patent Office, does the inventor
have to show up, or can they simply allow the ex parte
examination to be no party examination, and they can look at
it, right?
Mr. Mohr. Right.
Mr. Issa. So, there is no requirement to produce yourself,
whether you are a sovereign entity or the patent holder. In
fact, this is an administrative process over the patent. In
other words, it is a survey of the property. Right?
Mr. Mohr. That is right.
Mr. Issa. So, since it is completely optional, if Congress
were to through statute make it clear that in fact the
jurisdiction, the possession, and the asset lie in the Patent
Office, and any adjudication that occurs down the road in
Virginia is, in fact, of the patent and not of the people,
neither the plaintiffs nor the defendant, even if we allow them
to sit submit information. Right?
Mr. Mohr. Congress could do that.
Mr. Issa. And lastly, in a patent reexamination, and
actually, even in an ex parte, if you learn of it, is not it
true that anybody in the entire wide world can submit to the
Patent Office information to be considered?
Mr. Mohr. I believe that is correct.
Mr. Issa. So, there is no standing in these cases.
Mr. Mohr. No, there is no--if you mean case for
controversy, that is right. No.
Mr. Issa. So, what we have here is an administrative
process going on, no different than the original examination,
in which you could send a patent to the Patent Office as an
application and never look at it again except to pay the fees
as a patent holder and take your chances that the patent holder
does not send you back--excuse me--a denial that you then have
to discuss with them. Right?
Mr. Mohr. Right.
Mr. Issa. So, for those who have not seen it, that to me is
the essence of what we are discussing here. We are not
discussing, I hope, in the long run the question of whether the
tribe did something wrong, or whether we need to change
sovereign immunity. And one-half of what we are discussing here
today it seems to me we can define where the patent is and what
is being adjudicated, and I am going to pass this on to the
Ranking Member.
My concern, which I will leave to a second round, if we
have one, is that when it comes to assigning a plaintiff role
in which someone is suing--``heads I win, tails you cannot do
anything to me''--we may have to look at that, the active role
of when you essentially assign, with the help of a troll, to do
lawsuits. And that part will come in the second round. Mr.
Nadler.
Mr. Nadler. Thank you. Mr. Jay, the Allergan deal called
for by the St. Regis Mohawk tribe called for the St. Regis
Mohawk tribe to assert sovereign immunity only in the IPR
proceeding. I gather there is no reason that any other patent
holders could not transfer their patents to a sovereign on the
condition that the patents be shielded from reviewing in both
IPR and the Federal courts.
Mr. Jay. That is correct.
Mr. Nadler. Use your mic.
Mr. Jay. That is correct, as we understand the terms of
the----
Mr. Nadler. And what would be the impact in generic
competition and consumer drug prices if people did that?
Mr. Jay. Often in litigation in district court there is
more to the dispute than just whether the patents being
asserted by the plaintiff, the brand-name company, are
infringed and valid. So, for example, the brand company may try
to hold back some patents and not assert them right away as a
way of prolonging litigation and deterring generic companies
from coming onto the market for an even longer period. One way
to combat that right now is that the generic company can file a
counterclaim, trying to invalidate all----
Mr. Nadler. And they could not.
Mr. Jay. The concern is that if the plaintiff is a
sovereign, that that counterclaim could not be litigated.
Mr. Nadler. It would be a one-way situation, then?
Mr. Jay. Right. And similarly, they could not go into court
as a declaratory plaintiff and seek a declaratory judgment of
invalidity.
Mr. Nadler. Now, some defenders of this deal argue that
Allergan's transference of its patents to the tribe to make use
of its sovereign status is no different from cases in which
State universities have asserted sovereign immunity in IPR
proceedings. I think Mr. Manheim gave his reasons why that was
not true. Would you agree that there are differences?
Mr. Jay. There certainly are differences, including both
the foundation of the form of immunity which in the case of
tribes is a common-law immunity that----
Mr. Nadler. As opposed to----
Mr. Jay [continuing]. Congress has power over. And also,
the State cases have involved actual inventions by State
universities, State research arms, State employees doing
innovation themselves, not taking money to rent out the State's
sovereign immunity.
Mr. Nadler. In your testimony you argue that Congress
should consider legislation abrogating tribal sovereign
immunity in patent proceedings. Aside from the practical
difficulties in abrogating State sovereignty, is there any
reason to single out the tribes? Do you think there will be a
fair result?
Mr. Jay. Well, the constitutional difficulty in abrogating
State sovereign immunity obviously is a significant obstacle,
and that is why our proposal has focused on----
Mr. Nadler. All right, but given there is a practical
obstacle, given the practical obstacle in the one case, but not
in the other, do you think abrogating sovereign immunity in the
one case but not the other would be a fair result?
