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PATENT TROLLS: FACT OR FICTION?

HEARING

BEFORE THE

SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JUNE 15, 2006

Serial No. 109–104

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 

F. JAMES SENSENBRENNER, JR., Wisconsin, Chairman 

HENRY J. HYDE, Illinois 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

SPENCER BACHUS, Alabama 

BOB INGLIS, South Carolina 

JOHN N. HOSTETTLER, Indiana 

MARK GREEN, Wisconsin 

RIC KELLER, Florida 

DARRELL ISSA, California 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

CHRIS VAN HOLLEN, Maryland 

DEBBIE WASSERMAN SCHULTZ, Florida

PHILIP G. KIKO, General Counsel-Chief of Staff 

PERRY H. APELBAUM, Minority Chief Counsel 

SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

LAMAR SMITH, Texas, Chairman

HENRY J. HYDE, Illinois 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

WILLIAM L. JENKINS, Tennessee 

SPENCER BACHUS, Alabama 

BOB INGLIS, South Carolina 

RIC KELLER, Florida 

DARRELL ISSA, California 

CHRIS CANNON, Utah 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

HOWARD L. BERMAN, California 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

ZOE LOFGREN, California 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

ROBERT WEXLER, Florida 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California

BLAINE MERRITT, Chief Counsel 

DAVID WHITNEY, Counsel 

JOE KEELEY, Counsel 

RYAN VISCO, Counsel 

SHANNA WINTERS, Minority Counsel 

(III)

C O N T E N T S 

JUNE 15, 2006

OPENING STATEMENT 

Page 

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

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

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

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

Internet, and Intellectual Property .................................................................... 2

The Honorable Darrell Issa, a Representative in Congress from the State 

of California, and Member, Subcommittee on Courts, the Internet, and 

Intellectual Property ............................................................................................ 3

WITNESSES 

Edward R. Reines, Esq., Weil, Gotshal & Manges, LLP 

Oral Testimony ..................................................................................................... 5

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

Mr. Dean Kamen, President, DEKA Research & Development Corporation 

Oral Testimony ..................................................................................................... 11

Prepared Statement ............................................................................................. 14

Mr. Paul Misener, Vice President for Global Public Policy, Amazon.com 

Oral Testimony ..................................................................................................... 18

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

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

Inc. 

Oral Testimony ..................................................................................................... 23

Prepared Statement ............................................................................................. 26

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

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

in Congress from the State of California, and Ranking Member, Subcommittee on Courts, the Internet, and Intellectual Property ......................... 57

Letter from Mark T. Banner, Banner & Witcoff, LTD, Intellectual Property 

Law, with attachment from Chief Judge Paul R. Michel, to the Honorable 

Lamar Smith and the Honorable Howard Berman ........................................... 59

(1)

PATENT TROLLS: FACT OR FICTION? 

THURSDAY, JUNE 15, 2006

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COURTS, THE INTERNET,

AND INTELLECTUAL PROPERTY, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC.

The Subcommittee met, pursuant to notice, at 9:05 a.m., in Room 

2141, Rayburn House Office Building, the Honorable Lamar Smith 

(Chairman of the Subcommittee) presiding. 

Mr. SMITH. The Subcommittee on Courts, the Internet, and Intellectual Property will come to order. 

I am going to recognize myself in opening statement and the 

Ranking Member, and we’ll get to our witnesses immediately after 

that. We are looking forward to a great hearing today and learning 

a lot from who you are testifying. 

This morning, the Subcommittee will conduct its seventh hearing 

on patent reform in the 109th Congress by exploring the much-maligned patent troll. We hope to define trolling behavior in the modern patent world, determine its degree of privilege in the patent 

system and explore legislative reforms to combat it if needed. 

Complaints about trolling heightened public interest in patent 

reform and led to the development of the legislative drafts that our 

Subcommittee has reviewed. According to its critics, the troll is an 

individual who invents a patent product or process of suspect legal 

integrity or who acquires such a patent from a third party. The 

owner is characterized by someone who makes money by extorting 

a license from the manufacturer who allegedly has infringed the 

patent. Fearing the possibility of an injunction will force the manufacture to cease operations, the company settles. 

Critics of the patent system, including many high-tech and software companies, believe that trolls contribute to the proliferation 

of poor quality patents. Ultimately, these critics assert trolls force 

manufacturers to divert their resources from productive endeavors 

to combat bogus infringement suits. Other companies and individuals argue that licensing is a standard and a time-honored component of the patent system. They also assert that some proposals to 

change certain provisions in the Patent Act will disadvantage many 

legitimate companies, vendors, and universities. 

As our previous hearings have demonstrated, patent practice frequently pits conflicting interests against one another. For example, 

a software developer might endorse a specific change to the current 

statutory treatment of injunctive relief where damages computation is set forth in the Patent Act. The same revisions would be opVerDate 0ct 09 2002 11:58 Jul 20, 2006 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\061506\28201.000 HJUD1 PsN: DOUGA
2

posed by a number of patentee interests, especially those in biotechnology and pharmaceutical industries. 

Different entities use the patent system in different ways, depending on their respective business models. It is important to acknowledge this dynamic when evaluating the propriety of revising 

the patent system to combat trolling or promote other goals. Still, 

the patent system should reward 

creativity, not legal gamesmanship. 

In terms of the hearing scope, I hope the witnesses direct their 

testimony to subjects that have been addressed by H.R. 2795, the 

Patent Reform Act and other substitute drafts that the Subcommittee has reviewed. This includes a discussion about injunctive relief, especially in the wake of the Supreme Court’s decision 

in eBay v. MercExchange, apportionment of damages continuations 

and PTO operations, generally. 

Now that concludes my remarks; and the gentleman from California, Mr. Berman, the Ranking Member, is recognized. 

Mr. BERMAN. Thank you very much, Mr. Chairman; and thank 

you for scheduling this hearing so quickly after the eBay decision. 

As we have tried to move forward with patent reform, our efforts 

have been stymied by the many groups clinging to the notion that 

there was an entitlement to an automatic injunction upon a finding 

of infringement. I am hopeful that, as a result of the Supreme 

Court’s findings, we are able now to progress with legislation. 

Congressman Boucher and I introduced our patent bill 2 months 

ago, believing that the Federal circuit’s interpretation of the injunction statute invited abuse. We said that if we could merely underline or bold the current words in the statute guiding the infrastructure of injunction words like ‘‘may’’ and ‘‘equities’’ and ‘‘reasonable’’, 

we would have done so. 

Our goal is to achieve what the Supreme Court has now done for 

us: a return to the standard originally intended, that of providing 

courts with discretion and requiring a weighing of the equities. 

Therefore, I don’t believe at this time there is any further need to 

legislate on the injunction issue. 

However, the concurrence in the eBay decision raises additional 

issues relating—to quote an industry newly developed in which 

firms use patents not as a basis for producing and selling goods but 

instead primarily for obtaining licensing fees. 

