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38–563 PDF 2007

S. HRG. 109–984

PATENT LAW REFORM: INJUNCTIONS AND

DAMAGES

HEARING

BEFORE THE

SUBCOMMITTEE ON INTELLECTUAL PROPERTY

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

JUNE 14, 2005

Serial No. J–109–27

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY 

ARLEN SPECTER, Pennsylvania, Chairman 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

DAVID BROG, Staff Director 

MICHAEL O’NEILL, Chief Counsel 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

SUBCOMMITTEE ON INTELLECTUAL PROPERTY

ORRIN G. HATCH, Utah, Chairman 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

DIANNE FEINSTEIN, California 

HERBERT KOHL, Wisconsin 

RICHARD J. DURBIN, Illinois 

BRUCE ARTIM, Majority Chief Counsel 

BRUCE A. COHEN, Democratic Chief Counsel 

(III)

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS

Page

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 1

prepared statement .......................................................................................... 106

Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts ... 6

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 4

prepared statement .......................................................................................... 154

WITNESSES 

Band, Jonathan, Attorney at Law, on behalf of Visa U.S.A. and the Financial 

Services Roundtable, Washington, D.C. ............................................................. 9

Fish, Chuck, Vice President and Chief Patent Counsel, Time Warner, Inc., 

New York, New York ........................................................................................... 15

Gulbrandsen, Carl E., Managing Director, Wisconsin Alumni Research Foundation, Madison, Wisconsin ................................................................................. 7

Hawley, J. Jeffrey, President, Intellectual Property Owners Association, and 

Vice President and Director, Patent Legal Staff, Eastman Kodak Company, 

Rochester, New York ........................................................................................... 17

Kushan, Jeffrey P., Sidley Austin Brown and Wood, LLP, Washington, D.C. ... 13

Lemley, Mark A., Professor of Law, Stanford Law School, Stanford, California ..................................................................................................................... 11

QUESTIONS AND ANSWERS 

Responses of Jonathan Band to questions submitted by Senator Leahy ............ 30

Responses of Chuck Fish to questions submitted by Senator Leahy .................. 34

Responses of Carl E. Gulbrandsen to questions submitted by Senator Leahy ... 37

Responses of J. Jeffrey Hawley to questions submitted by Senator Leahy ........ 44

Responses of Jeffrey P. Kushan to questions submitted by Senator Leahy ....... 48

Responses of Mark A. Lemley to questions submitted by Senator Leahy .......... 59

SUBMISSIONS FOR THE RECORD 

Band, Jonathan, Attorney at Law, on behalf of Visa U.S.A. and the Financial 

Services Roundtable, Washington, D.C., prepared statement .......................... 68

Fish, Chuck, Vice President and Chief Patent Counsel, Time Warner, Inc., 

New York, New York, prepared statement ........................................................ 79

Gulbrandsen, Carl E., Managing Director, Wisconsin Alumni Research Foundation, Madison, Wisconsin, prepared statement .............................................. 89

Hawley, J. Jeffrey, President, Intellectual Property Owners Association, and 

Vice President and Director, Patent Legal Staff, Eastman Kodak Company, 

Rochester, New York, prepared statement ........................................................ 111

Kushan, Jeffrey P., Sidley Austin Brown and Wood, LLP, Washington, D.C., 

prepared statement .............................................................................................. 132

Lemley, Mark A., Professor of Law, Stanford Law School, Stanford, California, prepared statement .................................................................................. 157

(1)

PATENT LAW REFORM: INJUNCTIONS AND 

DAMAGES 

TUESDAY, JUNE 14, 2005 

UNITED STATES SENATE, 

SUBCOMMITTEE ON INTELLECTUAL PROPERTY, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:35 p.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Orrin G. Hatch, 

Chairman of the Subcommittee, presiding. 

Present: Senators Hatch, Leahy and Kennedy. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. 

SENATOR FROM THE STATE OF UTAH 

Chairman HATCH. We will call the meeting to order. We want to 

welcome you all to the Subcommittee’s second hearing on patent 

law reform. Today, we are going to focus our attention on problems 

that have arisen under current law with respect to the circumstances under which injunctions are granted and damages are 

awarded in connection with patent litigation. 

Senator Leahy and I are interested in and prepared to work with 

all interested parties in identifying issues and formulating possible 

solutions to problems with the Patent Code. Like our colleagues in 

the House, Chairman Lamar Smith and ranking Democratic member Howard Berman, we are prepared to develop legislation remedies if such legislation is found to be necessary and if a sufficient 

consensus emerges. 

We are mindful that it is often difficult to fashion intellectual 

property legislation, but this is a high priority for the Subcommittee and I would appreciate any help that you can all give 

and that others who are watching or are concerned can give. 

The art of developing legislation involves making sure that all 

the legitimate points of view have been heard and considered before legislation is developed and moved through the Congress. This 

entails considerable discussion and, I might add, compromise by all 

affected parties. 

Those who would change current law have the burden of persuading those of us in Congress that their proposals respond to significant problems, and they have the duty of persuading us that 

the legislation they propose actually resolves the problems that 

have been identified. Ideally, any new legislative solutions would 

not create bigger problems than they solve, and this is a difficult 

but a doable challenge. 

2

Today, we will examine some of the key problems related to patent litigation. By all accounts, patent litigation has become a significant problem in some industries and for some types of parties. 

There are a number of factors in patent law that drive up the cost 

and uncertainty of litigation in ways that appear to many to be 

largely unjustified. 

However, some of the principal problems and costs associated 

with patent litigation are not uniform across industrial sectors, and 

this has led to substantial and sometimes vociferous disagreements 

about the nature of the underlying problems, and thus what the 

appropriate solutions might be. 

The most contentious and controversial of the proposals to decrease excessive patent litigation are based on the assertion that 

current law imposes disproportionate liability and business risk on 

legitimate enterprises. The argument is advanced by some patentholders that some patent-holders who some less than affectionately 

characterize as patent ‘‘trolls’’ attempt to secure disproportionately 

high settlements from defendants that cannot afford to take an intolerably high risk of treble damage awards or massive lost profits 

if an injunction keeps their product off the market during and after 

litigation. 

We will hear from representatives of some of those in the hightech, software and financial services industries that currently are 

targets of a significant number of lawsuits or threatened lawsuits 

that they say are of questionable validity. 

Additionally, the costs of allegedly abusive litigation tactics do 

not seem to be evenly spread across industries or parties. At the 

risk of oversimplifying a complex situation, some argue that the 

most significant costs are focused on industries and parties that 

have a combination of the following attributes: short product cycles, 

high patent density and inventions that are less susceptible to 

clear and discrete descriptions in patent claims. Additionally, the 

current remedial scheme seems to provide greater relative leverage 

against defendants in these types of industries. 

On the other side of the spectrum are industries that do not suffer as significantly from this type of litigation. Generally speaking, 

these industries are characterized by longer product cycles with 

fewer alterations in each cycle, a lower patent-per-product ratio 

and inventions susceptible to discrete description. The biotech and 

pharmaceutical industries are two of the best examples of industries on this end of the continuum. 

Some of the high-tech industries most affected by abusive litigation seek reforms that others such as the biotech sector argue 

would weaken the current remedies available to patent plaintiffs 

under current law. Thus, while the weaker would help defendants 

in some industries to fend off illegitimate suits, if not carefully 

crafted they could materially disadvantage legitimate plaintiffs in 

other industries who argue that the weaker remedies devalue their 

patent rights. 

Trying to achieve the right balance in this situation means wrestling with many devilish details. Two critical challenges we face 

revolve around the advisability of, one, altering the standard for 

obtaining injunctions and, number two, codifying a rule for the apportionment of damages. 

3

Altering the standard for determining whether injunctive relief 

should be granted in a patent infringement case has emerged as 

perhaps the most contentious issue in the patent reform debate. 

Large tech companies, many of which have products covered by 

thousands of patents, believe that some change in current law is 

necessary to prevent what they consider as something akin to legalized extortion by plaintiffs who use the threat of an injunction 

to obtain settlements that are allegedly disproportionate to the 

value of the patent that is infringed. 

Because the profitable life of many high-tech products is relatively short, an injunction that keeps these products off the market for a year or two can threaten the profitability or even the viability of a small or mid-size tech company, which arguably forces 

these companies to settle cases for much more than the claims are 

actually worth. 

To add to the difficulties, some believe there appear to be quite 

a few over-broad patents in these areas, resulting in a situation 

where an infringement suit might be successful even though it 

would have failed if the patent claims were written properly. The 

tech industry has dealt with this problem in part through cross-licensing to avoid the mutually-assured destruction that would accompany aggressive enforcement of all relevant patent rights. 

Cross-licensing only works as a solution if the other potential litigants face a comparable threat from the available remedies. Many 

tech companies argue that the main threat is not from other legitimate companies. It is from overly aggressive patent-holders and 

their attorneys who use the disproportionate threat of an injunction to extort large settlements based on nearly worthless patents. 

It is alleged that these types of patent-holders, commonly referred to patent trolls or licensing shops, have no interest in crosslicensing because, in the most extreme examples, they don’t make 

or sell anything and therefore have no business risk from an injunction. They allegedly exist predominantly for the purpose of 

threatening litigation to obtain settlements. 

Interestingly, among the most vocal critics of the high-tech sector’s desire to amend the injunctive relief provisions in current law 

are the pharmaceutical and biotech industries, independent inventors and some business interests. Generally, the products patented 

by the drug companies and small inventors are discrete inventions 

covered by relatively few patents. They rely on the absolute exclusivity of their patent rights, often enforced by injunctions to ensure 

that they are able to commercialize their inventions and enjoy the 

fruits of their innovation. 

