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REVIEW OF RECENT JUDICIAL DECISIONS 

ON PATENT LAW 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTELLECTUAL PROPERTY, 

COMPETITION, AND THE INTERNET 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 10, 2011 

Serial No. 112–20 

Printed for the use of the Committee on the Judiciary 

( 

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

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM REED, New York 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

SEAN MCLAUGHLIN, Majority Chief of Staff and General Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMPETITION, AND THE INTERNET

BOB GOODLATTE, Virginia, Chairman 

HOWARD COBLE, North Carolina, Vice-Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM REED, New York 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

MELVIN L. WATT, North Carolina 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

BLAINE MERRITT, Chief Counsel 

STEPHANIE MOORE, Minority Counsel 

(III) 

C O N T E N T S 

MARCH 10, 2011 

Page 

OPENING STATEMENTS 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Subcommittee on Intellectual Property, Competition, and the Internet .................................................................................... 1 

The Honorable Melvin L. Watt, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Intellectual 

Property, Competition, and the Internet ............................................................ 2 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Ranking Member, Committee on the Judiciary, and 

Member, Subcommittee on Intellectual Property, Competition, and the 

Internet ................................................................................................................. 3 

WITNESSES 

Dan L. Burk, Chancellor’s Professor of Law, University of California, Irvine 

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

Prepared Statement ............................................................................................. 7 

Andrew J. Pincus, Partner, Mayer Brown LLP 

Oral Testimony ..................................................................................................... 14 

Prepared Statement ............................................................................................. 16 

Dennis Crouch, Associate Professor of Law, University of Missouri School 

of Law 

Oral Testimony ..................................................................................................... 31 

Prepared Statement ............................................................................................. 33 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Coalition for Patent Fairness .................................... 63 

Prepared Statement of John Boswell, Senior Vice President and General 

Counsel, SAS Institute ........................................................................................ 68 

Prepared Statement of Lateef Mtima, Professor, on behalf of the Institute 

for Intellectual Property and Social Justice ....................................................... 73 

(1) 

REVIEW OF RECENT JUDICIAL DECISIONS 

ON PATENT LAW 

THURSDAY, MARCH 10, 2011 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON INTELLECTUAL PROPERTY,

COMPETITION, AND THE INTERNET, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 1:06 p.m., in room 

2141, Rayburn Office Building, the Honorable Bob Goodlatte 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Goodlatte, Coble, Sensenbrenner, Issa, 

Poe, Reed, Griffin, Adams, Quayle, Watt, Conyers, Chu, and Nadler. 

Staff present: (Majority) Blaine Merritt, Subcommittee Chief 

Counsel; Olivia Lee, Clerk; and Stephanie Moore, Minority Counsel. 

Mr. GOODLATTE. Good afternoon. The Subcommittee will come to 

order. 

I have a statement. At the outset I want to express my surprise, 

as well as delight, that the other body has acted so expeditiously 

on their Patent Reform Bill. I look forward to continuing to work 

with Chairman Smith, Ranking Member Watt and other Members 

of the Judiciary Committee to fashion the House bill. This is the 

closest we have come in the past 6 years to enacting comprehensive 

patent reform and I am optimistic that we can get a bipartisan, bicameral bill on the President’s desk in the near future. 

Whatever the fate of patent reform in the coming weeks, we can 

all agree that Congress has found it difficult to enact a truly comprehensive reform bill. Why? The answer is twofold. First, different 

versions of the legislation have addressed many core provisions of 

the Patent Act. And second, a number of different stakeholders use 

the patent system in different ways. Businesses that devote significant resources on research and development have a greater financial need for patent protection than those spending less on R&D. 

In addition, some companies may generate one or two clearly understood patents that define an entire product while others, in the 

software or tech realms, may develop products that contain hundreds or even thousands of patents. In addition, many industries 

practice their patent portfolio defensively while other industries 

and patent-holding companies tend to go on the offensive to pursue 

their patent rights. 

2 

What this means is that our unitary patent system does not treat 

or affect all patent players in the same way. Some companies don’t 

need the Patent Act to innovate or operate; others couldn’t exist 

without it and the rest fall somewhere in between the two extremes. 

All of these factors have certainly made Congress’ task more difficult. Some patent observers believe that Congress cannot accommodate the concerns of all industry stakeholders with competing or 

incompatible financial interests every time a need to reform our 

patent law arises. They claim it would be far too time consuming 

and would generate substantial administrative cost for the courts 

and uncertainty for the stakeholders. There is also a strong likelihood that any industry specific legislative reform would ultimately 

fail because its lack of sufficient generality would not contemplate 

later changes in technology. 

Finally, it is possible that such Balkanization of the Patent Act 

violates our international obligations under various treaties or protocols such as TRIPS, the intellectual property component of the 

General Agreement on Tariffs and Trade. 

According to these patent critics, the courts are better positioned 

to generate appropriate reform over time, at least if Congress cannot do so legislatively. My belief is that Congress can learn from 

what the courts are doing and if the courts sufficiently have addressed an area of patent reform, then that may obviate the need 

for the Congress to act. In fact, one reason we are making greater 

progress on patent reform is because some of the more controversial issues that engendered the most disagreements are no longer 

addressed in the Senate bill. That is because the Supreme Court 

and the Federal Circuit have handed down decisions addressing 

many of the contentious issues we have grappled with over the 

years. 

This hearing will examine what the courts have done over the 

past 6 years to address the concerns Congress have expressed regarding—in the form of patent reform legislation and what remains 

for Congress to tackle. 

For example, when we first began to discuss patent reform I argued strongly that patent reform legislation needed to include reform of the way injunctions were being ordered by the courts in 

patent cases. The courts had developed a pattern of granting injunctions in almost all cases despite the plain reading of the statute. While finding common ground on a legislative solution proved 

extremely difficult, the Supreme Court addressed this issue conclusively with the eBay v. mercExchange decision in 2006. 

I look forward to hearing from our witnesses about other 

progress the courts have made in correcting some of the abuses 

that have been occurring with our patent laws. This hearing could 

not come at a more meaningful time in the process as the House 

readies its version of patent reform legislation for introduction. 

It is now my pleasure to recognize the Ranking Member of the 

Subcommittee, the gentleman from North Carolina, Mr. Watt? 

Mr. WATT. Thank you, Mr. Chairman and thank you for convening today’s hearing. It is an important hearing and I think it 

will be valuable to us as we move forward in this area of crafting 

new patent legislation. 

3 

As a former litigator of 22 years, I know both of the benefits of 

meaningful, warranted litigation and the burdens of frivolous, costly litigation, to the parties and to society at large. As a legislator 

for the past 19 years I also appreciate the need for Congress to 

monitor developments in the judicial system and where appropriate 

respond legislatively. 

Today’s hearing fittingly provides us with the opportunity to examine recent developments in patent law, to assess whether the 

courts are trending in the direction we think best or whether we 

should just stay out of some areas and let what the courts have 

said continue to be the prevailing law there and avoid additional 

controversies. 

So for us to do that and do it appropriately and in a balanced 

way, I think we need to have a better understanding of what the 

courts have done, have not done, what people perceive are the gray 

areas, the nuances that we need to be evaluating. And I am looking 

forward to hearing the testimony with that in mind. 

With that, Mr. Chairman, I yield back. 

Mr. GOODLATTE. I thank the gentleman. And it is now my pleasure to recognize the Ranking Member of the full Committee and a 

very consistent participate—participant in this Subcommittee, the 

gentleman from Michigan, Mr. Conyers? 

Mr. CONYERS. Thank you, Mr. Chairman and Ranking Member. 

My congratulations on bringing us together at this point in time on 

a very important subject. 

Most of my opening statement deals with the fact that patent reform has frequently ended up bipartisan in this Congress and in 

the 110th and 109th too, as a matter of fact. And that the courts 

have helped us, as you have said, Chairman Goodlatte, in ferreting 

out a lot of issues that seems to me that we can take mostly off 

the table. There are a number of subject matter where the courts 

have been helpful: venue, injunctions, willfulness, damages, obviousness have all helped us a lot. 

We now have a Senate product and we will be meeting here, informally, with Chairman Smith, with our colleagues, Issa, Coble, 

Watt, Zoe Lofgren and of course Howard Berman. And so I think 

we are well on the way. 

I have got a list of decisions that have been very helpful in sorting out some issues that the court can handle, perhaps, arguably 

even better than the legislature and some issues that are—that are 

leaving us with issues that are unique to ourselves. 

And so we are pleased to have these witnesses before us and I 

look forward and yield back the balance of my time. 

Mr. GOODLATTE. I thank the gentleman. Without objection, other 

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

we will now welcome our witnesses. 