Perhaps the place to start at this hearing is not the question of 

whether patent trolls are fact or fiction but rather the definitional 

question of what is a patent troll. Justice Kennedy asked it best. 

Is the troll the scary thing under the bridge or is it a fishing technique? 

Depending on where you are standing, the view from the bridge 

may render the same equity, either a patent holder who is simply 

trying to enforce his rights or a patent troll who is unfairly 

leveraging newly acquired property. 

In part, some of the irony surrounding the analogy to a troll is 

that, if I remember my fairy tales correctly, the troll usually loses 

in the end, contrary to what occurs in the marketplace today with 

patents. While I can provide no clear definition, I can tell you that 

in undertaking an effort to clarify aspects of the patent law to prevent the abuse of the system, there is no attempt here to impose 

3

a use requirement on a patentee. That’s not what we are trying to 

do. There is no attempt to prevent general licensing, and there is 

no attempt to weaken intellectual property rights. 

I have concerns about those who take advantage of the current 

patent system to the detriment of future innovations, whether 

called trolls, entrepreneurs or those that shall not be named. There 

is a significant problem if the patent being asserted is of questionable validity. 

I firmly believe that robust patent protection prevents innovation. However, I also believe that the patent system is strongest 

and that incentives for integration is the greatest when patents 

protect only those inventions that are truly inventive. 

When functioning properly, the patent system should encourage 

and enable the inventors to push the boundaries of knowledge and 

possibilities. If the patent system allows questionable patents to 

issue and fails to provide adequate safeguards against patent 

abuses, the system itself may stifle innovation and interfere with 

competitive market forces. 

When considering these principles together, I introduced a bill 

which provides the reform necessary for the patent system to 

achieve its intended goal of promoting innovation, including 

amendments to the Wolfowitz Standard, submission of third-party 

priority and a post-grant opposition procedure. These reforms are 

clearly not the only possibilities, and I look forward to hearing from 

the witnesses as they describe other alternatives and suggestions. 

As the New York Times has pointed out, there is legislation in 

the House to address the issue, and it needs to be taken up. I hope 

that introduction of the bill, in combination with the recent Supreme Court decision and these hearings, will facilitate the necessary advancement of patent reform legislation. High patent quality is essential to continued innovation litigation abuse. Especially 

those which thrive on low-quality patents impede the promotion of 

the progress of science and useful arts. 

I would still love to be able to act quickly during this 109th Congress to maintain the integrity of the patent system. 

Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Berman. 

Without objection, other Members’ opening statements will be 

made a part of the record. 

Does any other Member wish to be recognized for an opening 

statement? 

The gentleman from California, Mr. Issa. 

Mr. ISSA. Thank you, Mr. Smith. 

Mr. SMITH. Before you go on, Mr. Issa, if you will yield for a 

minute. 

It wouldn’t surprise me if I anticipate what you are going to comment on. Because you may have noticed that two of our witnesses 

mentioned one of your favorite subjects and that is a specialized 

patent court, and that may or may not be what you want to comment on. 

The gentleman is recognized. 

Mr. ISSA. I will put the balance of my statement into the record. 

I think you have succinctly hit on an issue that I hope that we do 

speak of more today. 

4

I do want to add to both of your opening statements, though, by 

saying that today I hope that we will look at injunctive relief also 

and look at it in terms of mend it, don’t end it. 

With that, I yield back. 

Mr. SMITH. Thank you, Mr. Issa. 

Before I introduce our witnesses, I would like for them to stand 

and be sworn in, please. 

[Witnesses sworn.] 

Mr. SMITH. By the way, I have never told this story before, but 

many years ago when I was first sworn in to Congress, I had my 

two young children with me. They were aged 7 and 9 at the time. 

And when the Speaker asked us to raise our hand to take the oath 

of office, both my children raised their hands and took the oath 

along with me, and I always felt that the 21st District had three 

Members of representatives for a couple of years there. 

But you are not under the same regimen of that. 

I also want to recognize a colleague of ours who has just joined 

us, Congressman Bass of New Hampshire. He has a constituent 

and a friend as a witness today, and I don’t know whether Congress Bass wants to introduce Mr. Kamen or whether you want me 

to introduce Mr. Kamen. 

Mr. BASS. If the distinguished gentleman will yield to me, I am 

most grateful for his accommodation. At the appropriate moment, 

if I could introduce my friend from New Hampshire, I’ll be most 

grateful. I am in no hurry. 

Mr. SMITH. Why don’t we go out of order and why don’t you introduce Mr. Kamen? 

Mr. BASS. I will only say that it warms my heart to see Dean 

Kamen stand up there and put up his right hand and say that he’ll 

tell the truth. Maybe we should do that every time we get together. 

I am honored to introduce to this Committee my friend from New 

Hampshire, Dean Kamen. Dean Kamen really works and represents what is the heart of America’s economics and industrial future. He is truly an inventor, and he owns and runs one of the Nation’s few really successful modern development labs. 

I often think to myself that Dean sits in his office on the edge 

of the Merrimack River in Manchester and the elevator opens all 

day long and these frogs jump out of the elevator and they hop 

down the hall into his office and they sit there and he kisses every 

one of them. Some of them, 9 out of 10 of them, remain exactly as 

they are, and he chucks them out of the window into the river behind him. All of a sudden, he kisses one, and it turns into a prince, 

and that prince goes on to become cures for people that have heart 

problems, people who are diabetic and need good insulin pumps, 

people who want different mobility devices and people who are in 

the business of trying to develop a long-term, stable energy future 

for our country. 

I know you are having a hearing today on the issue of a very 

thorny issue of patent regulation, if you will. But anything that you 

do that makes it difficult for people like Dean Kamen to be innovative and to bring new products to the U.S. Economy legitimately 

would be very tough for our country, and I appreciate his appearing here today. 

5

He’s a wonderful friend of mine and a great and compassionate 

American. So I thank you for being here today. 

Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Bass. You got Mr. Kamen off to a 

good start this morning. 

I’ll resume and introduce the rest of the witnesses. 

Our first witness is Edward Reines, a partner in the technology 

litigation practice of Weil, Gotshal & Manges in Redwood Shores, 

California. Mr. Reines is secretary of the Federal Circuit Bar Association and serves on its Board of Governors. He also teaches a patent litigation course at the University of California Berkeley’s 

Boalt Hall of Law. Mr. Reines received a J.D. From Columbia Law 

School and a BS from the State University at New York in Albany. 

Dean Kamen has been introduced. The only thing I might add 

to the wonderful introduction you received is you are the founder 

of DEKA Research and Development Corporation, which creates inventions and provides R&D services for corporate clients. The only 

other thing to add and the metaphor that Mr. Bass used, that you 

created 150 princes: 150 successful patents. 

Our next witness is Mr. Paul Misener, Vice President for Global 

Policy for Amazon.com. In this capacity, Mr. Misener is responsible 

for formulating Amazon.com’s public policies worldwide, as well as 

for managing the company’s policy specialists in Washington and 

Brussels. He received his BS in electrical engineering and computer science from Princeton University and his J.D. From the 

George Mason School of Law. 

