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PATENT ACT OF 2005

HEARING

BEFORE THE

SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

ON

H.R. 2795

JUNE 9, 2005

Serial No. 109–24

Printed for the use of the Committee on the Judiciary

(

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

(II)

COMMITTEE ON THE JUDICIARY 

F. JAMES SENSENBRENNER, JR., Wisconsin, Chairman 

HENRY J. HYDE, Illinois 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

SPENCER BACHUS, Alabama 

BOB INGLIS, South Carolina 

JOHN N. HOSTETTLER, Indiana 

MARK GREEN, Wisconsin 

RIC KELLER, Florida 

DARRELL ISSA, California 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

CHRIS VAN HOLLEN, Maryland 

DEBBIE WASSERMAN SCHULTZ, Florida

PHILIP G. KIKO, General Counsel-Chief of Staff 

PERRY H. APELBAUM, Minority Chief Counsel 

SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

LAMAR SMITH, Texas, Chairman

HENRY J. HYDE, Illinois 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

WILLIAM L. JENKINS, Tennessee 

SPENCER BACHUS, Alabama 

BOB INGLIS, South Carolina 

RIC KELLER, Florida 

DARRELL ISSA, California 

CHRIS CANNON, Utah 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

HOWARD L. BERMAN, California 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

ZOE LOFGREN, California 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

ROBERT WEXLER, Florida 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California

BLAINE MERRITT, Chief Counsel 

DAVID WHITNEY, Counsel 

JOE KEELEY, Counsel 

RYAN VISCO, Counsel 

SHANNA WINTERS, Minority Counsel 

(III)

C O N T E N T S 

JUNE 9, 2005

OPENING STATEMENT 

Page 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Chairman, Subcommittee on Courts, the Internet, and Intellectual Property .................................................................................................... 1

The Honorable Howard L. Berman, a Representative in Congress from the 

State of California, and Ranking Member, Subcommittee on Courts, the 

Internet, and Intellectual Property .................................................................... 3

WITNESSES 

Mr. Gary L. Griswold, President and Chief Intellectual Property Counsel, 

3M Innovative Properties Company, on behalf of the American Intellectual 

Property Law Association 

Oral Testimony ..................................................................................................... 4

Prepared Statement ............................................................................................. 6

Mr. Carl E. Gulbrandsen, Managing Director, Wisconsin Alumni Research 

Foundation (WARF) 

Oral Testimony ..................................................................................................... 16

Prepared Statement ............................................................................................. 19

Mr. Josh Lerner, Jacob H. Schiff Professor of Investment Banking, Harvard 

Business School 

Oral Testimony ..................................................................................................... 33

Prepared Statement ............................................................................................. 34

Mr. Daniel B. Ravicher, Executive Director, Public Patent Foundation 

(PUBPAT) 

Oral Testimony ..................................................................................................... 36

Prepared Statement ............................................................................................. 38

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Howard L. Berman, a Representative 

in Congress from the State of California, and Ranking Member, Subcommittee on Courts, the Internet, and Intellectual Property ......................... 63

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan ............................................................. 63

Prepared Statement of the Honorable Zoe Lofgren, a Representative in Congress from the State of California ....................................................................... 64

Memorandum of the Honorable Zoe Lofgren, a Representative in Congress 

from the State of California ................................................................................ 65

Letter from Michael K. Kirk, Executive Director, American Intellectual Property Law Association (AIPLA), in response to questions to Gary Griswold, 

President and Chief Intellectual Property Counsel, 3M Innovative Properties Company, submitted by the Honorable Zoe Lofgren, a Representative 

in Congress from the State of California ........................................................... 67

Prepared Statement of the Computer & Communications Industry Association ........................................................................................................................ 75

(1)

PATENT ACT OF 2005

THURSDAY, JUNE 9, 2005

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COURTS, THE INTERNET,

AND INTELLECTUAL PROPERTY, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC.

The Subcommittee met, pursuant to notice, at 9:20 a.m., in Room 

2141, Rayburn House Office Building, the Honorable Lamar Smith 

(Chair of the Subcommittee) presiding. 

Mr. SMITH. Good morning. The Subcommittee on Courts, the 

Internet, and Intellectual Property will come to order. 

Let me say that I should have had more faith in our witnesses 

and in the audience. I had no idea you all would be here and be 

so prompt. When the building was closed this morning, I thought, 

‘‘Well, we’ll be lucky to start at 10:00;’’ then I backed it up to 9:30. 

Then I get a call that three of our witnesses have already showed 

up at 9:00, so I realized that we’re going forward pretty much on 

time as expected. So thank you for your promptness, for your interest, and for your diligence in coming even though there was a 

delay, as you all know, getting into the building this morning. 

I’m going to recognize myself for an opening statement, then the 

Ranking Member, and then we’ll proceed. 

Today marks our third hearing on patent reform in the 109th 

Congress. The first two focused on the contents of a Committee 

Print. I want to take a moment to commend the Members of this 

Subcommittee, all of the witnesses, and other interested parties 

who have contributed so much to this project over the past 6 

months. 

To arrive at this point is no small accomplishment, given the 

scope of the bill and its eventual application to so many lives and 

jobs. The bill in its current form is, without question, the most 

comprehensive change to U.S. patent law since Congress passed 

the 1952 Patent Act. 

This Subcommittee has undertaken such responsibility because 

the changes are necessary to bolster the U.S. economy and improve 

the quality of living for all Americans. The bill will eliminate legal 

gamesmanship from the current system that rewards lawsuit 

abuses over creativity. It will enhance the quality of patents and 

increase public confidence in their legal integrity. 

This will help individuals and companies to obtain seed money 

for research, commercialize their inventions, grow their businesses, 

create new jobs, and offer the American public a dazzling array of 

products and services that make our country the envy of the world. 

2

All businesses, small and large, will benefit. All industries, directly 

or indirectly affected by patents, including finance, automotive 

manufacturing, high-tech, and pharmaceuticals, will profit. 

The bill before us is a good first cut of what we envisioned when 

this process commenced. No doubt, it will undergo changes as we 

proceed to markup. In this regard, I encourage the industry working groups to continue negotiating. If interested parties keep talking and remain committed to a holistic approach in which the 

greater good prevails, then we can and will produce a patent bill 

that benefits all Americans. 

That said, I will note that the bill makes the following substantive changes from the Committee Print. First, in response to 

criticism of the apportionment of damages section of the print, the 

bill contains language from case law that more clearly distinguishes between an inventive contribution and other features. 

Second, the bill replaces the print text governing injunctive relief 

which does not allow a court to presume the existence of irreparable harm. Instead, the new language supplements the existing 

statute on injunctive relief by compelling a court to consider the 

fairness of the remedy in light of all the facts and the relevant interests of the parties associated with the invention. The provision 

also makes it easier for a judge to stay an injunction pending appeal. 

Third, the bill addresses the issue of continuations, by authorizing the PTO director to limit by regulation the circumstances in 

which an applicant may file a continuation and still be entitled to 

the priority date of the parent application. 

Fourth, the bill includes a second window for proceedings under 

the post-grant opposition system. This additional review must be 

initiated within 6 months from the date on which a notice of infringement is received. 

Finally, section 10 of the bill allows third-party submission of 

prior art within 6 months after the date of publication of the patent 

application. The third party must articulate the relevance of each 

submission, and pay an accompanying fee to defray PTO expenses 

and discourage frivolous submissions. 

The other provisions in the bill largely mirror those in the print, 

with the exception of clarifying technical and conforming changes. 

We intend to mark up this bill by the end of the month, so it is 

incumbent upon Subcommittee Members, industry stakeholders, 

the PTO, and other interested parties, to work hard and in good 

faith between now and June 30th. 

That concludes my opening statement. But before I recognize the 

Ranking Member, Mr. Berman, I do want to say in recognizing him 

that this is truly a bipartisan bill. It started off as a Smith-Berman 

bill. It is now a ‘‘Smith-Berman-Goodlatte-Boucher-Lofgren-Darrell 

Issa and, I hope, Bill Jenkins bill.’’ We have a nice bipartisan bill 

going forward. 

And this isn’t the first Smith-Berman bill; nor will it be the last 

Smith-Berman bill. There will probably not be a Smith-Berman immigration bill, but there will be many more IP bills. And that’s one 

of the advantages and satisfactions of this particular IP Subcommittee. 

3

So in saying so, let me thank Mr. Berman again for his co-sponsorship and for his input along the process, and will now recognize 

him for his opening statement. 

Mr. BERMAN. Well, thank you, Mr. Chairman. And I have hopes 

that, with the passage of time, you will see the error of your ways, 

and there will be a joint Smith-Berman bill on immigration. 

[Laughter.] 

Thanks for scheduling the hearing on this Patent Act of 2005. 

Thank you for your leadership in putting what I think is a credible 

and good bipartisan package of provisions together in this legislation, and for focusing both the Subcommittee and the interested 

parties and the public on an intention to move legislation expeditiously. 

A number of groups have worked diligently to arrive at a consensus on reforms necessary to improve existing patent laws. There 

seems to be agreement that any legislation should focus on three 

broad subjects: the decrease in patent quality; the increase in litigation abuses; and the need to harmonize U.S. patent laws with 

the patent laws of foreign countries. 

The Chairman and I and our staffs have carefully considered the 

copious comments on the Committee Print, and have carefully 

crafted H.R. 2795 to respond to the concerns. 

I initially became interested in patent reform primarily because 

of the multitude of questionable-quality patents that were being 

issued. High-quality patents are essential to a healthy patent system. Poor-quality patents tend to spawn litigation; which in turn 

creates uncertainty in markets that depend on patent rights. As a 

result, investors hesitate to invest; innovators hesitate to invent. 

That is why I’m pleased that there is strong support for a key 

quality provision in the bill allowing third parties to submit prior 

art to examiners within a limited time frame. With section 10, we 

have taken an important first step in addressing the problem of 

poor patent quality, by enabling examiners to have more information from additional sources. During the question-and-answer portion of the hearing, I intend to explore the merits of the additional 

quality measures, such as the second window in the post-grant opposition procedure. 

The bill is by no means a perfect solution, but I believe many of 

my additional concerns will be addressed as the bill goes through 

Committee. For example, the PTO has voiced some concerns about 

its ability to administer the provision on the duty of candor. If the 

agency tasked with managing the procedure believes it will have 

trouble doing so, it’s worth taking a second look at the consequences of the language. 

Furthermore, I think the harmonization provisions need to be 

fleshed out a bit more to address the concerns of small inventors 

and universities; which I hope at least one of the witnesses will 

speak to today. 

As we move forward in this process, I hope we’ll continue to seek 

a consensus on the best way to reform our patent system. I look 

forward to hearing from the parties interested in patent reform 

over the next few weeks, in order to rectify any unintended consequences presented by the text of the bill. Overall, I believe that 

our bill has addressed a number of pressing issues and will cerVerDate 0ct 09 2002 11:41 Jul 06, 2005 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\060905\21655.000 HJUD1 PsN: 21655
4

tainly create a healthier, more effective patent system. Thank you, 

Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Berman. And without objection, other 

Members’ opening statements will be made a part of the record. 

And I’d like to invite our witnesses to stand and be sworn in. 

[Witnesses sworn.] 

Mr. SMITH. Our first witness is Gary Griswold, President and 

Chief Intellectual Property Counsel of 3M Innovative Properties 

Company, who will be testifying on behalf of the American Intellectual Property Law Association, or AIPLA. He has practiced intellectual property for 27 years at 3M and Dupont, and has served as 

a past president at both AIPLA and the Intellectual Property Owners Association. Mr. Griswold received a B.S. in chemical engineering from Iowa State University, an M.S. in industrial administration from Purdue University, and a J.D. from the University of 

Maryland. 

Our next witness is Carl E. Gulbrandsen, Managing Director of 

the Wisconsin Alumni Research Foundation, or WARF, which is 

the patent management organization for the University of Wisconsin at Madison. Mr. Gulbrandsen received his B.A. from Saint 

Olaf College in Northfield, Minnesota. He also earned a doctorate 

in physiology from the University of Wisconsin, Madison; and a law 

degree from the University of Wisconsin Law School. 

Our next witness is Josh Lerner, the Jacob H. Schiff Professor 

of Investment Banking at Harvard Business School, with a joint 

appointment in the Finance and Entrepreneurial Management 

Units. His research focuses on the structure of venture capital organizations and their role in transforming scientific discoveries into 

commercial products. He also examines the impact of intellectual 

property protection, especially patents, on the competitive strategies of firms in high-tech industries. I have found very helpful his 

most recent book, co-written with Adam Jaffe, entitled ‘‘Innovation 

and Its Discontents.’’ Our final witness is Dan Ravicher, Executive Director of the Public Patent Foundation, or PUBPAT, in New York. PUBPAT is a 

not-for-profit legal services organization that was formed to represent the public interest ‘‘against harms caused by wrongly issued 

patents and unsound patent policy.’’ Mr. Ravicher received his 

bachelor’s degree in materials science from the University of South 

Florida, and his law degree from the University of Virginia. 

Welcome to you all. We have your complete written statements, 

which will be made a part of the record, without objection. And 

please, as you all know, limit yourselves to 5 minutes on your opening remarks. 

And Mr. Griswold, we’ll begin with you. 

TESTIMONY OF GARY L. GRISWOLD, PRESIDENT AND CHIEF 

INTELLECTUAL PROPERTY COUNSEL, 3M INNOVATIVE 

PROPERTIES COMPANY, ON BEHALF OF THE AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION 

Mr. GRISWOLD. Thank you. Chairman Smith, Ranking Member 

Berman, Members of the Subcommittee, I am pleased to have the 

opportunity to present the views of AIPLA on H.R. 2795, the ‘‘Patent Act of 2005.’’

5

Like one-third of the AIPLA’s active members, I come from the 

corporate world where I am currently president and chief IP counsel of 3M Innovative Properties Company, a subsidiary of 3M, a 

company that sells over 50,000 different products, from pharmaceuticals to electronics to consumer products. 

A special AIPLA legislative strategies committee, established in 

the fall of 2003, was charged with devising a coordinated set of reforms to enhance the quality, speed, and efficiency of the patent 

system. 

The committee recommended that the patent laws be amended 

to: adopt a first-inventor-to-file system, with an objective definition 

of ‘‘prior art;’’ limit or eliminate the subjective elements in patent 

litigation; complete the desirable legislative enhancements originally proposed in the American Inventors Protection Act; and adopt 

a fair and balanced post-grant opposition system that takes advantage of the elimination of the subjective elements in patentability 

criteria that accompany adoption of the first-inventor-to-file principle. 

