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CROSSING THE FINISH LINE ON PATENT REFORM: 

WHAT CAN AND SHOULD BE DONE 

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 

FEBRUARY 11, 2011 

Serial No. 112–8 

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 

FEBRUARY 11, 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 Lamar Smith, a Representative in Congress from the State 

of Texas, and Chairman, Committee on the Judiciary ..................................... 4 

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 ................................................................................................................. 6 

WITNESSES 

David Simon, Associate General Counsel, Intellectual Property Policy, Intel 

Corporation, on behalf of the Coalition for Patent Fairness 

Oral Testimony ..................................................................................................... 7 

Prepared Statement ............................................................................................. 10 

Carl Horton, Chief Intellectual Property Counsel, General Electric, on behalf 

of the Coalition for 21st Century Patent Reform 

Oral Testimony ..................................................................................................... 17 

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

The Honorable Paul Michel (Ret.), former Chief Judge, U.S. Court of Appeals 

for the Federal Circuit 

Oral Testimony ..................................................................................................... 32 

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

(1) 

CROSSING THE FINISH LINE ON PATENT 

REFORM: WHAT CAN AND SHOULD BE DONE 

FRIDAY, FEBRUARY 11, 2011 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON INTELLECTUAL PROPERTY,

COMPETITION, AND THE INTERNET, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:30 a.m., in room 

2141, Rayburn House Office Building, the Honorable Bob Goodlatte 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Goodlatte, Smith, Coble, Chabot, Pence, 

Poe, Jordan, Chaffetz, Reed, Griffin, Marino, Adams, Quayle, Watt, 

Conyers, Chu, Deutch, Wasserman Schultz, Nadler, Lofgren, Jackson Lee, and Waters. 

Staff Present: (Majority) Blaine Merritt, Subcommittee Chief 

Counsel; Vishal Amin, Counsel; Olivia Lee, Clerk; and Stephanie 

Moore, Minority Counsel. 

Mr. GOODLATTE. The Subcommittee will come to order, and I will 

recognize myself for an opening statement. 

Nearly 60 years ago, Congress tackled the challenge of how to 

structure our patent laws for what was then the modern economy. 

Over those decades, we have gone from room-size computers with 

vacuum tubes to hand-held tablets, and black and white television 

to 3-D TV, and from wax cylinders and record players to digital 

downloads and streaming. Our patent laws have served us well, 

but as our industries have changed and new areas of the economy 

have emerged, our patent laws are beginning to show their age. 

That doesn’t mean that we need to start from scratch, but there 

are areas where we need to make some reforms. 

Modernizing our patent system is necessary to meet the needs of 

our 21st century economy and necessary to create jobs and economic growth. When an inventor or startup is able to take their 

idea from the garage or the lab to the Patent Office, it gives them 

the exclusive right to make use of that invention. This right then 

enables them to raise capital and get their business off the ground. 

When improving our patent system, we need to take into consideration the work the Federal Government has done in addressing 

patent reform. Since we began debating comprehensive patent reform over a half decade ago, the Federal courts have issued numerous opinions that have touched on some of the very reforms we 

have been working on, including injunctions, willfulness, damages, 

2 

and others. We need to assess those decisions carefully and factor 

them into any legislation we move. 

I hope that in today’s hearing we will talk more about what can 

and should be done to achieve the meaningful patent reform legislation that has eluded prior Congresses. Reform means putting forward commonsense ideas and not simply blanket opposition. Our 

goal is a patent system that allows for increased certainty, higher 

quality patents being issued, and reducing frivolous litigation. 

In the past few years, frivolous lawsuits against high-technology companies have doubled, costing on average $5 million to defeat 

each one of these questionable suits. These costs take money away 

from worthwhile R&D that leads directly to job creation. These 

costs discourage entrepreneurs from even taking that first plunge 

toward establishing a business. And, inevitably, these costs discourage overall innovation, hindering our Nation’s progress and future economic prosperity. 

Some may say that this is just the cost of doing business. If that 

is the case, then the cost of inaction is way too high. Congress has 

a constitutional duty here to ensure that we have an effective patent system. 

We also need to make sure that the PTO has the resources it 

needs to accomplish the tasks we will ask of it. Fee aversion is an 

unacceptable tax on our Nation’s innovators, and it diverts funds 

the PTO needs to other unrelated government programs. We must 

address this issue. 

I look forward to hearing from our distinguished panel today. 

They represent a variety of perspectives and industries. And I look 

forward to working with my fellow colleagues in the House and 

Senate and the stakeholder community to take the steps necessary 

to ensure that meaningful patent reform is completed during this 

Congress. 

It is now my pleasure to recognize our Ranking Member, the gentleman from North Carolina, Mr. Watt. 

Mr. WATT. Thank you, Mr. Chairman; and thank you for convening this hearing on patent reform. 

The patent reform debate has percolated through Congress for 

several sessions now. We have seen several iterations of a patent 

reform bill in both Chambers, most recently S. 23, which passed 

out of the Senate Judiciary Committee last week. 

At the core of the debate lay at least two truths: one, discovery 

and innovation is the engine of economic growth and development 

domestically and throughout the world; and, two, the U.S. Patent 

and Trade Office, this Nation’s primary mode of encouraging inventors and protecting their intellectual property, is overburdened and 

in need of adequate resources to perform its functions. 

The interplay between innovation, economic competitiveness and 

recovery and job creation has never been more widely acknowledged and supported than it is today. In fact, our very first hearing 

on the oversight of the PTO focused on the connection between job 

creation and innovation and showcased the increasingly important 

role of ideas in the global economy. 

The President’s State of the Union address later that same 

evening reemphasized the Administration’s commitment to encouraging and protecting innovators and their intellectual property. 

3 

And just this week the Administration issued an executive order 

implementing provisions of the PRO-IP Act, the Conyers-Smith— 

also co-sponsored by Goodlatte-Watt—bill, signaling to the world 

and the community of innovators that intellectual property stimulation and protection are at the top of the Nation’s agenda. 

Against this backdrop of consensus on the need to shore up the 

PTO and provide robust incentives and protections to our 

innovators, however, is the ongoing talk of deep, across-the-board 

budget cuts. I hope that we will all step back and make rational 

decisions about how the taxpayers’ money should be spent in a way 

that continues, rather than retards, our course of economic recovery. 

Let me just say a word or two about our witnesses. I am pleased 

that we have a panel of witnesses who have been active participants in this debate over the years. These stakeholders possess intimate knowledge of where we have been and have informed perspectives on where we should be going. The 21st Century Coalition 

and the Coalition for Patent Reform both represent members that 

have skin in the game, while Judge Michel comes from a vantage 

point of adjudicating patent cases for decades. Each witness provides useful knowledge as we consider how best to fashion policy 

choices for intellectual-property-driven industries consistent with 

the needs of the country. 

I know that I speak for both myself and Chairman Goodlatte 

when I say that the importance of developing a complete record reflecting a full scope of views is at the heart of the panel assembled 

today and necessary for our Committee’s work. Indeed, some of the 

laws and practices that prompted the effort to take on patent reform in earnest several years ago have changed. Hearing from 

these witnesses about what changes are adequate or inadequate, 

how they have affected their prior positions and current outlook is 

essential for us to understand the current landscape and to resist 

the urge to simply hold firm to positions that may no longer be constructive. 

Mr. Chairman, that is my prepared statement. I want to go off 

the reservation here a little bit. I don’t get this opportunity to have 

industry people that I can send a shot over the bow very often. And 

I am new here, so I am going to take the luxury here, I think. 

I have been kind of assessing this against a backdrop where I 

come from focusing most of my attention in the financial services 

industry. I watched the financial services industry fail to do some 

things, fail to come together on some things until we were in an 

absolute chaotic disaster. And only then could our Committee, the 

Financial Services Committee, and Congress really take steps that 

were really necessary. 

I think we are approaching in this situation not the kind of crisis 

that we faced in the financial industry, but we are approaching 

something that is very serious. Because we have been holding the 

PTO and its funding hostage to this whole discussion about patent 

reform. And nobody has been willing to kind of run over the industries because they are too powerful, just like in the financial services industry, and because we really think the industries ought to 

get together. 

4 

I am kind of sending the shot over the bow that it is really time, 

after 6 or 8 years, for the industries to get together and sit down 

and work out their differences on these issues so that we can move 

patent reform forward, so that we can move PTO funding forward 

and not hold those two things hostage to each other before we get 

to a crisis situation. We are approaching that in the backlog of patent applications we have at the PTO. And so I am earnestly suggesting to the industries that they come back to the table and try 

to roll up their sleeves and find common ground on a patent reform 

bill so that we can move this process forward. 

I know that is gratuitous. It wasn’t in my prepared statements, 

but I hope it is taken constructively. 

Thank you, Mr. Chairman. I yield back. 

Mr. GOODLATTE. I thank the gentleman. I know it will be. 

It is now my pleasure to recognize the Chairman of the full Committee, someone who has worked long and diligently on this issue, 

the gentleman from Texas, Mr. Smith. 

Mr. SMITH. Thank you, Mr. Chairman. 

Mr. Chairman, let me say at the outset that I think this is one 

of the most important Subcommittee hearings that the full Judiciary Committee will have this year, and I am particularly pleased 

with the Members who serve on this Subcommittee because they 

are all knowledgeable, they are all interested, and many of them 

have district interests as well that will be important as we move 

forward in the process. 

And I would only say to the Ranking Member, whose comments 

I appreciated, that I am not sure this is a shot across the bow, because I don’t think that warning is necessarily needed. I think everybody, as the gentleman concluded, is eager to move forward in 

a bipartisan process and try to accomplish the task so that we don’t 

end up with a situation as we did with some of the financial regulatory reform as well. So I thought his comments were very appropriate, and I think that we all would agree with what the gentleman said. And it is nice to have him as Ranking Member. 

Mr. Chairman, the foresight of the Founders to create an intellectual property system demonstrates their understanding of how 

patent rights ultimately benefit the American people. In January, 

our Subcommittee touched on this theme when we conducted our 

first hearing of the year on the importance of the Patent and 

Trademark Office. We learned that the technological innovation derived from our intellectual property is linked to three-quarters of 

America’s post-World War II economic growth. 

A recent study valued U.S. intellectual property at approximately 

$5 trillion, or about half of the U.S. gross domestic product. American IP industries now account for over half of all U.S. exports and 

represent 40 percent of our economic growth. 

Just a digression here, these companies, the intellectual property 

companies—many of whom are high-tech companies—actually represent about 5 percent of all the companies in America, and yet 

they account for 40 percent of our economic growth. So if we are 

going to have a healthy economy, we are going to have to have a 

healthy high-tech sector, intellectual property sector as well. These 

industries provide millions of Americans with well-paying jobs. 

5 

By any set of metrics, intellectual property is a driver in our national economy, one that creates wealth and jobs. And our patent 

laws, which provide a time-limited monopoly to inventors in exchange for their creative talents, are the key to perpetuating this 

prosperity. The original Patent Act was written in 1790 and has 

been amended multiple times over the past 220 years, and it is 

time for further change. We can’t act like disinterested spectators 

as frivolous lawsuits that typically cost $5 million each to defend 

prevent true inventors and industrious companies from creating 

amazing products and generating high-paying jobs. So we need to 

update our patent laws. 

We must work with the Senate to enact a bill that enhances patent quality, discourages frivolous litigation, harmonizes international patent principles, and enforces core rights. 

Our Committee undertook this initiative more than 5 years ago 

because patent changes are necessary to bolster the American economy and our Nation’s global competitiveness. Every industry directly or indirectly affected by patents, including finance, automotive, manufacturing, high tech and pharmaceuticals will benefit 

if we do our job correctly. 

The purpose of today’s hearing is not to recycle and recite each 

argument made by every stakeholder who participated in the debate. We don’t have time for this. Instead, we must identify common ground and establish priorities. That is why today’s hearing 

will focus on the doable, the practical, and ultimately achievable 

patent reform. 

We have all followed the recent developments in the Senate Judiciary Committee which reported their bill on February 3; and I am 

pleased that Chairman Leahy, Ranking Member Grassley, and 

other interested Senators are working to develop further revisions 

in advance of floor consideration. I met at some length with Senator Leahy a couple of weeks ago, and I am absolutely convinced 

that we are going to be able to find common ground. 