Mr. Jay. We do, because Congress has the power to solve the
problem before it and to use its power under the Indian
Commerce Clause to confine tribal sovereign immunity to its
historic function of preserving tribal self-government and
preventing it from interfering with the patent system and
competition.
Mr. Nadler. Thank you. Mr. Mohr, if agreements like the
Allergan deal become the norm, can the IPR process survive, and
what impact do you think this would have on the patent troll
problem?
Mr. Mohr. I think it is going to get a lot worse.
Mr. Issa. Microphone, please.
Mr. Mohr. I think the patent troll problem is going to get
a lot of worse. From the viewpoint of my members, the IPR
system has been an enormous benefit in terms of the ability of
our innovative companies to challenge bad patents. The relative
ease with which the deal in Allergan could be structured means
that, frankly, it could be very easily replicated. Once you
know what the terms are and that they have been judicially
approved, all you really need is a Xerox machine and you are
off and running. So, we are extremely concerned that that, if
widespread----
Mr. Nadler. Would destroy the IPR process.
Mr. Mohr. Precisely.
Mr. Nadler. Do you think that Congress should consider
limitations of sovereign immunity and IP matters, even when the
rights holder developed the property itself rather than
acquiring it through an Allergan-type transaction?
Mr. Mohr. Yes.
Mr. Nadler. Because?
Mr. Mohr. Because everyone should play by the same set of
rules.
Mr. Nadler. Okay, fair enough. Much of the discussion today
has focused on sovereign immunity in the context of patent law,
but since the hearing is Title VII Immunity and the
Intellectual Property System, can you tell me a little about
whether sovereign immunity is concerned for other forms of
intellectual property, like copyright?
Mr. Mohr. Sure. Our members, those that are copyright
holders, have the same concerns. We used to have an enforcement
program, and we would not be able to assert infringement suits
against States, and the cornerstone of the problem is the same.
In other words, it is States being able to operate by
different sets of rules. The difference between the two
statutes, the one that was struck down by the Supreme Court and
the one that was invalidated by the Fifth Circuit, is that
there is more of a record for copyright infringement, I think,
than there was present at the time that the Patent Remedy
Clarification Act was enacted. I am still holding out hope that
that may pass muster.
Mr. Nadler. Thank you. My last question is to Mr. Manheim.
Given the challenges in abrogating sovereign immunity by
statute, what incentives can Congress establish to encourage
States and Native American tribes to waive their sovereign
immunity in IP cases, short of abolishing the right?
Mr. Manheim. Sure. I think we should draw a distinction
between existing patents and existing intellectual property
rights and those that are yet to be granted, and that could be
conditioned upon the waiver of the right to assert sovereign
immunity. I think it would be much harder for Congress to
require a waiver for existing rights, at least when it comes to
States, than for yet-to-be granted rights, because then you are
changing the nature of the right that is being awarded.
So, as Chairman Issa was talking earlier about an IPR
proceeding, that really the patent holders need not be present,
that you are actually challenging the patent as a res, R-E-S;
that, I think, is a workable solution going forward. I do not
believe it is a solution that would work retroactively.
Now, the distinction between existing patents and
prospective patents is an important one when it comes to a
statutory remedy for State sovereign immunity. I do not think
it is as difficult when we are talking about tribal sovereign
immunity, because that really is a creature of statute and
common law which Congress has the right to overcome.
Mr. Nadler. I see. I cannot help but observe that you think
in that case, the case that you are talking about, that that
res is not really res publica.
Mr. Manheim. Yes, exactly.
Mr. Issa. The gentleman yields back. We now go to the
gentleman from Pennsylvania, Mr. Marino.
Mr. Marino. Thank you, Chairman. I would like to start with
Mr. Mohr and then move down, or up, however you want to refer
to it, if you want to comment on it.
A recent analysis found 263 cases where a district court
ruled a patent was valid, only to have the patent subsequently
challenged before the PTAB. In 200 of those cases, the PTAB
reached a different result and in fact invalidated at least one
of those patent claims. How do you explain those disparities
between the district court and the PTAB?
Microphone, please. If you want to review your notes, we
will go on to Mr. Johnson----
Mr. Mohr. Sure.
Mr. Marino [continuing]. If you are looking for something
specific. Mr. Johnson?
Mr. Johnson. Thank you. Well, it is quite simple. The rules
that are used in the PTAB are different and much easier to
invalidate patents than the rules that are used in the Federal
courts.
Mr. Marino. Can you give me an example of that?
Mr. Johnson. Sure. The claims are interpreted using the
broadest reasonable interpretation standard before the PTAB
instead of the ordinary and customary meaning of the claims,
which is known as the Philips standard.