AIPLA would like to highlight, however, the most fundamental 

problem in need of a solution: adequate and stable funding for the 

PTO. Both the National Academies of Science and the Federal 

Trade Commission, following their thorough reviews of the patent 

system, agree with AIPLA on this crucial point. The reforms in 

H.R. 2795 will require the PTO to play a greater role in the patent 

system, a role it cannot play unless it’s adequately funded. 

Most provisions of H.R. 2795 contribute to improvements in the 

quality, speed, and efficiency of the patent system. These include 

new section 8 that authorizes the director to regulate the filing of 

continuing applications, while ensuring that applicants can obtain 

adequate protection for their inventions; and new section 10, which 

will provide the public with an opportunity to submit information 

to the office to improve the initial examination. 

These provisions, coupled with the provisions carried over from 

the Committee Print that implemented the recommendations of our 

special committee, will materially improve patent quality and simplify litigation. 

Other provisions which have found their way into H.R. 2795 do 

not address these fundamental goals. Here, I am speaking of modification of the fundamental exclusivity of the patent right, and the 

transformation of post-grant procedure into a patent revocation 

procedure. Neither of these proposals will improve the quality, 

speed, and efficiency of the patent system. 

Of greatest concern to AIPLA is the proposal in section 7 to modify the existing rules of granting permanent injunction for a valid 

and infringed patent. AIPLA strongly opposes this provision. It will 

devalue the property right of patentees by undercutting their traditional right to injunctive relief against adjudged infringers. 

Its impact will be especially harsh on independent inventors, who 

already face great difficulty in commercializing their patented inventions. It will be likewise equally harsh on universities, who are 

precluded in many, if not most, cases from directly commercializing 

their inventions and who must therefore rely on licensing and selling them. 

6

It will also set an extremely unfortunate precedent internationally for the United States, by suggesting to other nations that there 

need be no patent exclusivity for all inventions; that other nations 

can also pick and choose the patented inventions for which they 

grant exclusivity. 

This Subcommittee recently held hearings on the enforcement 

problems that the U.S. right-holders are experiencing in Russia 

and China. One can only imagine what might be considered a ‘‘fair 

remedy in light of the relevant interests of the parties’’ in those 

countries. The danger of this provision seems inordinately high, in 

view of the other possibilities of addressing the problems it is intended to solve. AIPLA strongly urges that this provision be 

dropped. 

As I noted at the outset, AIPLA is a strong proponent of an effective and balanced post-grant procedure to allow the public to 

promptly correct mistakes made in the PTO in issuing patents. We 

strongly believe, however, that there should be only one window for 

requesting an opposition, and that the window should be 9 months 

after the patent is issued, to encourage the public to act promptly. 

After the initial 9-month period has passed and no opposition has 

been filed, patentees should enjoy a ‘‘quiet title’’ without a fear of 

later administrative challenges, except for inter partes reexamination procedure, which this bill has made more attractive. 

This brings me to the second window proposed in the new section 

of H.R. 2795, which would permit an individual to file an opposition not later than 6 months after receiving notice from the patent 

holder alleging infringement. 

AIPLA opposes a second window for bringing an opposition for 

the life of the patent. The post-grant procedure was conceived and 

designed as an early check on PTO quality. This proposed second 

window will remove the incentive to challenge patents during the 

first window, allowing improvidently granted patents to escape this 

important early quality-enhancing function and impede competition. 

A second window would increase the risks faced by patent holders, and dampen the enthusiasm for companies and venture capitalists to invest in the development and commercialization of patented technologies. 

Finally, a second window would, in effect, create a ‘‘patent revocation’’ system that does not fit the design of the post-grant system. It would require a significant restructuring of the provisions 

on discovery, claim amendment, burden of proof, estoppel, etc. For 

all these reasons, AIPLA strongly urges that the second window be 

dropped. 

Thank you for the opportunity to present my views, our views, 

and I’d be pleased to answer any questions. 

[The prepared statement of Mr. Griswold follows:]

PREPARED STATEMENT OF GARY GRISWOLD

Mr. Chairman: 

I am pleased to have the opportunity to present the views of the American Intellectual Property Law Association (AIPLA) on H.R. 2795, entitled the ‘‘Patent Act of 

2005.’’ AIPLA congratulates you for your efforts to identify important issues affecting the U.S. patent system and to search for appropriate reforms to increase its effectiveness. 

7

AIPLA is a national bar association of more than 16,000 members engaged in private and corporate practice, in government services, and in the academic community. The AIPLA represents a wide and diverse spectrum of individuals involved directly or indirectly in the practice of patent, trademark, copyright, and unfair competition law, as well as other fields of law affecting intellectual property. Since our 

members represent both patent owners as well as those against whom patents are 

asserted, we have a keen interest in reforms that further an efficient, effective, and 

balanced patent system. 

I appear today in my capacity as a Past President of AIPLA and as the Chair 

of two Special Committees appointed by then President Rick Nydegger to review 

and prepare responses to two recent studies on the patent system about which I will 

say more in a moment. But like one third of AIPLA’s active members, I come from 

the corporate world. I am currently President and Chief IP Counsel of 3M Innovative Properties Company, a subsidiary of 3M. 3M sells over 50,000 products, including consumer products such as ‘‘Post-It’’ Notes and ‘‘Scotch’’ Tape, pharmaceuticals 

such as Aldara for the treatment of basal skin carcinoma; medical products such as 

tapes, drapes, and software; brightness enhancement film used in laptops and cell 

phones; industrial products such as abrasives, adhesives and tape; and electronic 

products such as flex circuits and electrical connectors. 3M received 585 U.S. patents in 2004, ranking 34th of worldwide and 15th of U.S. companies. 

THE NEED FOR REFORM

The U.S. patent system has, in certain respects, functioned remarkably well. Its 

successes today are in significant part attributable to a number of reforms that have 

been made by Congress during the past 25 years. The creation of the Federal Circuit, the passage of the Patent Law Amendments Act of 1984, the adoption of reexamination, and the enactment of the American Inventors Protection Act have made 

the patent system more open and much stronger as an incentive to invest in innovation. However, there are aspects of the U.S. patent system that are not working well 

today. Over the past decade, some of these elements of the patent system have, in 

fact, come to work less well. 

This conclusion is shared by others. Two recent studies of the U.S. patent system 

have produced lengthy reports that have largely come to the same conclusion. The 

Federal Trade Commission (FTC) report, published in October 2003, found that 

while most of the patent system works well, some modifications are needed to maintain a proper balance between competition and patent law and policy. The FTC 

made ten recommendations that focused on tuning the balance between patent owners’ rights to effective exclusivity in valid patents and the public’s right to be free 

from the competition-limiting effects of invalid patents. 

The report of the National Academies of Sciences’ Committee on Intellectual Property Rights in the Knowledge-Based Economy was published just one year ago, in 

April 2004. Like the FTC effort, it was the culmination of a multi-year study of the 

patent system. The NAS report found that the U.S. patent system played an important role in stimulating technological innovation by providing legal protection to inventions and by disseminating useful technical information. Moreover, with the 

growing importance of technology to the nation’s well-being, it found that patents 

are playing an even more prominent role in the economy. It concluded with seven 

principal recommendations to ensure the vitality and improve the functioning of the 

U.S. patent system, several of which overlap those made by the FTC. 

AIPLA has also studied the effectiveness of the patent system. Former AIPLA 

President Rick Nydegger recognized the need to review the functioning of the patent 

system almost two years ago and established a Special AIPLA Committee on Patent 

Legislative Strategies in an effort to provide more concrete and coordinated ideas 

for needed reforms to the patent law. The Special Committee was co-chaired by two 

other former AIPLA Presidents, Don Martens and Bob Armitage, and its membership was drawn from a diverse cross-section of AIPLA members. It included former 

senior officials of the United States Patent and Trademark Office, a retired federal 

district court judge, some of the nation’s leading patent litigators including Past 

Presidents of our Association, and in-house IP counsel drawn from several industry 

sectors. I served on this Special Committee. 

In efforts paralleling that of our Special Committee on Legislative Strategies, I 

had the privilege, as I mentioned earlier, of chairing two AIPLA Special Committees 

that undertook an exhaustive analysis of the recommendations in both the FTC and 

NAS reports and offered replies. These parallel and sometimes intersecting efforts 

stimulated us to take a closer look at a number of issues and push to further develop and refine concrete proposals for reforms. 

8

The Association’s position on needed patent law reforms coming out of this twoyear effort consisted of four elements. First, adopt a first-inventor-to-file principle 

using so-called ‘‘best practices’’ developed in the context of international patent harmonization. Second, remove the ‘‘subjective elements’’ from patent litigation that are 

responsible for much of the excessive cost of enforcing and challenging patents. 

Third, complete the reforms started under the American Inventors Protection Act, 

a step which is greatly facilitated given the compelling merits for doing so as part 

of a first-inventor-to-file system. Fourth, create a true post-grant opposition system 

available during the first nine months after patent grant in which mistakes made 

in issuing the patent could be corrected in a manner that is both timely and that 

fairly balances the interests of the patentee and the opposer. 

After developing these reform proposals that were ultimately approved following 

several meetings of AIPLA’s Board of Directors, we concluded that it would be highly desirable to take them to a broader public. After discussions with the officials responsible for developing similar recommendations in the FTC and NAS reports, we 

agreed with FTC and NAS to jointly sponsor three ‘‘Town Hall’’ meetings across the 

country. These were open forums to explain to all stakeholders the proposed reforms 

to the patent system and to allow them to offer their reactions and suggestions. We 

are holding the fourth and final meeting today where you, Mr. Chairman, are scheduled to deliver a luncheon address. This final meeting will allow us to distill the 

work of the three previous meetings. 

What is striking about the parallel efforts by these three quite different organizations with quite distinct missions are the many similarities in the diagnosis of what 

needs improving in the patent system and, especially between AIPLA and NAS, the 

convergence in the recommendations for doing so. 

For any organization putting together an effort at patent law reform, a critically 

important task is to make a clear separation between what is right with our patent 

laws—and does not requiring tinkering—and what is wrong with our patent laws—

and, therefore, should be the subject of focused attention. Where, for example, could 

reforms have the biggest benefits for all users of the patent system? What is actually ready for reform today—because a sufficient consensus already exists or could 

be developed—and sufficient study and scholarship has taken place? And where 

might more study and reflection be needed before forging ahead with changes to the 

patent system? Our assessment is that our work with the NAS and the FTC in large 

part validates our four-point reform package as a possible way forward to near-term 

patent reforms. 

We have been especially mindful that patent law reform is never easy because of 

the diversity of the constituencies with a stake in the patent system. However, 

AIPLA believes that successful patent law reform has been and always will be an 

effort at inclusion. This comes naturally to us because our membership reflects the 

diversity of stakeholders in the patent system—clients of our members both obtain 

patents and challenge patents. Similarly, our members represent clients for whom 

money is not a critical limitation on the ability to use the patent system and clients 

for whom the cost of the patent system is the chief limitation on the ability to enjoy 

its advantages. 

Our notion of inclusion means, therefore, that reforms work to make a better patent system not only for inventors with adequate resources—more often than not inventors connected with so-called ‘‘large entities’’ such as corporations—but also for 

the least financially able inventors—which includes many ‘‘independent inventors,’’

not-for-profit institutions, and small businesses. 

Another equally important aspect of inclusion relates to the manner in which the 

patent system works to protect the interests of those who seek patents, those who 

challenge patents, and the public. The patent system works best when standards 

for patentability are rigorously applied and mistakes—that will inevitably be made 

when patents are issued that should not have—can be readily corrected. While 

much emphasis is understandably placed on making the patent system work better 

for inventors, a fair and balanced patent system needs to work equally well when 

a member of the public seeks to have a mistake made in issuing a patent quickly 

and inexpensively corrected. 

Against this background, AIPLA believes that the time is right for Congress to 

adopt a coordinated and interrelated set of reforms to the patent system as recommended by the NAS and which we support:

• Adopt a first-inventor-to file system with an objective definition of ‘‘prior 

art’’—the information used to determine if an invention is new and non-obvious.

• Limit or eliminate the subjective elements in patent litigation, i.e., limit ‘‘inequitable conduct’’ and ‘‘willful infringement,’’ and eliminate ‘‘best mode.’’

9

• Complete the desirable legislative enhancements originally proposed in what 

became the American Inventors Protection Act of 1999.

• Adopt a fair, balanced post-grant opposition system that takes advantage of 

limiting or eliminating the subjective elements in patentability criteria and 

other best practice changes that accompany adoption of the first-inventor-tofile principle. 

FUNDING: AN ESSENTIAL PREREQUISITE FOR PATENT LAW REFORM

Before discussing our legislative proposals for patent law reform, we cannot overlook the most fundamental problem in need of a solution—adequate and stable funding and operational flexibility for the PTO. Any careful study of the U.S. patent system today would reach this conclusion—indeed, both the NAS and FTC recommended providing adequate funding for the PTO. The Office must be afforded the 

resources and capabilities to deal with a workload that has grown dramatically—

both in size and complexity. As patent rights have become more important, it has 

become much more important that the quality of PTO’s work improve. Important 

patents take too long to issue. Technologies new to patenting require building new 

capabilities for examining them, sometimes almost from scratch. 

The need for a more efficient and effective PTO will require adequate funding, but 

it will also require long-range planning, oversight, and accountability. The PTO can 

not be expected to successfully engage in such long-range planning without an adequate level of funding that it can depend on year after year, with no diversion of 

its fee revenues. AIPLA supported the PTO’s development of the Strategic Plan requested by Congress. For the Office to be able to build new capabilities, improve 

its quality, become more efficient, and serve all its constituencies, it must anticipate, plan for, and invest in new capabilities. This requires on-going efforts at longterm planning that must include long-range financial and operational planning. 

Of course, PTO planning and Congressional oversight will mean nothing without 

adequate funding. Many of the reforms that AIPLA and others are proposing, such 

as post-grant opposition, will require the PTO to play a greater role in the overall 

patent system. AIPLA is dedicated to working with the Congress, both this Committee and the Appropriations Committee, to secure a financing structure that will 

allow the patent law reforms which we propose to be achieved. However, we cannot 

emphasize enough the importance of this goal: the most significant patent law reforms absolutely depend on the PTO having the financing and operational flexibility 

to carry them out effectively and efficiently. 

H.R. 2795

H.R. 2795 contains a number of proposals for modifying the patent system. As explained above, AIPLA developed its recommendations for patent system reform 

building on the extensive research and hearings held by the FTC and the NAS. 

Other associations interested in the patent system such as the Intellectual Property 

Owners Association, the Intellectual Property Law Section of the American Bar Association, and the Biotechnology Industry Organization were developing recommendations along lines similar to AIPLA. 

In January, we became aware of a proposal from the Business Software Alliance 

to revise the patent laws. In some respects, our concerns overlapped. For example, 

we agreed in concept on the need to adopt an effective post-grant opposition system 

and the need to constrain burdens placed upon industry by the current jurisprudence involving the doctrine of willful patent infringement. In other respects, our 

proposals diverged. 