We have been developing a bill on the House side for our Committee as well. While the Senate vehicle is a good start, I am hoping we can work together with the other body to make additional 

improvements. We need a few more tweaks to inhibit the abuses 

that gave rise to the project back in 2005. 

Politics is the art of the possible. I supported stronger language 

on such issues as apportionment of damages, willful infringement, 

and venue, but we have reached a point where no one member, industry, company, trade association, or advocacy group is going to 

be completely happy with the outcome, though I do hope they will 

be, say, 60 or 65 percent happy. 

All of us should maintain a holistic perspective as we develop a 

bipartisan, bicameral bill; and we must keep our common goal in 

mind: Better patents increase productivity and lead to economic 

prosperity. A modernized patent system will rev the engine of 

American competitiveness, put inventors and innovators in gear, 

and drive economic growth and job creation. 

I look forward to hearing from our witnesses today, Mr. Chairman, and once again appreciate the Subcommittee having a hearing on this subject. I yield back. 

Mr. GOODLATTE. I thank the Chairman. 

6 

Now it is my pleasure to recognize the Ranking Member of the 

full Committee, the gentleman from Michigan, Mr. Conyers. 

Mr. CONYERS. Thank you, Mr. Chairman and Members. 

I just wanted to particularly thank former Judge Michel for 

being with us today. He has a distinguished background. I welcome 

all our witnesses, but Judge Michel’s commitment to public service 

is extraordinary to me, and I am glad he is here. 

The only thing I would like to say with this opportunity that 

comes to me is that somewhere in the appropriations process the 

funds that are paid into the Patent and Trademark Office never get 

back to the Patent and Trademark Office. I think this is something 

that this distinguished Committee ought to look at and see what 

we can do about right away, because they are hurting. 

I know that there are conservative Members in the body in the 

112th Congress that want to cut $100 billion from the budget, and 

then some want to cut $32 billion from the budget, and then now 

I think the figure has gone up to $64 billion in the budget, so I am 

glad that we are going out this afternoon. I will be holding my 

breath when we come back on Monday. 

But this doesn’t involve those kind of breath-taking reductions 

from the Federal budget. This involves giving the Patent and 

Trademark Office funds that they have already collected. They go 

into the mysterious Byzantine process of the Appropriations Committee behind closed doors; and, lo and behold, they never get the 

funds they have already raised. This is creating a serious negative 

impact on the whole concept of patents and trademarks; and, to 

me, that is the number one issue that this Committee and these 

distinguished witnesses can assist us in trying to resolve. 

Thank you for your generosity, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman. And, without objection, 

other Members’ opening statements will be made a part of the 

record. 

It is now my pleasure to introduce the very distinguished panel 

of witnesses we have today. Each of the witnesses’ written statements will be entered into the record in its entirety, and I ask that 

each witness summarize his testimony in 5 minutes or less. To help 

you stay within that time, there is a timing light on your table. 

When the light switches from green to yellow, you will have 1 

minute to conclude your testimony. When the light turns red, it 

signals that the witness’ 5 minutes have expired. 

Before I introduce the witnesses, I would like to ask them to 

stand and be sworn in. 

[Witnesses sworn.] 

Mr. GOODLATTE. Thank you, and you may be seated. 

Our first witness is David Simon, Intel Corporation’s Associate 

General Counsel for Intellectual Property Policy. He will be testifying on behalf of the Coalition for Patent Fairness. 

Prior to joining Intel in 1997, David was in private practice in 

Los Angeles for 15 years and specialized in intellectual property 

matters, including licensing and high-technology law. He has been 

a featured speaker at a number of intellectual property seminars. 

He holds a B.S. In electrical engineering from MIT and a J.D. 

From Georgetown University. 

7 

Mr. Simon has testified before the House and Senate IP Committees on the need for patent reform and has been an active participant in the industry and bar group negotiations to arrive at a compromised bill. He currently is a member of the Board of Directors 

of the Intellectual Property Owners Association and the Coalition 

for Patent Fairness. 

Our next witness is Carl Horton, Chief IP Counsel for General 

Electric. He will be testifying on behalf of the Coalition for 21st 

Century Patent Reform. 

Earlier in his career, Mr. Horton served as the lead IP counsel 

for GE’s health care business, its electrical distribution and control 

business, and its industrial systems business. He has also worked 

as an IP counsel for several of GE’s plastic and advanced materials 

divisions. 

Prior to joining GE, Mr. Horton worked at the IP law firm of 

Burns, Doane, Swecker, & Mathis in Alexandria, Virginia. He received a chemical engineering degree with honors from the University of Utah and a J.D. Cum laude from George Washington University. 

Our final witness is Paul Michel, who was appointed to the 

United States Court of Appeals for the Federal Circuit in 1988 and 

assumed the duties of chief judge in 2004 before retiring last May. 

During his career as a jurist, Judge Michel handled thousands of 

appeals and wrote more than 800 opinions, approximately onethird of which were patent cases. 

Prior to his appointment to the bench, Judge Michel served in 

the executive and legislative branches for 22 years. His work experience includes stints as an Assistant District Attorney, an assistant special Watergate prosecutor, an assistant counsel for the Senate Select Committee on Intelligence, Acting Deputy Attorney General, and counsel and chief of staff to former Senator Arlen Specter. 

Judge Michel is a graduate of Williams College and the Virginia 

School of Law. 

Welcome to you all, and we will begin with Mr. Simon’s opening 

statement. 

Mr. WATT. Mr. Chairman, before you do that, I practiced law for 

22 years and never mispronounced a judge’s name, so I want to 

just apologize to the judge. 

Mr. GOODLATTE. Thank you for emphasizing that. 

Mr. WATT. I know how important that is. I may have to go back 

into the practice of law one day. 

TESTIMONY OF DAVID SIMON, ASSOCIATE GENERAL COUNSEL, INTELLECTUAL PROPERTY POLICY, INTEL CORPORATION, ON BEHALF OF THE COALITION FOR PATENT FAIRNESS 

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

Watt. 

I am here on behalf of Intel Corporation and the Coalition for 

Patent Fairness. 

For Intel, innovation is our lifeblood. Every 18 months, what was 

our state-of-the-art product is now obsolete; and, as a result, we 

have to constantly continue to innovate. And in doing that we also 

have to literally invest billions of dollars to design the products, get 

8 

the process ready, build the factories—of which every year for the 

last few years we have been investing about $5 billion a year in 

our factories in this country to make mostly processors. And that 

is really important for us. 

As the Chairman recognized in his opening comments and Chairman Smith recognized in an op-ed piece, patents do help protect innovation when they are the right patents; and when they are the 

wrong patents, they actually hurt innovation. And it is very important for us to make sure this does not continue. 

Since we started this effort on patent reform several years ago, 

there were a number of issues that at that time were very critical 

to us. Thanks in part to the leadership of this Committee and the 

courts, many of those issues have now gone away, and I think 

many of them will contribute to those issues having gone away— 

if not in the bill will contribute to reaching an accommodation between all concerned on patent reform. 

On the other hand, what we still face is people recognize that 

they can use patents as a way to hold up industry. These are patents, many of which, when we read them, they are on very esoteric 

subjects, but for those who are experts in the field recognize that 

they should not have issued. For that reason, this remains an important issue for us; and to us we think that the way to deal with 

this is primarily through the Patent and Trademark Office. 

As both the Chairman and the Ranking Member said, get the 

patent office its money—we are very open to you even giving it 

more money if the office is going to get that money—and to use 

that to modernize the office systems, but not merely to modernize 

the computer systems so that they can send each other e-mail. But 

also the systems that the Patent and Trademark Office, unfortunately, uses today in the examination of patents do not take advantage of the technology to actually affirmatively do that examination. 

Just by way of example, and as outlined in more detail in my testimony, one of the things that the Patent and Trademark Office is 

supposed to do is to read through the patent application and make 

sure that the claims—which are these run-on sentences, as you all 

know, at the end of the patent—actually are supported by the specification. That is a difficult task to do when you have many other 

things to do as an examiner, and computers can really help that. 

And to us that is where we think the efforts should really be devoted first and foremost before we start hiring additional staff. 

It is not that the office doesn’t need the additional staff, as Chief 

Judge Michel points out, but they need the right tools to do the job. 

Because just hiring additional staff and having relatively inexperienced examiners turned loose on applications is not going to help 

issue good-quality patents, and that is what we really need. When 

we have good-quality patents, industry understands what is a good 

quality patent. We are willing to pay, if we happen to be using 

somebody else’s patent, when it is a good-quality patent, but we are 

not willing to be held up by people who think that the patent system is a method of being a business lottery. 

As the Chairman rightly pointed out, this litigation is expensive. 

We frequently find ourselves being told that we ought to settle because the cost of the settlement is going to be much less than the 

9 

cost of litigation, and a system that encourages people to do that 

is not right. What it needs to do is focus on let’s get the resources 

to the examining office. 

In addition to getting those resources to the examining office initially, it is also important that patents be examined when they 

issue. If they are invalid, that there be methodologies to get back 

to the office and that those methodologies remain open. Inter 

partes re-exam has worked very well for us in that, and we are 

very concerned that some people’s proposals for that would limit 

access to the inter partes re-exam, so that concerns us. 

And, finally, one final note on the idea of moving toward harmonization, we think that is really important. On the other hand, we 

also think it is important that a harmonization be full harmonization, and that includes prior user rights. Those rights are important to us because they both ensure that we can file patents on the 

things that we think we should patent and not file patents on the 

things that we don’t think we should patent because we want to 

be able to continue to use them. But a system without that, if it 

switches, will cause us problems. 

Thank you. 

[The prepared statement of Mr. Simon follows:] 

10 


Simon-1.eps
11 


Simon-2.eps
12 


Simon-3.eps
13 


Simon-4.eps
14 


Simon-5.eps
15 


Simon-6.eps
16 

Mr. GOODLATTE. Thank you, Mr. Simon. 

Mr. Horton, welcome. 


Simon-7.eps
17 

TESTIMONY OF CARL HORTON, CHIEF INTELLECTUAL PROPERTY COUNSEL, GENERAL ELECTRIC, ON BEHALF OF THE 

COALITION FOR 21ST CENTURY PATENT REFORM 

Mr. HORTON. Mr. Chairman, Members of the Subcommittee, I 

very much appreciate the opportunity to testify today in my capacity as chair of the 21st Century Patent Coalition. 

As Chief IP Counsel of GE and a practicing patent attorney for 

20 years, this subject is near and dear to my heart. The 21st century Coalition is a diverse group of nearly 50 innovative companies 

that employ millions of Americans in well-paying jobs. These companies represent over 18 different industry sectors and thus bring 

the type of balanced perspective that is essential to assuring that 

improvements to the patent laws maximize the benefits to all industry sectors. 

GE also represents multiple industries. In fact, given that the 

various GE businesses have very different views on the issues involved in the patent reform debate, I can assure you that almost 

no one has been forced to seek a more balanced and holistic solution to these issues than I have. 

Moving from a first-to-invent to a first-inventor-to-file system is 

long overdue. The fact is most American companies already operate 

as if the U.S. had adopted a first-inventor-to-file system. Why, you 

ask? Because our export markets hang in the balance. U.S. inventors have lost patent rights to foreign companies because they unwisely relied upon the possibility that they could prove that they 

were first to invent something rather than acknowledging that the 

global patents go to those inventors who are not only first to invent 

but who are also first to reach the patent office steps. Exporting 

products made in America to these non-U.S. markets is crucial to 

the growth and prosperity of U.S. manufacturers. 

Both pre-issuance submission of prior art and post-grant review 

are perfectly suited to help the U.S. PTO separate valid patents 

that drive innovation and growth from invalid patents that do not. 

Pre-issuance submission of art will allow technical experts outside 

the office to assist the U.S. PTO by submitting relevant prior art 

and explaining to the examiner why the applicant is attempting to 

patent something that is already known in the art. 