We have a very distinguished panel today. Each of the witness’s 

written statements will be entered into the record in its entirety. 

And I ask each witness to summarize their testimony in 5 minutes 

or less. To help you stay within that time limit there is a timing 

light on your table. When the light switches from green to yellow 

you have 1 minute to conclude your testimony. When the light 

turns red it signals that the witness’ 5 minutes have expired. 

4 

Before I introduce our witnesses I would like them to stand and 

as is the custom of this Committee, be sworn in. 

[Witnesses sworn.] 

Mr. GOODLATTE. Thank you and be seated. 

Our first witness is Dan Burk, Chancellor’s Professor of Law at 

the University of California, Irvine, School of Law. Professor Burk 

is an internationally prominent authority on legal and social issues 

related to high technology whose research encompasses the areas 

of patent, copyright, electronic commerce and biotechnology law. 

Some of his most recent work has considered the statutory policy 

levers used by courts to apply patent incentives to industries with 

diverse innovation profiles, as well as the affect of intellectual 

property rights on the structure of firms and of industries. He is 

the co-author, along with Mark Lemley, of ‘‘The Patent Crisis and 

How the Courts Can Solve It.’’ 

Professor Burk received his BS in microbiology from Brigham 

Young University; his MS in molecular biology and biochemistry 

from Northwestern; his JD from Arizona State and his JSD from 

Stanford. He has covered the West Coast pretty well and even got 

as far as Illinois. 

Our next witness is Andrew J. Pincus, a partner at Mayer Brown 

here in Washington, D.C. Mr. Pincus will testify on behalf of the 

Business Software Alliance. He focuses on appellate practice on 

briefing and arguing cases before the U.S. Supreme Court and the 

Federal and State appellate courts. He is argued 22 cases before 

the Supreme Court and has filed Supreme Court briefs in more 

than 100 other cases. Mr. Pincus has also served as a Federal law 

clerk; general counsel of Anderson Worldwide and as the general 

counsel of the Department of Commerce. 

He was educated at Yale and the Columbia School of Law. 

Our final witness is Dennis Crouch, Associate Professor of Law 

at the University of Missouri. Prior to joining the Missouri faculty 

Professor Crouch taught at Boston University and practiced law in 

Chicago. He has also worked as a research fellow at NASA; a software developer at the Mayo Clinic and a Peace Corp volunteer in 

Ghana. 

He is perhaps best known as the editor of the popular patent 

blog, ‘‘Patently-O’’. Is that ‘‘O’’ or zero? 

Mr. PINCUS. ‘‘O.’’ 

Mr. GOODLATTE. The—Professor Crouch earned his BSE in mechanical engineering from Princeton and his JD from the University of Chicago Law School. 

Welcome to you all and we will begin with Professor Burk. 

TESTIMONY OF DAN L. BURK, CHANCELLOR’S PROFESSOR 

OF LAW, UNIVERSITY OF CALIFORNIA, IRVINE 

Mr. BURK. Thank you very much, Mr. Chairman. 

I am honored to be here with you, with the Committee today. I 

speak only for myself, as a scholar, but I am happy to present some 

of my research findings to the Committee. 

And I congratulate you, Mr. Chairman and that of our colleagues, on your leadership in addressing this question of patent 

reform and especially this question as to what has been decided by 

5 

the courts, what could be decided by the courts and what might be 

the role of Congress at this point. 

Mr. Chairman, I would say that the news is good news. As you 

indicated in your opening statement, as we also hear from Mr. 

Watt and Mr. Conyers in their opening statements, many of the 

contentious and difficult issues that have been identified in the 

area of patent reform over the past several years and which were 

suggested as possible topics of legislative reform have been addressed by the courts. And what that tells us, Mr. Chairman, is 

that the system is working the way that it is supposed to, that the 

courts are applying the statute, that we have a robust and dynamic 

statute that can address the needs of innovators. 

Innovation is a messy and protracted and dynamic and often unexpected business. The needs of innovators vary widely, as you indicated in your opening statement, Mr. Chairman. The needs of the 

software industry are very different than the needs of the pharmaceutical industry. Both of their needs are very different than semiconductors and other industries. There are industries that we had 

not yet imagined or that are just emerging and all of them have 

very diverse innovation profiles. 

All of them need the assistance of the patent statute to help 

them innovate. How can that possibly happen? It is neither practical, nor desirable, nor necessary for this Committee or for the 

Members of Congress to sit and continually tweak and adjust the 

patent statute to meet all those different needs that you pointed 

out in your opening statement, Mr. Chairman. Rather, what can 

happen, what is happening is that Congress charts the course. Congress sets the goals, sets the rules of the game, if you will, and 

then supplies the tools, through the statute to the courts, and 

sometimes to the patent office, in order to continually update and 

adjust the law to meet the ongoing changing needs of American industry so that the innovation that we all depend on can happen. 

And we have seen that happen over the past several years. You 

gave a wonderful example in your opening statement, Mr. Chairman, of the way that injunctive relief has been addressed by the 

Supreme Court. And since that has happened we have seen empirically a drop off in the number of injunctions, incorrectly or improvidently granted, that might impede innovation. 

The same type of process is ongoing in other areas, such as inequitable conduct, venue for patent lawsuits or the size of damage 

awards. In each of those cases we see the courts addressing those 

issues, grappling with those issues and solving those issues. And 

the written statements contain information and data about those 

particular cases. 

Are there places where Congress needs to intervene? Each of the 

opening statements asked that question. I would say that the answer is yes. For example, if you want to make a fundamental 

change to the rules of the game, if you want to adjust the fundamentals of the patent system, such as, for example, the current 

proposals to switch from a first-to-invent system that we have now, 

to a first-to-file system, that has to happen in Congress. The costs 

of making that switch are very significant; it would be disruptive 

to nearly 200 years of established law; and the determination must 

be made before that happens that the costs are worth the benefits 

6 

that might happen from the change. The courts can’t do that, the 

courts should not do that, that is a determination that really has 

to be made here. 

Similarly, the question of post-grant opposition. It is a decision 

that the Patent Office can’t make, the courts can’t make, that is 

something for you here in this legislative body to address. 

So in summary, Mr. Chairman, as I say, the news is good. Many 

of the most difficult issues that were before Congress 7 years ago 

have been resolved or are being resolved by the courts. That tells 

us that we have a robust statute, that the courts, and sometimes 

the Patent Office, can use to resolve most of these problems. And 

there remains a very small subset of problems, such as first-to-file 

or post-grant opposition, for this body to address. 

I again congratulate you on looking into this issue and I look forward to answering any questions, either oral or written, that you 

or the distinguished Members of the Committee might have for me. 

Thank you. 

[The prepared statement of Mr. Burk follows:] 

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Mr. GOODLATTE. Thank you, Professor Burk. 

Mr. Pincus, welcome. 


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TESTIMONY OF ANDREW J. PINCUS, PARTNER, 

MAYER BROWN LLP 

Mr. PINCUS. Thank you, Mr. Chairman, Ranking Member 

Watt—— 

Mr. GOODLATTE. You may want to turn that on and pull it close. 

Mr. PINCUS. Got you. Thank you, Mr. Chairman, Ranking Member Watt and Members of the Subcommittee. It is an honor to appear before you today, as you noted, on behalf of the Business Software Alliance. 

As the Members of the Subcommittee know BSA has been a 

strong supporter of patent reform throughout the nearly 6 years 

that this Committee has been focused on modernizing the patent 

law. BSA companies are innovators, they are substantial patent 

holders and at the same time they are frequently named as defendants in patent infringement actions. And so they have a great interest in properly calibrating the standards for obtaining patents, 

for challenging dubiously granted patents in administrative proceedings and also for enforcing patents in the courts. 

This Committee’s intense focus on the problems in the patent 

system since 2005 has had a real impact, significant impact on the 

court’s interpretation of the patent law. From 2000 to 2005 the Supreme Court decided only three patent cases. From 2006 through 

the end of the current term The Court will have ruled on eight patent issues. And the Federal Circuit has also been quite active in 

clarifying previously uncertain or unjustified legal principles. 

And the Supreme Court’s opinions and the Federal Circuit’s opinions have addressed, and largely cured, the imbalances in the law 

that created risks for inventors and diminished their incentives to 

innovate that this Committee focused on in its deliberations over 

this period. Just to name a few: 

The standard governing the issuance of injunctions in infringement cases, as you noted, Mr. Chairman, was a critical and very, 

very controversial issue in 2005 when the first bill was introduced. 

The Supreme Court resolved that issue unanimously in its eBay 

decision. 

The low standard for proof of willfulness, which results in the 

imposition of multiple damages and the associated unjustified intrusion on the attorney/client privilege, which was also the subject 

of a lot of the Committee’s deliberations, were overturned by the 

Federal Circuit in the Knorr-Bremse and the Seagate decisions. 