AIPLA has worked hard to seek common ground. AIPLA invited the four organizations mentioned above to meet to determine whether it might be possible to narrow the differences between our positions. We have held a number of meetings with 

these organizations (March 16, March 31, and May 9). Recognizing that there were 

certain issues where the organizations were far apart, several working groups were 

established to seek common ground on these issues as well as on issues where the 

divide was not as large. These working groups addressed willful infringement, damages, injunctive relief, post-grant oppositions, and pre-grant submission of prior art. 

From May 31st through June 2nd, in response to your urging Mr. Chairman, and 

with the able assistance of your staff, we held additional meetings with an expanded 

group of organizations (the Information Technology Industries Council, the Pharmaceutical Research and Manufacturing Association, the National Association of Manufacturers, and the Financial Services Roundtable among others). 

10

Sec. 3. Right of the First Inventor to File 

AIPLA supports the principle in Section 3 of H.R. 2795 that the first inventor to 

file an application for patent containing an adequate disclosure (35 U.S.C. § 112) of 

an invention should have the right to patent the invention. This change in U.S. patent law would bring a much needed simplification of the process and reduce the 

legal costs imposed on U.S. inventors. It would also improve the fairness of our patent system, and would significantly enhance the opportunity to make real progress 

toward a more global, harmonized patent system. 

The current system requires complex proofs of invention and is fundamentally unfair to independent inventors and small entities due to its costs and complexities. 

It frequently does not award patents to the first to invent. It uniformly awards patents to the first-inventor-to-file for a patent except in a very small number of cases 

where sufficient, corroborated invention date proofs can be marshaled to demonstrate that a second-to-file inventor can overcome the presumption currently afforded under our patent law in favor of the first inventor who filed. 

Moreover, the expense and complexity of the first-to-invent system mean that an 

inventor can be first to make the invention and first to file a patent application, 

but still forfeit the right to a patent because the inventor cannot sustain the cost 

of the ‘‘proof of invention’’ system. According to AIPLA’s 2003 Economic Survey, the 

median cost to an inventor in a simple, two-party interference is $113,000 to complete the preliminary phase (discovery) and over $300,000 to the final resolution. 

Costs of this magnitude place independent inventors, small entities and universities 

at a clear disadvantage. 

This disadvantage has been heightened in recent years by the new right of foreign-based inventors to introduce invention date proofs. While a decade ago a U.S.-

based inventor might have had some advantage because of the bar against relying 

on a foreign date of invention, this provision of U.S. patent law was outlawed by 

TRIPs. Thus, independent inventors, small entities and universities are now also 

subject to this kind of cost disparity from attacks brought by foreign applicants and 

parties. 

Former PTO Commissioner Gerald J. Mossinghoff presented empirical data at our 

Town Hall meetings based on his earlier research. See Gerald J. Mossinghoff, The 

First-to-Invent System Has Provided No Advantage to Small Entities, 88 J. Pat & 

Trademark Off. Soc’y 425 (2002). His data demonstrated conclusively that independent inventors, whose right to patent their inventions depended on their ability 

to prove that they were ‘‘first to invent,’’ managed to lose more often than not. In 

an April 15, 2005 Working Paper published by the Washington Legal Foundation, 

Mossinghoff’s most recent data suggests that the rate of loss by independent inventors has only accelerated over the past several years (Gerald J. Mossinghoff, Small 

Entities and the ‘‘First to Invent’’ System: An Empirical Analysis, http://www.wlf.org/

upload/MossinghoffWP.pdf ). 

An analysis by Professor Mark A. Lemley and Colleen V. Chien reaches an even 

more stunning conclusion. The Lemley and Chien findings suggest that the current 

first-to-invent contests ‘‘are more often used by large entities to challenge the priority of small entities, not the reverse. This evidence further supports Mossinghoff’s 

conclusion that the first to invent system is not working to the benefit of small entities.’’ See Are the U.S. Patent Priority Rules Really Necessary?, 54 Hastings Law 

Journal 1 (2003). 

Given the cost, complexity and demonstrable unfairness imposed by the present 

first-to-invent system, it is clear that a change to a first-inventor-to-file system in 

our patent law is justifiable simply on grounds that it is the ‘‘best practice.’’

With the adoption of a first-inventor-to-file rule, 35 U.S.C. § 102 can be greatly 

simplified. Prior art would no longer be measured against a date of invention: if information anticipating or making reasonably obvious the invention was reasonably 

and effectively accessible before the earliest effective filing date of a patent application, no patent issues. Similarly, the question of whether an inventor ‘‘abandoned’’

an invention would no longer be relevant. And, of course, proofs of conception, diligence, and reduction to practice, all of which require difficult and costly evidence 

of ‘‘what the inventor knew/did and when the inventor knew/did it,’’ become irrelevant. 

A first-inventor-to-file system will also clearly benefit large and small businesses. 

It will eliminate the present delays and uncertainty associated with resolution of 

interferences which complicate business planning. In addition, it will remove the potential cloud over important inventions that will always be present in a first-to-invent system. 

11

Sec. 4. Right to a patent—Filing by Assignee 

As discussed above, AIPLA believes that it is paramount that the patent statute 

clearly provide that the right to a patent is, in the first instance, the right of the 

inventor as provided in section 4 of the Committee Print. This fundamental right 

is captured in the description of the priority system we propose: first-inventor-tofile. This right of the inventor is well understood in the laws of other countries— only the inventor has the right to a patent. The inventor can transfer this right 

through assignment if desired, but no one can take the invention and obtain a valid 

patent merely by filing the first application. 

To compliment this fundamental right, section 4 authorizes any person to whom 

the inventor has assigned the invention to file an application for patent. AIPLA supports this provision. It will greatly facilitate the filing of patent applications by companies where their employed inventors have assigned the title to the invention or 

where they are under an obligation to assign the invention. 

Sec. 4. Right to a patent—Eliminate ‘‘Best Mode’’

As noted above, NAS singled out three so-called ‘‘subjective elements’’ in patent 

litigation that should be limited or eliminated. The ‘‘best mode’’ requirement is the 

first of those subjective elements addressed in the Committee Print. Section 112 of 

the Patent Act requires that an application ‘‘set forth the best mode contemplated 

by the inventor of carrying out his invention.’’ To enforce this requirement, courts 

inquire whether the inventor, at the time of filing, knew of a mode of practicing the 

invention that the inventor believed was better than that disclosed in the application. This test is obviously subjective, focusing on the inventor’s state of mind at 

the time an application was filed. 

Because the defense depends on historical facts and because the inventor’s state 

of mind usually can be established only by circumstantial evidence, litigation over 

this issue—especially pretrial discovery—can be extensive and time-consuming. Further, the best mode requirement provides only a marginal incentive for a patentee 

to disclose more information than is required by the written description and 

enablement provisions of 35 U.S.C. § 112. Given the cost and inefficiency of this defense and its limited incentive to provide additional disclosure to the public, the 

NAS report recommended its elimination and section 4 adopts that recommendation. 

AIPLA endorses this change. Section 4 of H.R. 2795 does not change the requirements that every patent application must provide the public a full description of the 

invention (i.e., the so-called ‘‘written description’’ requirement) and fully enable the 

practice of the invention the inventor seeks to patent (i.e., the so-called 

‘‘enablement’’ requirement). However, it removes the problematic and subjective best 

mode requirement, first introduced into the patent law in the 1952 Patent Act, that 

the inventor additionally include in the patent application the mode the inventor 

subjectively contemplated to be the best as of the day that the application was filed. 

Sec. 5. Duty of candor 

The National Academies singled out the ‘‘inequitable conduct’’ defense as another 

of three so-called ‘‘subjective elements’’ in patent litigation that should be limited 

or eliminated. Inventors and patent owners desperately need to have Congress address the issue of the ‘‘inequitable conduct’’ unenforceability defense. Section 5 does 

this. 

The defense of inequitable conduct applies when the patent applicant has made 

a material misstatement or omission with intent to deceive the PTO. Examples of 

conduct punishable as inequitable conduct might include the intentional failure to 

disclose a known prior art reference that is material to patentability (unless cumulative of other art already considered), or making false or misleading statements to 

the PTO such as when submitting false or misleading evidence of test data to support patentability. Despite the salutary intent of the doctrine, it has become an 

overused weapon in patent litigation. As noted in Burlington Industries v. Dayco 

Corp. 849 F.2d 1418 (Fed. Cir. 1988), ‘‘[T]he habit of charging inequitable conduct 

in almost every major patent case has become an absolute plague.’’

AIPLA agrees with the approach in section 5 to limit the ‘‘inequitable conduct’’

defense by accused infringers in patent litigation to clear cases of common law 

fraud. Under section 5, the defense of inequitable conduct could only be pled where 

the court has first invalidated a claim and the accused infringer has a reasonable 

basis for alleging that, absent the fraudulent misconduct attributable to the patent 

owner (‘‘but for’’ the conduct of the patent owner), a reasonable patent examiner 

would not have allowed the invalidated claim to issue as part of the patent. Where 

such conduct is proven, a fraud has occurred and the patent would be unenforceable. 

Thus, while a patent owner who had engaged in a fraud to secure an invalid claim 

would not be able to enforce the patent—the patent owner’s ‘‘unclean hands’’ would 

12

preclude such enforcement—section 5 would return the ‘‘inequitable conduct’’ defense to its equitable roots. Importantly, it would drastically reduce the current 

practice of asserting this defense in virtually all cases, by limiting it only to cases 

where claims have first been found to be invalid due to such misconduct. 

However, of equal importance, section 5 would not excuse other possible misconduct by a patent owner that does not rise to the level of fraud—that is, misconduct that would not have resulted in an examiner allowing a claim even if the 

omission or misstatement had not occurred. Such misconduct would be referred back 

to the PTO by the court. Thus section 5 would keep intact the duty of candor and 

good faith on individuals associated with the filing of a patent application. Further, 

it would give the PTO the authority to administer that duty where questionable 

misconduct is uncovered during patent enforcement proceedings. Like other agencies, Congress should look to the PTO to enforce its own rules and charge it with 

the responsibility for doing so. No agency of government undertaking work of crucial 

importance to the nation should have rules mandating high standards of conduct 

for those appearing before it and not have responsibility, resources, and capabilities 

for administering and enforcing those rules. This would allow the Office—as part 

of its control over the duty of candor and good faith—to determine whether or not 

the allegations merited investigation and sanction in appropriate cases referred to 

it during litigation. 

Giving the PTO authority over the duty of candor and good faith means that the 

Office could address other related dilemmas faced by those representing clients 

who—justifiably and consistently—have opposed efforts by the Office to mandate 

more meaningful disclosures of information. Such more meaningful disclosures could 

clearly drive the efficiency and accuracy of the patent examination process—for example, by specifying the contents of statements to be submitted regarding the potential relevance of prior art. Today, if such statements are offered, they are fodder for 

the ‘‘inequitable conduct’’ defenses raised in patent litigation. Placing the PTO in 

control of the duty of candor and good faith would allow the creation of ‘‘safe harbors’’ for applicants satisfying enhanced disclosure requirements which could not 

later be used as grounds for an allegation of inequitable conduct. 

Giving the PTO such authority could also address an AIPLA concern for the postgrant opposition procedure, namely, that the duty of candor and good faith should 

meaningfully apply to opposers. An opposer that raises an issue of unpatentability 

should be no more free to mislead or misrepresent the facts in that proceeding than 

an inventor or patent owner in a PTO proceeding. This is a hole in the duty today 

with respect to reexamination that could be filled by giving the PTO such authority. 

We therefore support authorizing the PTO to investigate misconduct by opposers 

and third parties who request reexamination and to impose civil monetary sanctions 

on patentees and disbarment of their attorneys. In addition, where false statements 

have been made, the mechanism for sanctioning misconduct should include a mechanism for referrals to the Criminal Division of the Department of Justice. 

We believe that such proceedings by the PTO—where the Office elects to proceed 

after reviewing a referral from a court—would be relatively rare events, but nonetheless a much more effective deterrent to misconduct than the current unenforceability defense. The current reliance on the courts for ‘‘enforcement’’ of the duty is 

problematic because it can lead to the punishment of benign deeds and the failure 

to punish bad deeds. The ultimate ineffectiveness of the inequitable conduct defense 

today is probably best illustrated by the fact that it is raised and litigated in almost 

every important patent case, but is rarely successful. 

Sec. 6. Right of the Inventor to Obtain Damages—Determination of Damages 

Section 6 of H.R. 2795 also proposes to add a paragraph to 35 U.S.C. 284 to limit 

the award of damages in the situation where the infringed patented invention is 

only one element of the defendant’s method or apparatus. The provision seeks to 

limit the damages to the portion of the total value of the method or apparatus represented by the value of the patented invention. 

This provision addresses what is known as the ‘‘entire market value’’ rule, which 

permits recovery on the market value of an entire machine when the patented feature is the basis for customer demand for the machine. Rite-Hite Corp. v. Kelley Co.,

56 F.3d 1538, 1549, (Fed. Cir.) (in banc), cert. denied, 116 S. Ct. 184 (1995). There 

are cases where damages have been based on the value of an apparatus of which 

the patented invention was only one element. This occurred in a case where the patented invention was found to contribute substantially to the increased demand for 

the entire product and the infringer acknowledged that improved performance influenced its decision to incorporate the invention into its product. Bose Corporation v. 

JBL, Inc., 274 F.3d 1354 (Fed. Cir. 2001). 

13

A different result was reached, and appropriately so, in Riles v. Shell Exploration 

& Production, 298 F.3d 1302 (Fed. Cir. 2002), where the patent claim was directed 

to a ‘‘method of offshore platform installation.’’ There the Court set aside a jury verdict because the plaintiff’s damage model did not ‘‘follow proper reasonable royalty 

criteria’’ in claiming damages equal to the cost of constructing the platform, 298 

F.3d at 1311. Thus, even though the claims were to the construction of the entire 

platform, the inventive character of the claimed platform was tied to a novel an element of the platform and damages were thus rightfully apportioned based on the 

value of the inventive element added to the platform rather than on the entire platform. 

Under current law, courts can flexibly assess each case on its merits and reach 

a fair determination on a royalty rate that will be adequate to compensate for the 

infringement. In determining a reasonable royalty, the courts look to the 15 Georgia 

Pacific factors and seem to manage quite nicely. Georgia-Pacific Corp. v. United 

States Plywood Corp., 318 F. Supp. 1116, 1119–1120 (S.D.N.Y. 1970). Therefore, we 

do not believe that a case has been made for codifying the many considerations in 

the case law on the proper calculation of damages. 