The small inventors, in particular, rely on injunctive relief to 

equalize the playing field when competing against larger, betterfunded enterprises. We heard both Dean Kamen and William 

Parker, a constituent of Senator Leahy’s, at our last Subcommittee 

hearing express their concerns about changing the current injunction law. 

This same type of debate is playing out with respect to the damage provisions of the Patent Code. I understand that this issue is 

most important to the software industry. They claim that under 

current law, a patent-holder who successfully sues a software comVerDate 0ct 09 2002 14:27 Nov 02, 2007 Jkt 038563 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\38563.TXT SJUD1 PsN: CMORC
4

pany for infringement may be rewarded well beyond the actual 

value that the invention contributes to the product. 

The argument is that under some damages theories, the plaintiff 

can receive damages based on the value of the market for an entire 

product when the patented invention is only a small part of the actual product. For example, suppose damages were based on the 

market value for an entire car when the patent only covered the 

windshield wiper motor or some other component out of hundreds. 

Crafting language that satisfactorily codifies a proportional contribution measure of damages is just one of the many challenges 

that we legislators face. 

Our witnesses today will give their views on the adequacy of the 

current Patent Code with respect to injunctions and damages and 

other matters. While we may ask for their views of the pros and 

cons on certain language that has been proposed, I do not intend 

for this to be a public negotiating session. I do suspect, however, 

that Senator Leahy and I will join our colleagues in the House, including Chairman Smith and Ranking Member Berman, in encouraging the affected parties to continue to discuss these matters and 

negotiate solutions. 

I hope that the introduction of H.R. 2795 and a planned House 

IP Subcommittee markup will help move this process along in a 

constructive fashion. If there is to be legislation, it is imperative 

that we get it done right. This will take hard work and good faith 

among many interested parties. 

We are grateful to have all of you here today who are willing to 

testify and help us to understand these issues that are very complex and difficult to begin with. Today, we will learn more about 

the matters of concern from expert representatives of many key actors in the intellectual property community, and we welcome your 

testimony and are very grateful to you. 

[The prepared statement of Senator Hatch appears as a submission for the record.] 

With that, we will turn to Senator Leahy. 

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR 

FROM THE STATE OF VERMONT 

Senator LEAHY. Thank you, Mr. Chairman, and I agree in welcoming the folks here today. Many of you, whether on the panel or 

in the audience, are not strangers to this Committee room. In fact, 

some of you, I think, have your mail forwarded here; you spend 

enough time here. We consider that a compliment to the Judiciary 

Committee. 

We have a very complex case ahead of us. We are trying to retain 

the best aspects of a system that has really brought about the innovative spirit of our country. At the same time, we have to make 

some changes and try not to inadvertently hamper those entrepreneurial accomplishments. So I have been working with Senator 

Hatch, and I will continue to, on this important initiative. 

I am grateful for all the work that our friends in the other body 

have done. I hope we will have a day soon when we can introduce 

related legislation in the Senate. If past experience is a useful predictor, then I think Senator Hatch and I can come up with legislation that will reach the President’s desk and can be signed by him. 

5

At this Subcommittee in April, as the Chairman mentioned, we 

heard a great deal about patent quality and about reforms that 

may be necessary to ensure that the Patent and Trademark Office 

issues patents for work that is truly innovative. Now, we have got 

to focus from the work rooms of the PTO to the courtrooms across 

America. 

We found three possible areas of reform: one, the use of injunctive relief and damages in patent infringement cases; secondly, the 

possibility of administrative processes rather than litigation to resolve certain issues; and, finally, the role of subjective elements in 

patent litigation. We have to be thorough in considering all of these 

issues, but I am particularly interested today in hearing about injunctions and damages. Those seem to be the kind of hot buttons 

as we try to draft legislation. 

I would like to thank our witnesses for taking time. I am particularly interested in hearing from you all on the subject of injunctive 

relief. In issuing injunctions, courts are instructed to balance the 

equities in a given case, evaluating the harm to one party if an injunction is issued versus the harm to the other party if it is not 

issued. At the same time, they have to consider the public interest. 

Some argue that under the current legal standards, plaintiffs are 

granted injunctions in nearly all cases. In such cases where a defendant is faced with a virtual certainty that production and marketing will grind to a halt, weak cases end up being leveraged into 

lucrative licensing agreements. On the other hand, we are all 

aware of the fact that there are cases where injunctive relief has 

to be available. Otherwise, you are going to have irreparable harm. 

Now, there is not consensus, I must say, on how to solve this. I 

think everybody agrees it has to be solved. They just don’t know 

how to do it. 

We have to talk about apportionment damages. I have heard 

from some that a verdict of infringement can result in an award 

of damages out of proportion to the actual role the infringed item 

plays. I think damages awarded should relate to the value of the 

infringement. That is a lot easier to say up here than if you are 

a judge or a jury making that determination. So I would like to 

hear some discussion on that. 

Another reform we heard mentioned touched on at this panel’s 

last hearing is the use of administrative procedures to reduce the 

quantity of litigation, yet also improves patent quality. Now, on 

that one, there seems to be general support for the idea. Several 

have spoken of the desirability of creating a post-grant review that 

would allow a third party to challenge a patent’s validity within 

the PTO without having to go into the courtroom. 

Finally, I have heard considerable support for some proposals to 

modify the subjective elements of patent litigation, the finding of 

willfulness to infringe by the determination of inequitable conduct 

and whatever that entails. Now, if you want to investigate those 

elements, it could be very costly. It would require the determination of a party’s state of mind at the time a patent application was 

filed. 

For example, the willful infringement standard. You can get treble damages for this if a defendant was aware of a plaintiff’s patent. That may have the unintended effect of discouraging compaVerDate 0ct 09 2002 14:27 Nov 02, 2007 Jkt 038563 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\38563.TXT SJUD1 PsN: CMORC
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nies from making a comprehensive search for prior art so they are 

not going to be penalized later on. We have to look at those issues. 

We have to remember that we are ultimately talking about the 

products that would be available to consumers. The ongoing Blackberry dispute—everybody is checking their pockets—that drives 

this home in a powerful way. I don’t know who is right in it. I do 

know that I breathed a sigh of relief when I heard they had an 

agreement. Now, we understand the agreement may be unraveling. 

So a lot of us are going to be watching this case, particularly with 

a nervous tick in our thumbs. Some people, probably our spouses, 

our staff and others, wish that we wouldn’t watch it so closely, but 

it could affect millions of people. 

I hope the ruling in Merck v. Integra Lifesciences is going to provide a much needed boost to scientific research. I would like to see 

greater sharing of drug patents. I would like to see an end to the 

practices by which some companies delay competition through anticompetitive conduct. 

A few years ago, I authored and we passed legislation to force 

companies signing non-compete agreements to disclose those agreements to the FTC. But I think the FTC now and the Department 

of Justice have to do a lot more to encourage competition. I hope 

that we will be able to soon turn to the Stem Cell Research Enhancement Act. It was passed by the House overwhelmingly, H.R. 

810, with 200 House cosponsors. It passed with 238 votes. It is 

critically important to certainly those whose family members who 

are suffering from debilitating diseases—Parkinson’s Alzheimer’s, 

diabetes, spinal cord injuries. They are watching this. It has been 

shunted aside and many of us here want to move forward. Many 

in both parties want to move forward and I hope that the Republican leadership will allow us to. 

So, Mr. Chairman, you and I have tackled complex issues like 

these before. Somehow, we have worked them out. We have worked 

together on them and we have gotten them on the President’s desk 

and we have gotten them signed, and I think we can do it again. 

Chairman HATCH. I do, too. 

Senator LEAHY. I will put my whole statement in the record. 

[The prepared statement of Senator Leahy appears as a submission for the record.] 

Chairman HATCH. Well, thank you, Senator. 

Senator Kennedy would like to make a brief statement. 

STATEMENT OF HON. EDWARD M. KENNEDY, A U.S. SENATOR 

FROM THE STATE OF MASSACHUSETTS 

Senator KENNEDY. Thank you very much, Mr. Chairman. We 

want to hear from our witnesses and I appreciate your courtesy. 

I represent a State that prides itself on innovation and creativity 

not only in the sciences, but also in the arts. Patents are enormously important in the biotech industry and the pharmaceutical 

industry and the life sciences industry, important in terms of our 

universities. Software is enormously important in my State. We 

want to make sure that the patent system is going to work for 

those who are creative and are innovative. About 50 percent of all 

the health patents are in my home State of Massachusetts, so this 

is enormously important. 

7

There is also an appropriate role in terms of the software industry in terms of these issues in terms of injunctions, and I want to 

hear from our very distinguished panel today. I am certainly open 

to see that we make what changes and modifications might be useful and helpful, and be valuable in terms of advancing the common 

interest, which is progress in terms of the economy and progress 

in terms of innovation. 

Mr. Solo of MIT recently pointed out that 50 percent of our 

growth as a Nation over the last 40 years has been innovation. And 

what we are talking about here is how we are going to recognize 

innovation and how we are going to give that protection and reward, but also as innovation is moving so rapidly in the software 

area how we are going to be sensitive to some of those issues as 

well. 

This is an enormously complex issue which we don’t visit very, 

very often, so we need a lot of help. We have got a very distinguished panel and I look forward to hearing from them. 

I thank the Chair. 

Chairman HATCH. Thank you, Senator Kennedy. 