The broad interpretation of Section 271F of the patent law, 

which led to significant extraterritorial application of our patent 

laws, was overturned by the Supreme Court in the Microsoft v. 

AT&T decisions. 

And the vague standards for calculating reasonable royalty, 

which is one of the principal drivers of abusive infringement litigation have been clarified. In a series of several rulings, the Federal 

Circuit has made clear that first of all, there will be appellate review of damages awards; there is not going to be a hands-off attitude by the Federal Circuit. That the entire market value rule, 

something this Committee focused on a lot is something that is inapplicable in most cases. And the compensatory damages, in the 

reasonable royalty context especially, should be based on the speVerDate Aug 31 2005 10:25 May 10, 2011 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6601 H:\WORK\IP\031011\65078.000 HJUD1 PsN: DOUGA
15 

cific features of the defendant’s product that are attributable to the 

infringed patent and that that is the rule, not the exception. 

And finally, as you noted, forum shopping has been addressed by 

a series of Federal Circuit rulings in which the Court, exercising 

its mandamus authority, has required plaintiffs to show a real connection between the forum and the litigation in order to maintain 

an action. 

So these key litigation issues have been resolved for the courts, 

at least for now. Obviously we will have to wait and see what will 

happen in the years ahead, no one can predict. 

But Congress still has an essentially role to play. The courts can 

interpret the statutory provisions governing infringement actions, 

as Professor Burk noted, but there is some issues the courts can’t 

address, because they require new legislation. And BSA member 

companies urge the Committee to focus its patent reform efforts on 

these areas, in particular, funding of the PTO, which the PTO obviously needs the freedom to set its own fees, to reduce pendency and 

have the funds it needs to become the efficient operation that it can 

become and of course fee diversion should be ended. 

An effective administration system to weed out bad patent. The 

experts at the PTO are in the best position to decide if a patent 

has been poorly issued, and they need an effective procedure in 

place to allow them to do that so people can challenge patents that 

were issued unjustifiably, bring those issues to the PTO and that 

requires changes to the current inter partes system. Allowing third 

parties to submit prior art for consideration of the examination 

process, something—this has been in all the bills considered by this 

Committee; putting an end to the false marking litigation, cottage 

industry that has grown up, really a new issue that has just arise 

in the last couple of years, that really needs to be addressed is this 

plague of false marking cases. And finally, adopting the first inventor to file system with the accompanying prior user rights that go 

along with it. 

Thank you very much, Mr. Chairman. I look forward to addressing the Subcommittee’s questions. 

[The prepared statement of Mr. Pincus follows:] 

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Mr. GOODLATTE. Thank you, Mr. Pincus. 

And Mr. Crouch, welcome. 


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TESTIMONY OF DENNIS CROUCH, ASSOCIATE PROFESSOR 

OF LAW, UNIVERSITY OF MISSOURI SCHOOL OF LAW 

Mr. CROUCH. Mr. Chairman, thank you very much. Mr. ViceChairman, Members of the Committee, I would like to thank you 

for inviting me here today. 

Last week in Missouri we held a major conference that focused 

on the role of the Court of Appeals for the Federal Circuit, in patent policy. And United States Patent and Trademark Office Director David Kappos was there, along with academics from around the 

world, as well as a couple of hundred patent law practitioners. 

There was broad consensus, amongst everyone there, without anyone voicing disagreement, that the Federal Circuit and the Supreme Court have been actively involved in patent policy over the 

past 6 years, and that we have had a tremendous and rapid development in patent law, in patent law doctrines over the past decade, 

even without congressional action. 

And it—with—in my law school I teach—in addition to teaching 

patent law I also teach real property. Real property is very much 

about the common law doctrine that had a radical change back in 

the day of William the Conqueror, 900 years ago, and has slowly 

plodded along since then, developing different doctrines in property. 

Patent law has been very much a counter-example of that. We 

have seen doctrines change rapidly these past 6 years. And I think 

the Federal Circuit and the structure of the Federal Circuit that 

Congress created almost 30 years ago is a big reason, although 

aided by the Supreme Court, why we have seen that rapid change. 

Over the past decade the Federal Circuit has heard well over 

4,000 patent cases, which is a surprising number. Two weeks ago 

I sat in on a 10th Circuit Court of Appeals copyright case. Although the judges there, I believe, asked appropriate questions and 

will decide the copyright case very well, it turned out that none of 

might had ever heard a copyright case before, even though they 

had all been judges for upwards of a decade. 

At the Federal Circuit all of the judges hear 20 to 30 patent 

cases every year. Every single major patent law doctrine arises 

multiple times each year before the Federal Circuit. What that 

means is that even as the Court makes incremental changes, case 

by case, over a short amount of time they can still make major developments just applying the common law doctrine and that is because they hear so many cases and the second reason because they 

are this nationwide court that has automatic, nationwide application of their decisions. 

Now I absolutely agree with Mr. Pincus and Mr. Burk that the 

decisions that have occurred in the past 6 years have related directly to the proposals that we have seen in this body and in the 

Senate over that time. And almost across the board and maybe actually across the board, all of the decisions on these particular 

issues have gone the way that the legislation was headed. That is, 

we have had legislation to control damage awards, and that is 

what the courts have directed—have worked to do. We have had 

legislation toward limiting injunctive relief, especially at times 

when we have an entity that is just a holding company and someone else manufacturing, and we want to allow that manufacturing 

32 

to go on and have some kind of damage award. And that is what 

this body was thinking of and that is what the courts did. 

We had a similar approach with enhanced damages for willful infringement, that we limited—the courts limited the scope of that as 

well as venue and inequitable conduct, that has been discussed. 

I certainly believe that although this has been going on the past 

6 years, it appears, and every indication that I have, makes it look 

like it will continue into the future. 

Now, in addition to legal changes, there is a lot of other changes 

that have happened this past 6 years. One of them is that the Patent Office backlog has continued to grow, something like up 30 percent from where it was 6 years ago, so that now we have about 1.2 

million patent applications pending at the Patent Office, which is 

a serious problem. In addition, the Patent Office has its own internal board of review. Six years ago they had about 700 cases pending, now they have 20,000 cases pending and a 3-year backlog just 

to hear those cases within the Patent Office. 

My—I guess my final point is maybe on a re-examination system. 

That 6 years ago people did not use re-examination as a form of 

post-grant opposition. These days most defendants who think they 

have a reasonable invalidity defense file for re-examination at the 

Patent Office and many of them have been successful at invalidating the patent that way as opposed to through—as opposed to 

through the courts. 

And I look forward to taking your questions as well. Thank you. 

[The prepared statement of Mr. Crouch follows:] 

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Mr. GOODLATTE. Thank you, Professor. 

I’ll begin the questioning with one to each of you. That is to 

make the point, aren’t the courts fallible, as the Congress may be 

fallible as well, and how can we be sure that they will make the 

right decisions? And as a corollary to that, let me ask you, are any 

of the decisions they have made in the last few years wrong-headed 


Crouch-12.eps
45 

and therefore should be addressed by the Congress because the 

courts didn’t get it right? 

We will start with you, Mr. Burk. 

Mr. BURK. Thank you, Mr. Chairman. Of course the courts are 

fallible. And what we see in the court system and in the common 

law system is, as I describe it to my students frequently, it is very 

much like an impressionist’s picture. When you start with one dab 

of paint or two dabs of paint, you can’t tell what the picture is 

going to look like, but as these dabs of paint build up over time, 

in the manner that Professor Crouch has described to you, you 

begin to see the picture. 

Mr. GOODLATTE. Since my time is limited, let me get you to focus 

in on any decisions that they have made that you think we should 

attempt to improve up. 

Mr. BURK. I don’t think there is one that I can think of at the 

moment, Mr. Chairman. As I said, I would urge you to focus on 

structural changes like first-to-file, post-grant opposition and so on. 

Mr. GOODLATTE. Got you. 

Mr. Pincus? 

Mr. PINCUS. In terms of decisions to focus on, I think the critical 

one is the false marking area. The Federal Circuit really took a bad 

turn in the Forest Group/Bon Tool case by saying that private 

plaintiffs who can invoke that false marking statute don’t have to 

show any harm to themselves. And so anybody can bring these 

claims and it has really evolved into an avalanche of litigation, 

even though there may be no harm to anybody. And that is a real 

problem in terms of the litigation costs that are being visited on 

legitimate companies, for no good reason. 

Mr. GOODLATTE. Thank you. 

Professor Crouch? 