Having noted our reservation, however, we believe that the new formulation of 

a rule on the calculation of damages is very much improved over the version that 

appeared in the Committee Print, and it is one which we believe is more balanced 

and thus will be more acceptable to a wider constituency. It captures the essence 

of the guidance contained in the Georgia-Pacific case for apportioning damages in 

the case of infringement damages based on claimed combinations where patentability of the combination is essentially tied to the inventive character of a component of the combination rather than the combination itself. 

Sec. 6. Right of the inventor to obtain damages—willful infringement 

The third of the three so-called ‘‘subjective elements’’ in patent litigation that NAS 

recommended for limitation or elimination is the doctrine of willful infringement. In 

its Report, NAS recommended that the doctrine of willful infringement be eliminated from patent litigation. It observed that the question of willful infringement 

involves an issue of intent that produces a significant discovery burden, introduces 

an element of substantial uncertainty, and complicates much patent infringement 

litigation. AIPLA does not recommend its elimination, but agrees with the limitation 

on willful infringement that is set forth in section 6 of the H.R. 2795. 

In practice, exposure to a claim of willfulness is not limited to cases of knowing, 

intentional infringement. Knowledge of a patent, coupled with a decision to engage 

in or continue conduct later found to be infringing, may be enough to result in treble 

damages. During the hearings conducted by the FTC, testimony revealed that some 

companies forbid their engineers from reading patents for fear that such acts might 

be used by a patentee to allege that, because the company had ‘‘knowledge’’ of the 

patent, the company willfully infringed the patent. As reported by the FTC, ‘‘the 

failure to read a competitor’s patents can jeopardize plans for a noninfringing business or research strategy, encourage wasteful duplication of effort, [and] delay follow-on innovation...’’ (To Promote Innovation: The Proper Balance of Competition 

and Patent Law and Policy, Report by the Federal Trade Commission, Chapter 6, 

page 29 (October 2003)). This fear forcefully demonstrates the chilling effect that the 

law on willfulness has on what would otherwise be an appropriate use of patents, 

and how consequently the current law on willfulness effectively undermines the 

Constitutional purpose of the patent system, i.e., to promote the progress of the useful arts. 

Moreover, willfulness is asserted in most cases. Professor Kimberly A. Moore, 

George Mason University School of Law, conducted an empirical study of willfulness, looking at patent infringement cases that terminated during litigation from 

1999–2000. Professor Moore found that willful infringement was alleged in over 92% 

of the cases, observing that her ‘‘results suggest that willfulness claims are plaguing 

patent law. It seems unlikely that in 92% of the cases, the patentee had sufficient 

factual basis at the time the complaint was filed to allege that the defendant’s infringement was willful.’’ See Empirical Statistics on Willful Patent Infringement, 15 

Fed. Cir. B.J. 227 (2004). 

Additional problems arise from the Federal Circuit’s opinion in Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F2d 1380 (Fed. Cir. 1983). The decision 

speaks of an accused infringer having an affirmative duty to exercise due care to 

determine whether he or she is infringing once given notice of another’s patent, including the duty to seek and obtain competent legal advice from counsel. This permits patent owners to ‘‘game’’ the system and create an unequal bargaining position 

by simply ‘‘notifying’’ those in affected industries of the patent, and then demanding 

large settlements or else face the risk of ‘‘willfulness’’ allegations at trial. This in 

14

turn leads to hundreds of thousands of dollars spent by company after company on 

opinions of counsel as insurance against a finding of willful infringement. This perceived obligation also leads to problems with attorney disqualification since the attorney giving the opinion will be called as a witness during the litigation. As a result, a company’s chosen counsel cannot act as both its counselor and its trial attorney. Some states, such as the state of Virginia, do not even allow the attorney trying 

the patent infringement case to be in the same law firm as the attorney who drafted 

the infringement opinion. Complicated issues involving waiver of attorney-client 

privilege further exacerbate the matter. 

These difficulties were not obviated by the en banc reconsideration of KnorrBremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp. 383 F3d 1337 (Fed. Cir. 

2004). While the Court did rule that it is inappropriate for the trier of fact to draw 

an adverse inference with respect to willful infringement when a defendant has not 

obtained legal advice or invokes the attorney-client privilege, the decision leaves untouched the duty of due care and the circumstances which give rise to such duty. 

While section 6 retains the concept of willful infringement, it carefully limits the 

circumstances where a determination of willful infringement can be made to those 

in which an infringer is truly a bad actor. Of course, every successful patentee will 

still receive damages adequate to compensate for the infringement, together with interest and costs as fixed by the court. In general, however, absent deliberate copying 

of a patented invention with knowledge that it was patented, we believe there 

should be no finding of willful infringement unless the patent owner has provided 

to the infringer a written notification that details which claims of the patent are 

infringed and the particular acts that are alleged to infringe, rather than merely 

sending notice of the patent. 

Moreover, we agree with the further limitation in section 6 that there should be 

no finding of willful infringement if an infringer can establish that, once it had received notice, (1) it obtained competent advice of counsel that there was no infringement on the grounds of invalidity, unenforceability or non-infringement, and (2) it 

reasonably relied upon such advice. In the case of the intentional copying of an invention knowing it to be patented, the informed good faith belief of the alleged infringer must exist prior to the time the alleged infringing activity begins. This preserves an importance balance, requiring ethical and prudent behavior by those in 

an affected industry. 

Finally, we also agree that the absence of an opinion of counsel should not create 

an inference that the infringement was willful and that mere knowledge of a patent 

should not be the basis for enhanced damages. Again, these are important limits 

on willfulness that prevent excessive use of the doctrine. 

Accordingly, we support the provisions in section 6 limiting the circumstances in 

which a finding of willful infringement can be found. 

Sec. 7. Injunctions 

Section 7 of H.R. 2795 would make two amendments to section 283. One of these 

proposed amendments to section 283 would significantly undercut the exclusive 

rights conferred under a valid patent to obtain final injunctive relief following a 

final, non-appealable holding that the patent is valid and infringed. It would provide 

that final injunctive relief might not be granted since ‘‘In determining equity the 

court shall consider the fairness of the remedy in light of all the facts and the relevant interest of the parties associated with the invention.’’ This would reduce, to 

some unknown degree, the possibility of patentees obtaining permanent injunctions 

to prevent the continued infringement of their patents following a final, 

unappealable judgment that their patents are valid and have been infringed. 

AIPLA strongly opposes this provision. It would devalue the property right of patentees by undercutting their traditional right to injunctive relief against adjudged 

infringers. The impact would appear to be especially harsh on independent inventors who already face great difficulty in commercializing their patented inventions. 

It would likewise be equally harsh on universities which are precluded in many, if 

not most, cases from directly commercializing their inventions and which must 

therefore rely on licensing or selling their inventions. It would also set an extremely 

unfortunate precedent internationally for the United States by suggesting to other 

nations that there need be no patent exclusivity for all inventions—that other nations can also pick and choose the patented inventions for which they wish to grant 

exclusivity. AIPLA strongly urges that this amendment not be made. 

The other proposed amendment would provide guidance to trial courts regarding 

the circumstances in which a preliminary injunction should be stayed, pending an 

appeal, following a ruling that a patent was valid and infringed. It would instruct 

courts to stay an injunction pending an appeal upon an affirmative showing that 

the stay would not result in irreparable harm to the owner of the patent and that 

15

the balance of hardships from the stay does not favor the owner of the patent. 

AIPLA had suggested this proposal to the Chairman and to the interested groups 

involved in the discussions regarding the content of a patent reform bill as the maximum limitation that should be imposed to meet the concerns of those who advocate 

limiting the grant of injunctions in patent infringement suits. We believe this proposal is balanced and appropriate and fully addresses the concerns of the proponents for change. Not only would it give an infringer the opportunity in appropriate cases to obtain a stay of any injunctive relief while it tests the correctness 

of the trial court’s ruling, but it also allows the infringer additional time to negotiate 

a license or develop a non-infringing alternative. Unfortunately, it was not accepted 

by others in the discussions we have been having, so perhaps it should be deleted 

from the bill. 

Sec. 8 Continuation Applications 

In testimony before this Subcommittee last month, Under Secretary Dudas noted 

the increased workload for the PTO due to the large number of continuing applications filed in the Office. In addition, there is a concern that a few applicants have 

abused the use of continuing applications by using them to ‘‘track’’ the commercial 

development of a technology and then springing a patent on a mature industry. On 

the other hand, the predominant uses of continuing applications are totally appropriate. They are necessary where an application faces a restriction requirement or 

where an inventor makes an improvement in his or her invention or where an applicant and an examiner simply have not had an adequate exchange regarding the 

issues surrounding an application. 

To address these concerns in a balanced and fair way, AIPLA believes it appropriate to give the Director the authority to promulgate a regulation specifying the 

circumstances under which a continuation application may be filed. The PTO clearly 

is in the best situation to understand the difficulties that applicants face as well 

as the problems that the Office faces, including the impact on fee revenues that any 

limitations on continuations might impose. Regulations can also be adjusted to fine 

tune any needed limitations. Most importantly, the PTO could ensure that no such 

regulation would deny applicants an adequate opportunity to obtain protection for 

their inventions. 

Sec. 9. Post-grant Procedures 

Taking advantage of the proposal to adopt a first-inventor-to-file system and to 

simplify the definition of prior art, section 9 proposes a post-grant opposition procedure. AIPLA believes that such a system can provide the public with an effective 

mechanism to promptly correct mistakes made by the PTO in issuing patents. We 

strongly believe, however, that there should be only one window for requesting an 

opposition and that the window should be nine months after a patent has issued 

to encourage the public to act promptly. These procedures should allow the public 

to correct improvidently granted patents—patents with claims that are too broad or 

patents that the PTO should not have granted at all. After the initial period of nine 

months has passed and no opposition has been filed, patentees should enjoy a ‘‘quiet 

title’’ without the fear of later administrative challenges, except for the inter partes 

reexamination procedure which this bill would make more attractive. 

Consistent with this approach, AIPLA agrees that, for an opposition brought within this nine month window from grant, an opposer should have the burden of proving the invalidity of a claim by a preponderance of the evidence. This is the same 

standard used during examination, and encourages use of the pre-grant procedure 

since the burden of proof is lower than that applied during litigation. Thus, consistent with this approach, we would retain the standard of ‘‘clear and convincing 

evidence’’ that applies in a patent infringement lawsuit or a declaratory judgment 

action seeking to invalidate a patent claim. In this way, the procedure strikes a balance—encourage the public to promptly eliminate questionable patents without unduly undercutting the patentee’s right to benefit from the invention. 

This brings us to the second window proposed in the opposition procedure by section 9 of H.R. 2795 that would permit an individual to file an opposition not ‘‘later 

than 6 months after receiving notice from the patent holder alleging infringement.’’

AIPLA opposes having a second window for bringing an opposition for the life of a 

patent. The proposed second window, where the burden of proof is a ‘‘preponderance 

of the evidence’’ instead of ‘‘clear and convincing evidence,’’ will increase the risks 

faced by patent holders and dampen their enthusiasm for investing in the development and commercialization of their patented technologies. It will also increase litigation in the courts since patent holders, to ensure that their patents will not be 

tested by the lower presumption of validity, will file suit instead of approaching suspected infringers about possible license arrangements or avoiding any infringement. 

16

Finally, creating this kind of second window in effect creates a ‘‘patent revocation’’ system that will greatly tax the existing human and financial resources of the Office 

to find and train the needed personnel to administer such proceedings and will work 

undue hardships and prevent patent owners who can least afford it (non-profit entities and individual inventors) from enjoying ‘‘quiet title’’ to their inventions. For all 

these reasons, AIPLA opposes the addition of the second window in H.R. 2795. 

21Sec. 10. Pre-grant Submissions of Prior Art By Third Parties 

AIPLA supports the proposed amendment to section 122 to allow a member of the 

public to submit information to the PTO for consideration following the publication 

of patent applications. We believe that this proposal will complement the post-grant 

opposition proposal and assist applicants to obtain stronger, more reliable patent 

protection by ensuring that the best prior art is before the PTO. The section is balanced and ensures that applicants will not be harassed by multiple submissions. 

Thus, it is especially significant that the amendment leaves untouched the proscription in current subsection 122(c), and thereby prevents such submissions from becoming a type of pre-grant opposition. This will ensure that such submissions cannot be used to harass applicants. In addition, the provision is crafted in a manner 

that gives the public maximum opportunity to submit such information while at the 

same time protecting against the disruption of the PTO’s examination process. 

Completing the Reforms Begun In the American Inventors Protection Act 

There are other important parts of the patent law that are addressed in H.R. 2795 

which we support. Moving to a first-inventor-to-file system suggests that changes 

should be made to the prior user defense to patent infringement. We also endorse 

the proposal that the PTO publish all pending applications for patent at 18-months 

after their initial filing. This will make the patent system more transparent and 

allow the public to make earlier determinations of whether an invention is novel 

and non-obvious on the basis of all prior art. It also allows the public to prepare 

any evidence that may be available for submission in the 9 month opposition period 

after the patent issues. 

CONCLUSION

The U.S. patent system continues to be an essential driver of our nation’s economic and technological success, but there is a growing consensus that it is in need 

of adjustment. The NAS and FTC have reached this conclusion and AIPLA agrees. 

While we strongly oppose any weakening of the traditional injunctive remedy of the 

patent law and the addition of a second window in opposition proceedings, we believe that there are many desirable reforms in H.R. 2795 that do have the widespread support of all stakeholders. We now have an opportunity—indeed, an obligation—to not only address the challenges of today, but also to prepare the U.S. patent system for the future. 

We commend you, Mr. Chairman, and the Ranking Member for your continuing 

leadership in striving to improve our intellectual property system. The AIPLA looks 

forward to working with you, the other Members of the Subcommittee, and your 

able staffs to support you in any way we can.

Mr. SMITH. Thank you, Mr. Griswold. 

Mr. Gulbrandsen. 

TESTIMONY OF CARL E. GULBRANDSEN, MANAGING 

DIRECTOR, WISCONSIN ALUMNI RESEARCH FOUNDATION 

Mr. GULBRANDSEN. Mr. Chairman, thank you for the opportunity 

to testify on the important topic of patent law reform. My name is 

Carl Gulbrandsen. I’m the Managing Director of the Wisconsin 

Alumni Research Foundation, known as WARF, on whose behalf I 

appear. The University of California also has expressed the concerns that I’ll talk about this morning and that are expressed in 

my written statement. 

WARF was founded in 1925, and was one of the first organizations to engage in university technology transfer. In March of this 

year, WARF received the National Medal of Technology, the highest award that can be conferred by the President of the United 

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tions to the country’s wellbeing through innovation and technology. 

This award recognized the importance to the United States economy of university technology transfer. 

This Subcommittee played an important role in drafting the 

Bayh-Dole Act and its cardinal principal that the American public 

benefits from a policy that permits universities and small businesses to elect ownership in innovations created with Federal 

funds. 