Post-grant review would also provide a workable process to third 

parties to promptly and affordably challenge the validity of a patent. The benefits of this system do not require a leap of faith on 

our part as workable post-grant review proceedings exist all over 

the world. The post-grant review procedures in S. 23, as unanimously reported out of the Senate Judiciary Committee last week, 

represent a workable compromise that I, as a practitioner, would 

love to have as an alternative to litigation to challenge the arguably invalid patents that occasionally issue. And if I can prove my 

case of invalidity, I can invalidate the patent, thereby releasing resources that have been reserved awaiting determination of the validity of the patent. Even if I am wrong and the patent is valid, 

then I can report to my management that we must either license 

the IP or design around it. Either way, I have certainty of action 

at a cost I can afford. 

I won’t belabor the issue of adequately funding the U.S. PTO as 

I know that Director Kappos already made that case before this 

18 

Subcommittee. However, users are prepared to pay what it costs to 

promptly issue patents after a full and thorough examination, but 

as some of the largest customers of the U.S. PTO, our Coalition 

members believe it fair to ask that we receive $100 worth of service 

for every $100 we pay to the Patent Office. Any diversion of such 

funding is, in reality, a tax on the innovation that might otherwise 

be creating jobs. 

False marking is undoubtedly one of the most antiquated components of the patent system. Unfortunately, there has been an explosion of false patent marking cases in just the past 15 months, 800 

or so, to be precise. That mandates that we take immediate action. 

These plaintiffs, virtually none of which have suffered any competitive injury, are exploiting the qui tam provisions of section 292 to 

chase mass-produced products where old, expired patent markings 

have yet to be removed. This is arguably the worst recent example 

of truly wasteful litigation. 

Let me conclude with three issues that don’t necessarily need to 

be redressed through patent reform legislation, namely, venue, 

willfulness, and patent damages. The Federal Circuit is already 

reining in inappropriate forum shopping by requiring transfer of 

venue when the transferee venue is clearly more convenient than 

the venue chosen by the plaintiff. Similarly, the Federal Circuit 

has clarified the standard of willful infringement to require proof 

of objective recklessness by the infringer before trouble damages 

may be awarded. Given that the current legislative proposals are 

attempting little more than the codification of the In Re Seagate 

decision, legislation pertaining to willfulness is likewise unnecessary. 

Finally, the Federal Circuit’s decision in Lucent v. Gateway is 

now requiring judges to act as gatekeepers in challenging the sufficiency of evidence supporting patent damage theories. Also, in 

Uniloc v. Microsoft, the Federal Circuit eliminated as inflexible and 

unreliable the 25 percent rule of thumb for calculating reasonable 

royalty damages. These cases and others like it have obviated the 

need to legislatively address patent damages. 

Again, the Coalition appreciates the opportu9nity to offer our 

views on what can and should be done on patent reform and stand 

ready to assist Congress in identifying achievable patent reform 

which can cross the finish line in the 112th Congress. 

I would be pleased to answer any questions you may have. 

Thank you. 

[The prepared statement of Mr. Horton follows:] 

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Mr. GOODLATTE. Thank you, Mr. Horton. 

Judge Michel, do I have that right now? I have a former employee by the same name and the same pronunciation and a former 

minority leader of the other pronunciation that I use. I think highly of both of them as I do of you, so welcome. 


Horton-13.eps
32 

TESTIMONY OF THE HONORABLE PAUL MICHEL (RET.), 

FORMER CHIEF JUDGE, U.S. COURT OF APPEALS FOR THE 

FEDERAL CIRCUIT 

Mr. MICHEL. Chairman Goodlatte, Ranking Member Watt, Chairman Smith, and Ranking Member of the full Committee Conyers, 

it is certainly understandable that there would be confusion about 

the pronunciation of my name—— 

Mr. WATT. Is your mic on? 

Mr. MICHEL. Yes, I think it is. The confusion about the pronunciation of my name is so understandable in the House of Representatives because of the long tenure of Congressman Bob Michel 

from Illinois. We may actually be distantly related, but I am not 

sure. And I want to assure you, Mr. Chairman, that as someone 

who used to enforce red lights, I will be sure not to be an offender 

over the time limit. 

I would like to very briefly address five general points. 

First, in my judgment, the principal problem in the American 

patent system, in the Patent Office, and in the courts can be summarized in a single phrase, ‘‘excessive delay.’’ The delays in examination average 3 years; and often it takes applicants 5, 6, 8, 9 

years to get a patent issued. The reexamination process also is taking years and years and years to conclude, and very often the reexamination going on in the Patent Office holds up court cases and 

causes further delay there as well. Harmful results follow, including the drying up of investment capital from venture capitalists 

and equity funds and other sources of risk capital that is needed 

for the growth and for the job creation and the technological advance of so many companies and industries. 

Just consider this: Of the 1.2 million applications pending today, 

we know, based on historical grant rates, that over 700,000 will result in granted patents. So you really could say that trapped in the 

Patent Office today are private-sector business assets that will 

produce economic growth and job creation if only they can get out 

of the Patent Office. So, in my judgment, fixing the funding problem is overwhelmingly the greatest need of patent reform from 

where we are today. 

I think the Patent Office has made many internal improvements 

and it continues to do so within the limit of its resources, but I 

don’t see any way that it can get where it needs to get on speed. 

And Edison, as I recall, got his patent in 6 week, not 6 years, 

which is common today. 

They can’t get there without substantial new resources. They do 

need more examiners. On this, I have to disagree with Mr. Simon. 

They also need a great many more board judges. The board is 

swamped. Its inventory went from 3,000-some to 20,000 over the 

last couple of years. The delays there are also years and years and 

getting worse, just like the re-exam delays and the delays in initial 

examinations. And the resource gap, the difference between the 

workload and the resources, has grown every single year for nearly 

a decade. So fixing the funding is the overwhelming need. I would 

say it is 80 percent of patent reform, given where we are today. 

As to post-issuance procedures, I want to make clear I am not 

against patent reform; I am in favor of patent reform. I am not 

against post-issuance procedures; I am in favor of them. 

33 

I do think that because delay is so harmful and so ubiquitous in 

the PTO and in the courts that great care would have to be taken 

in crafting the provisions so that post-issuance procedures, whether 

they are the same as we have now, additional ones, substitute 

ones, or however you end up choosing to do it, must contain sufficiently strong safeguards, things like a clear threshold, a meaningful threshold, or else you will have frivolous PTO proceedings. 

When frivolous court cases are a great concern, frivolity in either 

place, obviously is quite harmful and must be avoided. So strong 

safeguards are needed, a threshold, a clear burden of proof, estoppel effects, and a ban on serial attacks on the same patent are examples of those safeguards. 

Next, I want to say that I agree with Mr. Horton—and Mr. 

Simon agrees, at least to an extent—that the court-related provisions in recent patent reform bills are no longer needed. Now you 

could say, well, what is the harm if they just sort of codify current 

practice? But, in my view, there is harm because they will add uncertainty, they will add complexity, and, therefore, costs will go up 

instead of down and delay will go up instead of down. So I urge 

the Committee to be very cautious about anything relating to the 

courts; and, in my view, it would be better to leave out all of the 

court-related provisions. 

We have such an unusual situation here where industry, represented by these two distinguished gentlemen at the table with 

me, are eager to pay higher fees if they can get faster, better work 

from the Patent Office. And they can get faster and better work if, 

as has been said, the fees collected are adequate, number one, and, 

number two, can be accessed in their entirety by the Patent Office 

and don’t go off to support other governmental activities. 

And, of course, no taxpayer money is involved. So we are really 

not talking about Federal spending. We are really not talking 

about the Federal deficit. This is private money for a private purpose to achieve a private property right that ends up having huge 

public benefits if we can keep the system on the tracks. 

And I would like to stress, finally, that the benefits of much 

greater speed—and quality will go along with more resources as 

well as speed—will be all companies, all industries, all technologies 

at all stages of growth, from little startups to emerging companies 

that are growing fast, to companies that are ready to go into the 

public stock market to get even further funding, so everyone will 

benefit if we can solve the problem of speed. No one will be hurt. 

But those who will benefit the most are the smaller, newer, technology-driven, patent-dependent companies. 

And it turns out—and the Commerce Department approves this. 

The Kauffman Foundation approves this. The President is saying 

this, experts everywhere are saying this, most of the new jobs, 

most of the new wealth, most of the new technologies come from 

these emerging companies. They are the Intels of the future, but 

they need to be able to grow, and that is what speeding the work 

in the Patent Office and the courts will allow. 

Thank you very much. 

[The prepared statement of Mr. Michel follows:] 

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41 

Mr. GOODLATTE. Thank you, Judge. 

Let me ask both Mr. Simon and Mr. Horton, apart from patent 

pendency, about which you have all testified being a priority for 

you, and I think there is uniformity of agreement up here as well, 

apart from that, what is the one big worry that keeps you up at 

night regarding our patent system? 

Mr. Simon. 

Mr. SIMON. Well, I will try to go to the biggest one, but there are 

many worries that keep me up at night. The biggest one to me is 

making sure that what the Patent Office does is in fact quality 

work. It is all too often we get a lawsuit where it is the first time 

we have heard about this patent—which is years after the patent 

issued, never heard of the company. We greet the patent and we 

go, look, this was not examined right; it should never have gotten 

through the system. And the problem then is we have to deal with 

it frequently through the litigation system, and that is an immensely expensive process. 

We recently had a case where we got a patent invalidated be- cause the claims literally didn’t make sense, but it cost us $8.5 million to get there. 

Mr. GOODLATTE. We are with you on that, too. And since my time 

is limited, let me just ask you to refine that and tell me what 

would be the one thing you would do to improve that patent quality. 

Mr. SIMON. I think the biggest thing to improve patent quality— 

and I think the office really wants to do it in my discussions with 

them—is to start using computer technology to do a better job examining patents. I have been practicing for about 30 years. The 

Patent Office is always saying we are going to get it faster. We are 

going to hire more examiners to get it faster. Unfortunately, I 

think they need more examiners, but I don’t think that is going to 

solve the problem. 

Mr. GOODLATTE. Mr. Horton. 

Mr. HORTON. I would say I agree with what Mr. Simon says. And 

one of the ways I think to help that as well would be to move to 

a first-inventor-to-file system to speed things up and reduce the 

complexity. 

But I would say the companion thing that also concerns me is 

the ability to effectively challenge some of those invalid patents, 

shall we say. So to lead your question I guess would be, what do 

we do about it? I think the current post-grant structure is a good 

compromise between trying to allow rights holders the chance to 

get clear title to their inventions promptly and affordably while at 

the same time preserving the ability for those who disagree with 

the ruling of the Patent Office the chance and meaningful opportunity, again, on an affordable basis, to challenge the validity of 

that patent and clear up the issue once and for all so that you can 

have an actionable property right at the end of that. 

Mr. GOODLATTE. Okay. 

Mr. Simon, Mr. Horton agrees with your top suggestion. What is 

your opinion of his top suggestion? 

Mr. SIMON. His top suggestion is a very good one. I think we 

have some disagreements about the implementation of that top 

suggestion, though. 

42 

Mr. GOODLATTE. Can we close that gap? 

Mr. SIMON. We will work on it, Mr. Chairman. 

Mr. GOODLATTE. Turning to you now, Judge, my question for you 

is a little different. 

As a Judge, we hope that you don’t have to stay up late at night, 

but we would ask you this: If you were still on the bench, and 

apart from the issue of funding and pendency, what would be your 

greatest concern? And you can elaborate on both of their comments 

as well. 

Mr. MICHEL. Mr. Chairman, I think that, in addition to more examiners, it is important to focus on the quality of the examiners 

themselves, their experience level, their expertise level. Too large 

a proportion of the current examining corps are rather young and 

inexperienced. It will take resources to hire quality people of greater experience and expertise. So that is part of the package, and it 

will help quite a lot. 

I think the courts, like the Patent Office, in recent years have 

been moving rapidly to make improvements. For example, now it 

is much more common for a patent to be invalidated early in the 

litigation on summary judgment without having to go through full 

discovery and trial, which is certainly expensive. And there are also 

cases now where costs are being imposed for bringing weak or frivolous lawsuits against those who do so. I think the courts have 

ample tools, and they are beginning to use them much more aggressively in recent years than in the past. And I think that will 

continue and will greatly limit any court-level abuses. 

Mr. GOODLATTE. Thank you. 

Mr. Simon, you state in your testimony that there shouldn’t be 

any limitations placed on a post-grant review system. Do you think 

this position compromises the rights of legitimate patent holders by 

placing a perpetual cloud over their patents, something that Judge 

Michel alluded to in his remarks? 