So when these patents which were examined and ended up
coming out of the Patent Office with the expectation they would
be interpreted using the Philips standard, and then they get to
the PTAB, the PTAB broadens the claim so it sweeps in within
its coverage prior art that makes them easier to invalidate.
Using the chairman's example, it is as if everyone agreed
that the fence was where it was going to be, but when it goes
to the PTAB, the PTAB moves the fence out, and lo and behold,
instead of just losing the difference between how the fence was
moved, they lose the entire property.
And that is why there is rampant invalidation, and what was
intended originally by the AIA was that there would be a robust
ability to at least amend the claims, to pull them back in if
necessary to get them on the right boundaries, but as
implemented, the PTAB simply is not allowing those amendments.
Mr. Marino. All right. Mr. Mohr.
Mr. Mohr. Yeah, I mean, I guess it is unsurprising that I
would disagree with that characterization. I think the
difference between the two for a couple of reasons.
The first reason is--I mean, again you go back to first
principles. Right? The IPR allows the PTO to reconsider its
earlier decision to issue a patent, so there is a different
standard in Federal court, but that standard reflects deference
to the expert agency. There is no reason for the agency to
defer to itself.
So you are operating with respect to the broadest
reasonable interpretation standard. The PTAB applies the same
principles as district court. It is not possible to identify a
definitive claim interpretation that every court is going to
agree on, so what the PTAB is supposed to do is apply the
broadest reasonable interpretation that a court could come up
with, and that is the limit on their power.
Mr. Marino. Mr. Jay.
Mr. Jay. Thank you. Just to build on what Mr. Mohr said,
there are safeguards in district court litigation because those
are cases being heard by a generalist judge, and often by a lay
jury, and the standards for invalidating an issued patent under
those circumstances are understandably higher, and Congress has
put that in statute.
Congress also put in the statute that, as Mr. Mohr said,
when it is the Patent Office, when it is expert adjudicators
from the Patent Office doing the adjudication, they do not have
the generalist judge problem or the lay jury problem, and as a
result, they apply the same standard that the examiner applied
when considering whether to issue the patent, because their job
is to decide whether the patent should never have issued in the
first place.
Mr. Marino. Professor.
Mr. Manheim. I agree with that. The district courts are
generalist courts. They hear every variety of Federal claim,
and a lot of State claims. There is a presumption of patent
validity when a patent gets to district court; there is no
presumption of validity in the IPR proceeding, which is heard
by a panel of usually people with technical training.
One other thing to say about the district court litigation.
There is a very hard reversal rate in district court cases at
the Federal Circuit, which is a specialist court. So, this is
not to impugn district courts at all. They are doing absolutely
the best they can, but this is one explanation for why you
would see a different----
Mr. Marino. Do you think that has some to do with
experience? Not so much experience of the repetitiveness of the
cases versus district court, or review at the Patent Office.
Mr. Manheim. Absolutely. And I have heard that some
district court judges are hiring scientific or science students
as clerks because their cases are so technically oriented. Now,
there is also the patent pilot program in Federal court so that
some judges can develop that expertise. I do not have any
statistics on that, but--and this is a partial explanation for
why you would find different statistical outcomes.
Mr. Marino. Thank you. My time is expired.
Mr. Issa. The gentleman yields back. We now go to the
gentleman from New York, Mr. Jeffries.
Mr. Jeffries. I thank the chairman. I thank the witnesses
for your presence here today. Mr. Jay, am I correct that the
process for a generic drug company bringing a product to the
market is set forth in the Hatch-Waxman act?
Mr. Jay. That is generally correct, yes.
Mr. Jeffries. And so, just to make sure I have got this
process correct, the generic drug company would file a
paragraph for abbreviated new drug application, which would
then expedite the potential approval of bringing that generic
drug to market. Is that right?
Mr. Jay. Right. The ANDA is a streamlined application that
avoids the need to go through clinical trials and so forth,
because it builds off of what is already known about the
reference drug.
Chairman Goodlatte. And then the legacy drug company would
sue the generic for patent infringement under Hatch-Waxman. Is
that right?
Mr. Jay. That is right, if the generic drug company has
certified that the patent is either not infringed or is
invalid, and that triggers a time limit for the brand company
to sue. If the brand company does not sue, the generic can
bring a declaratory action to clarify whether the patent is
valid or not.
Chairman Goodlatte. And if the brand company sues, which I
believe is the case in the Eastern District of New York where
the sovereign immunity issue has arisen, if the brand company
sues, then the generic could issue or choose to file a
counterclaim in the context of that lawsuit. Is that right?
Mr. Jay. That is correct. It generally does happen that the
defendant files a counterclaim alleging that the patent is
invalid or unenforceable or both.
Mr. Jeffries. Professor Manheim, did you want to comment?