The Bayh-Dole Act was predicated on a patent system that provides predictable and strong protection for discoveries generated at 

U.S. universities. For the Bayh-Dole Act to continue to be successful in stimulating further innovations, patents must provide significant disincentives to would-be infringers. 

If patent law is strong, then technology transfer can flourish; resulting in a profound and positive impact on the health, safety, and 

welfare of the people in this country and worldwide. If patent law 

is weakened, the technology transfer falters, as do American universities and companies that depend on university research, and 

the public. 

In 1980, when the Bayh-Dole Act was passed, approximately 25 

U.S. universities had technology transfer offices. No uniform Federal policy existed, and federally-funded discoveries were rarely 

patented and commercialized. Today, more than 230 universities 

have technology transfer offices, and universities are now the owners of tens of thousands of U.S. patents. 

Today’s list of university inventions is also impressive. The list 

includes a lithography system, to enable the manufacturing of 

nano-devices, from the University of Texas, Austin; and an effective 

aneurysm treatment coming out of the University of California, Los 

Angeles. 

In the past two decades, intellectual property assets have become 

vital to the performance of the U.S. economy. Because of financial 

and administrative stresses in the United States Patent and Trademark Office, lapses in the quality of patents occasionally occur. It 

is my belief that low-quality patents issued from the PTO are the 

exception, rather than the rule. But even the exception should not 

be tolerated. 

As a member of the Patent Public Advisory Council, I know that 

the PTO is working hard to assure that all patents that are issued 

are of high quality. But as you know, the first line of defense 

against poor quality patents and slow decision-making is to provide 

the PTO with the resources that it needs to hire and train skilled 

examiners and to implement effective electronic processing. 

H.R. 2795 contains a number of provisions that WARF supports. 

WARF supports a provision relating to a limited post-grant opposition procedure, but not the second window, with the addition of appropriate curative amendments that are listed in my written statement. WARF also supports expanding the 18-month publication 

rule. 

I am also grateful to you, Mr. Chairman and Mr. Ranking Member, for your leadership and selflessness on enactment of the CREATE Act. I know that this important legislation would not have become law without your commitment to research and technology. 

And I would ask that you ensure that the CREATE Act be preVerDate 0ct 09 2002 11:41 Jul 06, 2005 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\060905\21655.000 HJUD1 PsN: 21655
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served, with the same effective date and legislative history as presently exist. 

The legislation before you also contains a number of provisions 

that will retard the success of university technology transfer and 

the creation of vibrant new university spin-out companies. WARF 

has great concerns with respect to four provisions. 

First, WARF objects to any change with respect to injunctive relief. H.R. 2795 tilts the playing field in favor of infringers. Currently, a presumption in favor of injunctive relief is built into the 

patent system, and this is for good reason. Injunctions respect the 

constitutional right of a patent owner to exclude others from using 

his or her patented technology. 

Second, WARF is concerned about limiting continuation practice, 

and believes that a change in the law would negatively impact universities if not tailored carefully to address only those overt abusive practices. 

Third, WARF opposes the expansion of prior user rights. Expanded prior user rights would encourage innovations to be kept as 

trade secrets, a practice which is contrary to the fundamental 

premise of the U.S. patent system which rewards and encourages 

disclosure. 

And fourth, the adoption of a first-inventor-to-file system, that is 

intended to bring us closer to the first-to-file system used in Europe and the rest of the world, disadvantages universities and independent inventors. The first inventor to file a proposal would be a 

hardship for a vast majority of universities. And WARF would prefer that the first-to-invent system be maintained. 

But if we must harmonize and move toward a first-to-file system, 

I would encourage the Committee to insert the proposed amendments suggested in my written statement, which are there to protect the rights of individuals and universities. 

Mr. Chairman, thank you again for your leadership, time, and 

attention. And if there are any questions, I’d be pleased to answer 

them. 

[The prepared statement of Mr. Gulbrandsen follows:]

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PREPARED STATEMENT OF CARL E. GULBRANDSEN


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Mr. SMITH. Thank you, Mr. Gulbrandsen. 

Professor Lerner. 

TESTIMONY OF JOSH LERNER, JACOB H. SCHIFF PROFESSOR 

OF INVESTMENT BANKING, HARVARD BUSINESS SCHOOL 

Mr. LERNER. Mr. Chairman, thank you for the opportunity to testify here. More generally, I think the Committee ought to be congratulated for undertaking this series of thoughtful and very important process of patent system reform. 

In our recent book, ‘‘Innovation and Its Discontents,’’ Adam Jaffe, 

of Brandeis University, and I argued that the problem with the 

patent system today is systematic and fundamental. In the past 

two decades, the U.S. has strengthened patent rights, while weakening the standards for granting patents. 

While unpremeditated, these two policy changes have created a 

perfect storm, a complex and intensifying combination of factors 

that increasingly makes the patent system a hindrance rather than 

a spur to innovation. 

The incentives that the existing system provides induce all participants, whether inventors, competitors, or potential litigators, to 

invest in abusing the system, rather than innovating, and to hide 

and husband information for strategic and litigious purposes, rather than bringing it forward to facilitate the determination of who 

really invented what. 

Adam Jaffe and I argue that we really must start with a recognition that much of the information to decide whether a given application should be approved is in the hands of competitors of the applicant, rather than in the hands of the PTO. 

A review process with multiple potential review levels efficiently 

balances the need to bring in information from the outside with the 

reality that most patents are unimportant. Multi-level review, with 

barriers to invoking review and the thoroughness of that review increasing at higher levels, would naturally focus attention on the 

most potentially important applications. 

Most patents would never receive anything other than the most 

basic examinations. But for those applications that really mattered, 

parties would have an incentive and opportunities to bring forward 

information in their possession before the PTO, and the PTO would 

have more resources to help it make the right decision in the cases 

that really matter. 

Breaking the vicious cycle of bad examination and bad applications is the key to reform of the patent issuance process. But there 

are always going to be mistakes, and so it’s important that the 

court system operate efficiently to rectify those mistakes, while protecting the holders of valid patents. 

Today, the legal playing field is significantly tilted in favor of 

patentees. Many observers highlight the right to a jury trial as a 

crucial problem. The evidence in a patent case can be highly technical, and the average juror has little competence to evaluate it. 

Having decisions made by people who can’t really understand the 

evidence increases the uncertainty surrounding the outcome. 

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less proven otherwise—is a big reason why accused infringers often 

settle rather than fight, even when they think that they are right. 

The right to a jury of one’s peers is a venerated concept in AngloAmerican law, but there is ample scope to encourage judges to use 

pre-trial rulings and reports of special masters commissioned by 

the court to resolve more of the mostly technical issues that determine the outcome of patent litigation. 

While litigation will always be uncertain, it has been structured 

so that complex technical issues are addressed in a way to—it 

should be structured in a way that complex technical issues are addressed in a way to elucidate rather than obscure them. 

Thus, I very much applaud the Committee for its work. The Patent Reform Act of 2005 contains many good ideas, such as the longoverdue shift to a first-to-file system, a reduction in the reliance on 

the arcane institution of patent interferences, a raising of the bar 

for injunctive relief, the expansion of prior user rights, universal 

publication of patent awards, and an improvement in the ability of 

other firms to challenge patents after grant. 

At the same time, I would urge, as the above remarks suggest, 

consideration of further steps to facilitate pre-grant challenges to 

patent applications and steps to reduce the reliance on juries in 

patent cases. 

Thank you very much. 

[The prepared statement of Mr. Lerner follows:]

PREPARED STATEMENT OF JOSH LERNER

This Committee is to be congratulated for initiating a series of thoughtful discussions of patent system reform. The importance of this discussion to the American 

inventors, corporations, and our society as a whole cannot be overemphasized. 

To be sure, the past decade has seen periodic uproars over patents. Amazon’s ‘‘one 

click’’ patent for online shopping, RiceTec’s patent on the basamati rice grown for 

centuries in Asia, PriceLine’s reverse auction patents, and Acadia Research’ s patents on digital transmission of audio and video are examples of patents that have 

triggered controversy and litigation. 

But while these troubling patents have been well publicized, the wrong lessons 

have all too often been drawn from these controversies. Commentators have tended 

to focus on the incompetence of the patent office in allowing ‘‘bad patents.’’ Other 

observers have concluded that the patent system is not working with respect to a 

particular area of technology. Concerns about software awards led, for instance, Jeff 

Bezos of Amazon to propose a new patent type for software in 2000 and demonstrators to take to the streets of Brussels earlier this year. 

In our recent book, Innovation and Its Discontents, Adam Jaffe of Brandeis University and I argue instead that the problem is systemic and fundamental. In the 

past two decades, the United States has strengthened patent rights while weakening the standards for granting patents. While unpremeditated, these two policy 

changes have created a ‘‘perfect storm’’: a complex and intensifying combination of 

factors that increasingly makes the patent system a hindrance rather than a spur 

to innovation. 

Congress set us on this road in 1982 when it created a centralized appellate court 

for patent cases called the Court of Appeals for the Federal Circuit. The court—

which advocates argued would simply ensure judicial consistency—has expanded the 

realm of what can be patented, lowered the standards for receiving awards, made 

it more likely that a challenged patent will stand up to legal scrutiny, and given 

patentholders more potent legal remedies. 

A decade later, Congress turned the Patent and Trademark Office (PTO) into a 

‘‘profit center’’. The office has been pushed to return ‘‘excess’’ revenue to the Federal 

treasury. This shift led to pressures to grant more patents, difficulties in attracting 

and retaining skilled examiners, and a torrent of low quality awards. These have 

ranged from the profoundly troubling cases above to absurdities such as awards for 

wristwatches (pawwatches?) for dogs, a method of swinging on a swing (‘‘invented’’

by a five year old), and peanut butter and jelly sandwiches. 

35

But railing against the incompetence or absurdity of the PTO misses the basic 

point, which is that the incentives of the existing system induce all participants—

inventors, competitors and potential litigators—to invest in abusing the system 

rather than innovating, and to hide and husband information for strategic and litigious purposes rather than bringing it forward to facilitate determination of who 

really invented what. Reform of the system must change these incentives by:

• Creating workable opportunities for knowledgeable competitors to challenge 

the novelty of inventions before a patent is granted;

• Providing graduated application reviews, so important patents are scrutinized 

carefully but time is not wasted on applications that don’t matter; and

• Leveling the playing field between litigants so that frivolous patent holders 

cannot intimidate true innovators into paying protection money in the form 

of patent royalties.

Our proposed reforms starts with the recognition that much of the information 

needed to decide if a given application should be approved is in the hands of competitors of the applicant, rather than the PTO. A review process with multiple potential review levels efficiently balances the need to bring in outside information 

with the reality that most patents are unimportant. Multilevel review, with the barriers to invoking review and the thoroughness of that review both increasing at 

higher levels, would naturally focus attention on the most potentially important applications. Most patents would never receive anything other than the most basic examinations. But for those applications that really mattered, parties would have an 

incentive and opportunities to bring information in their possession before the PTO, 

and the PTO would have more resources to help it make the right decision in the 

cases that really matter. 

If bad patents with important consequences were weeded out by the PTO, the incentive to file frivolous applications in the first place would be reduced. This would 

break the current vicious cycle in which inventors are induced to make marginal 

applications by their likelihood of success, and the resulting flood of applications 

overwhelms the patent office and makes it harder to separate the wheat from the 

chaff. 

Breaking the vicious cycle of bad examination and bad applications is the key to 

reform of the patent process. But there are always going to be mistakes, and so it 

is important that the court system operate efficiently to rectify those mistakes, 

while protecting holders of valid patents. Today, the legal playing field is significantly tilted in favor of patentees. 

Many observers highlight the right to a jury trial as a critical problem. The evidence in a patent case can be highly technical, and the average juror has little competence to evaluate it. Having decisions made by people who can’t really understand 

the evidence increases the uncertainty surrounding the outcome. The combination 

of this uncertainty with the legal presumption of validity—the rule that patents 

must be presumed legitimate unless proven otherwise—is a big reason why accused 

infringers often settle rather than fight even when they think they are right. 

The right to a jury of one’s peers is a venerated concept in Anglo-American law. 

But there is ample scope for judges to use pretrial rulings and reports of special 

‘‘Masters’’ commissioned by the Court to resolve more of the most technical issues 

that determine the outcome of patent litigation. While litigation will always be uncertain, it has to be structured so that complex technical issues are addressed in 

a way designed to elucidate rather than obscure them. 

Thus, we applaud the committee for its work. The Patent Reform Act of 2005 contains many good ideas, such as a long-overdue shift to a ‘‘first-to-file’’ system, a reduction in the reliance on the arcane institution of patent interferences, a raising 

of the bar for injunctive relief, nearly universal publication of patent awards, and 

improvements of the ability of other firms to challenge patents after grant. At the 

same time, we would urge consideration of steps to allow pre-grant oppositions, and 

to reduce the reliance on juries in patent cases, two issues not considered by the 

bill. 

The protection for true innovators created by a workable patent system is vital 

to technological change and economic growth. The problems in the existing U.S. patent system are structural, and the solutions need to be fundamental. As much as 

the Patent Office needs to do a better job, it can only do so if the system is modified 

so that all parties have incentives to help the PTO do its job, and the Court system 

provides a balanced, reliable backstop when mistakes are made.

Mr. SMITH. Thank you, Professor Lerner. 

Mr. Ravicher. 

36

TESTIMONY OF DANIEL B. RAVICHER, EXECUTIVE DIRECTOR, 

PUBLIC PATENT FOUNDATION 

Mr. RAVICHER. Chairman Smith, Ranking Member Berman, and 

Members of the Subcommittee, patent reform is not about weakening the patent system. It’s about strengthening the patent system so that it rewards innovation, not manipulation. 

I am Executive Director of the Public Patent Foundation, a notfor-profit legal services organization founded in 2003 to represent 

the public’s interests in the patent system; and most particularly, 

the public’s interests against the harms caused by wrongly issued 

patents and unsound patent policy. 

PUBPAT provides the general public and specific persons or entities otherwise deprived of access to the patent system with representation, advocacy, and education. Our work is funded by grants 

from the Rockefeller Foundation, the Echoing Green Foundation, 

the Rudolph Steiner Foundation, and the Open Society Institute, 

and by private donations from the public. 

Before commenting on the Patent Act of 2005, a very important 

point about the process by which patent policy is formed should be 

made. Despite what many people believe, the patent system has extremely far-reaching effects on all Americans. Although the public 

does indeed benefit from a properly functioning patent system, 

since patents are Government-sanctioned, absolute restraints on 

freedom and competition, the public can also be severely harmed 

by errors within the patent system. 