Mr. SIMON. Well, under our system, patents have always been— 

whether a patent is valid or not has always been an open question. 

There is no quiet title process by which you can acquire title to a 

patent, for many reasons. Even if the Patent Office does the best 

job it can do—because they are pretty much limited to prior art 

that is in the Patent Office and publications and can’t see what 

happened in industry—that is a big limitation. In addition to 

which, we have actually done a study. There are about 90,000 patents a year that issue in the tech industry. For us to have to go 

through 90,000 patents a year as to our products and then think 

through we have a pipeline of products that is 10 years long where 

we have started working on design and try to figure out which patents may impact that 90,000 every year, that means as a result we 

are very rarely going to be able to use it if it is a closed system. 

Mr. GOODLATTE. Mr. Horton, do you want to respond to that? 

Mr. HORTON. Actually, yes, I would. 

I would argue two things. First, I would say that the current proposals that seem to have garnered the greatest amount of support—granted, we haven’t satisfied the people on either end of the 

extreme, but we have a very large center around this kind of compromise proposal about having an all-issues post-grant review for 

a limited period of time. Again, anything you want to challenge, 

43 

bring it in. You get the benefits of a level playing field across the 

board. That is the time, that is the opportunity to get those issues 

resolved. 

But there is a fail-safe mechanism as well. The inter partes still 

does allow you to go forward and challenge those rights for the life 

of the patent provided you can come forward with the right prior 

art. And so I think that is a good—the way I analogize this is to 

purchasing a home. If some point I want to put an addition on my 

home, I want to know that this property is mine, that I am free 

to build on it, that I am free to expand upon it, and that someone 

is not going to come along 5 years later and say, oh, you know 

what? My uncle told me that he left me that in a deed, in a will. 

And if I ask to try and get it, they can’t produce it, but he is sure 

that it happened, I can’t live with that. I would have to sacrifice 

that. 

So there needs to be a process by which you can resolve the title 

to that property. Because the thing that is different about intellectual property, it is an actionable property right. We get them with 

the intention of doing something with them—investing in them, 

building with them, manufacturing. So we need to have quiet title 

at some point in time. It is only fair. 

Mr. GOODLATTE. And, finally, Judge Michel, you earlier on this 

subject said that there must be a clear threshold, a clear burden 

of proof, and an effective estoppel system. Anything you want to 

add to that or comment on what they have said? 

Mr. MICHEL. Mr. Chairman, I think that those safeguards would 

be adequate. I think a post-grant system, including the two procedures that Mr. Horton described, can be made to work effectively. 

But the key thing to remember is that the patent isn’t self-enforcing. It is not self-executing. Unless you can go to court and get enforcement of the patent, it actually has no value. It is something 

like a prize at a high school science fair. It is a piece of paper that 

recognizes an achievement, but economically, in terms of industry 

growing, it is nothing unless and until it can be enforced. 

So the problem is how to balance—as courts often have to do and 

now Congress will have to do the same—the need for certainty, the 

need for clear title, the need for things to not be forever challenged 

and rechallenged and rechallenged in the PTO before you can even 

get a court decision against the rights to have adequate challenges. 

I think that the compromises that have been worked out are 

pretty good and maybe need a little more refinement but are on the 

right track. But, at the end of the day, you have got to be able to 

go to court sooner than 5 or 10 years after issuance of your patent 

or the patent system will have no effect to drive the economy forward. 

Mr. GOODLATTE. Thank you. 

The gentleman from North Carolina, Mr. Watt. 

Mr. WATT. Thank you, Mr. Chairman. 

I think the Chairman has been gently nudging you all to identify 

your differences so we can see if they can be reconciled. I am going 

to be a little bit more aggressive, I think, in trying to nudge you 

in that direction. 

I think I heard Judge Michel say that the court-related provisions in legislation are no longer needed and would in fact be 

44 

harmful—or could in fact be harmful. I think I heard Mr. Horton 

say that there is no need for legislation on damages. I assume 

those two things are saying essentially the same thing. Where are 

you on that, Mr. Simon? 

Mr. SIMON. I am in agreement with them. 

Mr. WATT. Okay. You are speaking for a bunch of people here. 

They are in the audience. I didn’t see any frowns on many faces 

back there. 

All right. This process has been going on for quite a while, and 

the two parties here at the table have been involved in it. What 

do you see, Mr. Simon and Mr. Horton, as the major—just tell me 

two major issues that divide you. Don’t elaborate on them yet. I 

will give you a chance to come back and do that. But just tell me 

what the issues are first. Mr. Simon, you give me one. Then Mr. 

Horton give me one, and then Mr. Simon give me one, and Mr. 

Horton give me one. I am giving everybody equal chance here. Go 

ahead. 

Mr. SIMON. One of the issues that still divides us is what limitations, if any, are placed around inter partes re-examination and 

post-grant oppositions. 

Mr. WATT. Okay. Mr. Horton. 

Mr. HORTON. Prior to today, I would have said venue would have 

divided it—damages—— 

Mr. WATT. Hey, don’t go there. We got that one cleared up. 

Mr. HORTON. Honestly, I would have to say number one is how 

we optimize the post-grant review proceedings for both parties. I 

can’t think of any other—the judicial ones have always been the 

real thorny, complex problems we have been dealing with. 

Mr. WATT. So we are close here. There is not a second one then. 

Have you got a second one to identify, Mr. Simon. 

Mr. SIMON. Well, I am not sure it is appropriate to identify it as 

an issue that separates Mr. Horton and I, but another issue that 

we are concerned about is prior user rights. I don’t think Mr. Horton’s Coalition is opposed to them, but there are apparently others 

who may be. 

Mr. WATT. Okay. Well, let’s talk about the one that got the 

wlimitations on—tell me what the issue is. Identify it again so I 

am sure I understand what I am talking about. 

Mr. SIMON. This is on inter partes re-examination and post-grant 

opposition. 

Mr. WATT. Okay. Re-exams and post-grant opposition. And describe for me, if you can, what the differences are in the various 

positions so I am clear on what we are arguing about. 

Mr. SIMON. So the differences are when you can use them. So, 

for example—and I believe Mr. Horton’s coalition is supportive of 

the provision in S. 23—there are limitations of when you can use 

an inter partes re-exam if you are involved in litigation. So from 

our company’s standpoint—and there are similar ones on postgrant opposition in addition to the time limitation after the patent 

issues. 

So in our industry, frequently the patents come out of the woodwork as complete surprises. We have never heard of them before 

we got sued, we have never heard of the company before we got 

sued, and we have no meaningful way of knowing about it. And if 

45 

you have—from the time you get the complaint, if you have only 

a limited time in which to decide whether it is appropriate to use 

inter partes review or post-grant opposition before the time window 

closes and to find the art, it is totally inappropriate, in our view. 

Mr. WATT. How would you solve that problem? 

Mr. SIMON. Well, under the current system on inter partes, for 

example, there is no time limit currently. You can file an inter 

partes re-examination—— 

Mr. WATT. Would you leave it like that? 

Mr. SIMON. I think that that is an appropriate way. 

Mr. WATT. How do you address Judge Michel’s concern that that 

leaves this open forever and a day and never gets resolved? I don’t 

know how you can do that. 

Mr. SIMON. Well, in the current statute, there are actually res judicata provisions about the effect of inter partes re-exam. From our 

standpoint, we think, with a couple of minor issues, those work. 

The whole point is that frequently it is very difficult to argue to 

a jury why a patent is invalid. We think the Patent Office is the 

better place to deal with it. And we have had issues where what 

the interpretation of what the patent means is decided for us literally in the middle of the trial, sometimes even at the end of the 

trial; and that can have a dramatic effect as to whether the patent 

claims, in our view, is valid or not. 

Mr. WATT. Judge Michel, just give me your perspective on this. 

My time is up. 

Judge MICHEL. What’s happening already is that court proceedings that are ongoing are being stalled by things going back to 

the Patent Office for reexamination under the current system because the threshold to get there is meaningless. Ninety-five percent 

of the times that meaningless threshold of a so-called ‘‘substantial 

new question’’ is readily met. Any patent lawyer worth his salt can 

raise a substantial new question in virtually every case. So there 

has to be some kind of meaningful threshold for this procedure 

back in the Patent Office or a pending litigation is subject to severe 

and unlimited abuse. 

So I think the big difference between Mr. Simon and Mr. Horton 

is Mr. Simon wants the right to be able to be in the Patent Office 

virtually forever, no matter what’s happening in the courthouse, 

and Mr. Horton wants limits. And since patents can only be enforced in the courthouse and not in the Patent Office, it seems to 

me that a meaningful threshold for all post-grant procedures is absolutely critical. 

Mr. WATT. My time has expired. 

I would let you respond to that, Mr. Simon, but I am out of time. 

If you want to respond—I mean I would be interested in hearing 

a response. 

Mr. SIMON. Thank you. 

So, a couple of things. First of all, if you look at the statistics of 

the inter partes reexams that have actually gone through the system, the judge is correct that 94 and 95 percent of them have been 

granted. But the other thing is in 90 percent of them, at least one 

claim—or just about 90 percent of them—at least one claim was 

changed because of apparently the art that was found. 

46 

So, A, it is having an effect, and B, it doesn’t appear that frivolous inter partes reexams is a big problem. So that’s one issue. 

The second issue is when you decide to pull out the inter partes 

reexam, you have to be really careful because if you lose it, you basically have the Patent Office now reconfirm the validity of the patent over your opposition, and you’ve dug yourself a huge hole. So 

it is something you have to think long and hard about before you 

use it. 

Mr. WATT. I appreciate it. This has been helpful. 

I apologize to the Chair for abusing the time. 

Mr. GOODLATTE. No, not at all. I did the same thing. 

The gentleman from Utah is now recognized. And we will remind 

the Members that under the Chairman’s new process, we recognize 

Members in order of seniority based upon being here at the time 

of the start of the hearing; and then after that, based upon their 

time of arrival. 

So the gentleman from Utah is recognized. 

Mr. CHAFFETZ. Thank you, Mr. Chairman. Thank you all for 

being here. We do all appreciate it. 

Perhaps we can start with the judge. 

My question is about the transition to first-to-file, what the ramifications of that are from your standpoint. And particularly as it relates to small businesses and independent inventors and whatnot 

who aren’t necessarily represented here at the table. What are the 

implications, pros and cons? 

Judge MICHEL. Congressman, it’s a very good question and I 

think actually the answer is ‘‘no one knows.’’ As far as I’ve been 

able to discern, there isn’t an adequate factual record based on 

careful study to be able to assess whether—I don’t know the answer—but whether there would be undue negative effects on smaller companies, individual inventors, some universities and others at 

that end of the size scale, with Intel, of course, at the other end. 

So it seems to me that until Congress could satisfy itself that 

there wouldn’t be significant negative effects, it should be cautious 

about moving to a first-to-file system. It would have certain advantages. There’s no question about that, particularly for certain companies like ones that do lots of international business. And again, 

I am not against moving to first-to-file, but it seems to me that you 

might want to have a delay before it kicks in, and before you made 

that decision, you’d want to know that it doesn’t have undue negative effects on small business. 

Mr. CHAFFETZ. Thank you. 

Mr. HORTON. If I may. 

I look at the small, medium-sized enterprise individual inventors, 

and I break them into two different groups. As a practicing practitioner, that’s my perspective. Group one is that group who’s hoping 

at some point to be able to export their products outside the United 

States. In my mind, that group clearly benefits because now they 

are playing on a level playing field. They’re playing the way everybody else in the world plays. And so they’re playing to win the 

same game. They’re not playing a different game, where they were 

relying unwisely on the potential to delay getting to the Patent Office only to find out they lost everywhere but the U.S. 

47 

Group number two is the group where they’re never going to export outside the United States. It is solely a U.S. Market question. 

And for that one, I take one step back first in this analysis; and 

that is, remember the patent is the best friend of the small guy. 

It is one of the few and only tools that would allow Joe Inventor 

to take on a company the size of GE and win. 

But there is one huge caveat. In the first-to-invent system we 

have today, the only way Joe Inventor wins is if he can duke it out 

in court in the Patent Office, in the interference proceeding, and 

prove that he was first to invent. 