Our final witness is Chuck Fish. Mr. Fish is Vice President and 

Chief Patent Counsel for Time Warner. In addition to handling 

Time Warner’s patent affairs, Mr. Fish is a frequent speaker about 

legal matters before trade associations and other organizations. He 

is a graduate of the United States Naval Academy and Wayne 

State University Law School. 

Welcome to you all. We have written statements and your complete testimony. Without objection, the complete testimony will be 

made part of the record. 

As you all already know, we hope you’ll contain yourselves and 

limit yourself to 5 minutes during your formal remarks, and we’ll 

follow up with questions in just a minute. 

That concludes my introduction. 

Mr. Reines, we will begin with you. 

TESTIMONY OF EDWARD R. REINES, ESQ., WEIL,

GOTSHAL & MANGES, LLP 

Mr. REINES. Thank you, Chairman Smith, Ranking Member Berman and Members of the Subcommittee. Thank you again for inviting me to appear before this Committee on patent issues. 

To understand my vantage point, you need to understand I come 

from a law firm that has a very broad-based patent litigation practice. We have got about a hundred attorneys, full-time patent 

litigationists throughout the country. We represent all kinds of parties: big companies, little companies, all kinds of technologies, 

plaintiffs, defendants. We have gotten verdicts for tens of millions 

of dollars. We have defended against claims for tens of millions of 

dollars. 

6

So we have got a very balanced viewpoint. We are beholden to 

no type of client or any client in specific, and I hope that permits 

me to give the Committee an informed view from the trenches dayto-day in a courtroom or in a deposition room or looking at documents and not someone who is in the lobbying business. 

So I can give you a view from the front lines, and I hope it is 

a balanced and informed one. After I give my views, I am happy 

to answer any questions and hope to. 

Before I get to the substance of my testimony, I want to express 

appreciation for the investment this Committee has put into patent 

issues. As Chairman Smith says, there have been seven hearings. 

We all know patents are notoriously dense in terms of the subject 

matter and can be quite esoteric, and we appreciate the work of the 

Committee and the staff in taking on this important issue. 

To get right to the question of patent trolls, which is the question 

that the Committee has framed for today, I want to say at the outset the term was coined about 7 years ago and a lot of ink’s been 

spilled and Internet blogs filled trying to come up with a precise 

definition of the contours of who is a patent troll and who is not. 

Serious publications like the Wall Street Journal have all addressed this question. 

I want to directly answer your question and say that, based on 

my experiences, I think it’s fairly characterized that trolls do exist. 

So it is a fact. 

One instance is a company that we litigated against was a small 

group of attorneys that had pooled some money, bought a patent 

for $50,000 at a bankruptcy auction, basically a scavenger hunt. 

After spending $50,000, demanded billions of dollars from a very 

large, successful American company. And, fortunately, after a lot of 

expense and distractions of engineers and managers and other people that can be productively engaged in business, we eliminated the 

claim as having no reasonable basis. But I can conclude, based on 

that, that, yes, there are patent trolls that are out there. I think 

that entity fairly constitutes one. 

I’ll note that none of the qualities that I described doesn’t develop any technology. Only lawyers buy something cheap and try 

to make a lot money out of it. None of them would fit a Dean 

Kamen. 

So that is a pure patent troll, and they go exist. 

Now having concluded that a patent troll exists doesn’t necessarily answer the question that we want to answer, and that is 

how productive is the exercise of defining a patent troll for the 

process of patent reform. I think it is very elusive to come up with 

a definition that’s neither overinclusive nor underinclusive. It is an 

emotional hot-button to categorize or label someone as a troll, and 

I would be concerned that too much focus on that would detract 

from the important mission of patent reform. 

So I think it is to understand there are patent trolls, but the way 

I see for patent reform, you roll up your sleeves and you craft patent reform, is to address abusive practices, whoever engages in it 

and not try to necessarily define something with certainty and go 

at it that way. 

Regarding undesirable conduct, that is worthy of attention regardless of who engages in those actions. There are six areas that 

7

I think are appropriate for the Committee to consider. This really 

doesn’t go in to the patent quality issues. That’s a separate subject 

for a different hearing. 

But in terms of addressing troll-like behavior, or undesirable behavior in litigation or negotiations, whoever performs it, willfulness 

and treble damages based on willfulness is an important one. 

Submarine patents is important, continuation of these. The Patent Office is doing good work on that, but I think it is going to need 

this Committee’s report. 

Damages law hasn’t kept up with the changes in innovation in 

the nature of technology. 

Forum shopping and different forum issues have come up and injunctions. Just to address Representative Berman’s comment on injunctions, I am hopeful that the eBay decision will remove the debate between various industries about injunctions from being implemented to successful patent reform, and I think that will be 

true. I think I have heard that in a lot of the hallway discussions, 

and I am hoping that that will be so. 

I have written extensive comments on these subjects, and I’ll be 

happy to answer questions, but with the rest of my I’ll leave it at 

that. 

Mr. SMITH. Thank you, Mr. Reines. 

[The prepared statement of Mr. Reines follows:]

PREPARED STATEMENT OF EDWARD R. REINES

I.

INTRODUCTION

Thank you for asking me to share my thoughts concerning the question of ‘‘patent 

trolls’’ and effective patent reform. My name is Edward Reines, and I am a Partner 

in the law firm of Weil, Gotshal & Manges, LLP. I specialize in patent cases and 

I am based in Silicon Valley. I am honored to appear again before this Subcommittee. 

Let me briefly describe our patent litigation practice so you can understand more 

about my vantage point. Weil, Gotshal’s patent litigation practice is national; we try 

cases from coast to coast. We have a team of nearly one hundred attorneys who concentrate on patent litigation. At any given time, we handle dozens of active patent 

cases. We represent small entities and we represent large entities. We represent 

plaintiffs and we represent defendants. We have won verdicts for many millions of 

dollars and we have defended against such claims. 

In sum, as an attorney who works day-to-day in the patent litigation trenches, 

beholden to no class of litigant, I plan to share with the Subcommittee an informed 

and balanced perspective from the front-lines. In that regard, these are my independent views, not those of my law firm or any of its clients. I also welcome the 

opportunity to answer any questions you may have. 

II.

THE TIME IS RIGHT FOR PATENT REFORM

At the outset, as a member of the patent community at large, I would like to express appreciation for the investment this Subcommittee and its staff have made in 

taking a close look at patent reform. Patent issues can be esoteric and there are 

many other issues on the Congressional agenda that may be viewed as more glamorous. 

There is a building consensus that now is the right time for patent reform. Innovation is the life-blood of our economy and a key contributor to our global competitiveness. While there are fringe pundits who would eliminate our patent system, 

there can be no serious question that a vibrant patent system is a key ingredient 

to a thriving technology sector. However, for its own health, the patent system deserves reform now; much as an overgrown plant requires pruning to regain its balance and vitality. Concerns in the business community about excesses and abuses 

8

1 Joe Beyers, ‘‘Perspective: Rise Of The Patent Trolls,’’ CNET News, October 12, 2005 http:/

/news.com.com/Rise+of+the+patent+trolls/2010-1071—3-5892996.html (‘‘The shakedown is on. 