Mr. Manheim. I wanted to add to that. We are getting to
some areas of technical Federal court jurisdiction, but there
is a difference when it comes to sovereign immunity between
compulsory and permissive counterclaims.
So, as Mr. Jay said that, if a sovereign entity or assignee
is asserting a patent against a defendant or a competitor, they
may defend on any ground or assert a counterclaim relating to
that patent.
However, recall that the patent system crafts a fine
balance between promoting innovation and protecting
competition, and so, under a case called Walker Process, if it
turns out that the patent was procured by fraud, then the
defendant may do more than simply defend patent infringement,
but may also counterclaim for any trust violation.
And that is one way to keep the system in balance, but if
the patent holder has sovereign immunity, that counterclaim may
not be able to go forward, either in that case or any other
case. And so, that is one of the problems I see in sovereign
entities being able to resist any form of affirmative
litigation or counterclaim or IPR proceeding, as it may upset
that balance between innovation and competition. So----
Mr. Jeffries. Thank you for that, professor. The judge in
the Allergan case ruled or stated that sovereign immunity
should not be treated as a monetizable commodity that can be
purchased by private entities as part of a scheme to evade
their legal responsibilities. I assume you agree with that
statement. Is that right, professor?
Mr. Manheim. Basically, I do agree with that.
Mr. Jeffries. Mr. Jay.
Mr. Jay. Certainly.
Mr. Jeffries. Now, I guess the question is, is this an
issue that we should allow to resolve itself through the court
proceedings? You have got a pending case right now in the
Eastern District of Texas. Presumably, whichever way that goes,
that will be appealed to the Fifth Circuit; whichever way that
goes could potentially be appealed to the United States Supreme
Court.
You know, we have three branches of government for a
reason, and the courts are endeavoring to tackle what is a
complicated legal issue involving a potential sovereign's
involvement in a domestic dispute. Or, when is the right moment
for Congress to potentially intervene to address what is a
complicated challenge here?
Mr. Jay. We do urge that that Congress not wait, and let me
explain why these pending cases are not likely to result in
solving the problem promptly.
First, the Eastern District of Texas case that you referred
to, Congressman, the trial judge in that case, you know, one of
our best patent judges, former acting Solicitor General of
United States Judge Bryson, decided to let the patent tried
into the case permissively, basically to take the sham nature
of the transaction off the table as an issue on appeal.
So the Federal Circuit is not going to be considering the
sham nature of the transaction in an appeal in that case. Then
there is the proceeding going on about the Restasis patents
before the Patent Board.
The PTAB recently put out its projected schedule for
resolving the case. It has extended the time for a final
decision not until next April, April 2018, and there is no way
to know what they are going to decide on this motion to
dismiss. It could take a long time for the issue to percolate
up to the Federal Circuit, from the Federal Circuit to the
Supreme Court, and if it comes up in future cases where the
Patent Board feels it is unable to even begin in IPR, decisions
not to begin an IPR are not appealable at all.
And so, if sovereign immunity starts chilling the board
from taking action, that will not be something that can be
litigated up to the Court of Appeals.
Mr. Jeffries. Thank you. My time is expired. Thank you.
Mr. Issa. Thank you. I am only going to inquire; the
gentleman from Texas is next. Will the gentleman be able to
remain? Okay, the gentleman from Texas is recognized.
Mr. Farenthold. Thank you very much. You know, we have had
numerous hearings in this committee and other committees in
Congress about the high price of prescription drugs, especially
in the United States. The patent system is one of the reasons
that that is there, but you also see problems once a drug goes
into a generic when one company seems to be the only
manufacturer of the drugs. And the pharmaceutical industry is
taking a big hit in public perception, to the point it is
forcing Congress to investigate this and look for solutions.
What we are talking about now, this scheme by which we
shield patents from review, seems to me to be another one of
the abuses that, you know, non-intellectual property scholars--
and I will go to the average American--are just--they just
throw up their hands. You know this is what is wrong with the
system; this is what is wrong with Washington and they are mad
about it.
So, I want to start with Mr. Jay. Could you speak about the
balance that is in the system right now with respect to the
name-brand pharmaceutical companies and the inventions they do,
the link to the patent, and how they go into generic, and how
that affects cost, and how this might upset that balance?
Mr. Jay. Absolutely, Congressman. Thank you for the
question. Innovation is obviously tremendously important in the
pharmaceutical industry, but not every patent that is issued on
a pharmaceutical product represents a true innovation.
And so, striking that balance is what the Hatch-Waxman
framework is about, and it is what the IPR system is being used
for as well, to sift between those patents that represent true
innovations and that justify giving a period of market
exclusivity to the innovator, and those that are really just an
attempt to kind of evergreen the franchise, to make the
monopoly last longer through a second-generation patent that
does not represent a true innovation.