Let us give a hypothetical. For example, Joe Inventor invents the 

idea, but he delays slightly in getting to the Patent Office. In the 

meantime, foreign company X comes along, files the patent in country X, whatever country they reside in, ahead of Joe Inventor. Then 

you come to the U.S. Patent Office where Joe eventually does file 

his patent application and they have to fight it out. 

The problem Joe Inventor faces is—and Gerald Mossinghoff, the 

ex-commissioner of the Patent Office—ran some studies to prove 

this, Joe Inventor loses more times than he wins because he has 

to come up with the necessary proofs. And the burden is on him 

to prove that he was first to invent because the other party, the 

foreign party, will be presumed to be the first to invent because he 

was first to file. 

Mr. CHAFFETZ. Thank you. 

Mr. Simon, I am going to change the equation just a little bit on 

you, but be happy to address that portion of the question. 

Let’s talk about trolls. How do we limit the trolls that are out 

there and the problems that companies like yours deal with with 

the trolls that are out there that cause undue headaches that are 

slow, bog us down? How do we deal with that? 

Mr. SIMON. Well, thank you. And I just want to point out, just 

so the Committee appreciates it, that Mr. Horton and I also agree 

on that point. 

Mr. CHAFFETZ. Duly noted. 

Mr. SIMON. By the way, just to give you an idea of how small 

an issue I think this actually works out to be, Intel has filed over 

its history something like 25,000 to 30,000 patents in the United 

States. We’ve been involved in one interference in that amongst 

those 25,000 to 30,000 patents over a 40-plus year history. 

But turning to the issue of people who are in the business of 

using patents basically as a legal form of, quite frankly, extortion, 

you know I think the best thing we can do at this point is—I mean, 

the courts have done some things that have been very helpful. And 

then I think the other thing that we can do is I think we need to 

work on the office and make sure that the number of patents that 

get out, that are bad, is very, very small. It is impossible for them 

to be perfect. No one is. 

On the other hand, right now, given how underresourced they 

are and given the antiquated systems that they have, it is a real 

problem. 

Mr. CHAFFETZ. Thank you. Yield back. Thank you. 

Mr. GOODLATTE. Thank the gentleman. 

I am now pleased to recognize the Ranking Member, the gentleman from Michigan, Mr. Conyers. 

48 

Mr. CONYERS. Thank you, Chairman Goodlatte. This has been a 

very useful discussion here today. I commend all of the witnesses. 

Let’s go back to what I consider a key problem is that instead 

of the funds that are paid to the PTO going directly to the PTO— 

I would like to find who the legislator or legislators were that invented this process—that it goes back to the Appropriations Committee and they’ll get it over to you for us. And therein lies a lot 

of difficulty. 

Not only are we—are the applicants paying for this, but they’d 

be willing to pay more if we could all get what they’re actually paying in. 

And so without assessing blame too readily, the appropriators 

seem to not come up in a very favorable light the way I am describing this. 

And then we happen to have found out that, as we call them, 

‘‘the other body,’’ they don’t seem to like the idea of eliminating the 

appropriators from this process. 

To me, this is a very key problem, central to everything else 

we’re discussing. 

Could you all comment on that, starting with the judge? 

Judge MICHEL. Chairman Conyers, I think that the harm caused 

by lack of access to all of the fees collected is actually quite substantial. I’ve seen many figures and they all exceed $800 million 

in collected fees that didn’t end up supporting operations in the 

Patent Office. That’s a lot of money; given the Patent Office scale 

of spending, it could have done a lot of good if they had gotten it. 

The second thing is that I think it is an issue of fairness. People 

don’t pay user fees for patents as a gift to the society. They’re making an investment to get a property right, and they’re required by 

law to pay the fee. They have no choice. They’re forced to pay the 

fee and they pay it so that the Patent Office can examine their patent carefully and quickly. 

So I think it’s an issue of fairness to private industry who pay 

these fees under the compulsion of law, as well as a serious drain 

on the Patent Office. And it really ought to be stopped, and it is 

long overdue to stop it, in my judgment. 

Mr. HORTON. If I may, Chairman Conyers. 

I couldn’t agree more, both with what you articulated as well as 

the judge. And to that I will add I believe this is a unique moment 

in time for us. We have a director at the U.S. Patent and Trademark Office that enjoys widespread acclaim. Amongst the user 

groups we trust him, we respect him. He comes from the industry 

so he knows what he’s doing, and I think people are generally quite 

pleased with all of the progress he’s made as well as the ambitious 

plans they’ve laid down. So I think it is an opportunity for us to 

grab this moment in time to see if we can’t change that paradigm 

and get it fixed. 

Mr. CONYERS. Thank you. 

Mr. SIMON. I couldn’t agree more with both Judge Michel and 

Mr. Horton. So I will just leave it at that. 

Mr. CONYERS. Well now, I think this gets inside this mania for 

deficit reduction that seems to be driving this new Congress, because we’re not talking about adding to the deficit or creating more 

obligations. And so it is a win-win-win. 

49 

Now, you should ask me after the hearing that, if everybody’s in 

so much agreement, why don’t we do it? And so I’ll ask you since 

we’re at the hearing—I mean, what’s holding this up? Maybe I 

should—— 

Mr. WATT. Do you want me to attempt it? 

Mr. CONYERS. I am always afraid when Watt volunteers to help 

me out. That’s a very dangerous position for any questioner to get 

in. But that seems to be underlying the first steps toward the corrections that you all articulated so well. So I’m sure not going to 

yield to him. So I’ll turn back the balance of my time. 

Mr. GOODLATTE. I thank the gentleman. 

And it is now my pleasure to recognize the gentleman from New 

York, Mr. Reed. 

Mr. REED. Well, thank you very much, Mr. Chairman. I appreciate all of the testimony I’ve heard here today. 

And I am just a country lawyer, and a lot of times I’ll say a lot 

of the problems here, blame it on the lawyers. And one thing that’s 

been brought to my attention that I am greatly concerned about is 

law firms, such as a group called the Patent Assassins. I don’t 

know if you’ve heard of them. But some advertising came into my 

office where they specialize in going through and attacking legitimate patents, in my opinion, through the reexamination post-grant 

review process. 

And I’m concerned about that because in their materials they 

talk a lot about, well, we have the expertise, we have the specialty 

to tie these legitimate patents up. They don’t use the term ‘‘legitimate patents,’’ obviously, but tie these up and we can attack it 

through the PTO Office. And to me that’s just a symbol of something that demonstrates commitment to frivolous action that’s 

going to abuse the process. 

So I am concerned about, in particular, the post-grant review 

proposals that are in the Senate bill or the House bill. And, Judge, 

with all due respect, you’re the gentleman I was most eager to listen to today—with respect to these folks, too, over here—because 

you’re 22 years on the bench. What are your thoughts on that? 

Judge MICHEL. Congressman, the challenger is always going to 

say, ‘‘the patent is obviously bad. My people told me so. This is not 

an abusive challenge. This is a solid challenge and I think I’m 

going to win.’’ The other side is going to say ‘‘no, this is a frivolous 

challenge that’s needlessly delaying court litigation and keeping 

things open in terms of do I own a right or not,’’ as Mr. Horton 

said. 

So obviously what you need is some kind of mechanism in trying 

to separate the wheat from the chaff. That’s why I think it’s so important to have a meaningful threshold. And the threshold suggested in some of the recent proposals—and I believe it’s still in the 

current Senate proposal—is that there has to be a likelihood shown 

in order to start the proceeding that at least one claim of the patent is invalid. That seems to me to be a pretty good threshold. But 

if you’ve no threshold, it is wide open to abuse and I think it will 

happen. 

Look, the reality is lawyers, litigators, get paid to get advantage 

for their client any way they can, and they’re very tempted to press 

the limits. That’s the nature of the litigation system. It’s true in 

50 

the courthouse, it’s true in the Patent Office. So in both the courthouse and the Patent Office, you have to have meaningful thresholds to prevent abuse; because otherwise, sure as can be, it will 

happen. 

Mr. REED. And because I was also interested in your testimony 

about in the courts. You seem to be comfortable that the courts are 

using tools to sanction frivolous behavior. Are any of those tools 

available to the administrative process to the Patent Office that 

may be applicable to be applied there to make sure this abuse 

doesn’t occur in the administrative process? 

Judge MICHEL. I don’t think so. The Patent Office is quite handicapped. They don’t have subpoena power, so you can’t force the production of witnesses or documents, except what’s pretty much volunteered by the parties. And they, of course, can disbar lawyers if 

they lie, cheat, and steal or do something blatant and prevent them 

from practicing in the Patent Office in the future. But realistically, 

their power to prevent frivolous filings is nil. 

So the question then is can they screen them out by declining to 

move forward with the proceeding because the threshold is not 

met? 

Mr. REED. I appreciate that. Mr. Horton. 

Mr. HORTON. Yes. I think part of what is so attractive about the 

current compromise that has been reached is the fact that it tries 

to address both these dynamics that have been brought forward. 

The first is to address your very concern: We need a narrow window for an all-issues post-grant review. It doesn’t have to have a 

high threshold because you want to keep a level playing field in the 

event the Patent Office didn’t do something right. So provide a narrow window, again, a very short period to get that resolved quickly 

and allow litigants the chance to make their case once and for all. 

But once that’s done, you need a point in time where you can 

draw a line in the sand and say it’s time to invest. I deserve my 

presumption of validity on this patent, and now to the extent that 

any one wants to challenge me going forward, there ought to be a 

higher threshold, there ought to be a limitation on the types of evidence that be can brought in to make a challenge against a patent 

like that. That’s precisely what the current compromise language 

is attempting to do. 

Mr. REED. Mr. Simon, your thoughts. 

Mr. SIMON. Well, unfortunately, as we all know, lawyers advertise interesting things. Anybody who suffers from insomnia gets to 

see plenty of questionably tasteful—tasteless ads. 

But the point that I have to make is one, you know, if you look 

at the statistics, the statistics are a very small percentage of either 

inter partes reexam or ex-parte reexam actually end up where 

nothing happened. So that means that it’s a relatively small and 

confined problem. 

The second thing is it’s a much less expensive problem than the 

opposite of when you’re in court litigating one of these patents with 

a presumption of clear and convincing evidence that the patent is 

valid. 

And as to the delay, I think possibly one thing that the Committee could look at is whether—I know that the Patent Office has 

been complaining in inter partes reexam of largely the patent ownVerDate Aug 31 2005 10:43 Apr 05, 2011 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6601 H:\WORK\IP\021111\64407.000 HJUD1 PsN: DOUGA
51 

ers filing what are really frivolous petitions which delay the proceeding and keep the proceeding advancing through the Patent Office. And that may be one place where you could put limitations, 

because I don’t believe—at least my current reading of the rules— 

is they’re not permitted to do that. 

Thank you. 

Mr. REED. Thank you. I see my time has expired. Thank you, Mr. 

Chairman. 

Mr. COBLE. [Presiding.] The gentleman’s time has expired. I’m 

told the next witness, Ms. Chu from California, is recognized for 5 

minutes. 

If you will delay. I want to apologize to my colleagues and to the 

panel. I have been involved in a hearing regarding the oil spill of 

last fall, so I missed all of the testimony and I regret that. But I 

know the panelists contributed very favorably. It is good to be here 

even though belatedly. 

Ms. Chu, you’re recognized for 5 minutes. 

Ms. CHU. Thank you, Mr. Chair. 

Well, I believe that we in Congress have to be focused on jobs, 

jobs, jobs. And it caught my eye, Judge Michel, when you argued 

that fully funding the PTO and relieving the backlog would create 

up to 2.25 million new jobs. It sounds like a great investment, but 

I am wondering whether simply appropriating $1 billion to the Patent Office, without doing more, would truly reform the system. 

Do you truly think that no additional reforms are necessary? 

Judge MICHEL. Congresswoman, I think lots of efficiency measures are needed in the Patent Office. A great many have already 

been put in place in the 18 months under the new director, David 

Kappos. New ones are being hatched practically by the week. So of 

course they need to continue to improve efficiency. 

With respect to—I think you’re alluding to an editorial that I coauthored last summer, in which I said in the ideal world, there 

ought to be an investment on behalf of the country’s future of public money, not the user fee money, but taxpayer money, in the 

order of magnitude of a billion dollars because the Patent Office is 

so far behind, so badly backlogged. But given the current fiscal situation, I’m no longer making that suggestion because I don’t think 

it’s realistic. It’s not going to happen. 