We are very pleased to have with us today a number of very important witnesses: Carl Gulbrandsen, Managing Director of the 

Wisconsin Alumni Research Foundation, or WARF, from Madison, 

Wisconsin; Jonathan Band, on behalf of Visa and the Financial 

Services Roundtable; Mark A. Lemley, a professor at the Stanford 

Law School, in Stanford, California; Jeffrey P. Kushan, who is a 

partner at Sidley Austin Brown and Wood here in Washington; 

Chuck Fish, Vice President and Chief Patent Counsel for Time 

Warner, Inc.; and J. Jeffrey Hawley, President of the Intellectual 

Property Owners Association, and Legal Division Vice President of 

Eastman Kodak Company. 

We feel very honored to have you quality people here to help 

guide us and help us to try and find some solutions here. We will 

begin with you, Mr. Gulbrandsen. 

STATEMENT OF CARL E. GULBRANDSEN, MANAGING DIRECTOR, WISCONSIN ALUMNI RESEARCH FOUNDATION, MADISON, WISCONSIN 

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

to testify before your Subcommittee on the important topic of patent law reform, injunctions and damages. My name is Carl E. 

Gulbrandsen. I am the Managing Director of the Wisconsin Alumni 

Research Foundation, known as WARF. I am making my statement 

today on behalf of WARF. I am also authorized to state that Research Corporation Technologies of Tucson, Arizona, also known as 

RCT, supports the stances that are taken in my written and oral 

statements. RCT Corporation focuses on technology investments 

with origins from universities and research institutes. 

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 

States on individuals and organizations making lasting contributions to the country’s well-being. This award recognized the importance of technology transfer. 

8

The Senate Judiciary Committee played an instrumental role in 

the drafting of the Bayh-Dole Act and its cardinal principle that 

the American public benefits from public policy that permits universities and small businesses to elect ownership in innovations 

made using Federal funds. 

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 profound and positive impact on 

the health, safety and welfare of our country and worldwide. If patent law is weakened, then technology transfer suffers, as do U.S. 

universities, companies that depend on university research, and 

the public. 

In 1980 when the Bayh-Dole Act passed, approximately 25 U.S. 

universities had technology transfer offices. No uniform Federal 

patent policy existed and federally-funded discoveries were rarely 

patented and commercialized. Today, more than 230 U.S. universities have technology transfer offices, and universities are recipients of approximately 4 percent of U.S. patents issued. 

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

includes Leustatin, a chemotherapy drug from the Brigham Young 

University; a lithography system to enable the manufacturing of 

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

aneurysm treatment from the University of California at Los Angeles. 

In the past two decades, intellectual property assets have become 

vital to the performance of the U.S. economy. Since 1992, the volume of patent applications in the PTO has more than doubled to 

400,000 applications annually. In 2005, the PTO issued more patents than it did during the first four decades of American history, 

although because of recent administrative and fiscal strains, the 

backlog of patent applications has grown to 500,000 and continues 

to grow. 

In the eyes of many, patent quality has suffered. As a member 

of Patent Public Advisory Council, I believe that poor-quality patents are the exception rather than the rule, but even the exception 

should not be tolerated. The first line of defense against poor-quality patents and slow decisionmaking is to provide the PTO with the 

fiscal resources that it needs to hire and train skilled examiners 

and implement effective electronic processing capabilities. There is 

nothing in the current proposals that assist the PTO with these 

critical steps. 

Based on our initial analysis of a plethora of patent reform proposals on the table, WARF is able to express support for some. 

However, several of the reform proposals represent a step backwards for university patenting and commercialization efforts. Candidly, these proposals can be described as anti-patent under the 

label of litigation reform. Many of them fall into the category of diminishing enforcement rights and remedies of patent-holders and 

have little bearing on improving patent quality. I believe that their 

passage would thwart the tremendous success that universities 

have experienced in innovation. Economic development, small businesses and jobs could be jeopardized in every State in the Union. 

9

WARF therefore objects to four provisions currently being discussed. First, with respect to injunctive relief, current proposals tilt 

the playing field in favor of infringers. Currently, a presumption in 

favor of injunctive relief is built into our patent process. This is for 

good reason. Injunctions respect the constitutional right of patent 

owners to exclude others from using his or her patented invention. 

Second, 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 

disclosures. 

Third, WARF opposes limiting continuation practice and believes 

such a change in the law would negatively impact universities unless changes were specifically tailored to address abusive practices. 

Fourth, the adoption of a first to file system that is intended to 

bring us closer to the rest of the world disadvantages the vast majority of universities and independent inventors. If we must harmonize to the world’s patent laws, my written statement makes 

suggestions that should be incorporated in any harmonizing patent 

legislation in order to protect universities and independent inventors. 

Mr. Chairman, thank you for your leadership, time and attention. If there are any questions, I would be pleased to answer them. 

[The prepared statement of Mr. Gulbrandsen appears as a submission for the record.] 

Chairman HATCH. Thank you, Mr. Gulbrandsen. 

Mr. Band. 

STATEMENT OF JONATHAN BAND ON BEHALF OF VISA U.S.A. 

AND THE FINANCIAL SERVICES ROUNDTABLE, WASHINGTON, D.C. 

Mr. BAND. Chairman Hatch, Ranking Member Leahy and Senator Kennedy, I am pleased to testify today on behalf of Visa 

U.S.A. and the Financial Services Roundtable. 

The financial services community is intensely interested in patent quality and litigation issues, and is grateful that you are considering these matters. Since the subject of today’s hearing is injunctions and damages, I will focus my testimony on these topics. 

However, our views on remedies can be understood only against 

the background of the serious patent quality problem. 

Regardless of which features contribute to a lack of patent quality, businesses of all shapes and sizes, including financial institutions, are threatened by a large and growing number of frivolous 

claims of patent infringement. Claims of infringement are a serious 

problem already, but they are only the tip of the iceberg because 

of the time lag and the issuance of patents related to business 

methods. 

Since the State Street Bank decision in 1998, the number of patent applications involving financial services has surged. Because it 

typically takes more than 3 years to obtain a business method patent, the risk of increased litigation for financial services has now 

arrived. 

While the Patent Act’s provisions concerning remedies would 

need adjustment even if the Patent Office granted only valid patVerDate 0ct 09 2002 14:27 Nov 02, 2007 Jkt 038563 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\38563.TXT SJUD1 PsN: CMORC
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ents, the patent quality problem makes the need for litigation reform all the more compelling. The possibility of a broad injunction 

and treble damages means that a financial services institution 

must take even the most frivolous patent infringement claim seriously. 

The current rules regarding injunctions and damages place all 

the leverage in the hands of the patent owner even if the patent 

is extremely weak. Because the systems for processing credit cards 

or checks are large, complex and undifferentiated, an injunction on 

one small part of the system can shut down the entire system. If 

Congress does not correct the remedies under the patent law, the 

surge in the number of patents relating to financial services will 

lead to financial services institutions paying out ever larger license 

fees to holders of suspect patents, to the detriment of our customers. 

There are steps Congress can and should take to provide financial firms and other businesses with safeguards against these frivolous claims without impairing the important protections afforded 

under the patent law. Specifically, Congress should modify the 

standards for injunctive relief and clarify the damage rules with respect to willfulness and apportionment. 

In most cases, the prevailing plaintiff bears the burden of showing that it is entitled to injunctive relief because money damages 

are insufficient. In patent cases, however, if the patent owner 

shows that the patent is valid and infringed, the court presumes 

that the patent owner is irreparably harmed by the infringement. 

In theory, the defendant has the opportunity to rebut this presumption, but as a practical matter courts treat the presumption 

as virtually irrebuttable. 

The threat of a permanent injunction, even in the absence of any 

real irreparable harm, significantly increases the risk to the defendant of going to trial to prove invalidity or non-infringement. 

Accordingly, this presumption forces defendants to settle prematurely even in cases with weak patents held by patent trolls. 

The Patent Act should be amended to provide that a court can 

grant an injunction only if the patentee demonstrates that it is 

likely to suffer immediate and irreparable harm that cannot be 

remedied by the payment of money damages alone. The House IP 

Subcommittee’s Committee print contains such language. Unfortunately, the bill actually introduced, H.R. 2795, does not go as far 

as the Committee print in this respect. It implies that the defendant bears the burden concerning irreparable harm, rather than the 

plaintiff. Still, the language in H.R. 2795 is an improvement over 

the status quo because it makes clear that the presumption of irreparable harm is rebuttable. 

The patent law should also be modified to provide that a court 

can treble the damages only if the infringer engaged in egregious 

conduct, such as deliberately copying the patented subject matter 

with knowledge that it was patented. The Patent Act should make 

clear that treble damages should not be available if the infringer 

had a good-faith belief that the patent was invalid or unenforceable. H.R. 2795 contains provisions along these lines concerning 

willful infringement. 

11

Another area of concern is the apportionment of damages when 

a patent covers a small component of a larger product. The Act 

should direct the court to award damages only to the portion of the 

product covered by the patent and not the entire product. We are 

pleased that H.R. 2795 has appropriate language concerning apportionment. 

In conclusion, both Visa U.S.A. and the Financial Services 

Roundtable believe that the U.S. patent process is fundamental to 

a healthy U.S. economy. At the same time, if the problems with 

patent quality and remedies are not addressed, legitimate U.S. 

businesses will be flooded by a tidal wave of frivolous litigation. 

We appreciate the process you have started, and I would be 

happy to answer any questions you may have. 

[The prepared statement of Mr. Band appears as a submission 

for the record.] 

Chairman HATCH. Well, thank you very much. 

Mr. Lemley, we will turn to you. 