Mr. CROUCH. Yeah, I had—I had actually written down the same 

case that Mr. Pincus had written down, the Bon Tool case, which 

there may—the—you know, it is possible that there is no need to— 

for this chamber to act in that there is a District Court that has 

invalided that statute on constitutionality grounds, but that remains to be seen whether the Federal Circuit will address it in 

that manner. 

Although, the false marking cases, from my perspective, they appear to be a flash in the pan in that most companies were ignoring 

that doctrine that had been around since the 1840’s, but now that 

it has become such a hot ticket item, folks have—folks who are in 

business in manufacturing now understand what they need to do 

to avoid the problems. And so there has been a thousand cases filed 

in the past 2 years and I expect that in 5 years from now, if there 

are no changes, there may be something like 10 to 20 cases a year. 

Mr. GOODLATTE. Are litigants making greater use of the existing 

inter partes re-examination system? And if so, should we change 

the proceeding in our patent reform bill? 

Professor Burk? 

Mr. BURK. Yes, Mr. Chairman, there is no doubt that re-examination has become very popular. And as Professor Crouch indicated in his testimony, if re-examination is going to be used as a 

form of post-grant opposition, then it behooves this body to look at 

46 

turning it into a real proceeding post-grant opposition, not the very 

limited one that we have today. 

Mr. GOODLATTE. Mr. Pincus? 

Mr. PINCUS. The numbers are up, Mr. Chairman. I think our 

view is it is not clear, especially for technology companies, that it 

is the useful process that it could be and that there are improvements. Frankly, the ones that were in the bill that this Committee 

reported on and the House passed in 2007, would really turn it into 

a system that would be very, very effective. 

Mr. GOODLATTE. Professor Crouch? 

Mr. CROUCH. Yeah. In my testimony I put a few numbers in that 

from the Year 2000 to 2004 there were 53 requests for inter partes 

re-exam, and—but in the past 5 years that has jumped up to 903. 

Now, ex parte re-exam is much more popular and it has about 

doubled in its popularity over that time period. From my discussions with people involved with this, it appears that the Patent Office has put their highest caliber examiners in what they call the 

Central Re-examination Unit. And I have not spoken to any individual on either side who has questioned the quality of the work 

being done by this re-examination unit. 

And we have also seen that a number of cases—or we have seen 

statistically that parties requesting this do get favorable outcomes. 

That is, they are able to invalidate patents through this mechanism. But I would say the biggest failure, especially of inter partes 

re-examination, is the timeline, in that these tend to be extremely 

slow, as are many things at the Patent Office. And if there can be 

something to be done to shorten up that timeline, then what we 

have for inter partes re-exam may be sufficient. 

Mr. GOODLATTE. Finally, let me ask, I think Mr. Pincus you addressed this in your statement, but let me ask each of the other 

two, if you want to add something you’re welcome to, what areas 

of patent law would you put into a patent reform bill and what 

areas should be skipped by the Congress. 

Professor Burk? 

Mr. BURK. So, as I mentioned, Mr. Chairman, structural changes 

are the ones that this body needs to address. If it is desirable to 

go to first-to-file, this body must address that. If it is desirable to 

have a better post-grant opposition, this body must address that. 

Certainly this body needs to address the question of funding for the 

Patent Office. 

I disagree a little bit with my colleagues to my left, my guess is 

that the courts will work out the problem on false marking, probably by the time that this body could address that problem. 

So those are the ones that I would focus on. 

Mr. GOODLATTE. Professor Crouch? 

Mr. CROUCH. I absolutely agree with Professor Burk on that 

point and I guess without taking a specific position on first-to-file, 

if something is going to happen with that it has to happen here. 

And there is another issue in the background, in terms of the 

Patent Office’s ability to really work as an administrative agency 

in interpreting the law. And thus for—thus far the Federal Circuit 

has been reluctant to give the Patent Office that power and so it 

is possible that that may be an additional kind of non-structural 

element that you could take. 

47 

Mr. GOODLATTE. Thank you. 

Gentleman from North Carolina, Mr. Watt is recognized. 

Mr. WATT. Thank you, Mr. Chairman. 

Professor Crouch, you indicated that doctrines have changed rapidly over the last several years and that is always—raises a potential red flag with legislators because it is sometimes hard for us to 

know whether the courts are interpreting the law or whether they 

are making the law. 

And I wasn’t clear whether you were saying that they were interpreting the law and because of the number of cases they have clarified it and therefore doctrines have been changing, or that—— 

Mr. CROUCH. Right. 

Mr. WATT [continuing]. The courts are making the law. Which— 

where do you come down on that? 

Mr. CROUCH. If the courts are not making the law, they are coming extremely close to that in how they are operating. Just because 

we—just by looking at how the doctrines have shifted, you know, 

it is clear to me they are setting policy, from a practical standpoint. 

Mr. WATT. Give me an example. 

Mr. CROUCH. Now—— 

Mr. WATT. Give me an example. 

Mr. CROUCH. Well, so you know, there is the recent Supreme 

Court of KSR v. Teleflex, that is about the question of obviousness. 

And obviousness is really the core question of most patent law 

issues. Is this invention you have created a substantial step beyond 

what came before? That—— 

Mr. WATT. Okay. Is that something we could legislate, a definition of obviousness? 

Mr. CROUCH. Absolutely. You know, so if you look at what the 

European Patent Commission has done, they have, through essential legislature, spelled out exactly what they mean by obviousness, 

spelled out the steps that you would take to approach that question 

and try to figure it out. Now, there is always going to be a bit of 

subjective analysis, but certainly if this body wanted to you could, 

I would not recommend that. But—— 

Mr. WATT. Okay. So you are comfortable with the courts making—— 

Mr. CROUCH. Right. Right. 

Mr. WATT [continuing]. The law in some areas? Okay. 

Mr. CROUCH. Right. For—to a limited extent I think that is right. 

And the truth is—— 

Mr. WATT. And in an area of innovation, I mean you—I presume 

you are a little bit more comfortable with the courts making the 

law as opposed to us having to come back every time a new innovation—— 

Mr. CROUCH. Right. 

Mr. WATT [continuing]. Gets made and having to change the law 

to fit the new innovation? I take it you are—all three of you are 

probably comfortable with that to some extent, or am I misreading? 

Mr. PINCUS. I think that—I think so, Congressman. I guess I disagree with my colleague a little bit about what the courts have 

been doing. I think what has happened is patent law was a little 

bit like the part of a pier that is under water. And there had been 

a lot of growths, a lot of mussels and mollusks and things had sort 

48 

of grown up over the years that people maybe hadn’t thought a lot 

about. And there has been a lot of chipping away to get back to 

the basic principles. 

I mean I think willfulness is a perfect example. There was a 

principle, you get multiple damages for willful conduct, but somehow a series of decision had turned willfulness into negligence. And 

so the Federal Circuit said, you know what, we are going to go 

back to what this really means. And I think at several of the—in 

a number of these areas—eBay is another example, we are going 

to apply—the Supreme Court said, we are going to apply the equitable principles that have applied for 200 years, not a different rule 

for patents, et cetera. 

Mr. WATT. I am going to run out of time if I pursue this academic discussion. Let me ask a couple of more practical questions, 

because we are having—I mean I enjoy the academic discussion but 

in 5 minutes it is hard to really pursue it. 

The Court of Appeals of the Federal Circuit has issued several 

recent opinions allowing defendants to obtain a transfer of venue 

when another district is potentially more convenient and appropriate. Let me ask you a couple questions about that. 

If a plaintiff is allowed to name several defendants in the same 

lawsuit, what analysis does the court use to decide where to transfer the case? Would a plaintiff be able to defeat a transfer of venue 

simply by naming several defendants from various different places? 

And have there been any decisions that would limit patent plaintiffs from suing multiple defendants where there is no rational relationship among the defendants or the products accused of infringing? 

So I am just trying to figure out, are there still any areas in this 

venue area that we need to be ratcheting up or concerned about or 

has that law been made enough that we ought to just stay out of 

it? 

Mr. PINCUS. I am happy to take—— 

Mr. WATT. Go ahead. 

Mr. PINCUS [continuing]. It first. I think, Congressman, there is 

a lot of progress. Is it perfect? No. 

I mean first of all the Federal Circuit has to use its mandamus 

authority, which by definition means it can only deal sort of the 

outer edges of what is egregious. But it has begun to lay down a 

set of principles that at least deal with a one defendant case, deal 

with attempts to manufacture venue by moving things to districts 

before the lawsuit is filed. 

I am not aware of cases dealing with the multiple defendant situation. I will be happy to get back to you on that. But I think the 

Federal Circuit, you can see in the decisions that it sees the problem and is trying to address it, as the cases come to it. 

Mr. WATT. But generally, I mean we set the venue standards 

here, legislatively. We don’t leave it to the courts to say what the 

venue of particular cases should be. Is that an appropriate area for 

a court to be making case law as—making law by case or is that 

something that we ought be doing here? 