So second best is raise the fees and let the Patent Office keep 

every dollar of the fees collected to be used in the current year, and 

in future fiscal years as well, so they can plan ahead and operate 

more like an efficient business than in the past. 

Ms. CHU. So, Mr. Simon, and Mr. Horton, do you agree with that 

assessment? 

Mr. SIMON. Well, I certainly think that having patents delayed 

in the Patent Office unnecessarily is a bad thing for innovation. On 

the other hand, I just need to reflect again that, you know, what 

we want is good patents to issue, valid patents to issue, properly 

examined patents to issue. And I think providing the office with 

the tools—I think I agree wholeheartedly with Mr. Horton’s and 

Judge Michel’s comments about the current leadership at the office. 

If we do that, we have a much better chance of getting to that 

point. 

Ms. CHU. Mr. Horton. 

52 

Mr. HORTON. You know, in my mind you’ve got two things working simultaneously. And you have to optimize them both to get the 

optimal result. We need not only adequate funding for the PTO, 

but we also need the right system in place. So it’s the combination 

of systems and tools together with the adequate funding. 

The best analogy I can come up with is a sports car. Right now, 

poor Director Kappos is having to drive a 1979 Dodge Aspen. I 

know what that’s like. I drove one in law school. You don’t want 

to be there. But if we were to get the system upgraded pursuant 

to the legislation we’re pursuing, we could be putting him behind 

the wheel of a new Cadillac CPS V coup and that would do wonders. 

Now, if you’re curious whether I drive that today, let me be clear. 

I don’t. I can’t afford it. And my wife wouldn’t let me even if I 

could. 

But the combination of those two things really would give us the 

maximum efficiency. Together, the money and the system and 

tools. 

Ms. CHU. I see. 

Judge Michel, it seems to me that you’re assuming that all patents are created equal and there is no economic value being created 

by any of the ideas that are waiting for review at the Patent Office. 

But one of the key differences between some of the parties to this 

debate is that they rely on different technologies and business models. For example, the companies in the biotech community and the 

high-tech community rely on patents in different ways. 

How does your analysis change when you consider these differences? 

Judge MICHEL. Congresswoman, I think it’s very important for 

the patent system to work for every industry, to be fair to every 

industry. So it’s a little bit of a balancing act. It’s not going to be 

perfect from Mr. Simon’s standpoint unless it’s terrible for lots of 

other people. So it’s going to have to be somewhere in the middle. 

And finding the optimal balance, of course, is challenging. 

But I think that Mr. Horton has us on the right track when he 

talks about adequate provisions to prevent abuses, as well as greater resources, having the right systems in place. 

You know, we can’t afford to not get this problem solved because 

the word you used is the most important word uttered in this room 

today, which is ‘‘jobs.’’ We’ve got 16 million people unemployed or 

underemployed in this country, as you all know, and we have new 

workers joining the workforce in large numbers every year. So to 

just stay even, we have to create a very large number of new jobs 

every month. 

The patent system can play a great role in this. Now, it’s true 

there are lots of important companies that don’t depend very much 

on patents. Fine. They’re doing well without patents. There’s no requirement that you use patents, but it needs to be there for those 

companies that do need it, and there are many. 

And it is not only the pharmaceutical industry or biotech industry, it is a broad range of companies. Most of them are members 

of Mr. Horton’s very diverse coalition. 

So it would not be right to say this is a battle between big 

PhRMA and the California high-tech companies like Intel. I think 

53 

that’s a very misleading description that you sometimes see in the 

press. It is a question of finding what would work pretty well for 

everybody, even if imperfectly, for any particular company or industry. 

So it is finding the balance, and I think we’re getting closer and 

closer. 

Ms. CHU. Thank you. I yield back. 

Mr. COBLE. The gentlelady’s time has expired. 

Mr. Griffin, the gentleman from Arkansas, is recognized for 5 

minutes. 

Mr. GRIFFIN. Thank you, Mr. Chairman. 

I want to follow up, Mr. Horton, on your testimony. You mentioned the studies that deal with first-to-invent versus first-to-file. 

And I think you mentioned Mr. Mossinghoff’s study. 

In your testimony, you refer to Professor Linley’s study as well, 

and you indicate that it suggests that the current first-to-invent 

contest, more often used by large entities, challenge the priority of 

small entities, and not the reverse. And I see that you’re citing a 

Hastings Law Journal article. 

Could you talk a little—could you talk a little bit about that 

data, or are you familiar? 

Mr. HORTON. I don’t believe I cited the Linley study in my testimony. That’s the reason I raised my eyebrows. We did speak in my 

oral testimony about the Mossinghoff study. 

Mr. GRIFFIN. Okay. In your statement. I am sorry. 

Mr. HORTON. So the question? 

Mr. GRIFFIN. If you could talk a little bit about, if you’re able, 

if you’re familiar with that data, if you could talk a little bit about 

the Linley study and maybe that data versus the Mossinghoff 

study. What sort of data was used to write that Hastings Law 

Journal article? 

Mr. HORTON. I am most familiar with the Mossinghoff study. Do 

you want me to comment on that? 

Mr. GRIFFIN. Sure. Sure. 

Mr. HORTON. What Gerald Mossinghoff was attempting to look at 

is the frequency where the small inventor really did in fact—was 

successful in the Patent Office in a challenge contest over who was 

first to invent; the interference proceeding, essentially. And I think 

one of the things they were keyed in on—it’s not simply big versus 

small—it’s a question of who was first to invent, obviously, but it’s 

a big question of proofs. 

An interference proceeding, if you haven’t been in one, it’s very 

akin to a litigation. It takes a great deal of time. It is worse, as 

Judge Michel would say. It’s very lengthy, very expensive, and in 

all intents and purposes, the same. So the small inventor is at a 

significant disadvantage financially and otherwise to go up against 

the bigger companies. Not surprisingly, therefore, they win less 

than 50 percent of the time. 

Mr. GRIFFIN. To a large degree it’s simply a matter of who can 

fund the litigation and who can’t. 

Mr. HORTON. Yes, because you’re looking at proofs, who can come 

up with the proofs and substantiate it. It’s not whether I invented 

it first; it’s can I prove that I invented it first. 

54 

Mr. GRIFFIN. The judge mentioned the concept of balance here, 

and from what you’ve written and from the testimony I’ve heard, 

the first-to-file, a change to the first-to-file system may benefit 

small businesses or smaller inventors. 

What impact, if any, would it have other than maybe balancing 

things; what impact would it have on the bigger companies? Is it 

a more balanced approach, or does it just turn the advantage the 

other way? 

Mr. HORTON. You know, it’s funny you should ask that because 

Dave can comment on this as well. I am sure he feels very similar. 

We’ve been operating for years as if that were the system that 

the U.S. was using, because we have to. We’re global companies, 

so big companies that export, we have to play that way because it’s 

all about who gets to the office first. We stop thinking about who 

was first to invent and keeping detailed, you know, recording inventor notebooks that they keep. We stopped playing that game because we figured the safest way to win every single time everywhere is to get to the office first. 

Judge MICHEL. Congressman, if I can add, I don’t think it is so 

much a question of who wins these long complicated interference 

proceedings. I don’t challenge the statistics that have been mentioned. But from what I understand it’s more a question of who can 

fund early filing. And apparently there’s some evidence—I don’t 

purport to be able to weigh it because it is not all on the table in 

front of me—but there is some evidence that some universities, 

some smaller entities, have difficulty in funding the early filing of 

the patent. 

So I’m simply saying—I’m not against first-to-invent—pardon 

me, first to file—and I’m not for it either because I don’t know 

enough about it. My only pitch is that the Congress, before it 

makes the final decision, should assure itself that it doesn’t unduly 

hurt some of those universities and smaller entities. I’m not saying 

it does. I’m not saying it doesn’t. But it’s worth finding out. 

Mr. HORTON. I’ll just mention one caveat. That to the extent that 

it is a question of cost, obviously the S-23 is looking at that issue 

and creating even a microentity status that gives them a full 75 

percent cost reduction to make it even more affordable for them to 

afford that early filing. 

Mr. GRIFFIN. Sure. Just one—you had something to say. 

Mr. SIMON. Yes. The statistics I’ve seen are similar to the study 

that Mr. Horton refers. 

The only caveat I would say is I think it’s important for small 

businesses that have a prior user right, because if you actually can 

show that you used it first, the fact that somebody else patented 

it before you did, you’re still protected. 

Mr. GRIFFIN. One quick follow-up, if I’ve got a second. 

If there is additional data and additional empirical studies that 

aren’t mentioned in your statement, or you didn’t mention in your 

testimony, that would help us and fill in some of the gaps maybe 

that the judge was referring to, if you could get us that information, the citations would be real helpful. 

Thank you, Mr. Chairman. 

55 

Mr. COBLE. Time’s expired. I’m told that we’re applying the 

Chairman’s first-come-first-serve rule, Mr. Marino, and I inadvertently bypassed you, and I didn’t mean to do that. 

The Chair now recognizes the gentlelady from California, Ms. 

Waters, for 5 minutes. Ms. Waters is recognized for 5 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

I’ve been listening to this discussion of our witnesses, and as Mel 

Watt indicated, we have a lot to learn in a short period of time, 

trying to understand the issues that are important to those who 

are seeking using and protecting their patents. 

But I’m really drawn to the testimony of Judge Michel because 

he seems so fair, so balanced, and so completely understanding of 

what’s happening with our Patent Office. And I agree. I am not so 

sure I agree that the taxpayers should fund the operation, but I do 

agree that through fees, they should be able to use all of the money 

that they can collect in order to have a system that works. 

But I’m really drawn to where he finally took us in talking about 

jobs, and that what we’re hearing is that the reason this discussion 

is so important is because we’re all interested in innovation and job 

creation, and that’s what patents represent. But I am not so sure 

that I understand whether or not our country is benefiting from the 

patents that are being sought and utilized by some of the biggest 

operations in the country. 

Let me just ask a few questions. 

In the quarter ending September 30, 2010, GE’s corporate profits 

reached an all-time high of 1.66 trillion on an annual basis, according to the Commerce Department. This is in contrast to the fear 

and uncertainty in 2008 that led Mr. Immelt to seek participation 

in the Federal Government economic stabilization efforts. 

In 2008, GE and its subsidiary, GE Capital, accessed nearly 100 

billion through programs created by the Federal Reserve and Federal Deposit Insurance Corporation to combat frozen credit markets. This includes 16 billion from the Federal Reserve while Mr. 

Immelt was at the time on the board of the Federal Reserve Bank. 

In 2009, GE received over 20 million in stimulus money to help 

stimulate U.S. economic development, yet continued to ship jobs 

overseas. In that same year, GE paid no income taxes in the U.S. 

As its homeland operations were operating at a loss compared to 

its overseas businesses. 

Since Mr. Immelt took over in 2001, GE has shed 34,000 jobs in 

the U.S., according to its most recent annual filing with the Securities and Exchange Commission, but you’ve added 25,000 jobs overseas. In 2009, GE employed 36,000 more people abroad than it did 

in the U.S., and in 2000 it was nearly the opposite. 

Foreign work has proven lucrative to GE. In 2007 it derived half 

of its global sales from work abroad. In 2009, that share increased 

to 54 percent. U.S. sales have shrunk. And the investment was not 

in the U.S. The company has decided to look elsewhere. 

In 2008 and 2009, GE decided to indefinitely reinvest prior years’ 

earnings outside the country according to SEC filings. That helped 

the firm lower its tax rate. In 2009 the Connecticut-based firm effectively had a negative tax rate thanks to the 498 million loss it 

booked on U.S. operations versus the 10.8 billion in earnings it 

56 

booked abroad, and GE realized a 1 point billion tax benefit in 

2009. 

Now, I am pointing this out—and I could talk about Intel, too. 

I have some facts and data here. 

Why should we be so concerned to make sure that you can receive your patents abroad and maybe even imfringe on small inventors and folks who maybe got the patent but didn’t have the resources to pursue development or anything else related to it? And 

I don’t see your effort resulting in job creation and innovation, 

which is what this is supposed to be all about. 