STATEMENT OF MARK A. LEMLEY, PROFESSOR OF LAW, 

STANFORD LAW SCHOOL, STANFORD, CALIFORNIA 

Mr. LEMLEY. Thank you, Mr. Chairman. You have started to 

hear and will continue to hear very different things about various 

proposals in patent reform. That is not because one side is right 

and the other side is wrong. It is not because somebody is telling 

the truth and somebody else is lying. It is because different industries experience the patent system very differently, and I think you 

are going to hear that here today. 

That is not a reason to avoid patent reform. Patent reform is extremely important and I think, done right, is going to substantially 

improve innovation in this country. Rather, it is a reason to make 

sure that the patent reform is measured and is tailored to the particular problems that were identified. 

Now, there are two basic prongs to patent reform that people 

seem to be talking about and that H.R. 2795 discusses. One is a 

set that involves what I would call simplification, including harmonization with the rest of the world, changes like first to file, removing best mode and things of that nature. Consensus is too strong 

a word to use in anything related to patent law, I have discovered, 

but there seems actually to be widespread agreement that most of 

these proposals are, in fact, a good thing. 

The second set of proposals has to do with ending the problem 

of litigation abuse, and it is there I want to focus my remarks. Litigation abuse is a problem. It is a problem primarily in industries 

whose products aggregate large numbers of potentially patentable 

components together. It is not a problem particularly in the pharmaceutical industry or the biotechnology industry. It is very much 

a problem in the software and the hardware and the Internet and 

the telecommunications and the semiconductor industries. 

The problem is that it is actually relatively easy to get a patent 

in the United States and you can use various systems in the Patent 

Office to obtain patents that cover more than, in fact, you invented. 

One of the most problematic is the rather remarkable fact that 

under U.S. continuation practice, it is impossible for the Patent Office ever to finally reject a patent application. The applicant can alVerDate 0ct 09 2002 14:27 Nov 02, 2007 Jkt 038563 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\38563.TXT SJUD1 PsN: CMORC
12

ways come back an unlimited number of times and tailor their patent coverage to what it is that their competitors are doing in the 

marketplace. 

They can then use that patent to obtain substantially greater 

revenues than are warranted by the invention that they actually 

contributed to society. That results from the damages rules that we 

have established today and the injunctive relief rules we have established today. 

Because of the entire market value rule, you get to go to a jury 

and say all I want is a percentage of the sales of Intel’s micro processor. And Intel does not currently have the opportunity to defend 

by pointing out that there are 5,000 or 10,000 other inventions aggregated into that micro processor. 

There has been reference to the presumptive entitlement to injunctive relief, but as it has been applied by the courts, it is not 

presumptive; it is automatic. As a general matter, that is a good 

thing, but in certain circumstances, in certain cases, people can use 

the threat of an injunction against a large product that incorporates thousands of different inventions based on ownership of 

one single invention to extort money from legitimate innovators to 

get not just the reward they ought to be entitled to, the value they 

added to the patent system, but to get much greater reward. 

So it is quite common in my litigation experience in the IT industry to see cases settle for more money than the patentee could have 

won had they won the case at trial. That is a rather remarkable 

phenomenon, but I think it is driven by the fact that the company 

is at risk not just of having to change one small component of its 

product, but of being enjoined from making that product at all until 

it can go back and retool its factory. Finally, the possibility of willful infringement, which is asserted in 92 percent of all cases, allows 

the possibility of trebling these damages. 

Now, we shouldn’t get rid of any of these doctrines. They are legitimate reasons to use continuation applications. There are legitimate reasons why we presume entitlement to injunctive relief in 

most cases, and there are legitimate reasons for the entire market 

value rule. But I think what we need to do is to try to focus legislative reform on the specific sectors that present the problem and the 

specific issues that present the problem. 

So in damages, for example, and also in injunctive relief it is possible to target legislation so that it is the act of asserting a damages claim or seeking injunctive relief for a product much larger 

than the small invention that you created that is the problem. That 

relieves pharmaceutical or biotechnology companies from having to 

worry about losing their entitlement to injunctive relief in the ordinary case or not getting adequate damages. 

Similarly, while we shouldn’t abolish continuation applications, it 

is important that we try to prohibit their abuse. I think that the 

solution here is not say no one can agree and therefore we go home. 

It is possible with a group this diverse that people aren’t going to 

agree on everything, but reasonable compromises and tailored or 

measured solutions, I think, will improve the patent system in a 

significant way. 

[The prepared statement of Mr. Lemley appears as a submission 

for the record.] 

13

Chairman HATCH. Well, thank you very much, Mr. Lemley. 

Mr. Kushan. 

STATEMENT OF JEFFREY P. KUSHAN, SIDLEY AUSTIN BROWN 

AND WOOD, LLP, WASHINGTON, D.C. 

Mr. KUSHAN. Thank you, Mr. Chairman. My name is Jeff 

Kushan. I am a partner with the law firm of Sidley Austin Brown 

and Wood. I represent clients in the pharmaceutical and biotech 

sectors in patent procurement litigation and policy matters. I have 

been asked to testify today to provide the perspectives of companies 

in these sectors on patent reform. However, the views I am offering 

today are my own and not necessarily shared by my clients. 

Your hearing today is focused on questions that are at the heart 

of the movement for patent law reform. The primary motivating 

factor for reform is the inability of companies to predict outcomes 

when they become involved in patent litigation. In simple terms, 

they can’t predict if the patent in litigation will be held valid, enforceable and infringed, and what the consequences of that infringement will be. 

The concerns are not simply those of patent defendants. Patent 

owners have concerns about the lack of predictability in the patent 

system. Any company that has spent millions of dollars on drug development and bringing that product to market is going to experience great stress if they can’t predict that that patent is going to 

be effective when it is enforced. One reason there is uncertainty is 

that subjective criteria are embedded in the patent standards. Reforms that eliminate or constrain these subjective criteria will increase clarity and certainty in the patent law. 

A second significant source of the problem is the environment in 

which patent disputes are resolved—district court litigation. Plain 

construction findings of infringement and the consequences of infringement have all become unpredictable with variables in litigation. Reforms that make those determinations less unpredictable 

will significantly improve the patent system. 

I think a significant motivation for patent reform has already 

been touched on by a couple of the witnesses, and that is the scenario of the non-manufacturing patent owner. I think when you 

look at the task of enacting patent reform, you have to be very 

careful because it is very difficult to differentiate in the statute a 

good patent owner from a bad patent owner. 

For example, most biotech companies and nearly all universities 

fit the definition of a patent owner that is not manufacturing a 

product, yet is aggressively enforcing its patent rights. These patent owners have a legitimate right to enforce their valid patents. 

They often seek injunctive relief and significant damages to protect 

the future commercial value of their patent rights. 

That future value depends on their ability to exclusively license 

the patent to a commercial partner that can take an early-stage invention and develop it into a useful new product or service. If these 

early-stage patent owners cannot ensure market exclusivity, the 

value of their patents will be severely reduced. More importantly, 

the interest in developing an invention and a new drug will be severely reduced. This has extremely negative consequences for paVerDate 0ct 09 2002 14:27 Nov 02, 2007 Jkt 038563 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\38563.TXT SJUD1 PsN: CMORC
14

tients hoping for new cures. Certainly, one cannot uniformly label 

these patent owners bad actors. 

The path forward on reform must be one that creates a patent 

system in which the validity and scope of patent rights can be 

clearly appreciated and in which disputes can be resolved in a more 

transparent and predictable manner. This should be your ultimate 

litmus test when you go to evaluate different individual elements 

of patent reform. 

In the House, Chairman Smith has introduced a bill that reflects 

a good balance of reform measures, but which includes several nonstarters to the life sciences sector. I would like to briefly address 

some of these elements. 

One proposal would change the standard that courts use to 

evaluate requests for permanent injunctions once a patent owner 

has proven its patent valid and infringed. The House bill would 

amend the patent statute to provide that courts should consider the 

fairness of the injunction in light of all the facts and relevant interests of the parties associated with the invention. 

The motivation for this amendment seems to be the belief that 

this change will create more jurisprudence in the field of patent injunctions, and that this new patent jurisprudence will identify 

more instances where injunctions will not be awarded by district 

courts. I believe this type of change will prove extremely harmful 

to the life sciences sector and should not be pursued. 

Companies in this sector count on patent exclusivity to make 

critical business decisions, and those decisions are made very early 

in the product development process that routinely exceeds a decade. The upstream impact of this type of change will be severe and 

longstanding. Decisions on funding early-stage development ventures are based on the very simple belief that if a product actually 

reaches the market, the venture that brought that product to market will be able to use the patent to prevent copies of that product 

from being marketed for some period of time. If that assurance of 

market exclusivity is put into question, capital will move elsewhere. 

I also believe this type of reform measure will not deliver the 

predictability and certainty its proponents seek. The current patent 

injunction standards are grounded on the same injunctive relief 

principles used by courts in other legal disputes. It is true that patent injunctions are routinely granted once the patent owner has 

proven its patent valid and infringed, but this is simply the application of the general injunctive relief principles to patent infringement situations. 

Courts for more than a century have recognized that patent infringement causes a unique type of harm to the patent property. 

In the injunction context, this means that the patent owner can 

usually prove irreparable harm that cannot be adequately compensated by money damages. In my view, changes to these types 

of standards will simply create more uncertainty and undermine 

the efforts of all parties to get effective patent reform passed. 

A number of other variables in the patent reform package do 

merit careful consideration. The one area that I would like to touch 

on very briefly is the post-grant opposition procedure. One of the 

things that needs to be addressed in that proposal is to articulate 

15

a better standard to start those proceedings and to make sure that 

there is only a single window provided for reviewing patentability 

after the patent is granted. 