In the aftermath of the dot-com bust, a new kind of business with a simple, yet potentially lethal, model has emerged. Call them the ‘patent trolls.’ ’’). 2See Brenda Sandburg, ‘‘You May Not Have A Choice. Trolling for Dollars,’’ The San Francisco Recorder, July 30, 2001 (quoting Peter Detkin, ex-Intel legal counsel). 3See, e.g., Dennis Crouch, ‘‘What is a patent troll?,’’ Patently-O Patent Law Blog at http://

www.patentlyo.com/patent/2006/05/what—is—a—paten.html. Anyone familiar with modernday patent litigation should not be surprised that patent lawyers would dedicate such energy 

to attempt to arrive at a definitive meaning for a common term. 4Don Clark, ‘‘Inventors See Promise In Large-Scale Public Patent Auctions,’’ Wall Street Journal Online, March 9, 200; Lorraine Woellert, A Patent War Is Breaking Out On The Hill, Business Week, July, 2005. 

are at a high.1 This breeds cynicism and undermines confidence in the patent system. Moreover, the upsurge in Supreme Court activity in the patent area, and the 

media spotlight on high-profile patent matters such as the Blackberry(c) case, confirm that this is the right time for this Subcommittee to continue to lead the national debate on patent reform. 

III.

THE QUESTION OF PATENT TROLLS

The term ‘‘patent troll’’ was coined about seven years ago to refer to abusive patent litigants.2 Since then, a lot of ink has been spilled—and internet blogs filled—

attempting to define exactly who is a troll.3 Serious publications from Business 

Week to The Wall Street Journal have addressed this issue.4

To answer directly the question posed for this hearing, the existence of entities 

fairly characterized as patent trolls is a fact. If lawyers start a company purely to 

buy a patent out of bankruptcy, and promptly seek royalties that are one hundred 

thousand times what they just paid for the patent, you have a patent troll under 

any reasonable definition. This is particularly true where the demand is based on 

an implausible theory of infringement. 

I can tell you based on first-hand experience that such entities do, in fact, exist. 

But a valid, working definition that is neither over-inclusive nor under-inclusive is 

elusive. This is true because entities which attempt to exploit the existing imbalances in patent law take all shapes and forms. The only limit is human ingenuity. 

Thus, when it comes to the hard work of rolling up your sleeves and shaping patent 

reform legislation, it is my view that we are best off targeting actions that are undesirable when undertaken by any litigant. Nonetheless, an examination of the characteristics of what some consider a ‘‘pure troll’’ may be useful in highlighting the 

nature of the imbalances which need reform. Such an entity:

• Has no significant assets except patents

• Produces no products

• Has attorneys as its most important employees, and

• Acquires patents, but does not invent technology itself.

The patent community’s efforts to define a patent troll with precision have borne 

fruit by provoking helpful, and often passionate, discussion about who is abusing the 

patent system and how they can be deterred. However, effective reform legislation 

that addresses abusive practices generally will not only get at the root of the ‘‘patent 

troll’’ problem, but it also will evenhandedly deter undesirable behavior regardless 

of who engages in it. In the end, because the debate over whether this litigant, or 

that litigant, is a troll can provoke an emotional controversy over the intrinsic worth 

of a company or person, there is a risk that too much focus on labeling particular 

entities as patent trolls will distract from the greater patent reform effort. 

IV.

UNDESIRABLE CONDUCT WORTHY OF ATTENTION

Much of the patent reform debate has focused on patent quality and the need for 

improvement at the Patent Office. In litigation, we see many patents that are valid 

and which were properly granted by the Patent Office. We recently tried a case in 

which we enforced patents covering an invention for which a Nobel Prize was 

awarded. To be sure, such patents are important. Nevertheless, based on the mixed 

quality of the patents seen day to day in litigation, patent quality is undoubtedly 

a subject worthy of scrutiny. However, because this Subcommittee has already conducted productive hearings on patent quality, and because patent quality is not specific to the ‘‘patent troll’’ issue, I will focus my testimony on undesirable conduct by 

9

5See 35 U.S.C. Section 122. 

the users of the patent system, rather than patent quality per se. That said, the 

need for an even-handed review of patent validity is essential, and the Committee 

should examine post-grant opposition mechanisms that allow for an opposition to be 

filed after a patent infringement lawsuit is brought. 

Below, I identify six areas for potential reform to improve the patent system and 

discourage undesirable behavior. 

A. Treble Damages—Willfulness 

Top among the areas worth attention as part of patent reform is treble damages 

based on claims of willfulness. Too often, patent owners use the threat of treble 

damages to attempt to extract a greater settlement than is warranted. This frequently happens in negotiations before a case is filed. In patent cases, the specter 

of treble damages is easy to create because it does not take much to level an allegation of willful infringement. Indeed, I cannot recall a patent infringement complaint 

that did not have a request for treble damages based on an allegation of willfulness. 

Abusive litigants will commonly ‘‘notify’’ a defendant of many allegedly infringed 

patents leading up to the filing of a complaint, often using clever lawyer language 

to implicate as many patents in its portfolio as possible. A company in receipt of 

such a letter is put in a difficult situation. If it would like to have a traditional legal 

opinion to respond to a willfulness allegation, it obviously needs to secure and pay 

for an opinion from an independent law firm each time it receives a notice letter. 

The cost of an opinion can easily reach $50,000 and up per patent, not to mention 

the time of corporate legal and technical staffs to manage the opinion process. In 

such circumstances, it can be economically rational for the accused to simply settle 

the matter before expending the resources and time necessary to gather outside 

legal opinions for every threatened patent. 

Moreover, should the case go to litigation, defendants are put to the difficult 

choice of waiving the attorney-client privilege to prove that they in fact relied upon 

‘‘competent’’ legal advice. If they do not waive the privilege, they will be unable to 

rely upon the exculpatory advice they sought and received. However, if they do 

waive the privilege there are heavy costs. Such a waiver is highly invasive and 

handicaps the defendant from the outset because it is forced to unilaterally turn 

over its legal theories and strategy. In addition, given the volume of so-called ‘‘notice’’ letters that are sent, it is difficult as a practical matter for even the most conscientious legal staff to secure legal opinions for every patent brought to its attention that cannot be called into question in some way by a skilled trial attorney if 

the case goes to trial. 

In short, the current rules for willful infringement invite abuse and are worthy 

of this Subcommittee’s attention. The duty to respond to an allegation of patent infringement should only arise when a direct allegation of infringement has been 

made. 