Mr. PINCUS. Well there is the out—the statute sets the outside 

limit. The problem is, if your products are distributed nationwide, 

the way the statute works, the case can be brought anywhere. And 

49 

so the statute itself doesn’t set the limits and so the courts are 

using the transfer power, which is, you know, convenience of witnesses, convenience of justice, in order to alleviate the worst kind 

of abuses that arise. 

Mr. WATT. Well get back to me on the multiple—if any of you 

know multiple—— 

Mr. CROUCH. Mr. Watt, there is one—— 

Mr. WATT [continuing]. Are there cases? I am sorry, my time is 

expired. So—but you can answer the—answer that question—— 

Mr. CROUCH. Oh. 

Mr. GOODLATTE. That is fine. 

Mr. WATT [continuing]. That I already asked it. 

Mr. CROUCH. There is one case called In re: Nintendo in which 

there was a set of something like one party in California, another 

in New York and they brought the case in Texas and they said, 

well this is the middle of the country and it—you know, it is half 

way between each and the court said absolutely not. You absolutely 

cannot do that, there is no kind of central to our—all the parties’ 

rule that allows you to bring it in Texas even though nobody is 

here. 

Mr. REED [presiding]. Okay, thank you very much. 

At this point in time we will recognize my colleague from Florida, 

Ms. Adams. 

Ms. ADAMS. Thank you. 

It sounds to me like the legislative patent debate from ’05 to ’11 

at least has sparked the interest of the courts in getting involved, 

from your testimony. 

Is there something to be said for Congress maybe taking the first 

crack at amending the statute rather than deferring to the courts 

hoping they will adjudicate appropriately? Is—do you believe that 

might be the better way to go? Any of you. 

Mr. BURK. Well, Ms. Adams, that is a great question and I think 

it relates to the question that Mr. Watt asked a moment ago. 

Ms. ADAMS. Yes. 

Mr. BURK. We have a very robust patent statute and Congress 

has done a marvelous job, you and your predecessors have done a 

marvelous job of setting, as Mr. Pincus says, ‘‘the outside boundaries.’’ And now the courts are working out the details. 

There are very few places where Congress needs to tinker with 

the statute because the goals or the outside boundaries are unclear. 

So to answer both your question and the question of Mr. Watt, as 

long as the courts are headed in the direction that Congress has 

indicated, and are achieving the goals that Congress has set—yes, 

they are making law and that is what they are supposed to do, that 

is what you have empowered them to do, and the statute is very 

robust and lets them do that. 

Ms. ADAMS. Anyone else? 

Mr. PINCUS. As I said earlier, I think a lot of these problems 

were frankly of the courts making because they didn’t follow Congress’ directions in the first place. And so I think a lot of what has 

happened, in a number of these areas, and again, I go back to injunctions as sort of the classic, where the language in the patent 

law is the same as the language in other areas in which Congress 

has authorized courts to grant injunctions, but somehow in the patVerDate Aug 31 2005 10:25 May 10, 2011 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6601 H:\WORK\IP\031011\65078.000 HJUD1 PsN: DOUGA
50 

ent statute it got interrupted differently than everywhere else. And 

the Supreme Court said, no, same words, Congress used the same 

words, it should mean the same thing. 

So I think a lot of this has been moving back to what Congress 

did in the first place. Even the KSR decision that someone referred 

to earlier, on obviousness, the Federal Circuit had just said, we are 

going to adopt an arbitrary rule on how you prove obviousness, it 

is not in the statute, it wasn’t anywhere, we are just going to adopt 

this rule. And the Supreme Court said, the rule is not in the statute, so you can’t make it up. 

So I actually think what has happened in the last 5 years has 

been to move closer to what Congress intended and carve away a 

lot of this stuff that had grown up. 

Mr. CROUCH. Now, there is a big difference with patent law and 

copyright law in that if you pick up the copyright statute and drop 

it on the table it makes a loud thud, but the patent statute is, you 

know, one-tenth or maybe one—you know, maybe one-twentieth of 

the size of the copyright statute. And so in the patent world Congress has spoken with much less detail, which is one reason why 

the Court, I think, feels this leeway. And so although it is robust, 

right, there is still a lot of room for the courts to interpret and it 

is not as true in other areas of law and maybe with more recent 

statutes that have been developed. But I certainly don’t see that as 

a problem. 

Ms. ADAMS. And is there any patent decisions the courts have 

gotten wrong, in your idea or beliefs, that may be still subject to 

appellate review? 

Mr. Crouch? 

Mr. CROUCH. I don’t think I understand the question. 

Ms. ADAMS. In other words, there is—you know, the decisions on 

the patent—the patent decisions from the courts that maybe you 

feel the courts were a little bit wrong and therefore are subject to 

appellate review and may be impacted by something we do here 

today or during this Congress. 

Mr. CROUCH. You know, it is hard to say whether congressional 

action 6 years ago, right, that—right there were—there was no 

positive vote taken, but just from the way things worked out, it 

looks like courts responded to the activity in Congress. And we just 

don’t know if that is true or not, because they were just taking the 

cases that came to them and deciding them. And after the series 

of cases it turned out we were Congress was headed. 

And so I—you know, I don’t know, but I do know that, right, we 

know that this court is sitting here in D.C. and we know that 

courts are political actors just like everyone else, and they are listening, we just don’t know in the future will they respond in the 

same way or if you need to push them do you have to take legislative action that actually has a kick to it. 

Mr. PINCUS. I think this false marking area is an area of concern. I—some of my colleagues may disagree, but although the Federal Circuit has a case in which it could declare the statute unconstitutional, the government—the Administration is defending the 

statute, that might not happen. And if something isn’t done, it is 

a big problem. And so that is an area where I think there is a big 

role for Congress. 

51 

Mr. BURK. I do disagree a bit. I think that that the site an example for you of lower court decisions that are probably mistaken, 

that are probably counterproductive, but that is a work in progress. 

And as I said, earlier, I fully agree with Professor Crotch, that 

if we come back in 5 years I think we will find that most of that 

problem has been solved. 

Ms. ADAMS. Okay. 

Mr. REED. Thank you, Ms. Adams. 

The Chair, at this point in time would recognize the former 

Chairman, Mr. Conyers, from Michigan. 

Mr. CONYERS. Thank you, sir. 

Let us look at the first-to-file and the prior user rights provision. 

How do you feel about that when we don’t have prior user rights— 

if we have first-to-file without prior user rights? Anybody want to 

volunteer? 

Mr. PINCUS. I’m happy to. I think it is a significant problem. Obviously first-to-file is a shift from first-to-invent. And the problem 

is you have first-to-file without prior user rights, that creates an 

opportunity—companies have one of two choices. Either they have 

to patent almost anything that is patentable, as soon as it happens 

to avoid the possibility that something that is incorporated into 

their product, even though they wouldn’t patent it today, because 

it is not that significant, but in a first-to-file system, if they don’t 

patent it and someone else does and there are no prior user rights, 

they have a big problem. 

So you force them into the situation of patenting everything, 

which is going to lead to more of a burden on the PTO, which is 

going to lead to more of a backlog, et cetera. The way to solve that 

is, as other countries have done, is to provide prior user rights that 

will protect companies that are users, from the possibility of an infringement action by some subsequent person who happens to be 

the first-to-file. But unfortunately, you know, that is not something 

that, for example, is in the Senate-passed bill, but we think it is 

very important. 

Mr. CONYERS. Do you have some reservations, Professor? 

Mr. BURK. Mr. Conyers, what I would say is, is just what I said 

to my students, which is that a bill that implements first-to-file in 

the United States, should really be entitled, ‘‘The Patent Lawyers 

Full Employment Act of 2011.’’ The reality is that that is an enormous change. It will create an enormous amount of work for my 

students and for my former students. And although it is perhaps 

a statement against interest, I think businesses probably want to 

create products and produce products more than they want to pay 

patent lawyers. 

So you have to think very carefully that the benefits of that 

change, and in particular the way that Mr. Pincus indicated, if 

you’re going to have prior user rights—— 

Mr. CONYERS. So you are not for first-to-file to begin with? 

Mr. BURK. I am saying this can be very disruptive—— 

Mr. CONYERS. Yes. 

Mr. BURK [continuing]. And very expensive. And it may be that 

it is worth it, but I am not convinced. 

Mr. CONYERS. Right. I can appreciate that. 

Mr. CROUCH. Excuse me. 

52 

Mr. CONYERS. What is your feeling? 

Mr. CROUCH. Thank you, Mr. Conyers. You know, the—I guess 

there is the first point that currently we don’t have prior—we do 

not have prior user rights right now. And so there are cases that 

come up where someone was using a product before someone else 

independently invented it and then the patent law can stop them 

from using it. 