Now, maybe I am on the wrong track here. But, Mr. Simon, what 

do you say about that? 

Mr. SIMON. Well, I obviously, Congresswoman Waters, can’t answer questions on behalf of GE. I’ll leave that to Mr. Horton. 

Ms. WATERS. Okay. 

Mr. SIMON. But maybe I should ask him for some tax advice. 

Ms. WATERS. Mr. Horton, what do you say to that? 

Mr. HORTON. Look. It is a good question. Are we investing overseas? Absolutely. Fifty percent of global growth is overseas. We 

would be an unwise company if we weren’t investing where the 

growth is. 

At the same time, however—and this is I think critical to this 

hearing—is that intellectual property is one of those tools that allows us to compete globally with jobs in the United States. It levels 

the playing field because we’re not having to chase simply cost of 

labor, which is very often the case when you’re manufacturing very 

labor-intensive, very commodity-intensive resources. You go where 

the cost is the cheapest. 

But I’ll give you an example. We’ve got technology today that 

we’re trying to scale up in the United States around, let’s say, 

green technology batteries. We’re trying to replace the old leadbased batteries with sodium or lithium ion type batteries that last 

10 times as long and deliver enough power. That’s key. We’re putting a plant—we spent, I would say, $150 million in the U.S. On 

developing that Next Generation technology. We’re spending a hundred million dollars this year to put a plant in the State of New 

York where we will put 350 new jobs in play, hopefully to grow 

that to a billion-dollar business over the duration, and that came 

from two sources of R&D—not only what we’re spending on jobs in 

the research and development on the technology here in the U.S. 

Mr. COBLE. The gentlelady’s time has expired. If you could wrap 

up. 

Mr. HORTON. But the other is we’ve invested $70 million in a 

venture capital group, also here in the U.S., that has complementary technology to what we have invested solely so that we can 

manufacture the stuff in the U.S. and keep foreign manufacturers 

from beating us on price. 

Ms. WATERS. Thank you, Mr. Chairman. I appreciate that. 

But you know, this is going to be an issue as we take a look at 

where you invest to where you’re creating the jobs and what you 

are doing in the United States. This is going to be an issue because 

everybody is supposedly so focused on job creation, helping small 

businesses, and innovation. So look out. 

Mr. COBLE. The gentlelady’s time has expired. 

57 

The gentleman from Indiana is recognized for 5 minutes. 

Mr. PENCE. Thank you, Mr. Chairman. Thank you for filling in 

so graciously on this hearing for Chairman Goodlatte. And all I 

know is that I want to patent Howard Coble. If I could get a round 

of applause on that it probably wouldn’t offend him. 

Mr. WATT. Can we patent him without cloning him? 

Mr. PENCE. I knew that would be your request. 

Let me say I am intrigued at the written testimony. I want to 

appreciate this panel. You’re serious. These are serious minds that 

are coming before this Committee. This is the beginning of a conversation that I hope will be more fruitful in this Congress than 

it is been in previous Congresses. 

Let me commend the modeling of bipartisanship that shows up 

at this table, showing that Patent Fairness and the 21st Century 

Coalition can sit next to one another civilly. And Judge Michel, 

thank you for your written testimony which I reviewed and your 

remarks today. 

I do think this is about jobs. I think that intellectual property, 

like other forms of private property, is a pillar of economic prosperity, and whether it be with regard to protecting intellectual 

property overseas or creating pro-growth environment in this country, we have to modernize our laws with regard to intellectual 

property. And I have been committed to that and attempted to be 

a constructive force as a Member of this Committee in years past, 

and as I return to the Committee, I intend to be active in this. 

I also want to associate myself strongly with Judge Michel, your 

comment about this isn’t about winners or losers. I am paraphrasing now. But it’s about developing a comprehensive reform 

that works pretty well for everybody. We can’t have a zero-sum 

game. The varied interests in this debate represent bulwarks in the 

American economy and we want everybody to win. We want everybody to prosper. And so I want to associate myself with those remarks. 

Speaking specifically about the PTO, Judge Michel, you make 

some interesting comments that—particularly that the classic story 

of thousands of foreign engineers sitting, not doing research, but 

rather at computer screens reading U.S. patent applications. When 

you marry that with the extraordinary delays that we’re faced 

with, we start to figure out why America is losing the battle on innovation—exporting our best ideas inadvertently because we aren’t 

meeting that 2-year time frame. 

But you call in your testimony, Judge Michel, for several thousand additional examiners, dozens of additional board of appeals 

members. 

Now I know that this is a fee-based system, or at least it is supposed to be, that former Chairman Conyers I thought made some 

very useful comments today about this business of ending fee diversion. And Congress is a place where we love to find money that 

really wasn’t supposed to be there. And it does strike me as we 

think about reform, we ought to think about ensuring that what 

are effectively user fees here being paid out of the industry don’t 

end up subsidizing other priorities within the national government. 

I guess my question in that vein is, as we think about addressing 

this extraordinary backlog which seems to be the enemy of our 

58 

prosperity, is there a role—and I would be open to the panel speaking to this—is there a role for the private sector in this process? 

Can we in effect talk about outsourcing the role of examiners, at 

least in the first instance? Or is that fraught too much with peril 

because of the specific interests that are associated thereto? It does 

seem to me it warms the cockles of this conservative’s heart to 

think about maybe further invigorating the private sector in this 

country without expanding the size and scope of government. 

Could we address this backlog in a way where we at least conduct some of the modernization by utilizing outsourcing and private sector as a way of expediting this examination; or is it the 

judgment of this panel that it has to involve government employees? 

Judge MICHEL. Congressman Pence, I understand that some 

outsourcing to private contractors is already done with respect to 

certain PTO operations and that the continuation of that program, 

like the hiring of new examiners and modernizing the information 

technology systems, has been badly crimped by the funding problem. So they do some and they’re trying to do more, but the money 

problem is limiting what they can do in every direction. 

The other thing I would say is that, in a way, hiring a thousand 

or two or three unemployed scientists and engineers and other intellectual property professionals in a way would be its own jobs 

programs. These are highly trained, expert, talented people, many 

of whom who are now unemployed in cities all around America. 

So in a way, it is not like taking government workers who are 

permanent from one agency and putting them in some other agency. It would be hiring scientists and engineers from the private sector, who are now unemployed, to beat this backlog down so that we 

can create a million or two or three jobs just out of the current 

backlog. And every year there’s another 500,000 new patent applications that come in, and staying current on them every year going 

forward will continue to create more jobs. 

So I think it is very important to get the right number and the 

right level of examiners. And it would also provide jobs for deserving people as well. And of course they’re taxpayers and voters, and 

it benefits the communities they’re in and spreads benefits widely. 

Mr. PENCE. Mr. Chairman, by your forbearance if they can’t answer the question, I would welcome a written statement. But the 

Chairman can call the ball here. 

Mr. GRIFFIN. The time has expired. 

You need a few more seconds. 

Mr. PENCE. If the panel is permitted to give an answer or two, 

and I would welcome any thoughts about outsourcing or expanding 

existing outsourcing of which I was not aware of the PTO from our 

panel. 

Mr. HORTON. I would differentiate two things. One would be operations, as Judge Michel talked about. There are things that they 

could, I think, outsource effectively. What I think would be difficult 

to outsource and probably unwise is the examination itself. The 

real intellectual horsepowers ought to come from an objective, independent third party. We as users would like to see a stamp of approval from some objective body. And I think the government does 

that well. 

59 

If I were going to hire someone to run this private enterprise, it 

would be Director Kappos. So key is getting somebody in there who 

can run it efficiently and run the operations and know where to do 

it most effectively and efficiently. 

Mr. SIMON. I am not going to quite break out into kumbayah but 

I would agree with Mr. Horton’s comments. 

Mr. GRIFFIN. [Presiding.] Thank you. 

Ms. Lofgren, you are recognized for 5 minutes. 

Ms. LOFGREN. Thank you very much. 

My apologies for my brief absence. I had a meeting I had to attend, I could not get out of. But I am very pleased that we are having this hearing. 

And as the witnesses know, this is something I’ve been working 

on for many, many years. And it is an area where we’ve had a bipartisan effort to address the deficiencies in the Patent Office as 

well as patent law. 

I’ve come to the conclusion over the years that the differences of 

opinion that exist are really based on different business models 

more than anything else, and that finding common ground in certain areas is very difficult just because of that fact. 

Having said that, though, I know, because we have actually 

crafted some measures, that there can be consensus on certain 

items and that would be helpful. 

I am interested and I wanted a chance—obviously, the testimony 

of all of the witnesses is very important. I wanted to specifically 

thank David Simon because he’s from my neck of the woods in 

Santa Clara County, ground central for innovation in America. 

It seems that there’s at least this consensus, that the one thing 

that the Congress can do that the courts cannot do is to provide 

resources, to provide oversight to our new director who is committed to modernizing the office. That’s something that, as the 

cases get decided and clean up problems, the courts can’t possibly 

do that. 

So would you agree that that is one thing, that ought to be job 

one of the Congress to focus on that issue? 

Mr. SIMON. Yes. I think that making sure that the office has the 

resources to do the job properly is key both to reducing the backlog 

and making sure that the patents that come out are valid patents. 

Ms. LOFGREN. As well as modernization of the computer systems 

and the like. 

Mr. HORTON. To that I would add also it is not just a matter of 

funds, because you need a better system as well. So as long as you 

provide those two parts together, I think you will optimize them. 

Ms. LOFGREN. If we just hire more people but don’t change the 

technology, we’re never going to get caught up. 

Mr. HORTON. Precisely. 

Ms. LOFGREN. Let me ask this. I think it is very helpful to hear 

about all of the Federal court decisions that have made measurable 

progress against some of the problems in the patent system, especially abusive litigation. 

Could more of these decisions be on the way, Mr. Simon, do you 

know? What are some of the other issues that are currently making 

their way up through the system that we ought to be keeping our 

eyes on? 

60 

Mr. SIMON. Well, one decisions that’s currently before the Supreme Court actually is in the I4I case where the question is the 

presumption of validity, whether it should be clear and convincing 

or whether it should be something else in at least some set of circumstances. That’s one example. 

There are a number of other cases winding through on further 

refinements on damages and some of the other issues that have 

proven difficult. Some of the—they’re continuing to be a series of 

venue decisions eliminating some of the arbitrariness that was 

going on with venue. 

So those are just some of the things that are happening today. 

Ms. LOFGREN. I remember years ago, maybe about 5 or 6 years 

ago, somebody in the valley, in Silicon Valley, saying well, the 

courts ultimately will get to this, but it will be so slow, so we’re 

looking to the Congress. And actually the courts have ended up 

moving a little bit faster than we have on this subject matter. 

I am thinking, in addition to resources, what the courts will not 

be able to address. Obviously, I thought we had a great venue statute in our bill that really everybody on both the coalition supported 

and that we worked very carefully on. The court’s decision left 

some holes. They’ve got to circle back and fix that. I have confidence they will. 

But it seems to me an additional item that the court can’t really 

fix is third-party submission of prior art that I think is an important element. 

Do you have a comment on that, whether we should also, right 

after resources, be addressing that issue? 

Judge MICHEL. I don’t see any argument against allowing anyone 

who has helpful information to put it on the table at the Patent 

Office. It certainly seems like a sensible thing to do. I don’t think 

there’s opposition to it. How much it would help, who knows, but 

it would help some. That’s in some of the bills and it seems to me 

like it is a good provision. I think it’s fairly minor compared to the 

post-issuance procedures, which also would have to be done legislatively; can’t be done by the courts, or by the Patent Office. 

Ms. LOFGREN. We may have to go step by step into this. 

But I remember about, again, half a decade ago, maybe more 

than that, going out to a major technology company in Silicon Valley, and instead of the general counsel and the patent lawyers, 

they had the engineers there talking to me. And they thought the 

most important thing was third-party submission of prior art. And 

I thought, well, nobody else is talking about that. And they really 

thought about it as sort of the wickifying patent submissions. 

And it got me thinking that, although the lawyers weren’t looking at that, the engineers in this case might actually have a very 

good point on that, and that it would get a lot of bad patents out 

of the way. 

I mean, the worst thing that can happen, worse even then pendency is the issuance of bad patents that just mess up the system. 

I think my time has expired. I thank the gentleman for yielding. 