Mr. Farenthold. And what effect does that have on prices?
Mr. Jay. When there is no competition, of course prices are
higher. That is why, for example, the price for Restasis, which
is the product we have all been talking about, has more than
doubled over 10 years when there is no competition.
Mr. Farenthold. Now, the Federal Circuit judge sitting by
designation in district court on the Allergan case said the
court ``has serious concerns about the legitimacy of the tactic
that Allergan and the tribe have employed. What Allergan seeks
is the right to continue to enjoy the considerable benefits of
the U.S. patent system without accepting the limits that
Congress has placed on those benefits through the
administrative mechanism for cancelling invalid patents.'' You
are familiar with this case. Do you agree with the judge in
that?
Mr. Jay. Absolutely. I----
Mr. Farenthold. Go ahead.
Mr. Jay. Judge Bryson has been around the patent system a
long time. As you mentioned, he is primarily an appellate
judge. He sits by designation in Texas a lot. You know, he is a
veteran of the system, and we agree with his observation.
Mr. Farenthold. At the risk of opening this up and
involving more folks in it, sovereign immunity is also enjoyed
by the States and State universities. Is there an unfairness in
the system that they are able to, say, be immune from copyright
infringement on the software they use for--we will say word
processing, just in developing the memos associated with
developing whatever they develop.
But yet they can enjoy the patent and copyright system on
what they create, but they are not held accountable for their
abuses of it. Is there a problem there, too?
Mr. Jay. I would say a couple of things about that. Number
one, as I mentioned before, you know, and as I think your
question recognizes, often a State university's patent
represents innovation that goes on on that campus, you know, by
the faculty at that State university, you know, true
innovation, not renting out the sovereign immunity. And second,
you know, the difference between tribal sovereign immunity and
State sovereign immunity is important. It is grounded in the
Constitution.
And third, it remains an option for States to agree to
waive their sovereign immunity, and you know, a State
government has more political accountability, you know, to the
customers who buy products in a market that would benefit from
competition, you know, than an Indian tribe does.
Mr. Farenthold. I have one final question for Mr. Johnson.
At the end of your testimony you said that fixing the IPR
system is squarely within this committee's jurisdiction. Give
me a couple of things we could do with fixing it, short of
throwing it out.
Mr. Johnson. You could require that the patent claims be
interpreted using the same rules both in the federal courts and
in the PTAB proceedings, for one. You could require that the
procedures be fair and look at due process issues that are
involved between the two.
Right now, many of the protections for patent owners that
were written into the America Invents Act have not been
implemented, either by regulation or they have been left to
individual panels of the PTAB, who basically do not apply them.
And a classic abuse of the system is the fact that almost half
of the petitions that are filed for IPRs are duplicative of
other petitions that were already filed, and some patent owners
have received not just one or two or three but a dozen or more
petitions, and in one case I have heard over a hundred
petitions.
Mr. Farenthold. All right, thank you I know we addressed
some of those as well. And my time is out.
Mr. Johnson. Suffice it to say, I could go on.
Mr. Farenthold. All right, thank you. I see my time is
expired.
Mr. Issa. We will try to give him time in good time. The
gentleman from Georgia, Mr. Johnson.
Mr. Johnson of Georgia. Thank you, Mr. Chairman. Mr. Mohr,
are assertions of sovereign immunity out of place in a modern
intellectual property system?
Mr. Mohr. Yes--oops, sorry about that. Yes.
Mr. Johnson of Georgia. Want to explain?
Mr. Mohr. Sure. It goes back to the conversation that we
were having earlier.
Mr. Johnson of Georgia. Sorry, I missed it. I was getting
in.
Mr. Mohr. Oh, apologies. The example I used had to do with
the States and how the States are involved in a variety of
activities, such as broadcasting sports games and merchandising
and research and licensing in which they act really very, very
similarly--in fact, identically, in many respects--to private
parties, and the idea is when they engage in that federally
created marketplace they should play by the same sets of rules.
It is a simple fairness question.
Mr. Johnson of Georgia. Professor Manheim.
Mr. Manheim. I think it is important to have a level
playing field across the intellectual property ecosystem, and
when one species of participant has an unfair advantage because
of immunity it distorts the entire system, whether it is a
State or a Native American tribe.
Mr. Johnson of Georgia. Mr. Jay.
Mr. Jay. We certainly agree that, especially as the
chairman brought up earlier, you know, when the Patent Office
has issued a patent, you know, it should be open to the Patent
Office to reexamine that patent and to decide whether the
Patent Office made a mistake really irrespective of who holds
that patent at any given time.
Mr. Johnson of Georgia. And Mr. Johnson.