And you know, getting to Mr. Burk’s point, I—you know, in reading the Senate bill, which may or may not be, you know, this 

House might present something different, but by just reading 

through it, time after time I ran across these words that are new, 

completely new to the patent system that we have had for 200 

years and left undefined in the act. 

And I certainly don’t want that to happen, because all that will 

lead to is litigation. And these cases are big cases and any single 

word like that that is left undefined is just going to lead to appeal 

after appeal, which I think is problematic. 

Mr. CONYERS. What about inter partes re-examination? That 

could become a pretty big consideration. We have had it in our bill 

H.R. 1908, a couple of congresses ago, do we get general agreement 

on that? Are you okay on that as well? 

Mr. CROUCH. I am okay on—and certainly, right, certainly we 

have had problems of current re-examination has limited scope. 

There are lots of reasons why people would want to invalidate a 

patent and they are not able to because of the current re-examination system. And so if we expanded that out I think it could actually improve our ability to get rid of patents that should have never 

issued. 

Mr. CONYERS. Okay. Finally, inequitable conduct, patent amnesty, we may—we are going to be meeting with the Chairman of 

the Committee with Berman and Coble and Goodlatte and Zoe 

Lofgren, to try to work that out. How would you recommend us 

take care of this in a closed-room, secretly with nobody knowing 

that we had talked to you? 

Mr. PINCUS. I think, Congressman Conyers, that inequitable conduct falls in the same category as a lot of the other litigation issues 

that we have been discussing, venue and injunctions and the rest. 

As my colleagues both note in their testimony, there—the Federal 

Circuit has decided one inequitable conduct case that tightens up 

on the standards for inequitable conduct. It has another case before 

it on—now, that seems to be another one of these areas where the 

courts are working it out and Congress doesn’t have to intervene. 

Mr. CONYERS. Thank you very much, Mr. Chairman. 

Mr. REED. Thank you, Mr. Conyers. 

I’ll recognize myself at this point in time. 

I’m concerned about any reform that we enact and encouraging 

or allowing for frivolous type of lawsuits, or be it also in a litigation 

setting but also the administrative review, the post-grant review, 

et cetera. 

Could you offer any comments on ways that we can make sure 

that we don’t open up the door to frivolous type of action going 

down the road. 

We’ll start with Mr. Burk, if you don’t mind. 

53 

Mr. BURK. Again, I think that the courts are well positioned to 

deal with that. So if you set the broad parameters, if you say, you 

know, we are going to have post-grant opposition review and we 

are going to allow the Patent Office or we are going to create a 

remedy in the courts to deal with frivolous problems, that can be 

worked out. So I guess I would advise you not to try to tinker too 

much. 

Mr. REED. Okay. 

Mr. Pincus? 

Mr. PINCUS. I think in terms of the courts a lot of what they 

have done is helping to solve what has been a real problem with 

abusive litigation in this area And as I say, the false marking piece 

is sort of the last piece left. 

In the administrative process I think empowering the PTO to 

take action against abuses of its processes is the way to go there. 

I don’t think you need artificial limits on how it works, you could 

certainly prevent people from bringing some repetitive administrative claims but also just giving the PTO the power to issue regulations to prevent abuse of its processes I think would do the trick. 

Mr. REED. What type of tools would you envision them having, 

other than repetitive filings? 

Mr. PINCUS. The—the same kinds of tools that the courts have 

now. If parties bring repeat, unjustified claims they can be sanctioned, sort of a Rule 11 equivalent—for the PTO process. They can 

be, as I say, barred from being repetitive claims. 

Mr. REED. Okay. 

Mr. Crouch? 

Mr. CROUCH. Yeah, I would—I think—I agree with Mr. Pincus, 

but I want to make a slight distinction in that I think there is little 

chance for abusive opposition filings. And the reason is because it— 

unlike, you know, unlike—sometimes we talk about abusive litigation where someone files a claim seeking some settlement amount 

of money, right, with these oppositions, right, you would only file 

these to invalidate someone else’s patent. And there is no kind of 

money that tends to change hands with those and so far, with our 

re-examination system we really have not seen any accusations of 

this happening and no examples of that happening. 

But what we have seen is within the process. So once a re-examination is ongoing, then folks are abusing the process. And one 

problem is, I think at this point, the Patent Office just isn’t as good 

as an Article III judge at kind of managing what is essentially litigation within this administrative body. 

Mr. REED. Yeah, because I—I guess I am concerned about also 

is not only just the commencement of frivolous actions, be it in the 

administrative venue in order to force negotiations, you know, of 

using it as a tool rather than for the endgame or the ultimate result, but using it from a practical—I used to be a former litigator 

before I came here and a lot of times there was strategy involved 

by utilizing litigation as a tool. 

So that is what I’m getting to. There may not be a financial problem, but a leveraging piece that could be utilized. Is that what you 

are touching upon? 

Mr. CROUCH. Yeah, that is exactly right, but also, you know, I— 

last week I was talking with the Patent Office director, Dave 

54 

Kappos, and he was speaking to me about, you know, at times with 

these—especially with inter partes re-examination, they receive petition after petition after petition and at this point they don’t feel 

like they have the power to enact rules that stop that. 

And so one way, potentially, and maybe this is the way that they 

would like, is for you to give them power to do that as opposed to 

explicitly spelling out, you know, what abusive process means and 

what the sanction would be and so forth. But then you just have 

to trust the Patent Office can do a good job of setting forth those 

rules. 

Mr. REED. Okay. Thank you. 

I’ll yield back the balance of my time. And the Chair will recognize, I believe, the colleague from California, Miss Chu? 

Ms. CHU. Thank you, Mr. Chair. 

I wanted to go back to the first-to-file and the prior user rights 

issue. Of course as you know this, the Senate Bill 23 does put in 

the first-to-file system so that we can harmonize with the rest of 

the world. On the other hand, there is the prior user rights issue, 

and I know that Mr. Burk had—has problems with that. 

But I’m wondering, Mr. Pincus, is there some way for us to address the concerns that universities have with prior user rights and 

the expansion of that, if we are to try to move to a first-to-file system? 

Mr. PINCUS. I think Congresswoman, there are—there is a way 

to do that. I think part of the problem is, you know, there hasn’t 

been the willingness of everyone to really get around the table and 

talk about what the problems—what the specific issues are, what 

the specific concerns are. But, I think you know, what is critical is 

the tech companies that are worried about this problem are worried that basically their ongoing business and processes are going 

to be—something they are using is going to be disrupted and that 

is their concern, that is what they wanted protected. 

As you know right now, the prior user rights privilege only applies to methods, it doesn’t apply to the other types of patents. So 

there are problems in scope, there are problems in use that we 

think have to be addressed. And I think there probably is a way 

to do that that wouldn’t make educational institutions concerned 

that their investments in patents could somehow be overcome by 

the fact that there were these prior users out there, who, after all, 

have developed this thing separately. It is not like they looked at 

the patent and then magically started using that product or service 

or process, they have done it independently. 

Ms. CHU. Should there be a carve out for universities? 

Mr. PINCUS. That certainly is one thing that could be talked 

about. It was talked about in other parts of the bill and earlier incarnations, with things like the venue provision, when it was in the 

bill. And there may be some way to do that. But I think that the 

critical interests, the balance are finding a way to make sure the 

universities are protected, but also making sure that businesses 

are protected. And also, you know, frankly, any kind of carve out 

that is developed is susceptible to other people trying to use it and 

so it would have to be—— 

Ms. CHU. That is true. 

Mr. PINCUS. Drafted pretty tightly to avoid that problem. 

55 

Ms. CHU. Let me ask also about patent trolls in the eBay decision. Have firms whose business models primarily focused on purchasing and asserting patents, the so-called patent trolls, been able 

to obtain injunctions after the eBay decision? 

Mr. Pincus and then Mr. Burk? 

Mr. PINCUS. I think Mr. Burk actually has some study about that 

and—— 

Mr. BURK. The—a number of scholars looked at this and in fact 

I think that some of this is in Professor Crouch’s written treatment. And I would also commend to you the FTC report that was 

issued last week that has some of this data. 

The number of such injunctions has dropped dramatically since 

the—that decision, which is why it is one of the real success stories 

in addressing a current patent reform problem by applying, as Mr. 

Pincus said, the statute as Congress wrote it, so that legitimate injunctions can still be issued for first time innovators. Patent—nonpracticing entities or patent trolls can still get their monetary damages, so they can still get their income from the patents, but the 

statute indicates there is no reason they ought to get an injunction 

and I think that has been a real success story of the courts addressing that problem. 

Ms. CHU. Is this a success story that is left well enough alone 

or should Congress consider addressing it? 