If you will permit me ten more seconds, I will just confirm that 

one of the concerns that people have expressed about opening up 

a second window is that the post-grant procedure is inherently designed to be a limited procedure, with limited discovery and a very 

constrained proceeding. Having that proceeding adjudicate patents 

that people have spent a lot of money on creates a significant risk 

for the life sciences sector. 

I encourage you to look carefully at these proposals and create 

a balanced package that a lot of industries can move forward on 

and support. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Kushan appears as a submission 

for the record.] 

Chairman HATCH. Thank you, Mr. Kushan. 

Mr. Fish. 

STATEMENT OF CHUCK FISH, VICE PRESIDENT AND CHIEF 

PATENT COUNSEL, TIME WARNER, INC., NEW YORK, NEW 

YORK 

Mr. FISH. Thank you, Mr. Chairman, Senator Leahy. My name 

is Chuck Fish. I am Vice President and Chief Patent Counsel at 

Time Warner. I am happy to be able to come and talk to you today. 

As a large and diverse media company, Time Warner has an 

enormous interest in the maintenance of strong intellectual property protections in all contexts in the country. We believe that creators and innovators must have the fruits of their intellectual endeavors protected, lest this country lose its edge in exporting valuable products like, for example, Time Warner’s entertainment products. 

But our commitment to intellectual property protection, and in 

particular today to a strong and enforceable patent system, is wholly compatible with repairing a remedy system that has begun to reward not innovation, but the hiring of aggressive and tenacious 

lawyers. Indeed, it is critical today that the remedial aspects of 

patent law and their judicial application strike the right balance in 

dealing with the marketplaces we face. 

Like most of the people sitting in front of you, I don’t think that 

you can solve the problem just in the area of litigation reforms, and 

so my written testimony talks about other things that Time Warner thinks are important. But if you do focus on the areas of litigation reform and what we say are litigation abuses, or rising indications of litigation abuse, we think there is a group of actions which 

the Congress could take which would actually improve the laws 

and would actually be fair for everyone who is involved. My written 

testimony gives you some details. 

In general, Time Warner sees that abuse of patent litigation appears to be on the rise. We see the establishment of business models that essentially insist on investing in patents that no one had 

any intent in using just as a ticket to litigation. We believe that 

patent litigation has truly left the mainstream of American busiVerDate 0ct 09 2002 14:27 Nov 02, 2007 Jkt 038563 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\38563.TXT SJUD1 PsN: CMORC
16

ness litigation and it ought to be returned back to that mainstream. 

So a few highlights, if I might. First, Time Warner believes that 

Congress should require meaningful proof before awarding increased damages in patent suits. This is basically the willfulness 

area that a lot of people have talked to you about. Problems with 

willfulness include, as you mentioned, Senator Hatch, that it is a 

subjective standard. But there are also worse than that. As Professor Lemley mentioned, the proportion of patent cases in which 

willfulness is pled is truly outrageous and it leads to a distortion 

of the litigation system. Indeed, as Judge Dyk noted in his partial 

concurrence in the Knorr-Bremse case, the current standard is 

quite frankly inappropriate in view of the settled law of punitive 

damages. 

So for these reasons, Time Warner believes the Patent Act 

should be amended so that the purpose behind increased damages, 

which is a valid purpose to punish those who have acted with disregard for the law, is actually the predicate for the finding of willful damages. 

Secondly, Time Warner believes that patent damages should be 

conformed to the reality in the marketplace today that there are 

multiple, or indeed sometimes hundreds of patents covering products. This is the issue that people have been calling the apportionment issue. 

Essentially, Time Warner supports reforming damages law by explicitly directing courts to begin their damages inquiry for combination inventions by focusing on the incremental value attributed to 

the patentable invention. You will realize that today that is not the 

case at all. In fact, the leading way of determining what patent 

damages ought to be today goes back to a district court case in 

1970 which was compiling a number of factors from the years before that. 

Essentially, it is our position that the patent law is mired in a 

19th century view of the world in which there are only one or two 

or three patents covering an invention, and in which it is perfectly 

okay to take 15 or 20 factors and look at them and decide what 

should be going on here; that that is an appropriate amount of discretion. 

But that is not an appropriate amount of discretion. It is not an 

appropriate starting place. Rather, it is a ticket for the creativity 

of aggressive lawyers to look at any potentially relevant revenue as 

being part of a damages base. That is what we see happening in 

the damages area. That is why we think that apportionment is important. 

The third area that we would highlight is that Congress should 

fix the patent injunction imbalance. I know there will be disagreement and hopefully some heated discussion about that topic today. 

But Time Warner’s view is that essentially the problem here isn’t 

the availability of injunctions. The problem is the way that the 

rules determining what should happen for injunctions have been 

applied by the Federal Circuit. The basic question, we believe, 

should be why has discretion been removed from the Federal 

courts, not why is it people who are proposing change are proposing that change. 

17

In conclusion, thank you very much for the opportunity to talk 

to you today. 

Chairman HATCH. Thank you. We miss Sean Bentley up here arguing with us on these matters. We hope he is doing well. 

Mr. FISH. Yes. Actually, I spoke to him today, Senator, and he 

is doing well, I hope. 

Chairman HATCH. Well, give him our regards, will you? He 

worked a long time on this Committee and helped a lot of us on 

both sides of the table. 

[The prepared statement of Mr. Fish appears as a submission for 

the record.] 

Chairman HATCH. Mr. Hawley, we will conclude with you. 

STATEMENT OF J. JEFFREY HAWLEY, PRESIDENT, INTELLECTUAL PROPERTY OWNERS ASSOCIATION, AND VICE PRESIDENT AND DIRECTOR, PATENT LEGAL STAFF, EASTMAN 

KODAK COMPANY, ROCHESTER, NEW YORK 

Mr. HAWLEY. Yes, thank you, Mr. Chairman. It is probably appropriate for a broad-based organization like IPO to speak last 

today because you have already heard from all my constituencies 

on all sides of the issue. 

Chairman HATCH. It kind of puts you in a tough position, doesn’t 

it? 

Mr. HAWLEY. Well, no. I am used to it. 

We really deeply appreciate the opportunity today to testify and 

we hope to be able to articulate the perspective of a broad-based 

organization whose focus is on that of the intellectual property 

owner. 

I think it is worth emphasizing, as several of the witnesses have 

already, that the patent system of the United States has served the 

country extremely well over 200 years. The outcome of the Federal 

Trade Commission and the National Academy of Sciences and 

other studies could have come out differently, but they didn’t. They 

validated the extreme value of the patent system for our country, 

but did recommend some changes. 

IPO was one of the first organizations to point out, for example, 

that the U.S. Patent Office was in crisis. More and more often, we 

are seeing articles in the popular press criticizing some aspect of 

our intellectual property system. And as a result of a wide variety 

of issues, many of which you articulated yourself and you have 

heard again here today, including the emergence of a cottage industry that has sprung up to take advantage of uncertainties in the 

system, litigation costs are increasing rapidly. 

IPO strongly supports the vast majority of the current proposals 

that improve the PTO processing efficiency, improve the quality of 

issued patents and reduce litigation costs. In particular, we clearly 

support first inventor to file, assignee filing, 18-month publication 

for all applications; a post-grant opposition system, as well as many 

other reforms. 

In the context of this hearing which is focused on litigation, I 

think it is important to realize that if you are able to increase particularly the quality of the patents coming out of the Patent Office, 

that will go a long way toward alleviating the litigation burden. 

But that all pre-supposes adequate funding for the Patent Office, 

18

and down the road that again would mean less abusive litigation 

as patent quality increases. For example, when we are all satisfied 

with the post-grant opposition language and we breathe a sigh of 

relief, let’s not forget that the Patent Office needs the resources to 

do the job correctly. 

Reducing the abuse of the patent system is very important to our 

members, and you have heard from several of them today already. 

Every hour that is spent by patent litigators defending against 

questionable patents being asserted by patent system abusers 

means that $500 is not being spent on new innovation and new 

product development. 

We have been specifically asked today to speak about damages, 

so I want to talk about willful infringement. The concept of treble 

damages was put into our law in 1793, at a time when many infringers took a cavalier attitude toward patents. The same is not 

true today. Patents are frequently held valid and infringed, and 

large damage awards are common, particularly in comparison to 

damage awards typically granted in other countries. 

In the current environment, the threat of treble damages tips the 

balance too far in favor of those patent owners who seek to game 

the system. As you have heard probably several times, some companies are actually instructing their engineers not to read patents 

and the cottage industry that I referred to uses the threat of willful 

infringement to extract an amount in settlement disproportionate 

to any contribution they have made. 

Mr. Chairman, imagine yourself as the patent counsel for a large 

company and a form letter arrives in your in-basket accusing you 

of infringement of xyz patent. The cost to investigate will be 

$50,000. If there is a hint of doubt, you will have to buy another 

$50,000 legal opinion. Lo and behold, the form letter contains an 

offer. For a mere $75,000, you can buy a license. In this situation, 

if the patent owner can collect $75,000 from 100 companies, he has 

netted $7.5 million. The law with respect to willful infringement 

needs to be rebalanced. IPO strongly supports the language in the 

bill recently introduced in the House. 

Mr. Chairman, a little anecdote. When I was growing up, my father was a property law professor at New York University Law 

School. After practicing chemical engineering for a number of 

years, Kodak gave me the opportunity to become a patent attorney. 

So not knowing what I was getting into, I called my father and I 

said, dad, what is patent law? And in retrospect, the answer should 

have been predictable. He said to me—and I remember the conversation vividly to this day—patent law is just a special form of 

property law. 