Mr. Johnson. We would not have the problem if the rules
were being applied the same way both in the Patent Office and
in the courts. And by the way, as to administrative review,
sovereign immunity does not prevent an ex parte reexamination,
even a third party-requested ex parte reexamination, because
that is a different type of proceeding to which sovereign
immunity does not apply.
So, anyone at any time can go back in and have that patent
re-examined by the Patent Office, not by administrative patent
judges who really do not have any background in the particular
field to which the invention pertains, but by elite patent
examiners who actually have experience in understanding the
prior art and can do a much better job of reconsidering them.
And those have existed for 40 years, are considered to be
fair, have reached resolutions comparable to the Federal
courts, and to be an aid which is not susceptible to troll
abuse. It is virtually unheard of with respect to ex parte re-
examinations.
Mr. Johnson of Georgia. Thank you. In light of how Allergan
has moved to distort, for lack of a better word, the inter
partes review process. Is there a role for Congress to play on
this issue? Anybody?
Mr. Jay. I would happily speak to that, Congressman. We
think that the issue really is that the assertion of tribal
sovereign immunity after a rental transaction like this, you
know, threatens to gum up the well-working system, and it
threatens to raise prices by allowing some patent owners to
escape review when their patents are flawed. We think that
there is a role for Congress to play to ensure that sovereign
immunity cannot be used to keep bad patents from being
subjected to review.
Mr. Johnson of Georgia. Yes, sir, Mr. Johnson.
Mr. Johnson. In the case of drugs and would-be generic
drugs, it is impossible for sovereign immunity to stop that,
because under the procedures of the Hatch-Waxman act, after the
paragraph four certification is given the patent owner must
bring suit in Federal court if they want to stop that generic
from coming on the market. And when they bring suit in Federal
district court they waive sovereign immunity, so they do not
stop anything from coming out unless they sue, and if they sue,
sovereign immunity does not apply. There is no known case of a
drug being kept off the market because of sovereign immunity.
Mr. Jay. Not yet.
Mr. Manheim. Mr. Jeffries asked a similar question and
suggested that we might let the courts deal with the problem.
However, the Supreme Court has made it pretty clear when it
comes to tribal sovereign immunity that it is a matter for
Congress to deal with and not for the courts.
Mr. Johnson of Georgia. Mr. Mohr.
Mr. Mohr. I think for us there would be no quicker way for
me to go from five-eight to five feet than to get out in front
of my members. Where we are right now is that we are extremely
concerned about the proliferation of this kind of arrangement.
We believe it is destructive. We think it is really important
because the issue is complicated, particularly if you are
concerned about stopping this kind of transaction with States.
It is going to require careful study, and we are glad that you
are examining this, but we are not in a position to endorse
legislation at this time.
Mr. Johnson of Georgia. Thank you, and I yield back.
Mr. Issa. The gentleman yields back. We now go to the very
patient gentleman from Florida, Mr. Gaetz.
Mr. Gaetz. Thank you, Mr. Chairman. Mr. Manheim, one of the
great threats to creativity in the American economy is the
theft of intellectual property, particularly from China. The
United States has to maintain some degree of credibility around
the world to be able to marshal international efforts to bring
China and other violators into compliance with norms.
In recent years, some studies have indicated that the
United States has slipped from the leading standard in
intellectual property to tied for tenth with Hungary. Is it
your assessment that the current construct of this sovereign
immunity regime would continue to undermine the United States'
credibility on broader issues related to intellectual property?
Mr. Manheim. I do not believe so. I agree with your
assessment, by the way, and of course, intellectual property is
the major engine of the U.S. economy, so we want to do
everything to promote innovation and smooth the wheels of
progress. But I do not believe that the sovereign immunity
issue has a great impact on the direction we have. I think
there are other reasons for Congress to examine it, but not
necessarily because it is going to affect the U.S.'s
competitiveness in the world economy.
Mr. Gaetz. Mr. Mohr, you stated earlier in response to, I
believe, Mr. Johnson's question that tribes ought to act like
any other private stakeholder in the pursuit of intellectual
property. Have I paraphrased you correctly?
Mr. Mohr. Not quite. I think what I said was that sovereign
immunity does not have a place in a modern intellectual
property system, which is a little different.
Mr. Gaetz. Fair. Are there areas now where tribes are
treated differently in the utilization of drugs than perhaps
States or other entities?
Mr. Mohr. I think you would have to direct that question to
somebody who knows a lot more about Indian tribes than I do. I
cannot answer it.
Mr. Gaetz. Sure. In the development of intellectual
property, would we agree that there are some circumstances
where tribes need to be treated differently than the several
states?
Mr. Mohr. It is theoretically possible, sure.
Mr. Gaetz. All right. So, one example that comes to mind
for me is cannabis. Right now, tribes are not under the same
restrictions that other commercial entities are regarding the
cultivation, production, and distribution of cannabis.