Mr. BURK. As far as we can tell, Congress did address it in the 

original statute. As Mr. Pincus said, the Supreme Court reminded 

the lower courts of that and it seems to be working itself out. 

Ms. CHU. Okay. And then finally, how—what is your assessment 

of how the damages provision in the current patent statute has 

been handled by the courts? Do you believe that the current case 

law properly assesses damages for patent infringement or does the 

current system allow patent owners to be overly compensated? 

Mr. PINCUS. I think, Congressman, that was—this was one— 

after injunctions it probably is the biggest problem as when this 

Committee started looking at this issue in 2005. And I think although it is not quite as great a success story as maybe the eBay 

decision, as I think the Federal Circuit in several recent decisions 

has moved down the road of explaining that the way reasonable 

royalty damages especially, which are the royalties that are sought 

by non-practicing entities, because they don’t have any lost profits 

to recover, have to be—that the lower courts sort of reflective use 

of the entire market value rule, which as you know, meant that the 

royalty could be based on the whole product even if the patent involved just a tiny little aspect of what the product delivered, that 

that rule really is the exception and not the rule and the Federal 

Circuit has been very firm on laying that down. It has been very 

firm in saying that a rule of thumb, that royalties should be 25 

percent just because that seemed like a good place to start, was 

specifically rejected. 

And that in the most recent—in the Unilock decision saying that 

the basic rule should be that the royalties have to be commensurate with what the infringement adds to the product and that is 

the critical focus. And if that principle gets applied in subsequent 

decisions that is going to really do for the damages issue what 

eBay did for the injunction issue. 

56 

Ms. CHU. Thank you. 

I yield back. 

Mr. REED. Okay. Thank you very much. 

The Chair, at this point, would recognize Mr. Griffin. 

Mr. GRIFFIN. Thank you, Mr. Chairman. 

Mr. Burk, I want to follow up on your comments on first-to-file. 

Mr. BURK. Yes. 

Mr. GRIFFIN. I have spoken to a lot of people about this and I 

am told that a lot of our actors act as if first-to-file is already in 

place, particularly people who are operating internationally. And so 

I am interested in hearing your comments on the impact of moving 

to a first-to-invent system, if people are in fact already acting as 

if we have a first-to-file system. 

Can you comment on that? 

Mr. BURK. I think you are certainly correct that internationally 

people have to take into account the fact that most countries are 

first-to-file. And there is no question that in some ways it would 

be cheaper and easier for everyone to be first-to-file, for those companies that are doing that. 

But within the United States, as Professor Crouch mentioned 

earlier, this is going to have a very disruptive effect on domestic 

patenting and on companies that are primarily focused on domestic 

patenting. We are going to have to figure out what all these terms 

mean, unless they are very carefully defined and so that is the disruption that I mentioned. 

Mr. GRIFFIN. And what about the major tech companies that are 

doing business internationally, are they already acting as if we 

have a first-to-file? 

Mr. BURK. Well, they certainly are internationally and thinking 

about when and where to file. All right. But again, domestically 

when they file in the United States there are all kinds of provisions 

and Section 102 and 103 that they will have to figure out what 

that means in the U.S. 

Mr. GRIFFIN. Some of the testimony that we have hard has basically said that with a first-to-invent system, your disadvantaging 

smaller businesses because they don’t have the resources or the 

funds to be in prolonged litigation. And if we go to a first-to-file 

then that will somehow help in that area. 

Can you comment on that and that is for all three of you. 

Mr. BURK. I think it is very difficult to assess that. There are arguments both ways. I have both heard that first-to-file disadvantages small businesses because they don’t have the resources to file 

as quickly. And then I have heard that first-to-invent disadvantages small businesses, as you indicated, because they don’t have 

the resources to be tied up in interferences and other kinds of litigation. 

So I think everyone is guessing at that. What I do know is—— 

Mr. GRIFFIN. Could I stop you there for a second? 

Mr. BURK. Sure. 

Mr. GRIFFIN. And I don’t know if you are familiar with this, but 

the witnesses who testified previously in some other hearings, one 

in particular cited some studies, a Hasting Law Review study, and 

where they had gathered data on litigation. And you know, you 

have probably seen those, if you haven’t I would certain commend 

57 

that to you because that sort of convinced me, to some extent, that 

they were guessing, that they had some data to back up their argument on that. But I welcome your comment on that. 

Mr. BURK. No, you are absolutely correct, Mr. Griffin. I mean 

people have tried to gather some data There is also data that goes 

the other direction and I think the data we have is inconclusive. 

So I am not sure whether it will advantage or disadvantage small 

businesses. What I do know is we will spend the next decade figuring out what that means for domestic patent law, which as I 

said, is going to be great job security for my students, but it may 

or may not be good for businesses. 

Mr. GRIFFIN. Sure. Do you all want to comment on that particular? 

Mr. CROUCH. I have a quick comment. And there is no way that 

I will be able to convince people to change the name of this away 

from first-to-invent verse first-to-file, but the change that occurs is 

not really about the patent race between two entities. Right? The 

biggest change for most patent applicants is that under the current 

system there is a potential to focus on your invention date, which 

is some time in history versus focusing on your filing date. 

And if we look at what the Senate has passed, basically we have 

take amount—some amount of prior art that didn’t used to be prior 

art under the old system, because you could claim back to your invention date, and now if we go to first-to-file there is going to be 

a lot more prior art that is everything that came out from the day 

you invented to the day you filed. And all of that can be used 

against you, not just in litigation or these protracted battles, but 

just when you are trying to get your patent through the Patent Office. And the Patent Office can find those and make it easier to invalidate the patent. 

Mr. GRIFFIN. I want to get one more question in, you can answer 

it and my time is about up. 

Look at the universe of decisions, and that is really what this 

hearing is supposed to be about, can you identify particular decisions that have either positively or negative impacted certain sizes 

of business, small business versus big business and what that impact has been? Because as we have gone through this debate we 

have heard a lot about the impact of changes in the law on either 

small business or big business, businesses with resources, those 

that don’t have them. 

So if there is anything in particular that—any cases you would 

want to point out, I would love to hear it. 

Thank you, Mr. Chairman. 

Mr. PINCUS. I think the decisions we have been talking about, 

eBay, the damages decisions, the willfulness decisions, the venue 

decisions all go to the burden on defendants. And I think those defendants can be large or small. There is certainly, I know, in the 

Committee’s past hearings on this issue over the last 6 years, there 

have been a number of small businesses that have said that they 

were victims of lawsuits, either by MPEs or by others and just had 

to settle because they couldn’t afford to defend them under the 

rules that existed. And now that playing field has been leveled in 

a way that hopefully they can afford to defend them. 

Mr. REED. Thank you, Mr. Griffin. 

58 

At this point in time I will recognize the gentleman from New 

York, Mr. Nadler? 

Mr. NADLER. Thank you. Thank you, Mr. Chairman. Gentlemen, 

I have been listening to your testimony and let us get down to one 

brass tack in particular. Given what you have all said about the 

progress that we have made in solving some of these problems 

through the courts, in particular perhaps the measure of damages 

question that was of great concern and which may have been taken 

care of through the courts, take a look specifically at the Senate 

bill that just passed the Senate. In your opinion, should we pass 

it? Should we ignore it? Should we modify it? 

For all three of you. One at a time. 

Mr. BURK. I guess my first answer would be I was fairly encouraged that the bill that passed the Senate, whatever you may think 

about the individual provisions, seems to focus on the kinds of 

things that I said earlier Congress ought to focus on. So most of 

the issues that we have said the courts have dealt with seem to 

have disappeared out of that bill. There is this kind of funny thing 

about tax patents, I am not sure what that is doing in there. 

Mr. NADLER. Tax patents? 

Mr. BURK. Yes, there is provisions—— 

Mr. NADLER. Oh. Tax strategies? 

Mr. BURK. Exactly, yeah. I am not sure that is something that 

this body needs to take up. 

But for the most part, the questions are the structural questions 

that Congress needs to think about, first-to-file, post-grant opposition and those kinds of things. So I find that encouraging. 

Mr. NADLER. Would you—and you would encourage us to pass 

that bill? 

Mr. BURK. I would encourage you to focus on those same questions. 

Mr. NADLER. Okay. 

Mr. PINCUS. I think I would encourage you to look at the bill but 

probably make some changes. I think in particular the re-examination, post-grant review provision that was in H.R. 1908 that the 

Committee reported out in 2007 and the House passed is a much 

superior administrative process for the PTO. 

Mr. NADLER. Why? Why is that provision superior to the provision in the Leahy bill? 