B. Submarine Patents 

Submarine patents are a problem often associated with patent trolls. Submarine 

patents are patents that are secret until long after the date of invention and long 

after the market in an area of technology has developed. Under current United 

States law, publication of a patent application can be delayed until a patent is actually granted if one does not file corresponding foreign patent applications.5

When the existence of a patent application remains secret, the market becomes 

quite vulnerable to a late-issuing patent. This is because market participants build 

products and develop industries blind to the claimed patent rights of others. Once 

the market adopts a technology, altering products to remove that technology can be 

very expensive and disruptive. Customers get used to a particular technology and 

will resist change. This is true even if the selected technology is no better than 

available alternatives. For example, in our country, household appliances have developed based on the design of the common electrical wall plug with which we are 

all familiar. It would be very difficult to now change the plug style we use in this 

country, even though we know that there are equally effective wall plug designs successfully used around the world. Thus, taking this example, when adopting a style 

of wall plug it would be beneficial to know who is claiming the exclusive rights to 

which style plug so an informed choice can be made. 

In short, submarine patents provide a patent owner with unfair leverage as a result of stealth. This problem can be addressed by requiring publication of patent applications 18 months after filing for all patent applications regardless of whether related applications are filed abroad. 

10

C. Continuation Applications 

A problem related to the issue of submarine patents is the unlimited right patent 

applicants have to file continuation applications when seeking patents. As things 

stand, after receiving a patent on an initial patent application, the applicant can 

submit an unlimited number of continuation applications. This allows an applicant 

to obtain a patent but also ‘‘keep alive’’ a duplicate of that patent application by 

filing a ‘‘continuation.’’ New patents can then be sought on the same technology for 

years to come. 

This common practice allows a patent owner to file suit based on its initial patent 

while a continuation of the patent application remains pending in the Patent Office. 

Inevitably, applicants exploit information gained in litigation or from the marketplace to shift their patent rights over time to cover the products in the marketplace 

rather than to cover what they believed was invented. One negative effect of this 

practice is that patent owners can threaten a product not only with its existing patents, but with the promise that new and improved patents will issue long into the 

future. Product makers are then motivated to settle rather than face a long future 

of patent litigation by a tenacious patent owner, even if they believe they can win 

the case they are then litigating. 

The Patent Office is seriously considering the revision of its continuation rules to 

address this area of abuse. The Subcommittee should support the Patent Office in 

its laudable effort to reform continuation practice, as appropriate. In addition, the 

Subcommittee should continue to monitor this issue to determine whether legislative reform is warranted. 

D. Damage Apportionment 

The issue of damage apportionment is important, but often overlooked. The problem stems from the fact that modern technology is so complex that one product can 

relate to thousands of patents. Patent owners often seek a substantial royalty that 

is a percentage of the value of the overall product, even where the patentee’s inventive contribution relates to an extremely small aspect of the product. Thus, if a product sells for $100,000, the patentee will often seek 5% or more of the overall price 

of the product for a $5000 royalty per product, even if the patent relates only to 

a minor and rarely used option. This problem is particularly acute when the patent 

owner sells no products. This is because there is no risk that overreaching royalty 

demands it makes will be used against it by others. 

Unfortunately, current law does not do a good job of ensuring that a patentee receives a royalty in proportion to the true role of the patented invention. As an example, in many cases damages’ experts will rely on the traditional principle that, as 

a ‘‘rule of thumb,’’ licensors should receive a quarter to a third of the profit made 

on a product. However, if there are five patents relevant to a complex product, much 

less thousands, all the profit and then some would go to patent licensors applying 

this ‘‘rule of thumb.’’ The party that actually created and sold the product would 

be forced to lose money on its products sales, under this common royalty analysis. 

Yet, this type of testimony is often permitted because of years of authority and longstanding licensing practices from a bygone era. 

Another factor is that the legal form of patent claims can be manipulated to inflate damage demands and awards. A patentee can draft a patent claim to cover a 

large and expensive product even where the invention relates only to a minor and 

inexpensive component. For example, if one were to invent a new type of windshield 

wiper, patent law permits the patent to be granted on a standard car with the improved windshield wiper. Under common interpretations of patent law, the royalty 

percentage is then based on the price of the entire car, not just the improved windshield wipers. This, not surprisingly, inflates unduly the plaintiffs’ demands. 

Put simply, in the real world, a host of factors impede attempts to put a patent 

in context so one can effectively explain to a jury this concept of proportionality. For 

example, judges often do not want a trial to involve what other patents may cover 

a product beyond those that are allegedly infringed because it is complex enough 

for the jury to determine whether the asserted patent or patents cover the product. 

In addition, a juror is subjected to so much focus on the asserted patent and the 

accused feature in the trial process that efforts to put into perspective the limited 

role of the patented technology are difficult. 

Reforms to the law of patent damages are worthy of this Subcommittee’s attention 

and simply codifying existing caselaw, such as the so-called ‘‘Georgia Pacific’’ factors, 

is insufficient. 

E. Choice of Forum 

Another area worthy of the Subcommittee’s attention is the forum selection system for patent cases. Some commentators complain about generalist courts that do 

11

not have sufficient patent expertise or sufficient resources to resolve patent cases 

fairly. On the other hand, other commentators pick on one or two courts because 

they attract a lot of patent cases. But the issue is not any particular venue or region. Rather, the issue is that the breadth of the current patent venue statute allows plaintiffs to select a courthouse with such latitude that the selected forum—

wherever it may be—is often viewed by the defendant as unfairly inconvenient, unsympathetic or otherwise unfavorable. 

Some have proposed experiments with specialized patent courts, others have proposed major revisions to the venue statute, still others believe the current venue 

transfer rules are more than adequate to address this issue. Regardless of the ultimate answer, this is an area worthy of the Subcommittee’s attention. 

F. Injunctions 

Until the Supreme Court’s recent eBay decision, the law of injunctions in patent 

cases was susceptible to abuse. Settlement negotiations often featured graphic, and 

public, threats of a permanent injunction designed explicitly to gain undue settlement leverage. Courts would almost always grant permanent injunctions. Exceptions were rare. To avoid the near automatic injunction required an extreme situation, such as the potential for a public health emergency or a threat to national security. 

Hopefully, the eBay decision will improve the law of patent injunctions and thus 

bring closer together the various groups that support patent reform. But while the 

eBay decision encourages a greater weighing of the equities by district courts, the 

decision was not determinative as to the future direction of the law of injunctions 

in patent cases. Accordingly, this is an area worthy of continued monitoring by the 

Subcommittee. 

V.

CONCLUSION

A healthy patent system is important to the continued success and progress of the 

American economy and society. Our current system is in need of reform. Patent 

trolls exist and they are a problem. However, the proposed definitions of that term 

are over-inclusive, under-inclusive or, more frequently, both. Abuse in the patent 

system is best addressed by identifying undesirable conduct that should be deterred 

regardless of who engages in such conduct. I hope this testimony helps the Subcommittee identify areas of abuse so that balanced patent reform can be pursued. 

Improvements in patent law in a very direct sense improve the prosperity of our 

technology community, which is a crown jewel of the American economy. The work 

undertaken by the Subcommittee and its staff directed towards patent reform is 

therefore most appreciated.