Is there a risk if we were to adopt any of the proposals
that have been discussed today that we could throw a wet
blanket over innovation in the cannabis space if tribes were
not treated differently but were instead treated like any other
commercial actor?
Mr. Mohr. That is a fair question. I mean, there are two
answers. I have two answers to that question. The first is that
we have no position on legal marijuana. The second answer to
that question is that I think, again, if the tribe--we are
looking at two different things. One is that if the tribe were
to seek IP protection, specifically patent protection, for
whatever they developed, our view would be that they should be
subject to IPR to review those patents.
Mr. Gaetz. Mr. Chairman, I would simply say that, as we
move forward, there are areas where tribes are treated
differently that can create an ecosystem for creativity that
might not exist otherwise, and in solving the various
challenges that we have seen raised today, I would hate to see
us have an unintended consequence of potentially limiting that
innovation, particularly in the area of cannabis.
Mr. Issa. If the gentleman would yield?
Mr. Gaetz. I will.
Mr. Issa. Being an entrepreneur, but not in that particular
field----
Mr. Gaetz. Not yet, Mr. Chairman. You are from California.
Mr. Issa. This job sometimes drives me to drink. But I
agree with the gentleman's premise that nothing we do here
should limit sovereign immunity of the States or of Native
American tribes in a way that would have any consequences
beyond the administrative issue before us, and I think you are
exactly right.
Mr. Gaetz. I yield back.
Mr. Issa. The gentleman yields back, which leaves me and
Mr. Nadler. I want to follow up on a couple of things I heard,
because I think there are some very important points.
Mr. Johnson, I do not know whether you have got these guys
surrounded or they have got you surrounded, but you are doing a
really great job. But I want to follow up on some things,
because some of the people who, in a broad sense of the word,
you may be speaking for today went out of their way to kill Mr.
Goodlatte's bill because he would not, I would not, many of us
would not do an outright carve-out on the PTAB process for
pharma and bio.
And I do not think anyone in this room, including some of
my friends from the industry, are going to object to that being
said. But one of the reasons was we were not able to find an
effective alternative to an outright carve-out, and I think
there were a couple of things you said here today that I want
to make sure we get into the record.
You know, one of them had to do with the double standard;
the other had to do with your assertion particularly that your
PTAB judges, and I have one next to me, may or may not be
experts in the field, and I will take that point.
And so, what I would like you to do for the record if you
are able to do it, individually or as part of a group, is to
look at the various off-ramp possibilities that could bring the
experts back in.
Currently, it is routine in a PTAB case to stay an ex parte
reexamination that may be going on. There may be a question of
fairness if the patent holder had become aware of some prior
art, submitted that prior art, and reasonably believes that
with an examiner knowledgeable in the area would be able to
limit their claims, maybe change a dependent claim here or
there, and come out with a bona fide as-new patent, and I would
like to make sure that even if we can never agree on some
things, that we explore the process of amending.
And I say that, particularly, because the one area I am
concerned in is when we voted for AIA, we went out of our way
to give the court, the administrative court, the ability,
actually, to amend claims, and they have used it almost never.
And one of the reasons may be your assertion here today, that
they lack the expertise, the confidence to do so, or they do
not believe, perhaps, that we meant what we said. If you have
any comments, and I would go to Mr. Mohr on this part of it.
Mr. Johnson. Yes, that was the intention of the AIA to
allow amendments, but I think when it came to implementation,
in the short timeframe and given the backgrounds and other
issues before the APJs, it seemed too unwieldy.
They just, I think, did not know how to get their hands
around the examinational aspect and seemed uncomfortable to do
what most people would do, which would be to assume that any
claim narrower than the originally allowed claim, any amended
claim that was narrower, and they were required to be narrower,
should be presumed to be valid.
Because if you narrow down, if you have a claim saying you
own the whole property, and you say, ``Well, at least I own the
middle of it,'' you could presume that was a valid claim. But
they seemed reluctant or unwilling to do that, and I think they
punted and decided they just would not allow amendments.
Mr. Issa. For the other witnesses that observe the
process--and I know this is slightly outside the one part of
the hearing, but it is certainly within the subcommittee's
jurisdiction--would you agree that this is one of the areas
that could be considered a deficit of this process? Anyone?
Mr. Jay. One development to note on that, Mr. Chairman, is
that the Federal Circuit sitting on bond has just recently
changed the rules for what has to be shown in order to amend a
claim. You know, that literally happened within the past few
weeks and has not had a chance really to percolate. That
obviously----
Mr. Issa. It always is interesting to see when the Fed
Circuit changes our laws, but having said that, you are right
that encouraging a process is part of it. But let me just go
back to Mr. Johnson's statement for the other three.