Unfortunately, it is too often the case that not all of the interests 

affected by the patent system are adequately represented in patent 

policy discussions. Specifically, the interests of the non-patent-holding public are almost always absent from any meaningful participation in decision-making about the patent system, despite the fact 

that they bear the brunt of its burdens. 

Patent policy should be made with consideration of all the 

public’s interests, not just the specific interests of the PTO, patent 

holders, patent practitioners, and large commercial actors. As such, 

I am pleased to have been invited to represent those interests 

today, and I strongly urge you to continue to ensure that all affected interests are always adequately represented in patent policy 

discussions in the future. 

There are several ways to strengthen the patent system so that 

it benefits all Americans, and the Patent Act of 2005 addresses 

many of them. Two of the most important issues addressed by the 

bill are injunctions and post-grant opposition. 

When discussing injunctions, we should keep in mind that the 

patent system’s ultimate purpose is to deliver advances in technology to the American people; not simply line the pockets of patent holders. Although these ends are typically aligned, there does 

come a point at which over-rewarding patent holders can in fact retard technological development. This is why the patent right is limited, such as by a finite term. 

Similarly, if a patent holder is not making its invention available 

to the American public, courts should not issue an injunction 

against another party that desires to do so, if they can compensate 

the patent holder fairly for the advance that has been made. 

37

For example, but a few years ago, this House was deeply concerned about a patent that was being used in an attempt to enjoin 

an electronic communications device of importance to Representatives, the Blackberry. The concern was justified, because patents 

that are used to deny the American people access to technology 

cause unnecessary and unwarranted harm. 

The Committee Print’s injunction provision guaranteed patentees 

an award of fair compensation by the courts, and accomplished the 

patent system’s goal of bringing technological advance to the American people as quickly as possible. I urge you—I strongly urge 

you—to reinsert that provision into the Patent Act of 2005. 

With respect to post-grant opposition, the public should be empowered to oppose any patent at any time that it is harming them. 

The mere existence of a wrongly-issued patent can cause substantial public harm, by making things more expensive, if not completely unavailable; by preventing scientists from advancing technology; by restraining civil liberties and individual freedoms; and 

by diminishing the value of valid patents held by legitimate inventors. 

Thus, all patents should be eligible for post-grant review during 

their full term, just like they can be subject to reexamination at 

any time during their term. Unfortunately, the Patent Act of 2005 

severely limits the timing of post-grant oppositions. 

The second window for filing oppositions triggered by the patent 

owner making an allegation of infringement is fair, because patentees cannot be heard to complain about being denied so-called 

‘‘quiet title,’’ if they are the ones making the noise. Thus, although 

patents should be eligible for post-grant opposition throughout 

their full term, I am pleased to at least see that oppositions can 

be filed against any patent that has been asserted by its owner. 

However, the bill limits such eligibility to only the party against 

whom the patent is asserted. To be meaningfully effective, postgrant opposition should be open to any member of the public, just 

like reexamination is, because a wrongly-issued patent asserted 

against anyone harms everyone. And there will often be other parties more capable and more willing to defend the public from an 

aggressive patentee. To bar them from doing so would forsake the 

enormous potential post-grant opposition has to be an effective patent quality improvement tool. 

Thank you once again for inviting me to make these remarks 

about the Patent Act of 2005. 

[The prepared statement of Mr. Ravicher follows:]

38

PREPARED STATEMENT OF DANIEL B. RAVICHER


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Mr. SMITH. Thank you, Mr. Ravicher. 

It’s my understanding that Mr. Berman has a commitment at 10 

that cannot be postponed, so I’m going to initially yield time to him 

for his questions. 

Mr. BERMAN. Well, thank you very much, Mr. Chairman. I appreciate it very much. 

I think initially—I think it’s fair to state it’s certainly my intent—and I think it’s the Chair’s and the Subcommittee’s intent—

on the issue of the CREATE Act, not to do damage to that law, and 

to the extent that we’re inadvertently—it was chopped up in the 

Committee Print, hopefully, it’s been rectified to some extent with 

the bill that’s been introduced. And we’re certainly interested in 

any other suggested changes to ensure that what we passed last 

year stays as law. 

Mr. GULBRANDSEN. Thank you, Mr. Ranking Member. 

Mr. BERMAN. But, while I have you, your written testimony 

states that, ‘‘Unless a strong and compelling showing is made that 

change is necessary, maintain the patent law as it is presently enacted. Elements of the Patent Act of 2005 represent the interests 

of a narrow group of companies from one or two industry sectors, 

and undermine the important policies upon which the Bayh-Dole 

Act is predicated. We should continue to search for consensus, rather than special-interest solutions.’’

That comment gets under my skin. 

After hearing just some anecdotal stories from practitioners in 

this area about the problem of poor patent quality, the Federal 

Trade Commission came out with a report calling for major reform. 

The National Academy of Science called for making major reform 

in the patent law. We have an economist here and a spokesman for 

a public interest group, calling for the kind of substantial reforms, 

or even larger reforms than we’re proposing in this bill. And the 

notion that one particular organization, which has its own interests, assumes they speak for the public interest, and anyone who 

disagrees with them is representing narrow special interests, I find 

somewhat troublesome. And it seems to me we can talk about the 

merits of specific provisions without throwing out charges which on 

their face are preposterous. 

Mr. Griswold, when you talked about the inequitable conduct defense in your testimony, you mentioned that you would like to return the defense to its equitable roots: the injunction. 

Currently, section 283 reads that, ‘‘Several courts having jurisdiction of cases under this title may grant injunctions, in accordance with the principles of equity, to prevent the violation of any 

right secured by a patent, on such terms as the court deems reasonable.’’

Yet the courts have automatically—not presumed, but essentially 

automatically—granted permanent injunctions upon a finding of infringement. And this practice is the general rule, with very narrow 

exceptions for significant public health consequences. 

Our objective is only to end the practice of the automatic injunction; not the entitlement to an injunction, the likelihood of an injunction. It’s only to, up-front, change what the courts have turned 

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certainty created, when section 283, as it reads now, on its face allows for equitable considerations? 

Mr. GRISWOLD. Well, as you mentioned, Mr. Berman, the courts 

have, in our view, basically followed what we believe the constitutional direction was; and that’s grant exclusive rights to people who 

engage in inventive activity. So we support the idea that’s continued basically over a couple hundred years, of providing those exclusive rights to inventors. 

Now, I understand the language you’re talking about. But I can 

tell you, if the sentence that we have in H.R. 2795 goes into law, 

there’ll be a whole new world of consideration of whether or not 

there should or should not be an injunction. 

And if you look at the language itself, it says that, ‘‘In determining equity, the court shall consider the fairness of the remedy 

in light of all of the facts and the relevant interests of the parties 

associated with the invention.’’ Is that all that we consider? What 

about the public and other folks? 

But what our view is, is that there is no need to change the injunction language. In fact, in our view, the thing to do is to take 

care of some of the main problems in patents—— Mr. BERMAN. One final question. 

Mr. GRISWOLD. Yes. 

Mr. BERMAN. As I understand it, a company called ‘‘In Focus’’ has sued 3M, for whom you are general counsel of one of their subsidiaries, for patent infringement. 

Mr. GRISWOLD. Yes. 

Mr. BERMAN. Alleging that 3M copied an In Focus patented invention that is a safety feature that presents users from getting an 

electric shock when they changed a burned-out light bulb in projectors. As far as we can tell, this suit is still active. 

If 3M were to be found guilty of infringing In Focus’ patent, 

should the court presume irreparable harm and permanently enjoin 

3M from selling any products that have patent safety feature, without weighing or considering any of the equitable factors? 

Mr. GRISWOLD. Our view is that—yes, that we think that if we 

are found—judged to be an infringer, that we should be enjoined. 

That’s our view. 

Mr. BERMAN. Okay. 

Mr. GRISWOLD. We don’t go both—we don’t see it different ways. 

It’s one way. 

Mr. BERMAN. Okay. 

Mr. SMITH. The gentleman’s time has expired——

Mr. BERMAN. Thank you very much, Mr. Chairman. 

Mr. SMITH.—and his commitment looms. 

Mr. BERMAN. Yes. 

Mr. SMITH. Okay. Mr. Griswold, Mr. Gulbrandsen, let me address my first question to you all. And this is to follow up a little 

bit differently on the question you were just asked. 

One of the subjects on which there continues to be much discussion is the subject of injunctions. And we all know the situation 

that troubles some companies today, which is to say injunctions 

have become almost automatic, granted in almost every case. 

Both of you all oppose the changes that we’ve made in the injunction language. My question for each of you, therefore, is, given 

50

the undisputed concerns—I think, legitimate—that many companies have, what is your solution for trying to dissuade patent trolls 

from filing specious patents or lawsuits? What do we do to try to 

stop the—if they’re not frivolous, then they’re sort of shake-down 

lawsuits that are filed? 

And Mr. Gulbrandsen, why don’t we start with you, and then go 

to Mr. Griswold. 

Mr. GULBRANDSEN. Well, I think that much of the complaint with 

respect to what you refer to as ‘‘patent trolls’’ is not something that 

I’m really that familiar with. 

Mr. SMITH. Okay. 

Mr. GULBRANDSEN. The complaints with respect to abuses in litigation really pertain to some suggestions with respect to Mr. 

Lerner’s book, of more special masters and so forth for the courts 

so that the courts are more educated in this. I’m all in favor of having a more educated judiciary and better educated juries in litigating cases. 

But I do think, at the end of the day, you need to be—if you do 

win the case, if your patent is found valid and infringed, you need 

to have the right to exclude the infringer from using it, unless 

you’re willing to license them. 

Mr. SMITH. Right. Okay. Mr. Griswold? 

Mr. GRISWOLD. Yes. My solution, or our solution, is to start with 

the major problem. The problem is patents of low quality. Because 

if people have patents that are of a high quality, and they’ve been 

to the Patent Office and have been examined over the best prior 

art, then as far as we’re concerned, injunction should be granted, 

and it should be basically automatic. 

But what’s nice about this particular bill is it deals with many 

of the patent quality issues. And if you look at a whole array of 

them, one of them it doesn’t deal with specifically, but your Committee has dealt with, is PTO funding. And that’s a key issue. 

Pre-grant submissions; inequitable conduct that allows the patent applicant to have more—be more relaxed in dealing with the 

Patent Office and not be concerned about what they say; post-grant 

review; expanded re-exam; even the work on the continuations. All 

these pieces help, relative to the patent validity. 

Mr. SMITH. So you would suggest that we could get to the same 

goal—that is, reducing the number of shake-down lawsuits—by 

other means? 

Mr. GRISWOLD. By other means; by improving the quality of patents. That’s the key issue, is getting the quality of the patents 

right. 

And my experience is, don’t change too many variables when 

you’re trying to fix a problem. Fix that problem, and you will fix 

the rest of the problems. It’s going to take a while to get that fixed, 

but that’s the thing to take care of. 

Mr. SMITH. Okay. Thank you, Mr. Griswold. 

Professor Lerner, you made two suggestions that I’d actually like 

the other witnesses to respond to, and then I’ll give you the last 

word. You urged consideration of steps to allow pre-grant oppositions, and to reduce the reliance on juries in patent cases. These 

are two issues that we did not consider in the bill, that you’ve suggested. 

51

Let me just go down the line, if I might. Mr. Griswold, do you 

want to respond to those two suggestions? 

Mr. GRISWOLD. Give me those suggestions again? 

Mr. SMITH. The two suggestions were to allow pre-grant opposition, and to reduce the reliance on juries in patent cases. 

Mr. GRISWOLD. Yes. Relative to pre-grant oppositions, we have 

been opposed to those forever, for the reason that it allows others 

to get into the process with the examination during the early 

phases, and manipulate it, and to the detriment of the patent applicant. So we have been opposed to that; in fact, opposed pre-hearing oppositions in Japan, and they removed those. So that is a key 

piece. 

Relative to juries in patent cases, that’s a debate, and I think 

we’ve tried to move as much as we could over the decisions by the 

court. But many people believe that jurors make very good decisions in patent cases. 

Mr. SMITH. Thank you. Mr. Gulbrandsen, can you be brief? 

Mr. GULBRANDSEN. Yes. I would agree with Mr. Griswold, and 

just add additionally that, to the extent that we put more burdens 

on the Patent Office, we are actually going to exacerbate the problems of low-quality patents. We need to make sure funding is there, 

and that if you do post-grant opposition, which we favor, that in 

fact adequate resources are given to the Patent Office. 

Mr. SMITH. Okay. Professor Lerner? 

Mr. LERNER. I would simply note that it seems that the process 

of evaluating patents which are in process is very challenging for 

an examiner. And I think even in the best of all possible worlds, 

where the resources are increased significantly, the amount of resources that—and the amount of time for examining any given patent is going to be quite modest. 

So I think that, you know, given the complexity of today’s world, 

having the opportunity for outside input is extremely important. 

Mr. SMITH. Okay. Thank you, Professor Lerner. 

The gentleman from Virginia, Mr. Goodlatte, is recognized for his 

questions. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

Mr. Gulbrandsen, according to Mr. Griswold’s testimony, the av- erage interference action costs an inventor over $300,000. Do universities and independent inventors have the resources to fight 

these interference actions? 

Mr. GULBRANDSEN. Interference actions certainly are expensive. 

But I’ve been at WARF for 8 years. We file about two to three hundred patents a year. We have about 2,000 pending applications. 

And during my 8 years, we have only had one interference. 

So the interference practice in the Patent Office is 1/10th of 1 

percent of all U.S. patents filed. It is not a major problem with either the Patent Office or with universities, as far as I’m concerned. 

Mr. GOODLATTE. Do you think that a change to a first-inventorto-file system would help reduce even further these interference actions? 

Mr. GULBRANDSEN. Well, certainly, if the present proposal becomes law, interference practice would go away. But interference 

practice, again, as far as our experience is concerned, has not been 

a particularly burdensome issue. 

52

Mr. GOODLATTE. Thank you. This is a question for all of the witnesses. We’ll start with you, Mr. Ravicher. Since it was not previously in the Committee Print, could each of you briefly comment 

on whether you believe that allowing third-party submissions of 

prior art with comments during the examination period is a good 

idea? 

Mr. RAVICHER. It’s a good idea, but I doubt it’ll be very effective, 

because the problem is a credibility issue with the PTO; not that 

they’re incapable to adequately review patents, but that they’re created—they are given incentives which decrease their ability to perform a quality review. They’re encouraged, both at the agency level 

and at the examiner level, to just issue patents, ‘‘Get them out of 

the office as quickly as possible, get it off my desk as quickly as 

possible.’’

So simply giving them more information may not do too much to 

actually help them, if you don’t give them the time and enable the 

examiner to do the job that they are capable of doing. 

Mr. GOODLATTE. Thank you. Professor Lerner? 