Mr. SMITH. Mr. Kamen. 

TESTIMONY OF DEAN KAMEN, PRESIDENT,

DEKA RESEARCH & DEVELOPMENT CORPORATION 

Mr. KAMEN. First of all, thank you for those very kind remarks, 

but I wish I was getting a prince out of only 10 frogs. It is way 

worse than that in the real world. Thank you. 

I also have only 5 minutes; and, not being a lawyer, I would just 

say that I of the reasons I am interested in this situation is I’ve 

had two kinds of business models in my life, and I only recently 

found out after reading the definition of a troll that I am one. So 

I would like to explain to you what my business was and what it 

is and why I think it is maybe a little unfair and dangerous to 

characterize people that licenses products as trolls. 

So my first business I started when I was in high school. My 

older brother was in medical school. He’s a brilliant guy, and he 

would come home on the weekends and complain about the fact 

that equipment didn’t exist for treating very, very small babies, 

neonates, that he was trying to develop cures for their cancers. I 

built them little pumps over the next couple of years. He would 

12

take it to the various schools, the university where he was, and 

there was a broader and broader need for these things. 

Over about a 6-year period, after taking only a few months or, 

at most, a year to get the first ones out, it took about 6 years to 

build a whole business by which I was designing, building, testing, 

manufacturing, and then delivering these things. I had to build a 

whole sales organization, and it worked, and we had a successful 

little business. 

We sold that business to a giant company for a couple of reasons. 

It had grown to be a few hundred people, only 10 or 12 of which 

were still doing the research on our next generation of products. 

And running that business was a lot of work. It took a lot of capital. It took a lot of time. And I didn’t think we were very cost-effectively getting their product to the market because we had one product or two products and we had to support a whole infrastructure 

to put them out. 

We sold the business, and I decided I could either work on any 

one of the new products I had, and it would probably take another 

6 or 8 or 10 years to convince the world we had a better solution 

to get it built and delivered, but you only get a few cycles of that 

in a lifetime and in a career. 

My other alternative was, why don’t I focus on solving these 

problems, creating these prototypes which we could develop relatively quickly, take them to these giant companies who do what 

they do well. They have marketing, they have sales, they have distribution, they have infrastructure, and I deliver the solutions to 

them. Because I thought we were better at doing that than these 

big companies and we would create by doing that business model 

a win-win situation. 

I win because I get to do the front-end fun stuff. I get to kiss a 

lot of frogs, and I can work on a lot of projects. And the big companies win because I deliver stuff to them and they can throw it out 

if they like and they didn’t have to waste time on new stuff. But 

if they like it, they can take it. And mostly the public would win, 

because I could get way more products out to way more people 

more quickly; and it would cost the public less because they are 

taking advantage of this larger infrastructure of my big corporate 

client. 

Over the next few years, we worked on as many diverse things 

as we made the first home dialysis systems. There’s now 80,000 of 

them out there. We made our hundred millionth disposable for that 

this year. We built iBots for people who can’t walk up stairs. We 

built stents for people to eliminate surgery. 

We now have the same 200 people I had—well, not the same. We 

have the same quantity of people, but they are all development 

people. We work on a lot of stuff. We kiss a lot of frogs, but if we 

get to something that looks good, and we deliver it to a large company, and they do what they do well, they get out to the public, 

it is a way faster process of getting innovation out there. 

My concern is when I walk into that big company they’ve got 

marketing, they’ve got distribution, they’ve got everything. If I 

show them what I have got, the only thing that I have on my side 

of the table is that patent; and the only way to convince them that 

they should commit the huge resources to turn that into a product 

13

is to be able to say that I can deliver this to you in return for supporting this product and you singularly are going to have to pay 

for the development and introduction. You singularly—you exclusively will have the right for some period of time to do this. You 

give me my royalty; you get your product. The product gets to the 

public, and it works. 

And I think that was the purpose of the patent system. Big companies probably don’t need that. They’ve got de facto standards; 

they’ve got market standards. I think the patent system was intended to help encourage everybody to be able to participate in 

being innovative without needing to be a giant company. I think it 

works. 

I have got 200 people and 200 families that are supported by 

that system. I have got a lot of big clients that like what we deliver 

to them, and I think the public has gotten a lot of benefit from 

what we do. 

Mr. SMITH. Okay. Thank you, Mr. Kamen. 

[The prepared statement of Mr. Kamen follows:]

14

PREPARED STATEMENT OF DEAN KAMEN


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Mr. SMITH. Mr. Misener. 

TESTIMONY OF PAUL MISENER, VICE PRESIDENT

FOR GLOBAL PUBLIC POLICY, AMAZON.COM 

Mr. MISENER. Good morning, Chairman Smith, Mr. Berman and 

Members of the Subcommittee. Thank you very much for inviting 

me to testify on this important matter. 

Mr. Chairman, let me begin by thanking you for your leadership 

and resolve on patent reform. You and your Subcommittee have 

long recognized the centrality of intellectual property to our information economy; and now, with household brand names involved in 

well-publicized lawsuits, the importance of sensible patent litigation reform is becoming increasingly obvious to the public. We also 

greatly appreciate the efforts of the Ranking Member and others 

who have worked hard on this important issue. 

Let me thank you on the Subcommittee for passing section 115 

reform last week. As with music licensing, the law of patent litigation must now be rebalanced. More than any other request in my 

testimony this morning and on behalf of my customers and company, I ask that you continue your leadership in patent reforms so 

that legislation can be enacted next year at the latest. 

I also ask that you consider Amazon’s particular experience with 

patent litigation in our two specific proposals to solve a pair of 

problems we have encountered. 

At the outset, Mr. Chairman, let me offer my general thoughts 

on so-called patent trolls. In testimony today and elsewhere, I have 

tried to avoid using the term ‘‘troll,’’ not because troll-like behavior 

does not exist or should not be proscribed but, rather, because the 

term may vilify entities that are simply taking advantage of the 

currently flawed patent litigation system. 

Mr. Chairman, notwithstanding Amazon.com’s extensive and 

growing portfolio, which includes at least one well-known business 

method patent that we have enforced against a competitor, we have 

long recognized the need to rebalance the patent litigation system 

which, in our view, currently is unfairly skewed in favor of patent 

owners. 

Indeed, Amazon.com has seen patent litigation from both sides, 

and we believe the system needs to be tipped back to a level in fairness to entities that bring patented technologies to consumers. Our 

patent litigation experience over the past 6 years has reinforced 

our belief in a need to rebalance the current needs system. 

In the Pinpoint case, we were sued for over $60 million for damages in the allegations that our customer personalization techniques infringed a patent covering cable TV movie systems. In the 

IPXL case, we were sued for tens of millions of dollars, with the 

plaintiff alleging that our 1-Click ordering service infringed a patent covering a bank ATM interface. And, last year, for $40 million, 

we settled with the owner of a host of E-commerce patents, nearly 

two dozen of which were purchased for less than $2 million. 