Mr. PINCUS. Because the Senate-passed bill actually makes the 

administrative process less open, less useful than current law, in 

terms of the standard for starting the process is higher, there are 

rules about when the administrative process can be initiated that 

make it very difficult because they are very tight after the—after 

someone has been sued they have a relatively short period of time 

to initiate a post-grant review. Remember, they have to file all 

their evidence at the beginning, so they have a very—it is 6 

months. It seems long, but you have to file your entire case upfront, so it is really not that long at all, if you are starting from 

a standstill. 

It continues to have the broad estoppel which could have 

raised—which as the Committee remembers from its deliberations, 

makes going into the administrative process a very treacherous 

thing for a company that may not know about a potential grounds 

59 

for challenging a patent, but gives it up by not raising it even 

though it didn’t know about it. And then in a subsequent proceeding there is lots of litigation about whether they could have 

known—— 

Mr. NADLER. Would you remove that estoppel from that provision? 

Mr. PINCUS. Excuse me? 

Mr. NADLER. Would you remove that estoppel from that provision? 

Mr. PINCUS. Yes, the House-passed bill has said there was only 

estoppel for things that were actually raised, and we think that 

makes the provision sensible and eliminates this sort of treachery. 

And also the inequitable conduct provision that is in the Senate 

bill, we don’t believe is necessary given what the courts are doing 

on inequitable conduct. 

And finally, as I said before, on prior user rights, we think that 

is sort of a critical aspect of first-to-file is broadening prior user 

rights as every country that has first-to-file has done. 

Mr. NADLER. And this does not do that? 

Mr. PINCUS. No. 

Mr. NADLER. Professor Crouch? 

Mr. CROUCH. Yes, sir. I have not made it all the way through the 

Senate bill and so I don’t know all the details. 

Mr. NADLER. Most of us don’t make it all through—all the way 

through any Senate product, so that is okay. 

Mr. CROUCH. But I do know that the Senate had an opportunity 

to pass a bill and they rushed to complete that and certainly even 

if you want to enact this, the purpose behind the Senate bill, there 

is a lot of work that needs to go into it and the onus is now on 

you guys to fix a lot—what I might call ‘‘technical problems’’ with 

the bill. And I think we have mentioned some, in terms of definitions and language that is there. 

There is also some—you know, there is an entirely new jurisdiction portion that essentially overrules a Supreme Court case called 

Holmes v. Vornado that is maybe a 2002, 2003 Supreme Court case 

and takes certain cases that might have patents as a counterclaim 

or a patent type defense and brings those into Federal courts. And 

in my view that is a wholly new provision and I never—I have 

never actually heard of Congress holding a hearing on that topic. 

And so there are some new things in there that I think got added 

at the last minute that need some special look. 

Mr. NADLER. Thank you. 

Let me ask just one other question, to any of you. You have identified a number of areas in which there are outstanding issues 

that—to be resolved in patent law. Are there any particularly significant cases now pending that you can advise us of, on the appeals level, that may resolve these issues in a way that you think 

is acceptable or will clarify the law? Any particularly notable cases 

we could keep an eye out? 

Mr. PINCUS. I think there are a number of cases, the Supreme 

Court has two, there are a number of cases pending in the Federal 

Circuit. I don’t know that any of them address the issues that we 

think should be in the bill, with the exception of, to go back to the 

false marking issue, there is a case pending in the Federal Circuit. 

60 

I think our concern is it doesn’t seem likely that it is going to resolve that issue but that is certainly something that is out there. 

Mr. NADLER. I see my time has expired. Thank you. 

Mr. GOODLATTE [presiding]. Thank you. 

At this point in time I will recognize the Ranking Member Mr. 

Watt? 

Mr. WATT. Thank you, Mr. Chairman. Just to—I have three more 

questions and I will direct one to each panelist. 

Mr. Burk I didn’t—I ran out of time before you got a chance to 

respond to my question about multiple defendants and some—the 

possibility that somebody might game the system by just adding 

additional defendants, the venue system. Did you have a response 

that you wanted to make to that? 

Mr. BURK. I think the short response, Mr. Watt, is that we don’t 

know, that has not been decided yet. But the courts are working 

on it, and that is the kind of thing that I think the courts can and 

will solve. It is not clear to me that you need to focus your attention on—— 

Mr. WATT. So we don’t need to deal with it? Okay. 

Second, Mr. Pincus, I saw something in one of the drafts about 

the possibility of you take a—you get a second review before the 

Patent and Trademark Office and that becomes the absolute final 

opportunity. I mean there is no right of appeal to the court. As a 

lawyer I always react to that in a negative way. And I wonder if 

I am over reacting to that in a negative way. 

Are there any other precedents for something of that kind or is 

there a reason why that should be done in this particular area of 

the law? 

Mr. PINCUS. I know that it—— 

Mr. WATT. You are familiar with what I am talking about? 

Mr. PINCUS. Are you talking about—there is a provision that 

says if the director declines to initiate an inter partes or a postgrant proceeding, that that decision not to allow it to be initiated 

is non-reviewable. 

Mr. WATT. No. I thought there was a possibility at least that we 

might come up with something that said if you go through the postgrant review process, if you ever go through it, that is the end of 

it. Is that—am I miss—I am not talking about something that 

is—— 

Mr. PINCUS. I—— 

Mr. WATT [continuing]. In the law, I am talking about something 

that somebody proposed. 

Mr. PINCUS. Yeah. I am not aware of it. And I agree with you, 

it seems to me important that if that process is opened and the 

PTO makes a decision on the merits about the validity issue that 

is before it, that it is hard to imagine why there wouldn’t be judicial review of that decision. 

Mr. WATT. All right. Mr. Crouch, all three of the witnesses seem 

very comfortable with the court either making or clarifying or interpreting law. We won’t get into that distinction, whether they are 

making or clarifying or interpreting. 

Is there something in the current law that will enable the court 

to make a good judgment interpreting law, as opposed to making 

law, on two outstanding issues: business methods and tax strategy 

61 

patents? Is that something we can leave to the courts to resolve or 

is that something we have got to deal with by statute? 

Mr. CROUCH. Well, last year the Supreme Court decided a business method case called In re: Bilski or Bilski v. Kappos and that 

case was not a tax case but what it involved was Bilski had invented a method of hedging, basically buying commodities to hedge 

against the risk of bad weather, which for a commodities trader 

sounds obvious, but I think there were some potentially non-obvious, some inventive features. And the Patent Office refused to give 

him a patent on grounds that that is not the type of thing that they 

allow patents on. 

The Supreme Court took the case and agreed, although their reasoning maybe was slightly different, the Supreme Court said, we 

have had a rule for over a 100 years that we don’t give patents on 

abstract ideas and the general idea of hedging is an abstract idea, 

and therefore no patent on that. And I would—— 

Mr. WATT. Wait, now, remember I am on the Financial Services—— 

Mr. CROUCH. Okay. Yes. 

Mr. WATT.—Committee so it is not abstract to those guys. 

Mr. CROUCH. Right. Right, I agree. You know, and you know, I 

went to Princeton University and at this point in the engineering 

school where I went, right, they had—they now have a financial engineering department where you know, that—they are doing engineering and using the same differential equations that I used for 

mechanical and aerospace engineering, they are using for financial 

issues and so they certainly believe that is engineering. 

And if those are the type of—right, that this is something that 

is amenable to some legislation, but I—but there is a big concern 

in that our—the statute that we have now on patentable subject 

matter has been essentially identical since it was passed, I think 

in 1794. And it has changed by two to three words and that is— 

and there are about 50 to 60 Supreme Court cases in that interim 

interpreting that particular statute. And—— 

Mr. WATT. Do I read between the lines, if we change more than 

two or three words we are going to be asking for more litigation 

and reinterpretation—— 

Mr. CROUCH. Absolutely. Absolutely. 

Mr. WATT [continuing]. Than we are going to solve the problem? 

That is what you think on both business methods and tax? 

Mr. CROUCH. You know but the Supreme Court did not absolutely ban those. And so if that is what you want to do, then you 

may have to take action. 

Mr. WATT. All right. I thank the Chairman for yielding me a second round of questions. And I thank the witnesses for what I think 

has been a very informative and instructive set of responses. 

Mr. GOODLATTE. Well, thank you. The gentleman yields. 

At this point in time I would like to thank the witnesses for their 

testimony today. 

Without objection all Members will have 5 legislative days to 

submit to the Chair additional written questions for the witnesses, 

which we will forward and ask the witnesses to respond as promptly as they can, so that their answers may be part of the—made 

part of the record. 

62 

Without objection all Members will have 5 legislative days to 

submit any additional materials for inclusion in the record. 

With that, again, I thank the witnesses and this hearing is adjourned. 

[Whereupon, at 2:29 p.m., the Subcommittee was adjourned.] 

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