The right to prevent trespass is fundamental to property concepts. It is not surprising that proposals to tinker with the right 

to injunction in patent cases has evoked vigorous debate. Any language altering an injunction needs to be thoroughly justified. 

Again, Mr. Chairman, IPO is grateful for the opportunity to express our views. Our members are optimistic that much of the 

needed reform will come out of the 109th Congress. 

Thank you. 

[The prepared statement of Mr. Hawley appears as a submission 

for the record.] 

19

Chairman HATCH. Well, thank you. We appreciate all of your testimony. 

We have four charts that can help us in our discussion here 

today. We might want to get those put up there, but let me start 

by helping us to get to the nub of the injunction question, with the 

proviso that I am not asking any of you to negotiate in public or 

to reveal any bottom lines here. We want you to just help us. 

I would like to ask each of you—and we will start with Mr. 

Gulbrandsen and just go across the table—to give your general 

views of the current law with respect to injunctions and to tell us 

from your perspective what the pros and cons are of current law 

and what are the pros and cons of some of the proposals that exist 

to change current law. We would like to have the best you can give. 

We will start with current law, the House Subcommittee discussion draft, the injunction proposals supported by the high-tech industry and, of course, the injunction language of H.R. 2795. So 

these may be of some help to you, we hope, but let’s see if you can 

be of some help to us. 

Mr. Gulbrandsen. 

Mr. GULBRANDSEN. Mr. Chairman, I speak from the perspective 

of the independent patent owners and university patent owners, individuals that start companies with technology out of universities, 

individuals that depend on investor dollars to start those companies. The current patent law is well-suited to our ability to start 

companies out of universities. Investors who are putting the money 

at risk in those companies are assured that if the technology is patented, they will have the power of staying for the long term with 

that investment and enforcing it against others that might trespass 

on it and hopefully recover their investment with a nice return. If 

you start tinkering with that law, those investors are going to be 

less anxious to take the risk on university technology and our 

start-up programs are going to suffer. 

Chairman HATCH. Mr. Band. 

Mr. BAND. Well, the wording of the existing law, the current law, 

is fine as far as it goes. The question is how has it been interpreted. And you could say, well, the principles of equity—I mean, 

what else should govern the issuance of injunctions? But the problem is the way that has been interpreted by the courts is that there 

is a presumption in favor of an injunction and there is a presumption of irreparable injury, and, second, that that presumption is as 

a practical matter irrebuttable. So the words are fine, but the problem is how the Federal Circuit, in particular, has been interpreting 

these words. That is why we feel there needs to be something more 

specific. 

Now, of all these alternatives, I suppose the preferred alternative 

for the financial services industry would be the House Subcommittee draft because that makes clear two things. First of all, 

it makes clear that you can only have an injunction if the patentholder bears the burden of showing that there would be irreparable 

harm if there isn’t an injunction issued. So that is why that is the 

best language from our point of view. 

It does two things. First, it says that there is no presumption in 

favor of the plaintiff. And second of all, it makes it clear that you 

20

have to look at all the factors and determine that, in fact, money 

damages alone would not be sufficient to take care of the problem. 

The language proposed by the high-tech industry is very similar 

to the language included ultimately in H.R. 2795. It is better than 

the existing law in terms of giving some guidance, but it isn’t quite 

as good as the Committee print language in that it doesn’t clearly 

eliminate the presumption that exists now under current law. 

Chairman HATCH. Mr. Lemley. 

Mr. LEMLEY. Thank you, Mr. Chairman. Just so the record is absolutely clear, I think actually that the language of H.R. 2795 is 

somewhat different than the one that is in the poster. In particular, the language takes the last sentence of the injunction proposal supported by high-tech and uses it in place of any of the discussion of irreparable harm. 

Now, let’s be clear in terms of what is desirable. If you look at 

section 283, section 283 actually grants by its literal terms pretty 

broad power to courts to consider whether or not an injunction is 

appropriate. The courts may grant injunctions in accordance with 

the principles of equity on such terms as the court deems reasonable. The problem, as Mr. Band says, is that the Federal Circuit 

has essentially forbidden to the district courts the exercise of that 

equitable power that the statute gave them. 

I think the goal of 2795 and the fairness language is basically 

to reiterate what section 283 already says to say we meant it when 

we said you have got to use principles of equity here and consider 

all of the relevant factors. My only concern with that language is 

not actually what will happen in the district courts in the United 

States. I think it is quite reasonable to think that district court 

judges will do a good job, will understand the importance of injunctive relief as the baseline in the patent system. 

My fear with the fairness language is more what might happen 

abroad, and in particular the risk that some developing countries 

might use the existence of this particular term ‘‘fairness’’ as invitation to deny patent protection to pharmaceutical companies in drug 

patents. That is a worry. 

So I would prefer language somewhat more tailored actually to 

the problem of abuse of the patent system, somewhat tailored to 

the problem of a patent owner who asserts a patent and demands 

an injunction not just covering the particular component that they 

have invented, but covering the larger product. In my written testimony, there is language that would accomplish that end. So I think 

the idea behind the high-tech proposal, the fairness proposal, is the 

right one, but we may need to work on the language to make sure 

we don’t create a problem. 

Chairman HATCH. Thank you. 

Mr. Kushan, if you would care to comment. 

Mr. KUSHAN. Sure. Thank you, Mr. Chairman. Depending on my 

comments, I may be your favorite or most hated witness. The 

standard that is articulated and embedded in the jurisprudence as 

it exists today is the standard that virtually every— 

Senator LEAHY. Some people find it possible to be both at the 

same hearing, so here is your opportunity. 

[Laughter.] 

Mr. KUSHAN. I may achieve that, too. 

21

The one topic that I have heard unanimous perspectives on from 

every company in the life sciences sector is that disturbing the jurisprudence in the area of permanent injunctions is to be not pursued. This is an unequivocal message that comes about from the 

effect that patent exclusivity has on the financial thought process 

of this industry. 

One of the things that should be emphasized is that there is a 

lot of sympathy for the concerns of unpredictable patent litigation 

and the consequences of patent infringement. But when you look 

at the patent jurisprudence, what you see embedded consistently in 

many, many years or jurisprudence is the understanding that because of the nature of the patent right—it is an exclusive right; 

there is no physical property—you have to take an extraordinarily 

sensitive perspective on preserving the ability of the patent owner 

to prevent the unauthorized use of the patented technology. 

The discussions that have been going on about recalibrating the 

standard are terrifying in the sense that you are going to create 

more jurisprudence and there is going to be a period of uncertainty 

during which people who invest very early on in the drug development process will not know what the standards will be 10 years 

from now. If you change the standards in that fashion, you are 

going to force the capital that comes in and is so critical to earlystage development of a company away from the sector. That is the 

risk that is of concern in most of the discussions I have been part 

of. 

One of the other things I would like to emphasize is that this 

type of change does not give clear, unequivocal relief to those people who are concerned with the environment of the litigation today. 

The uncertainty will continue. The uncertainty is going to be more 

pronounced as you go forward, and I don’t think any of these proposals is going to be able to give any patent defendant comfort in 

knowing that they are not going to be shut down with a patent at 

the end of the litigation. 

The emphasis that I think needs to be put on patent reform is 

in changing the equation of patent litigation, and the comments 

that have been made so far reiterate this point. There is a lot of 

gaming in the system that is available today. There are immense 

costs. There is a lot of opportunity for abuse. If you but down on 

a number of these different areas of abuse and risk, then you will 

see a great sigh of relief in the business community of the U.S. because the risks become less unclear. 

I just will end by noting that things like the change to willful infringement standards—that is a very good thing to pursue and will 

address some of the concerns that people have. But going down the 

path of recalibrating what the entitlement to injunctive relief is or 

should be will just create more confusion and we think should be 

avoided. 

Chairman HATCH. Well, thank you. 

Mr. Fish. 

Mr. FISH. Well, Senator, if it was an option, what Time Warner 

suggest that you do is just get out a highlighter or an underliner, 

and if you started with the current statute and you underlined 

‘‘may grant injunctions’’ and you underlined ‘‘in accordance with 

22

the principles of equity’’ and you underlined ‘‘as the court deems 

reasonable,’’ we would be fine with the law. 

The problem is, as we see it, that the Federal Circuit has done 

just the opposite of that. They have turned that ‘‘may’’ into a 

‘‘shall.’’ They have turned that ‘‘in accordance with the principles 

of equity’’ into a meaningless shell. I mean, they have taken the 

Supreme Court law and just gutted it. The Federal Circuit now in 

this area, for whatever reason, has decided that all the things that 

courts of equity traditionally did district courts shall not do. So 

they have changed the statute that way. 

And then, finally, there is not to be any discussion of what is or 

isn’t reasonable. Obviously, courts usually believe that they are 

reasonable, so perhaps that is not a real protection. But the historic protections of equity showing that money damages are actually inadequate, showing that irreparable harm will, in fact, occur, 

showing that the balance of the private interest versus the public 

interest favors the granting of an injunction—that is the cornerstone of our law, I mean, for hundreds of years, and before it was 

in the United States in the United Kingdom. That is the way that 

equitable remedies operated. 

Now, it is interesting to hear people say, for example, that university programs will fall apart if strong injunctions such as now 

exist under the Federal Circuit are not granted. I mean, go back 

and look. When WARF lost the case in 1945, the Ninth Circuit said 

we know you have a valid patent on a method of making margarine 

that increases vitamin D and keeps people who have rickets from 

getting vitamin D. It is not an appropriate injunction in this case. 