If these judges are not the subject area experts, are we in
fact asking a job that these judges are not generalist, but
they are also not in specificity the experts that would be
assigned within the Patent Office ordinarily to do an
examination or reexamination? Mr. Mohr, you have got some
experience there. Would you concur with that?
Mr. Mohr. I would say your statements about my experience
there are overrated, sir. What I would say is this----
Mr. Issa. Let's just say that I have had to sit there in
the old Crystal City with examiners who knew more about my
products than I did, and I was the inventor, so I have been
impressed at times with many of the well-read examiners. And I
do not necessarily have the same experience other than my
Federal court judges at the end of court cases, after they were
decided off, often still had questions.
Mr. Mohr. From our perspective, I think our members believe
the IPR proceeding is working well, as it is, and we believe
that the In re Aqua products decision should be allowed to
percolate through the PTO before any consideration of tinkering
occurs.
Mr. Issa. Okay. I have been called a tinkerer at times. I
have always taken as a compliment. Mr. Johnson.
Mr. Johnson. Yes, I think I am the only one on the panel
who is registered to practice before in the Patent Office and
has actually written, prosecuted, and appeared before the
office----
Mr. Issa. Well, then we can disallow you altogether.
Mr. Johnson. Right, you can. I am guilty of whatever you
want to charge me. But I would be happy to submit supplemental
testimony on the off-ramp idea. It has received a fair amount
of attention, and I believe Chief Judge Michel in his
supplemental testimony suggested it was something that should
be looked at.
Mr. Issa. Okay, and I will welcome that. I also would
welcome it from organizations that some of you may be involved
in. The only question I would ask is when you look at the off-
ramp, the most important question that probably would be asked
and have to be answered by us is what would be the litigable
date on the new, emerging claim? In other words, a normal
reexamination you get the benefit that it is a lesser included,
and you keep your original litigation date on a new patent.
Especially, if PTAB has determined that you were overly
broad, you may lose some of your trailing edge, and those
questions, it would be helpful if justifications for all or
some to be taken away. Obviously, one of the examples would be
when we normally have a Latcha [phonetic] situation of six
years. If time has gone by, would we at least limit past
damages to six years if something emerged with a, if you will,
new claim, or would we make it upon the day it went into
reexamination, on the day it went out?
These questions are important because I am--and I think my
ranking member, too--we would like to find ways to take what we
have--what Mr. Mohr likes, what Mr. Johnson is more reticent
about--and find something that would be agreeable between the
parties as even better. And if we can do that, that is
certainly a goal of this committee. Mr. Johnson.
Mr. Johnson. I would be happy to work on that but suggest
that as long as the standards for finding invalidity are lower
one place than the other, you are not going to get agreement
because the people who see themselves as infringers will want
the lower standard; the patent owners will want a higher
standard.
So, part and parcel of this will be a need to conform all
proceedings so that everybody agrees there is one standard of
validity, one standard of non-obviousness, one standard of
novelty that is applied everywhere, and then I do believe that,
procedurally, you could get where you want to go.
Mr. Issa. Well, I hope to get there. I will say one thing.
I have seen article III judges who know the standard but often
consider that the standard is the same, and I think you would
probably find that that has been the case.
Certainly, in the case of the Allergan there certainly was
a decision that, by clear and convincing evidence, the examiner
was just dead wrong, period, and since the examiner did have
the prior art, the actual prior patents, and made a decision
which was patentable over it, the judge found a way to
completely say that he was wrong and not show any deference, if
you will, to that since the prior art was fully considered.
Mr. Johnson. Since the beginning of the patent system, the
courts have always looked at these issues, and when new
evidence arises or when the evidence is considered in the full
exposure of development to discovery, live testimony heard and
determined by the courts, patents have been found invalid, or
they have been found valid. And that is always going to
continue, and we are not going to stop that.
Mr. Issa. I look forward to it. Mr. Nadler, do you have
anything else?
Hearing no others, I will simply close with an admonishment
to all that see the record to look at the 11th Amendment,
because in looking at it, the one thing it makes clear is it
never limited the Federal Government's decision on its behalf
to decide what the States were responsible for.
And I only say that because during the discussion today, so
many people seem to think that the 11th Amendment applied, and
I think we have to be careful. It certainly applies to if I
want to sue my State; it does not seem to apply.
And in legislation that we will be preparing we will make
the assumption that if the decision is a decision of the
Federal Government, it is binding on the States and on Indian
tribes equally as to what the Federal Government's position is,
notwithstanding the litigants on either side. And I only say
that because we will be writing legislation based on that
assumption, and I am happy to have you send me a different view
on the 11th Amendment.
Thank you, and we stand adjourned.
[Whereupon, at 3:33 p.m., the subcommittee was adjourned.]
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