Soverain had alleged that a few of these patents tread on our use 

of the virtual shopping cart and other features on our Web site. 

Besides the threat of automatic injunction, we encountered in our 

litigation experience two essential problems with patent law. First, 

we had little or no way of knowing in advance of the relevance of 

19

patents at issue; and, second, in none of these cases did the plaintiffs substantially practice the patents at issue. Yet in all of these 

cases the damages sought reflected plaintiffs’ belief that they were 

entitled to compensation beyond reasonable royalties. 

Based on this experience, Amazon now respectfully offers two 

patent litigation reform proposals. 

In Amazon’s first proposal, we ask that Congress ask successful 

claimants with method patents to obtain damages only back to the 

point that the defendant had actual notice or knowledge of the alleged infringement. 

For the same reasons that constructive or actual notice is required of the owner of an apparatus patent who practices the patented invention, fairness requires notice with regard to method 

patents. Therefore, for method patents, where constructive notice is 

not workable, Amazon proposes that the law be rebalanced to require actual knowledge of the patent by an infringer before damages can accrue. 

In Amazon’s second proposal, we ask that Congress clarify that 

when courts analyze whether a plaintiff should be entitled to such 

an award of lost profits as a matter of law, a plaintiff should be 

entitled to such an award only if and for the time that the defendant’s infringing product competes with a product that the plaintiff 

makes or sells. 

Although the general rule that is that if the plaintiff is not in 

the marketplace, it is only entitled only to a reasonable royalty, 

some courts still will occasionally allow a plaintiff that does not 

practice the patent nonetheless to argue to a jury that it is entitled 

to obtain lost profits. These outlier decisions create needless uncertainty and impede or artificially inflate the cost of settlements. 

Therefore, Amazon asks that Congress clarify that patent owners 

that are not genuinely in the marketplace competing with the defendant are not entitled to lost profits but, instead, to a reasonable 

royalty. 

In conclusion, Mr. Chairman, by virtue of our experience with 

patent litigation, Amazon.com believes that reform is essential; 

And we are very grateful for your leadership in this area. To the 

list of several excellent proposals already on the table, we would 

like to add the two suggestions I have described this morning to 

address specific shortcomings in the patent litigation system that 

we have encountered. 

Thank you again, Mr. Chairman. I look forward to your questions. 

Mr. SMITH. Thank you, Mr. Misener. 

[The prepared statement of Mr. Misener follows:]

PREPARED STATEMENT OF PAUL MISENER

Good morning, Chairman Smith, Ranking Member Berman, and Members of the 

Subcommittee. My name is Paul Misener. I am Amazon.com’s Vice President for 

Global Public Policy. Thank you very much for inviting me to testify on this important matter. I respectfully request that my entire written statement be included in 

the record. 

Mr. Chairman, let me begin by thanking you for your leadership and resolve on 

patent reform. You and your Subcommittee have long recognized the centrality of 

intellectual property to our information economy and, now, with household brand 

names involved in well-publicized lawsuits, the importance of sensible patent litigation reform is becoming increasingly obvious to the public. We also greatly appreVerDate 0ct 09 2002 11:58 Jul 20, 2006 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6621 G:\WORK\COURTS\061506\28201.000 HJUD1 PsN: DOUGA
20

ciate the efforts of the Ranking Member and others on the Subcommittee who have 

worked hard on this important issue. Relatedly, let me also thank you and the Subcommittee for passing Section 115 reform last week. Amazon believes that, as with 

music licensing, the law of patent litigation must now be rebalanced. 

Therefore, more than any other request in my testimony this morning, and on behalf of our customers and our company, which is dedicated to bringing novel products to consumers as quickly as possible, I ask that you continue your leadership 

in patent reform so that legislation can be enacted next year, at latest. I also ask 

that you consider Amazon’s particular experience with patent litigation, and our two 

specific proposals to solve a pair of problems we have encountered. As I will describe 

in detail, Amazon asks that Congress:

1. allow successful claimants with method patents to obtain damages only back 

to the point that the defendant had actual notice or knowledge of alleged infringement and, as under current law, in no case back more than six years 

before the complaint was filed; and

2. clarify that when courts analyze whether a plaintiff should be entitled to an 

award of lost profits as a matter of law, a plaintiff should be entitled to such 

an award only if, and for the time that, the defendant’s infringing product 

competes with a product that the plaintiff makes or sells.

At the outset, Mr. Chairman, let me offer my general thoughts on so-called ‘‘patent trolls,’’ a moniker usually ascribed to entities that own and enforce patents without substantially practicing them. Although this term provides a vivid, colloquial 

image of some plaintiffs in patent litigation, agreement on a definition of ‘‘troll’’ may 

not be easy to attain and, more importantly, is not necessary for Congress to dramatically improve our patent system. So, in my testimony today and elsewhere, I 

have tried to avoid using the ‘‘troll’’ term, not because troll-like behavior does not 

exist or should not be proscribed but, rather, because the term may vilify entities 

that simply are taking advantage of the current, flawed patent litigation system. 

Put another way, as a matter of fairness and sound public policy, America’s patent 

litigation system needs to be rebalanced, but we need not specifically define ‘‘trolls’’ 

in order to do so. 

Mr. Chairman, notwithstanding Amazon.com’s extensive and growing patent portfolio, which includes at least one well-known business method patent that we have 

enforced against a competitor, we have long recognized the need to rebalance the 

patent litigation system which, in our view, currently is unfairly skewed in favor 

of patent owners. Indeed, Amazon.com has seen patent litigation from both sides, 

and we believe the system needs to be tipped back to level in fairness to entities 

that bring patented technologies to consumers. Six years ago, only months after we 

successfully sued to enjoin a competitor from infringing our 1-Click patent, we 

made several proposals that actually would have curtailed the rights of patent 

plaintiffs. Since then, there have been several positive changes to the overall patent 

environment, including the provision of full funding for the U.S. PTO and the Supreme Court’s recent decision in the MercExchange case. In addition, Amazon has 

half a decade more experience in patent litigation. Based on these changes and direct experience, Amazon has modified its specific reform proposals from the year 

2000, but still strongly believes that patent litigation reform is needed to rebalance 

the rights of patent plaintiffs and defendants. This morning, I will offer two modest 

proposals with respect to damages. 

But before I describe these proposals, please allow me to provide some background 

on Amazon’s experience. As noted before, we have a significant and growing patent 

portfolio, including two business method patents commonly known as the ‘‘1-Click’’ 

and ‘‘Associates’’ patents. Despite how these patents occasionally have been portrayed in the press and elsewhere, we continue to believe that they represent novel 

inventions that seem obvious only in hindsight. 