It is about health, it is about the public is at war, it is about poor 

people who can’t get it. It doesn’t cut it that way. You know what? 

WARF has gotten a lot more competitive and come up with great 

inventions since 1945, and so what they are predicting will happen, 

I think, history gives the lie to. 

So of these choices, Time Warner would say that a change that 

brings the law back to where it was before the Federal Circuit 

went too far would be an appropriate change. Any change that 

went further than that would be inappropriate because injunctions 

are an important piece of relief, and we agree with our friends, for 

example, in the pharmaceutical industry about that. But it is just 

that it has gotten a little bit too far. 

Chairman HATCH. Well, thank you. 

Mr. Hawley. 

Mr. HAWLEY. Yes, thank you, Mr. Chairman. I am a little confused here. As another witness pointed out, the actual proposed 

language in the bill—and I will read it because there are several 

parts of it that are important—is it adds to the current statute by 

adding, in determining equity the court shall consider the fairness 

of the remedy in light of all the facts and the relevant interests of 

the party associated with the invention. So that is the language 

that is currently being considered in the other chamber. 

But I would like to comment on what is labeled here as the 

House Subcommittee discussion draft of April 14. This is language 

that dates back probably to around 2000, 2001, and it has been debated in a number of different forums since then and it was actuVerDate 0ct 09 2002 14:27 Nov 02, 2007 Jkt 038563 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\38563.TXT SJUD1 PsN: CMORC
23

ally the language that was found in the Committee print before 

H.R. 2795 was introduced last week. 

We testified with regard to that in our written statement that 

the problem that IPO had with that in a board debate in 2001 was, 

first of all, it changed the burden of proof. Under current law, if 

you have been found to have infringed a valid patent, you have to 

establish why an injunction should not issue. If you read the language here, the court shall not grant an injunction unless the patentee proves irreparable harm. So it changes the burden of proof. 

Secondly—and this is important and you have heard this train 

of thought throughout this testimony here today—it finds that the 

patentee is likely to suffer irreparable harm that cannot be remedied by money damages. Most of our members find that to be 

similar to, if not identical to, the preliminary injunction standard. 

So you are applying a preliminary injunction standard to a situation where the defendant has been found to infringe a valid patent. 

Finally, there was other language in here that caught a lot of 

fire, and that was including the extent to which the patentee 

makes use of the invention. And you have heard discussion about 

that. So those were the criticisms that were leveled against the 

House Subcommittee discussion draft and have been leveled 

against this language since about 2001. 

The language that is, in fact, in 2795 avoids those three problems. It does not shift the balance of proof, it does not establish a 

preliminary injunction standard, and it does not specifically mention the patentee’s use of the invention. But I would also point 

out—and this builds on something Senator Leahy said—2795 also 

does not have any public interest aspect to it yet. 

I note that the words for the chart labeled ‘‘Injunction Proposal,’’ 

supported by high-tech, does have the public interest in it, and I 

would say that many of our members feel that that is a very important aspect that needs to be reflected. 

Chairman HATCH. Thank you. 

Senator Leahy. 

Senator LEAHY. Thank you, Mr. Chairman. 

Mr. Band—and actually it was referred to by others—was talking 

about the 37-cent notice, where a patent holder can go fishing for 

infringers by sending a letter to large companies alleging patent infringement. Notice doesn’t need to be specific—Mr. Fish, you talked 

about this, too, and others—but it can subject a defendant to enhanced damages. 

Several of you said that we ought to include a requirement that 

a plaintiff initially supply a defendant with a notice of infringement sufficiently detailed so as to allow the defendant to seek declaratory judgment. 

Does anybody disagree with that? Mr. Gulbrandsen, do you disagree with that, that the plaintiff initially supply a defendant with 

a notice of infringement sufficiently detailed so that the defendant 

could seek a declaratory judgment? 

Mr. GULBRANDSEN. Senator Leahy, I think that, first of all, encourages litigation. It doesn’t encourage settlement. Frankly, 

WARF would not a send a letter like that because we don’t want 

to be subjected to a lawsuit in California or New York, and we 

would like to sit down at the table— 

24

Senator LEAHY. Do you think it would be better to have a nonspecific notice? 

Mr. GULBRANDSEN. I think that it is fair to provide a notice, but 

I don’t think it should be a notice that is sufficient to require a default. 

Senator LEAHY. Mr. Band. 

Mr. BAND. I agree with you completely. I mean, I think we need 

to have very specific notice because otherwise you are dealing with 

a situation that Mr. Fish described. You really don’t know what to 

do. Do you investigate? Do you not investigate? Do you spend a lot 

of money? Do you just settle? 

Senator LEAHY. Professor Lemley. 

Mr. LEMLEY. Absolutely, the change is warranted. It just seems 

unreasonable to think that you can put someone on notice for willfulness purposes, put them to the $75,000 or $100,000 expense of 

getting an opinion letter with a threat that is sufficiently vague 

that it is not even sufficient to create declaratory judgment jurisdiction. 

Senator LEAHY. Mr. Kushan. 

Mr. KUSHAN. I think the standard would enhance the environment significantly. I think you also have to address the concern a 

lot of companies have about just perpetuating the patent opinion 

industry, and one of the things that isn’t addressed in legislation 

is the idea that if an infringer makes a good-faith effort to avoid 

infringement, not going to an attorney, but actually trying to modify their product to avoid infringement, that should be a defense, 

as well as and as legitimate as the attorney opinion. 

Senator LEAHY. Mr. Fish. 

Mr. FISH. Senator, I think that sort of notice would be one situation in which it would be reasonable to conclude that somebody 

who had ignored that ought to risk increased damages. So, yes, I 

think that sort of notice would be good for that reason. 

Senator LEAHY. Mr. Hawley. 

Mr. HAWLEY. I am delighted to hear the support for all of that. 

Senator LEAHY. It is not uniform, but go ahead. 

Mr. HAWLEY. Well, it is closer than most times. 

Senator LEAHY. I don’t want to leave Mr. Gulbrandsen out on 

this. 

Mr. HAWLEY. I understand. I didn’t say unanimous support. I am 

delighted to hear the amount of support. 

The scheme that you mentioned is something that was debated 

over several IPO board meetings about 2 years ago, and the characteristics that are now in the proposal reflect a careful balancing 

during those debates. We would strongly support particularly the 

notice requirement so that—we just put the Chairman in the seat 

of a patent counsel and we placed him in limbo and that is just not 

a fair thing to do, and so by giving adequate notice and by giving 

a parallel ability for the defendant to defend themselves, we think 

that is a good balance. 

Senator LEAHY. We have also heard a lot about apportionment 

of damages. That complaint seems straightforward enough. When 

the infringed patent is just part of a larger product, the damages 

awarded should be proportional to the role that infringed patent 

plays in the larger product. 

25

Mr. Gulbrandsen, correct me if I am misstating your position. 

You say that requiring judges to calibrate damages by weighing the 

portion of a product or process infringed as against the whole unnecessarily ties the hands of Federal judges. 

Is that your position, basically? 

Mr. GULBRANDSEN. What I mean is that— 

Senator LEAHY. That is a quote from your statement. 

Mr. GULBRANDSEN. What I mean is that I think the present 

standards in the common law with respect to determining damages 

allow the court to weigh all of the factors. And in some instances, 

the improvement may be a small improvement, but it may be a 

critical improvement that really built the whole market for that 

particular product. So I think it would be unfair to prohibit the 

judges from weighing what value it really brought and look at the 

whole market condition. 

Senator LEAHY. I am trying to figure out how damages should be 

calculated in a case where there is a single contested patent, but 

it is within a more complex product. 

Mr. Gulbrandsen has been very clear in his feelings. Mr. Band, 

do you have a feeling? 

Mr. BAND. Absolutely. I think apportionment is essential. For example, the credit card system is a very complicated, integrated system which has many, many different components, lots of software, 

lots of hardware, lots of business methods, all wrapped into one integrated system. 

If you have, let’s say, a patent ultimately reading on one little 

piece of this entire system, what is the right measure of damages? 

It should be that little system. It shouldn’t be a royalty based on 

the entire system. You can also see the problem with an injunction 

that goes—even though what is enjoined is just that one little 

piece, because it is an integrated system, it causes the whole system to fail. So that is why these issues are very, very closely linked 

with one another. 

Senator LEAHY. Professor Lemley. 

Mr. LEMLEY. Yes, I agree that this is a very important reform. 

The problem is quite simple. In theory, we take care of this by adjusting the royalty percentage. But in practice, never happens. No 

jury gets to hear about all the other 4,999 patents that went into 

this micro processor. I think it is perfectly appropriate, as Mr. 

Gulbrandsen says, that in circumstances where your component, 

even though it is only one component, is the critical one that you 

get substantial damages that result from that. 

But H.R. 2795 would permit that. All it says is that the court 

shall consider, if relevant and among other factors, whether there 

are a bunch of other components contributing to the success of the 

product. And if we are trying to get damages right, if we are trying 

to say what you are entitled to is a function of your contribution 

to this product, that is the logical thing to do. 

Senator LEAHY. Mr. Kushan. 

Mr. KUSHAN. This standard is lifted pretty much out of the prevailing law and it is not necessarily a revolution to incorporate it 

into the statute. I think as we have already heard from Mr. 

Gulbrandsen and from Mark here, as long as you have access to 

address other damages scenarios that allow you to put your invenVerDate 0ct 09 2002 14:27 Nov 02, 2007 Jkt 038563 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\38563.TXT SJUD1 PsN: CMORC
26

tion and your patent in the right setting for a proper calculation 

other than as cast in this standard, you are not going to disrupt 

the law and you are going to protect the interests of patent owners. 