Mr. GRIFFIN. Mr. Nadler, you’re recognized for 5 minutes. 

Mr. NADLER. Thank you. 

Judge Michel, you said that 80 percent of the patent issue is in 

increased funding levels. Everything else is 20 percent, but 80 perVerDate Aug 31 2005 10:43 Apr 05, 2011 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6601 H:\WORK\IP\021111\64407.000 HJUD1 PsN: DOUGA
61 

cent of the problems that we have would be satisfied with increased funding levels. And we’ve heard about that from all of the 

witnesses. In the continuing resolution for fiscal year 2011 that 

we’re going to be considering, I think next week, the Republican 

majority plans to reduce funding in general to 2008 levels. We 

haven’t seen the text, so we’re not sure, but we suspect that this 

may reduce the Patent Office to 2008 funding levels as well. At our 

oversight hearing last month, Director Kappos said that doing this 

would be a disaster. 

What is your assessment of what such a decision would do to the 

Patent Office and to jobs? 

Judge MICHEL. Well, it could be catastrophic. The Patent Office 

can’t function at the level of resources it has now in an effective 

way. And if it were reduced even lower than the current level, everything would get worse. Delays would go up, quality would go 

down. The system would melt down. 

So I hope that that’s not what comes out of whatever the Congress has to do to address the fiscal problems of the country, because the Patent Office really is a different kind of operation. It is 

really not a government regulatory agency. It deals with private 

property rights, not governmental programs in the normal sense. It 

seems to me it shouldn’t really be counted as part of the budget. 

It shouldn’t have anything to do with a spending reduction, because it is not spending taxpayer money in the first place. 

Mr. NADLER. So in other words, it deals with private property 

rights, as does something like the Securities and Exchange Commission, which we know is going to take a funding hit, presumably. 

But it is financed independently, which the SEC is not. That’s what 

you’re saying. 

Judge MICHEL. Yes. 

Mr. NADLER. But it would be catastrophic if it were reduced substantially. Thank you. 

Now, you also said—we talked about perhaps codifying some of 

the court decisions that have been rendered that have solved some 

of the ambiguities that we have had. And you said, I think, that 

codifying the court decisions would be an unfortunate course of action for Congress to take because it would add to uncertainty. 

Why would codifying court decisions add to uncertainty? 

Judge MICHEL. Congressman, the reason is that the bills use different language than the court decisions do. That gives lawyers a 

field day to fight over exactly what does the new language mean. 

So it really does add, I think, uncertainty and complexity. 

Mr. NADLER. Excuse me, but don’t the lawyers have a field day 

arguing over what the court decision means? Why would they have 

a greater field day over what Congress meant? 

Judge MICHEL. It gives them more to fight over. It is certainly 

true that they disagree often about what a sentence in a court decision means. 

But, you know, the other thing is this is a very dynamic process. 

The Federal Circuit decides 3 or 400 patent-related cases every single year. Every month, every judge has patent cases on their desk. 

So they have endless opportunities to keep adjusting and refining 

the law in the face of new litigation tactics, in the face of new economic developments, new technology and so forth. 

62 

So the courts have a huge advantage, because for them it’s not 

a one-time thing, it’s every day, every month, every year. So they 

keep making improvements. 

If you legislatively codify what they did last year, that’s going to 

bar them from doing even better next year by freezing them in 

place. So they have to follow the statute. 

Mr. NADLER. That’s an argument in favor of common law against 

any statutory law. 

Judge MICHEL. Well, it’s in favor of letting a broad statute have 

sufficient common-law development which can continue because it 

is not then frozen in place by a later statute. 

Mr. NADLER. Okay. Thank you. 

Before my time expires, let me ask Mr. Horton, you talked about 

the first-to-file problem for Joe inventor, for the little guy, and how 

he files a patent and someone comes in and the big corporation 

says, no, no, you weren’t the first to invent it. Then he’s got to defend, and the burden of proof is on him and it’s very expensive and 

difficult. Presumably, you think the solution to that is to go to a 

first-to-file rather than a first-to-invent standard, which raises 

other problems. 

Let me ask you this; what would happen if we kept the first-tofile, the first-to-invent standard but shifted the burden of proof? 

Mr. HORTON. So I if I understand correctly, you are saying that, 

even though a party was first to file for a patent, you wouldn’t give 

them the presumption. 

Mr. NADLER. No. 

Mr. HORTON. That’s why they have the presumption, is because 

they were the first one to come forward and say—— 

Mr. NADLER. Well, they have the presumption, but, as I understand what you said, if someone contests them, they have the burden to prove that they were first to invent, no? 

Mr. HORTON. Well, the party who is not the first to file is the 

one who faces the uphill battle to prove that they were first to—— 

Mr. NADLER. Then I don’t understand your contention, or your 

statement. It makes sense that the challenger of the first to file 

should have the burden of proof, intuitively and intellectually, but 

if that’s the case, then Joe inventor, the little guy, he files his patent, how does he get the burden to prove that he was first? 

Mr. HORTON. Well, in my hypothetical I gave, he was, let’s just 

say, using the U.S. crutch, you know, the fact that he could prove 

he was first to invent at some point in time. So he wasn’t quick 

in getting to the office. He didn’t race down there in an expeditious 

manner. Others around the world are accustomed to doing that. 

That’s how they think, and so they tend to run to the office faster. 

So that would put him at a disadvantage, because he was not first 

to file because they filed ahead of him. And that’s the concern. 

That’s why we as global companies always run to the office first, 

because we know that—— 

Mr. NADLER. So you’re saying it’s a problem because of—let me 

just ask one last question as I see the red light is on. This is a 

problem because of a difference of culture between the United 

States and foreigners, where foreigners run to file faster. Well, 

could you solve that by saying, okay, somebody who filed a patent 

abroad has the burden of proving first? 

63 

Mr. HORTON. I think we would face the WTO in that regard. 

Mr. NADLER. Okay. Thank you. 

Mr. GRIFFIN. Ms. Jackson Lee is recognized for 5 minutes. 

Ms. JACKSON LEE. Thank you very much, Mr. Chairman; and I 

thank the Ranking Member. 

This is an important hearing, and I thank the witnesses that are 

here. Some of you are wise enough to place behind you friends that 

we have worked with for a very long period of time, maybe you orchestrated that, and they will tell you that I’m still a good person 

and will maintain our friendship. 

We are on the floor of the House debating a regulatory scheme 

that would call on this body to exert itself over every regulatory— 

major regulation that would come out of the executive. And I only 

say that because what I see here are some crucially important 

issues that want me to rush toward patent reform for the ability 

to create jobs, and I would offer to say in the United States. 

I am going to ask a question and then a series of quickly moving 

questions, but you can weave this particular answer in because I’m 

excited about the brilliance of this country. I served 12 years on the 

Science Committee, and I would always say that science is the 

work of the 21st century, and here we are. It’s amazing to be in 

the 21st century. 

My general question is, is there a genius factor in America? Do 

we still have it? Is it a genius factor of inventiveness and invention? And let me go now to my questions. Please weave in your answers as to whether or not we’ve abandoned it, whether we don’t 

have any more abilities. 

Judge, let me say that I agree wholeheartedly with you on a 

thousand, several thousand more examiners, dozens of additional 

Board of Appeal members, major modernization of the IT systems. 

I don’t see why we can do any less. Inventions create jobs. And I’ll 

go back to Thomas Edison, who I believe was a United States citizen, and the light bulb. 

In addition, I would like to stop fee diversion. And, frankly, you 

are dependent on fees. I don’t know whether there’s something in 

our CR that is going to cut patent operations even further since 

that is the mindset of cut and grow—wrongly so, I believe. 

But, Mr. Simon, let me quickly move. We have an 18-month period of display. All of your Intel is shown for about 18 months. Tell 

me whether or not we could shorten that time frame. You’ve already debated the question of first to file. Do we need to use first 

to use? And since you’re so large—and, Mr. Horton, I want this 

question to you. Let me ask you first. How many people do you employ here in the United States, Mr. Simon? 

Mr. SIMON. Something over 40,000. 

Ms. JACKSON LEE. And how many around the world? 

Mr. SIMON. Less than that. 

Ms. JACKSON LEE. Somewhere around—— 

Mr. SIMON. I’m not sure of the exact number. I know that’s over 

half—— 

Ms. JACKSON LEE. And that’s 40. And so you may do 20 or 30 

around the world? 

Mr. SIMON. It would probably be something in that area. 

64 

Ms. JACKSON LEE. Mr. Horton, how many are in the United 

States? 

Mr. HORTON. I’d have to ask Congresswoman Waters to give me 

those numbers. I think she read them earlier. But 300,000 globally, 

and my last recollection is we were somewhere around 50/50. I 

know revenue-wise we’re more outside the U.S., but I think employee-wise we’re still more in the U.S. 

Ms. JACKSON LEE. Alright, thank you. 

Mr. Simon, I want to go to the 18-month structure. Do we do well 

to pull that back? Do we do first to file, first to use? 

Mr. SIMON. So, in terms of, first—— 

Ms. JACKSON LEE. Your mic is not on, and I still have a green 

light, but I’m going to ask you to speak in bionic speed. 

Mr. SIMON. I’m from New York. I’ll do it really fast. 

I think the country still has genius. We’re investing over $5 billion in our latest generation manufacturing plants in this country 

just because of that, so I don’t think that’s the problem. 

In terms of publication, we’ve long ago come to the conclusion 

that there is a certain amount of information. If you want to get 

a patent, part of the price you pay is you’re going to disclose information to the public. 

Ms. JACKSON LEE. Can we shorten it? 

Mr. SIMON. The only way you could shorten it is actually speeding up the Patent Office. And I would rather have the Patent Office 

do its job right than—— 

Ms. JACKSON LEE. Speed up the process, but leave the 18 

months? 

Mr. SIMON. Yes. 

Ms. JACKSON LEE. What about first to file, first to use? 

Mr. SIMON. First to file, first to use, the concern that I have 

there, if we go to a first-to-file system, if you don’t have prior user 

rights there, you’re forcing companies like Intel, who normally do 

not want to file because we don’t want to disclose, for example, how 

we test and validate our products, we would be forced to file much 

more in that area. And we know, as Judge Michel said in his testimony, that people will be reading those patents. So we actually 

would really think having a prior user right so we can avoid that 

problem would be really important to us. 

Ms. JACKSON LEE. Mr. Horton, we live in a hackers’ paradise. 

And I have a lot of good friends around the world, in China, and 

so I want to preface it by saying they’re good friends—I want you 

to answer what he said—they are good friends, but I understand 

they are genius in hacking. So my question is, if you would answer 

that and finish—and when I say answer, answer the same question 

but also finish in terms of how you, being so large, hamper the little guys that I hope hold the genius that can help to create jobs 

even more than some of your larger companies? And how will you 

use your patent to build jobs in America versus around the world? 

Patents plural. 

Mr. HORTON. For one, I would say we’re absolutely bullish on 

America and we are bullish on working with small inventors. Just 

recently, you may have seen in the press, we issued an 

Ecoimagination challenge where we put $100 million out there for 

65 

no other purpose than to reach out to the small guys and find out 

who’s inventing in our space. 

I would like to think we’re fairly good at inventing ourselves. 

We’re one of the biggest patent holders in the world because we’ve 

been doing this for 120 years. So we’re just as bullish on investing 

in our own researchers in Niskayuna and Atlanta and elsewhere 

within the U.S. But I think there’s a place to come together, particularly on these new and nascent technologies where they have 

yet to be developed, which is why we both invest in VC money in 

trying to find those, but also these problems like the Ecoimagination challenge where we’re trying to flush them out of the woodwork. This is the place we want to invent. The patent system helps 

us afford to do that and then bring the manufacturing behind that 

and also do it in the U.S. and be able to compete effectively with 

the lower cost of labor elsewhere. 

Ms. JACKSON LEE. Well, we want to give you an effective patent 

system; we want you to give us jobs. It is not so attractive to me 

to see the peaking number of GE jobs—or anyone else—and not 

have the same jobs here in the United States. 

I yield back. Thank you. 

Mr. GRIFFIN. I thank our 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 made part of the 

record. 

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. 

The hearing is adjourned. 

[Whereupon, at 12:50 p.m., the Subcommittee was adjourned.] 

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