Mr. LERNER. I think it is a good idea. The one thing that I would 

add as a caveat is that it’s important that submissions not basically 

limit people’s ability to bring up the same prior art if it gets litigated subsequently. In other words, people’s willingness to participate in essentially submitting stuff pre-grant will probably be 

much reduced if it’s the case that they are essentially going to be 

limited in terms of using that prior art if the patent examiner 

doesn’t understand its importance. So I think it’s important to 

make a provision in that regard. 

Mr. GOODLATTE. Thank you. Mr. Gulbrandsen? 

Mr. GULBRANDSEN. As a member of the Patent Public Advisory 

Council, I can tell you that the Patent Office strategic plan is directed in great part to increasing the quality of patents. We have 

a tremendous pendency of applications in the Patent Office. And if 

you exacerbate that pendency, that is going to damage the economy 

of this country more than the perceived help that additional thirdparty interaction during prosecution would help. 

Mr. GOODLATTE. Thank you. Mr. Griswold? 

Mr. GRISWOLD. Yes, we support the idea of third-party submissions. The key is having the Patent Office have the right information to make the decision. And as you heard me earlier talking 

about patent quality, we think it’s a good feature. 

Mr. GOODLATTE. Thank you. And Mr. Griswold, this question for 

you and Mr. Gulbrandsen. I understand that the current statute 

regarding injunctions was enacted over a hundred years ago. The 

statute calls on the courts to balance the equities when deciding 

whether to grant an injunction. However, I’ve heard reports that 

recent court decisions have resulted in almost automatic application of injunctions when infringement is found. 

Do you believe that the changes in the last hundred years in 

business methodologies and in the nature of certain products today, 

that can involve hundreds or even thousands of patents, are the 

very kinds of reasons why the statute was written to allow for 

some flexibility? Didn’t the statute build flexibility into the law 

that perhaps is not being used today? Start with you, Mr. Griswold. 

53

Mr. GRISWOLD. I believe that the grant of an injunction as being 

almost automatic is appropriate, as you heard me answer earlier. 

I think it goes both ways. If we are found to be an infringer, we 

should be enjoined; and I feel the same way if we go after somebody else. 

So I think the key is, as we bring in new technologies and different kinds of subject matter into the patent system, that those— the people practicing those subject matters act like others that do 

this every day. We understand what the prior art is; we do clearance opinions; we avoid patents of others; we do validity studies. 

That’s the way it works. I think that’s a good system, and I think 

that eventually, as I mentioned, patent quality and people practicing in that system will solve the problems that we’re concerned 

about here. 

Mr. GOODLATTE. If I might, Mr. Chairman, let Mr. Gulbrandsen 

answer the same question. 

Mr. SMITH. Okay. 

Mr. GULBRANDSEN. I would agree with Mr. Griswold. I think that 

the ability to get an injunction if your patent is found valid and infringed is one of the hallmarks of our successful patent system. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Goodlatte. 

The gentlewoman from California, Ms. Lofgren, is recognized for 

her questions. 

Ms. LOFGREN. Thank you, Mr. Chairman. And thanks for scheduling this hearing. I think this has been a very helpful process. 

As Mr. Berman mentioned in his statement, we were informed 

by the National Academy of Science, the Federal Trade Commission. We’ve had a number of hearings that have been enormously 

helpful. We’ve had a lot of input from academic groups and from 

non-profits, as well as associations and interested parties. So I 

think we’ve ended up with a bill which I think all of us have cosponsored. We recognize this is not necessarily the final product, 

but it’s a good starting point to move from. And I’m happy to be 

a part of the process. 

Along those lines, and as part of the process, I sent yesterday to 

each of the witnesses and to the co-sponsors of the bill some suggestions that are not proposals on my part, but suggestions that 

have been made to me primarily by academics and not-for-profit organizations, that would not be instead of the bill that has been sent 

to us, but in addition to the bill that has been sent. 

And they really go not to the procedural issues primarily that the 

bill focuses on, but the obviousness standards that are in law, that 

Mr. Ravicher really touched on in his written testimony and, Professor Lerner, that you touch on in your book—which, by the way, 

I enjoyed a great deal. 

I’d like first to ask unanimous consent that my memo be made 

a part of the record. 

Mr. SMITH. Without objection. 

Ms. LOFGREN. And I’m wondering if the witnesses have—I gave 

them to you beforehand so that I wouldn’t surprise you and you 

might have an opportunity to give me your thoughts. And don’t feel 

shy if you think they’re bad ideas, because they’re not my own. 

[Laughter.] 

54

And if we could start with Professor Lerner. 

Mr. LERNER. Well, I just wanted to highlight one set of ideas that 

I think really is a very important set of issues; which is the issues 

that were raised regarding the standard setting process. In many 

senses, when we think about the nature of innovation in the 

United States, we don’t have these, you know, sort of giant corporate monoliths doing innovation by themselves. Instead, we have 

systems, where large companies and small companies work together. 

And standard-setting bodies play a very important role in terms 

of coordinating that process. But over the last 10 years, they’ve 

been increasingly basically subject to strategic behavior. The case 

of Rambus has gotten a lot of attention, but there’s been a number 

of other quite disturbing cases. 

And I think that, at least as an item for future consideration, 

this is an area that the Subcommittee should think about very seriously, in terms of trying to address some of these abuses. 

Mr. RAVICHER. The reduction in the obviousness bar to patentability is accurately identified as a substantial issue affecting patent quality. The problem is not with the statutory language. The 

problem is that the Federal circuit has taken the statutory language and added in its own requirements that have no basis in 

law. 

Specifically, they’ve added in a requirement that the prior art 

have a teaching suggestion or motivation to combine two references 

before you can use two references to make an obviousness rejection. 

This effectively eliminates what the statute requires a court to consider; namely, the knowledge of one having ordinary skill in the 

art. 

So the statute isn’t flawed. The Federal circuit’s application and 

addition to the statute is what’s flawed. 

Ms. LOFGREN. Well, if I may, I identify that as an issue. And the 

question is, what can the Congress do about it? And obviously, the 

court is the other branch, and they have their job to play. But it 

seems to me, a remedy that we do have is to clarify the statute so 

that they might be better informed as to what the law should be. 

Mr. RAVICHER. Right. The so-called ‘‘secondary considerations of 

obviousness,’’ which don’t exist in the statute, were created by the 

Supreme Court as a gut-check, last-second look to make sure that 

the original determination of obviousness isn’t flawed. 

The Federal circuit has taken those secondary considerations and 

plugged them in front of the statute. So communicating to the Federal circuit that that was incorrect application of law would be very 

worthwhile. 

Ms. LOFGREN. Mr. Griswold? 

Mr. GRISWOLD. Yes, I’ll comment on a couple of these. The first 

one was the eliminate the suggestion to combine test. We commented on that, and took a look at it in the response to FTC-3, 

Recommendation 3 of the Federal Trade Commission. 

We looked at this issue, and believe that, indeed—that this is appropriate to find some suggestion to combine references; rather 

than rely on some hypothetical person’s skill in the art. And how 

are we going to figure that out? I think this may be a case where 

more of a bright-line test provides more certainty and is better 

55

than having a very fuzzy standard. So we support this and you’ll 

find that in the FTC-3 response. 

Ms. LOFGREN. Thank you. And could Mr. Gulbrandsen answer? 

Mr. SMITH. Yes. 

Mr. GULBRANDSEN. I would be very reticent to change the obviousness—non-obviousness standard to an inventive steps standard. 

I think, again, many of these issues that are addressed can be addressed through increases in the support of the Patent Office, so 

that we are certain that we issue high-quality patents and that 

they’re examined appropriately the first time around. 

Ms. LOFGREN. If I—my time has expired, but if any of the witnesses would—— Mr. SMITH. Does the gentlewoman want to be recognized for another minute? 

Ms. LOFGREN. I would appreciate that. 

Mr. SMITH. Okay. Without objection, she is. 

Ms. LOFGREN. I won’t use the whole minute. I would just welcome any written comments that any of the witnesses has on any 

of these questions. And I thank the Chairman. 

Mr. SMITH. All right. Thank you, Ms. Lofgren. 

The gentleman from California, the holder of 37 patents, Mr. Issa 

is recognized for his questions. 

Mr. ISSA. Thank you, Mr. Chairman. And I’ll try to limit how 

much my experience as both a plaintiff and a defendant color my 

questions—but I’ll fail. 

I’m a co-sponsor of this bill, very happily, because I believe that 

each of the areas that it addresses must be addressed. I want to 

echo the Chairman’s statement when he said this was a first cut. 

But I want to limit it—both for the witnesses here, and perhaps 

for those who will see our statements—it’s a first cut that has to 

be taken seriously. It cannot be assumed that we’re going to throw 

out any of the aspects; that we’re not going to address any of these 

areas. Because I think the Chairman rightfully has hit each of the 

areas in which there are failures to get the outcome that we think 

should be arrived at. 

And if anything, I would be the person adding more to this bill, 

to include professionalizing the district court, or its equivalent, 

since I think the Supreme Court—Judge Breyer, when he was over 

in the Senate, was brilliant in realizing that it was time to have 

a professionalized court for patents. 

I think he erred, and that the fed circuit was in fact the wrong 

place to put it. And rather than professionalizing the second look 

at something after the damage has been done, after an injunction 

has been issued, after people have posted appeal bonds—after, 

after, after—that, in fact, we should seriously look at professionalizing the district court. 

My experience has been—as many of you would empathize with, 

my experience has been that the junior, poor former magistrate 

that gets elevated is the guy that’s going to get your patent case, 

if anyone can unload it. And with rare exceptions, judges who are 

experts in the area, the thing they know is not to take the case. 

Having said that, I’d like to concentrate on a couple of areas. 

First of all—and this would probably work for all of you—if we are 

to allow expanded reach into the patent application process, either 

56

pre- or post-, then would it be fair to say that we should include 

as a guidance to this court that I’ve already said is flawed still a 

de novo approach to looking at patent claims? 

In other words, are they allowed to fully discount for errors 

based on an equal standard that may have been made by the examiner? Or will they continue to be held to the assumption that 

the examiner looked at it, the examiner reviewed it, and therefore 

there is a high burden to undo that same material if it was seen 

by the examiner, even if it was just in a stack this thick that came 

in in the applicant’s packet? 

And I think each of you, I’d appreciate an answer. 

Mr. GRISWOLD. Well, we think that we certainly support the presumption of validity, and believe that the applicant has come forward, placed their invention into the process, and attempted to get 

a patent. And we believe that that should come with something; 

which is the presumption of validity, in our view. 

We also support, however, the post-grant review that’s in this bill 

that has as a standard a preponderance of the evidence. And we 

think that that, as a continuation of the examination process, is a 

very effective way to address some of these concerns. But it should 

in our opinion be done in the first—within 9 months—that’s when 

they should bring the opposition—after the patent grant. And that 

should be when it occurs; not later. No second window. 

Mr. GULBRANDSEN. I think, at the end of the day, when the patent is issued, and if you do adopt a post-grant opposition proceeding that is limited in time, we need to have certainty with respect to the validity and the strength of that patent. Otherwise, in 

starting small companies, you are not going to attract investors to 

place their money at risk, if there is continued uncertainty as to 

whether those patents are going to be able to be enforced. 

Mr. LERNER. I would agree with the two speakers on the left that 

the right approach is not to get rid of the presumption of validity, 

but rather to make sure that that really means something or that 

the presumption is well grounded, by essentially having a higher 

quality system. 

I will point out, though, that I think there are a number of quite 

disturbing cases where it seems that, if anything, the district judge 

has taken a patent issuance which was actually carefully constructed and actually quite dramatically broadened it out. The Research in Motion case, which was alluded to earlier, was one example, I think. The Eolas case versus Microsoft would be another example, where it seems that, if anything, the judge was going beyond the scope of rather careful review that the Patent Office had 

conducted. 

Mr. ISSA. Time passes quickly. One more answer. 

Mr. RAVICHER. Yes. The presumption of validity is statutory. 

There’s some empirical evidence that calls into question whether 

it’s justified. But the problem with the presumption of validity is 

that the Federal circuit again has taken it and ratcheted it up way 

too far in favor of patentees by requiring that challengers of patents come in with clear and convincing evidence; which is almost 

as high as ‘‘beyond a reasonable doubt’’—much, much higher than 

just ‘‘preponderance of the evidence.’’ That’s nowhere supported by 

the statute. 

57

The presumption of validity is fine, but the evidence that a defendant should have to come forward with is only a presumption 

of evidence that the patent’s invalid; not clear and convincing evidence. That makes it too tough on them. 

Mr. ISSA. So you would formally—just a last follow-up. You 

would formally say that shifting the burden not away from presumption, but to the fact that it’s overcomeable by the defendant 

by, as you say, a preponderance of the evidence, should be the overall standard for all aspects, including the initial granting? 

Mr. RAVICHER. Right, because that is the burden that the Patent 

Office uses during all of its proceedings. It’s the same burden that’s 

applied; especially with respect to art that no one’s ever looked at 

before. If it’s brand-new art, the first time anyone’s seen it is in 

litigation, why should that have to be clear and convincing? It just 

doesn’t make sense. 

Mr. ISSA. Thank you, Mr. Chairman. 

Mr. SMITH. The gentleman’s time has expired. 

The gentleman from California, Mr. Schiff, is recognized for his 

questions. 

Mr. SCHIFF. Thank you, Mr. Chairman. There are really two 

areas that I wanted to inquire about. And I support a lot of the 

work in the bill, and am proud to support the bill. 

There are some issues that have been raised of concern that I 

want to get your thoughts on, in particular about the impact on 

universities; two of which are very strongly out in my neck of the 

woods, Cal-Tech and the University of California. 

Both of the witnesses before the Committee from the academic 

community and from the universities themselves, I’ve gotten conflicting views, even within the same university, even within people 

doing the same work in the same university. But the two primary 

concerns—although there are several that have been raised with 

me in the university setting—have been over the first-to-file issue 

and a preliminary injunction issue. 

And if I could start with Professor Lerner and Mr. Gulbrandsen, 

who seem to come from the same academic environment but take 

two different views on this, if you’d share a little bit of your 

thoughts on those two issues in the current print. 

And maybe if you can go beyond it, assuming that there are 

going to be changes made, are there any things that can be done 

to ameliorate the concerns that the universities have with the 

change that’s being proposed? 

Mr. LERNER. Okay. Well, I guess I should start by just simply 

saying I’m speaking on behalf of myself, rather than on behalf of 

Harvard University. 

Mr. SCHIFF. Oh, before you do——

Mr. LERNER. Yes. 

Mr. SCHIFF.—I just want to say, as the Jacob Schiff chair, that 

Jacob Schiff was my great-grandfather. However, it was Jacob 

Schiff, the kosher butcher; regrettably, not the wealthy financier 

who has endowed your chair. But nonetheless, you have a special 

place in my heart. [Laughter.] 