It is just making sure that we don’t create more confusion in the 

standards that govern damages determinations. 

Senator LEAHY. Mr. Fish. 

Mr. FISH. Senator, I think I would answer you this way. There 

are two ways that the problem can arise. One is the one that we 

have been talking about. You have a patent to a narrow feature or 

a narrow piece of a much more complicated system, and then the 

question becomes what portion of the total revenue should be attributed to that one thing. That is an apportionment problem, and 

I would agree that there are cases that can be proved that that one 

little thing is the majority of the driver for the demand. That is 

what the entire market value rule attempts to do. What it unfortunately does in practice is that it says open the flood gates and look 

at all the revenue; patent plaintiffs, your lawyers should be used 

for malpractice if they can’t think of creative ways to get at everything. 

The second way that the problem comes up, Senator—and it is 

the reason that Time Warner says we should look at the damages 

calculation as starting with what is the value and then moving 

on—the second way that it comes up is just by claiming the invention differently, so that instead of claiming the motor on the intermittent windshield wiper, you claim a car that as a motor that has 

an intermittent windshield wiper. Then there is no problem of entire market value rule. There is direct infringement, and your 

argue is, look, the car is worth this many thousand dollars and 

that is what the claim covers. 

So you can get to the problem either way, and the way that we 

would suggest to fix it is to get courts to start the damages analysis at the right place, which is if it is a combination invention, 

what is the value. And then there are all sorts of models and there 

are all sorts of smart economists and there are all sorts of smart 

lawyers. And we believe that with their discretion properly guided, 

the district courts will probably do it right, and the Federal Circuit 

probably will, too. 

Senator LEAHY. Mr. Hawley. 

Mr. HAWLEY. We went into this in our written statement, and 

just to review that, this is a very recent proposal, by the way. It 

came out of some discussions over the past few months. 

Senator LEAHY. I know. That is why we are asking. 

Mr. HAWLEY. Yes, I know, I know. We have not yet taken a position on this one, but it clearly needs— 

Senator LEAHY. Do you want to go out on a limb? 

Mr. HAWLEY. I have learned not to do that, Senator. 

Senator LEAHY. Most of us in elective office wish we had learned 

that a long, long time ago. 

Mr. HAWLEY. I am also in elective office, not nearly like yours, 

but I still feel the heat from time to time. 

I would just point out, as I think Mr. Kushan mentioned, and 

others, this is one factor that is lifted out of Georgia-Pacific v. U.S. 

Plywood Corporation, a 1970 district court case, admittedly, but it 

is factor number 13 out of 15 of the factors that the court considVerDate 0ct 09 2002 14:27 Nov 02, 2007 Jkt 038563 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\38563.TXT SJUD1 PsN: CMORC
27

ered. So we are a little concerned that focusing on just that factor 

is going to have unintended consequences. 

We need to better understand what the cases are that give rise 

to the need for this above and beyond the Georgia-Pacific considerations. Unfortunately, I can’t help much today in taking a strong 

position. 

Senator LEAHY. I understand, but I wanted to throw it out because it is obviously going to be one of the things we are going to 

be discussing when we go forward on legislation. Certainly, if you 

and your organization come to a very specific recommendation, I 

would like to have it. 

I have some other questions which I will submit. I will pare them 

down based on some of the answers to Chairman Hatch and some 

of the answers to me, but I will be sending each of you some questions. I wish you could take time to respond. I will try not to make 

them overly onerous, but this is an important subject. It is a dry 

subject. 

I mean, tomorrow morning we will have a hearing in this same 

room on detainees at Guantanamo and there will be all kinds of 

people watching. That is a very important thing, but this is also 

extremely, extremely important. Neither Senator Hatch nor I have 

approached it in a partisan way. We are trying to work out the best 

way. Nobody likes to make changes in the patent law willy-nilly, 

because you want to have a degree of continuity there, and predictability. 

But I find some alarming situations in this area; one, I think an 

overworked PTO, and then I think some of the things that go 

through there and it is simply because the people are overworked. 

We had a hearing on that and talked to them about ways we might 

change that, ways we might make it better. 

I am also, though, concerned by a growing industry in this country that doesn’t invent anything, but simply tries to get involved 

in litigation on patents. The more complex inventions are, of 

course, the more potential patents there are. I don’t want to interfere with people’s rights, but also when you see an inventor has a 

great idea and wants to go forward—and as we know, in this country a lot of our best inventions have come from small inventors, 

and they are suddenly forced out by the threat of litigation which 

really doesn’t have a great deal to do with the ultimate product. 

So we are trying to find out way through that. 

Senator Hatch, I am delighted you had this hearing and I appreciate it. 

Chairman HATCH. Well, thank you, and thank you for your good 

questions. 

I will submit questions for the record, too, but let me just ask 

one last question. Some have suggested a venue limitation as a 

partial solution to the current patent litigation problems. 

Would a limitation on venue be effective to prevent forum-shopping, and if so, what would be a reasonable limitation? If you could 

just answer it real quickly, if it is possible, we will finish with that 

question. 

Mr. GULBRANDSEN. Are you suggesting a specialized district 

court for patents? 

28

Chairman HATCH. Well, not necessarily, but rather than just 

have venue broad-based across the country, limit it to certain particulars. 

Mr. GULBRANDSEN. I would favor a venue as long as it could be 

done as fast as we can do it in Madison, Wisconsin, which is less 

than a year. 

Chairman HATCH. I think we would all favor that. 

Yes, Mr. Band. 

Mr. BAND. Yes, we think that doing something with venue would 

be helpful. The venue would be limited to the jurisdiction where 

the company is headquartered or is incorporated, something like 

that, to prevent forum-shopping. 

But another way of solving this venue problem could even be 

achieved through allowing interlocutory appeals after Markman

hearings. That could have the same effect of reducing the adverse 

problems of having cases litigated all around the country because 

you could get the claim construction into the Federal Circuit at an 

early stage and thereby keep some of the issues out of the jury’s 

hands later on. 

Chairman HATCH. Okay, thanks. 

Professor Lemley. 

Mr. LEMLEY. I think it would probably be a desirable change. 

The current favored district is the Eastern District of Texas where 

patent plaintiffs like to bring their lawsuits because no jury so far 

has ever invalidated a patent in the Eastern District of Texas. 

There is obviously forum-shopping that is going on. 

I think it would be attractive to limit it to something on the 

order of where the plaintiff or the defendant reside or have their 

principal place of business or are incorporated if they are corporations. It is not a complete solution. It is not going to make the 

‘‘troll’’ problem go away, but it may reduce one component of it. 

Chairman HATCH. Make it more fair. 

Mr. LEMLEY. Absolutely. 

Chairman HATCH. Well, give us some ideas on that. We would 

love to have them. 

Mr. Kushan. 

Mr. KUSHAN. On this one, I don’t have much to say. I think there 

is a lot of concern about the Eastern District of Texas scenario, as 

Mr. Lemley has pointed out. But on a proposal like this, it is not 

so clearly a plus or minus on the overall equation in patent litigation reform that you can say it will be good or bad. Obviously, we 

will have to look and see what kind of proposals come forward on 

it. 

Chairman HATCH. Thank you. 

Mr. Fish. 

Mr. FISH. Senator, there are certainly people who say it would 

be helpful. I think Time Warner’s position would be we are not 

clear why it is another area where there has to be a patent-specific 

rule, especially since there has been forum-shopping for venues in 

patent cases since we have had them. So although it might be helpful, I think some of the other areas might be more helpful. 

Chairman HATCH. Mr. Hawley. 

Mr. HAWLEY. Yes. Mr. Chairman, I am happy to report that we 

have had a few days to discuss this one, certainly not with our full 

29

board and so it is not possible for us to give you a strong indication. But in informal discussions with the leadership, they haven’t 

dismissed it out of hand, which is a good sign. So we will be definitely working on this proposal with all of our litigator friends and 

our organization, and we are going to be vigorously looking at alternatives that might help with the abusers of the system. 

Chairman HATCH. Without asking you to answer it today, I am 

intrigued by the idea of allowing an interlocutory appeal with 

Markman claim construction determinations combined with the bifurcation of the trial process that delays the determination of willfulness. It seems to me that an interlocutory appeal of the claim 

construction might provide some efficiencies in litigation, and I 

would like you to write to us and tell us what are the benefits to 

this and are there any significant downsides. We are looking at 

that fairly carefully as well. 

This has been a particularly prescient panel. I really appreciate 

all the efforts that you have made to be here and it has been very 

helpful to us here today. I am very grateful to all of you. Just help 

us to get it right, because we don’t want to hurt anybody, but we 

would like to have something that would get rid of some of the inefficiencies, inadequacies, wrongful things that occur in these areas, 

and help us to find some ways of doing justice, which is, after all, 

what we are all about. 

We don’t have any desire to pick one side or the other, or any 

one of the multiplicity of sides, but we do have a desire to get the 

very best possible legislation we can to be able to resolve at least 

a maximum number of problems. So we would appreciate any advice you could give us on this beyond this hearing and we will keep 

the record open for any further advice that you care to send us. We 

will keep the record open for a week for anybody who wants to ask 

additional questions in writing. 

We are grateful to you all. We know it has been a pain to be 

here, but you are doing the work of the Lord and we appreciate you 

being here. Thanks so much. 

With that, we will recess until further notice. 

[Whereupon, at 4:07 p.m., the Subcommittee was adjourned.] 

[Questions and answers and submissions for the record follow.]

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