Mr. LERNER. Well, thank you. I think that in some sense—I 

think the point was just raised earlier, that the use of interference 

is extremely rare. I mean, I think in some sense, I regard that as 

58

sort of prima facie evidence that this is something which really 

ought to be gotten rid of. 

This is something which essentially is—only a tiny fraction of 

patents get into interferences. There is nonetheless a lot of resources spent worrying about these procedures. And certainly, it’s 

fair to say that there’s a well compensated interference bar in this 

city which has done well within themselves dealing with these 

cases. 

I think that, given that this is an element which is quite an 

outlier and is sort of so rarely used, I would very much see this 

as being a sort of very low-cost step that could be done toward the 

harmonization of the U.S. system with the rest of the world, and 

I just—particularly today, in the era where there’s, you know, provisional filings which can be done on a very quick basis and are 

routinely done by university technology transfer offices, I don’t see 

this as a major problem. 

Mr. SCHIFF. So you feel the universities can adapt? 

Mr. LERNER. Absolutely—in effect, they—I mean, given that, you 

know, pretty much every important patent today is not just filed 

in the United States, but filed in Europe and elsewhere, where essentially it is a first-to-file world, people are indeed, you know, sort 

of filing as soon as they can, using provisional applications. 

I think, with the injunctive issues it’s a harder issue. But I will 

point out that, you know, sort of when we look at the history of the 

use of injunctive relief, you know, yes, it’s been in the statute for 

a long time; but certainly, when you look at the history for the 

first, you know, several decades, there are a number of decades in 

which it was used. It was something that was used on occasion, but 

was not seen as, by any means, an automatic procedure. 

And I think that that kind of balances one that would be one 

that would be harmful. After all, universities, particularly after 

Madey v. Duke, have real worries about not only being initiators 

of litigation, but also being on the receiving end. And I think as 

a result, they have a lot to gain from having a well-working patent 

system. Thanks. 

Mr. GULBRANDSEN. For private universities and for a university 

like the University of Wisconsin, Madison, that has a WARF with 

a large endowment, we could live with the system that you’re talking about, provided the additional protection that I address in my 

written statement exists; namely, the requirement that the inventor, or who is filing on behalf of the inventor, sign an oath. 

For most of the public universities, however, they don’t have a 

patent budget, and they need to rely on the good graces of a licensee to pay for the patent filing. For them, a race to the Patent 

Office just doesn’t work. And for them, it would be a true hardship. 

In our case, more often than not, the technology comes to us 

after somebody has published their discovery. And so we can still 

race to the Patent Office, because we have the resources to do it 

and we are able to speculate on technology; we don’t need to wait 

for a licensee in the wings. But for the great majority of public universities, this is going to be a real change of culture, and I think, 

at least initially, it will be a hardship. 

Mr. SCHIFF. May I just follow up for 30 seconds, Mr. Chairman? 

59

Mr. SMITH. The gentleman is recognized for an additional 

minute. 

Mr. SCHIFF. Thank you. Professor Lerner, can you respond? I 

know you’re a private university. How do you think the publics are 

going to be impacted? 

Mr. LERNER. Well, I think that it is fair to say that the sort of 

sophistication and skill of the operations, in terms of technology 

transfer, vary a lot; that there are some universities, including private ones like my own, as well as public ones like the University 

of California, which have very sophisticated operations, and many 

both private and public which are less well organized in that process and, as a result, are—probably, this is a real issue. 

But I think that this really argues for essentially making the investment on the part of the universities to essentially try to get the 

information about potential innovators earlier, and do that rather 

than trying to create some special exception for them. 

Mr. SCHIFF. Mr. Gulbrandsen? 

Mr. GULBRANDSEN. I would just state additionally that universities are open environments. For the universities to change their 

culture and say, ‘‘We’ve got to get to the Patent Office before we 

publish this discovery, or before we talk to anybody about it,’’ is 

really a change for universities, even a change for Wisconsin. We 

encourage publication. That’s what we’re about. We’re an open environment. And that’s how technology works in this country. 

If I could just read to you what PROTON, which is the pan-European network of knowledge transfer offices, says about the European patent system; its quote is, ‘‘The European patent system, 

with its complexity and cost, is much less appropriate to university-based inventions than the U.S. system, and acts as a barrier 

to innovation for public research. It lacks a grace period, a provisional patent system, a continuation in parts system, and is several 

times more expensive. PROTON Europe is convinced that these 

changes account in large part for the much lower number of patented inventions coming out of public research in Europe.’’

Mr. SCHIFF. Thank you very much. Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Schiff. 

The gentleman from Utah, Mr. Cannon, is recognized for his 

questions. 

Mr. CANNON. Thank you, Mr. Chairman. I appreciate this hearing. It’s been very informative. And I’d like to just ask the panel, 

in series, if there are any things they would like to add to what 

has been said, if there’s anything else that we ought to cover other 

than what’s happened already. Thank you. 

Mr. RAVICHER. There is one issue I address in my written testimony that I think is very important. Unlike trademark and copyright law, where there are defenses based on the exercise of constitutional rights, there is no such defense to patent infringement. 

And patents today, because life is more dependent on technology, 

it impacts all of our most critical freedoms. It impacts speech; it 

impacts privacy; it impacts assembly; it even impacts voting and 

religion. There are patents on everything you can imagine. It impacts all areas of life. 

Fortunately, we haven’t had any horror scenarios where some 

such—a patentee has been trying to use it to foreclose someone 

60

from exercising their constitutional right. But I would prefer us to 

have an expressed provision that says, when constitutional rights 

are being threatened by patents, the patent shall yield to the constitutional right. 

Mr. CANNON. Thank you. If you just want to go down the line 

of the panel, that would be great. 

Mr. LERNER. I think this has been a very thoughtful discussion, 

and one which has brought out a range of important issues. And 

I think, you know, no doubt, the bill which gets ultimately marked 

up and delivered will address some of these issues; others perhaps 

will be left on the plate for future consideration. 

But certainly, I would just highlight, you know, some of the consideration around the issue that was raised earlier about the idea 

of whether the specialized court is at the right level; and particularly, whether some of the issues around addressing the quality of 

the first trials, of the district-level trials, is a issue that perhaps 

the Committee might want to consider down the road. Thank you. 

Mr. GULBRANDSEN. I again would like to thank the Committee. 

And I mean, this is very important work, and it is the most drastic 

change to the patent laws in 50 years. 

But I would like to also say that the United States remains the 

technological leader in the world, and we have been the technological leader for almost a hundred years. I firmly believe that one 

of the reasons why this country is such a strong leader in innovation is because of our strong patent system. 

So, we have to maintain a strong patent system. We have to encourage people to want to invest in start-up companies. That’s 

where the innovation comes from. And, please, please, don’t do anything that is going to diminish the strength of patents. And please 

encourage the continued innovation country is great for. Thanks. 

Mr. GRISWOLD. Yes. I certainly would support the comment of 

not diminishing the value of patents. They are essential. They’ve 

been essential to 3M’s business from 1907—1902, actually. 

But I would say this. I think the bill overall, with the two exceptions which I mentioned, is a good bill and will not negatively impact the patent system. But there are two pieces that I mentioned: 

the second window; and any language on injunctions is an issue. 

I would also say this; that relative to the burden of proof in the 

response to FTC-2, Recommendation 2, we went into great length 

in describing what the true burden of proof standard is and why 

it’s appropriate. And I would refer the Committee to that for that 

discussion. 

Mr. CANNON. Thank you. I’d like to thank the panel members. 

I think it’s been a very enlightening discussion. And yield back, Mr. 

Chairman. 

Mr. SMITH. I thank you, Mr. Cannon. I, too, would like to thank 

the Members for their presence, the witnesses for their statements 

and their responses. This has been particularly enlightening. And 

also, for everyone in the room, this is a higher than usual turnout, 

and it indicates an interest in an important subject. 

Let me also add that, if we do our job—and I am confident that 

we will—and continue to massage this bill between now and the 

markup scheduled on June 30th, we will have a product that in 

fact will help businesses across the country; that will create jobs; 

61

that will spur the economy; that will stimulate innovation and creativity; and that will help many, many Americans. And that is our 

aim, and I believe that we will achieve that. 

And thank you again for your help along the way. We stand adjourned. 

[Whereupon, at 10:35 a.m., the Subcommittee was adjourned.] 

(63)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE HOWARD L. BERMAN, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF CALIFORNIA

Thank you for scheduling a hearing on the Patent Act of 2005. Several groups 

have worked diligently to arrive at a consensus on reforms necessary to improve existing patent laws. There seems to be agreement that any legislation should focus 

on three broad subjects: 1) the decrease in patent quality, 2) the increase in litigation abuses, and 3) the need to harmonize U.S. patent laws with the patent laws 

of foreign countries. The Chairman and I and our staffs, have carefully considered 

the copious comments on the committee print and have carefully crafted H.R. 2795 

to respond to the concerns. 

I initially became interested in patent reform, primarily because of the multitude 

of questionable quality patents that were being issued. High-quality patents are essential to a healthy patent system. Poor quality patents tend to spawn litigation, 

which in turn creates uncertainty in markets that depend on patent rights. As a 

result, investors hesitate to invest and innovators hesitate to invent. That is why 

I am pleased that there is strong support for a key quality provision in the bill—

allowing third parties to submit prior art to examiners within a limited time frame. 

With Section 10, we have taken an important first step in addressing the problem 

of poor patent quality by enabling examiners to have more information from additional sources. During the question and answer portion of this hearing, I intend to 

explore the merits of additional quality measures such as the ‘‘second window’’ in 

the post-grant opposition procedure. 

This bill is by no means a perfect solution, but I believe many of my additional 

concerns will be addressed as the bill goes through committee. For example, the 

PTO has voiced some concerns about its ability to administer the provision on the 

duty of candor. If the agency tasked with managing the procedure believes it will 

have trouble doing so, it is worth taking a second look at the consequences of the 

language. Furthermore, I think the harmonization provisions need to be fleshed out 

a bit more to address the concerns of small-inventors and universities, which I hope 

at least one of the witnesses will speak today. As we move forward in this process, 

I hope that we will continue to seek a consensus on the best way to reform our patent system. 

I look forward to hearing from parties interested in patent reform over the next 

few weeks in order to rectify any unintended consequences presented by the text 

of the bill. Overall, I believe that our bill has addressed a number of pressing issues 

and will certainly create a healthier more effective patent system. 

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN

I am an original cosponsor of this legislation because I believe we need to make 

major changes to the patent system. At the same time, however, I do have concerns 

with several of the provisions in the bill. 

At the outset, it is important for our economy to harmonize our patent system 

with those of other countries. To this end, we should establish a system that awards 

the patent to the first-inventor-to-file. We also should make it easier for third parties to challenge patents after they have issued as long as the process has some finality to it. 

Other sections, however, will require continuing discussions. I have not heard 

anyone deny that there are too many ‘bad’ patents out there, patents that are 

overbroad or that the Patent and Trademark Office should have been denied as 

64

being obvious. Owners of such patents file infringement suits and receive either 

damages or injunctions for patents that never should have been issued. This drives 

up costs not only for businesses but also for consumers. To address this, we are 

faced with two options. 

Because of problems in a few industries, there are proposals that we make it more 

difficult to enforce patents. I fear, however, that this could disproportionately affect 

smaller patent owners, who would have a more difficult time in establishing harm 

from infringement if damages but not an injunction were awarded. 

In terms of scope, this approach may be too broad. It would affect owners of not 

just overbroad patents but also those that are entirely legitimate. It also would affect not just the industry in question but every industry that is vital to our economy, 

from biotechnology to software to high-tech. Finally, it could discourage investment 

and research into new drugs and technologies, as investors would not know whether 

any resulting patents would ultimately be enforceable. 

The second option, which I believe deserves greater consideration, is to prohibit 

such patents from issuing in the first place. Such an approach would help avoid infringement and related litigation costs altogether. It also would ensure against the 

issuance of injunctions for patents that should not have been granted without affecting the rights of legitimate patent owners. 

One proposal to accomplish this is to allow patent examiners to review more than 

just officially published documents. Patent examiners must be able to consult information that tells whether an application describes something that is not really new, 

even if that information was not a patent or a journal article. I would hope we can 

all agree that the PTO should be able to consider a wider variety of such prior art 

than it is currently permitted. 

We also need to revisit the standard that is used to determine whether an application describes something that would be obvious to people in the field. Even if an 

invention was not clearly explained somewhere, the concept of it may be too obvious 

to merit patent protection, and we should make that clear to the PTO and to the 

Federal Circuit. These two ideas, among others, could drastically cut the number 

of bad patents being issued and drive down costs for all of us without harming valid 

patent owners, large and small. 

PREPARED STATEMENT OF THE HONORABLE ZOE LOFGREN, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA

Today we are here to discuss the merits of the ‘‘Patent Act of 2005.’’ But first I 

want to thank Chairman Smith and his staff for all their hard work on this bill and 

their willingness to work across the aisle on it. I also want to thank Ranking Member Berman and his staff, as well as the academic and industry groups who have 

tried to find creative solutions to some of the more vexing parts of this legislation. 

I know we have a lot of work left to do. I think our country needs patent reform 

and for that reason I am a cosponsor of this bill. But this is just the beginning of 

the process. The bill we are considering today includes many needed reforms that 

I think everyone can support. Obviously, there are aspects that will need further 

work and change. 

Patents are a critical source of this country’s economic vitality. The strength of 

our patent system has spurred innovation and led to the creation of entire industries. But to ensure the continued success of our patent system, it is clear that 

changes need to be made. This legislation is a needed first step to move this process 

forward. 

As we continue to seek the right balance, I hope that we also consider other ways 

to improve patent quality. Over the last several weeks, I have received numerous 

suggestions including, among other things, suggested improvements to the non-obviousness standard found in section 103(a). While it is too early for me to endorse any 

of these suggestions, I hope that we can give them serious consideration. 

Again, thank you Mr. Chairman, I look forward to working with you and the other 

Members of the Subcommittee on this legislation in the weeks to come.

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MEMORANDUM SUBMITTED BY THE HONORABLE ZOE LOFGREN, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA


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LETTER FROM MICHAEL K. KIRK, EXECUTIVE DIRECTOR, AMERICAN INTELLECTUAL

PROPERTY LAW ASSOCIATION (AIPLA), IN RESPONSE TO QUESTIONS TO GARY GRISWOLD, PRESIDENT AND CHIEF INTELLECTUAL PROPERTY COUNSEL, 3M INNOVATIVE

PROPERTIES COMPANY, SUBMITTED BY THE HONORABLE ZOE LOFGREN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA


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PREPARED STATEMENT OF THE COMPUTER & COMMUNICATIONS

INDUSTRY ASSOCIATION


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Æ


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