For example, at the time we filed our 1-Click patent application in the summer 

of 1997, online sales were focused entirely on the ‘‘shopping cart’’ and ‘‘checkout 

line’’ metaphors, with all the attendant consumer steps needed just to buy something. Our inventors recognized that, on the Web, such steps are not necessary, and 

described a much simpler, consumer-friendly, and innovative method for making 

purchases. Extensive, well-publicized attempts to invalidate these patents, even 

with monetary bounties available, have failed. We were—and remain—confident in 

the strength of these patents, and the fairness of litigating them against infringing 

competitors such as Barnes and Noble which, at the time of our litigation, had 

vowed to crush our business; had not invested in developing novel online purchasing 

technologies; and, in many instances, appeared to be copying features from Amazon’s website. 

21

Nonetheless, we soon recognized another side of the story: the potential for litigation excesses by patent owners. This recognition came in part because, early in the 

year 2000, we became associated in the press with litigation abuses, and were criticized by some of our customers. Rather than rejecting or simply ignoring this criticism, we did some soul-searching and, in March 2000, made proposals to Congress 

which, if they had been adopted, would have restricted our rights as a patent plaintiff. 

In one proposal, we suggested that the term of business method and software patents be dramatically shortened to something on the order of three to five years. To 

our way of thinking, the businesses to which such patents apply change so rapidly 

that inventors could get enough benefit from a few years of protection without stifling innovation over the longer term. In another proposal, we suggested that some 

pre-grant opposition process should be instituted in order to help the patent office 

discover (with the help of third parties) any prior art. This, of course, was one way 

to engender more confidence in the patent system that appropriately grants protection to some inventions that may seem obvious in hindsight. 

These proposals, we thought, would help future patent litigation defendants by insulating them from infringement suits long after an invention was novel and by increasing, in some fashion, the ‘‘quality’’ of patents, thereby reducing defendants’ 

need to do the hard work of invalidating faulty patents. At the same time, we 

strongly supported this Committee’s efforts to allow the U.S. PTO to retain and 

spend all the funds it collected in patent filing fees. More numerous and better-compensated patent examiners, we knew, would both improve confidence in the system 

and reduce patent examination delays. 

By now, of course, we recognize that a dramatic change to something as fundamental as patent term, especially so soon after the 20-year post filing term was 

adopted to harmonize with the international norm, would be highly unlikely and 

probably unwise. And although a short, pre-grant opposition period may still be better than the current circumstance for applications for U.S.-only protection, a postgrant opposition period, such as proposed in H.R. 2795, as well as in H.R. 5096, 

would be better yet. And, of course, Mr. Chairman, we are very grateful for your 

and your Subcommittee’s leadership in changing the funding mechanism for the 

U.S. PTO. We believe that, fully funded, the PTO now is much better situated to 

examine patent applications in a timely manner and issue patents only to novel inventions. 

Our patent litigation experience over the past six years has reinforced our belief 

in the need to rebalance the current system between patent owners and others who 

practice patents. Several separate matters, in which Amazon was accused of infringement by Pinpoint Incorporated, IPXL Holdings, and Soverain Software, illustrate this experience. In the Pinpoint case, we were sued for over $60 million in damages on the allegation that our customer personalization techniques infringed a patent covering cable 

TV movie systems. In the IPXL case, we were sued for tens of millions of dollars 

with the plaintiff alleging that our 1-Click ordering service infringed a patent covering a bank ATM interface. And last year, for $40 million, we settled with 

Soverain, owner of a host of broad ecommerce patents, nearly two dozen of which 

reportedly were purchased for less than a million dollars. Soverain had alleged that 

a few of these patents read on our use of the virtual ‘‘shopping cart’’ and other features on our website. 

In each case, we were forced to pursue our litigation strategy under the cloud of 

automatic injunction for successful claimants that, before last month’s decision in 

MercExchange, gave plaintiffs the plausible threat of closing down a significant part 

of our business if we did not come to terms, regardless of the equities of an injunction under the traditional balancing test. Although we are satisfied that the 

MercExchange decision has removed the threat of automatic injunction, we strongly 

believe that other problems with patent litigation that we have confronted should 

be addressed in reform legislation. 

Besides the threat of automatic injunction, we encountered in our litigation experience two essential problems with patent law. These are the two problems we propose this morning to solve with legislation. 

First, we had little or no way of knowing in advance the relevance of the patents 

at issue. Both the Pinpoint and IPXL actions involved business method patents on 

intangible products in fields distant from Amazon.com’s core business and, thus, 

made the plaintiff’s claims to relevant intellectual property all but impossible for us 

to discover or anticipate. And, likewise, in the Soverain cases, the widespread availability of online shopping carts, and commonly used underlying technologies, including so-called ‘‘session IDs,’’ made the patents at issue appear highly unlikely to be 

validated or enforced. 

22

Second, in none of these cases did plaintiffs substantially practice the patents at 

issue, yet in all of these cases the damages sought reflected plaintiffs’ belief that 

they were entitled to compensation beyond reasonable royalties as if they had made 

the investments and taken the risks incident to practicing the patents, and as if 

Amazon had taken business from them. 

Based on this experience, Amazon now respectfully offers two patent litigation reform proposals, each with respect to damages. Although these proposals are focused 

only on damages, we believe they would go a long way to rebalancing the currently 

imbalanced patent litigation system. 

Please note, of course, that we also generally support other proposals for patent 

reform already included in bills before Congress. For example, we support the damage apportionment language in H.R. 2795. Where the value of the defendant’s product is a combination, the damage award should reflect the incremental value attributable to the patented invention. And, as already indicated, we support enactment 

of some sort of post-grant opposition procedure, which is addressed in H.R. 2795 as 

introduced, as well as in H.R. 5096. Lastly, we generally support other proposals 

advocated by the Coalition for Patent Fairness, which seeks various legislative reforms. 

Mr. Chairman, we respectfully request that Amazon’s two proposals, which I will 

now describe, be considered in addition to these other proposals. 

In Amazon’s first proposal, we ask that Congress allow successful claimants with 

method patents to obtain damages only back to the point that the defendant had 

actual notice or knowledge of alleged infringement and, as under current law, in no 

case back more than six years before the complaint was filed. This would rebalance 

today’s system wherein a defendant can be liable for infringement damages with but 

little or no reliable way of knowing in advance the relevance of the patents at issue. 

Under law today, plaintiffs with method patents need not put defendants on any 

sort of notice in order to obtain damages for infringement over the previous six 

years. In contrast, the law requires the owner of an apparatus patent to mark all 

products covered by the patent to be able to collect damages for infringement prior 

to time the infringer received actual notice of the patent. If an apparatus patent 

owner marks its products, then the law permits the patent owner to collect damages 

going back six years from the filing of the infringement lawsuit. This approach is 

entirely reasonable for apparatus patents. If a company without knowledge of a particular patent decides to make a product covered by the patent, it will, in the course 

of its standard market research, discover the patent owner’s or a licensee’s product, 

and a simple inspection of that product will reveal the existence of the patent. 

Marking enables others to study the patent and either seek a license from the patent owner or develop products in a manner that does not infringe the patent. Thus, 

the marking requirement provides meaningful constructive notice for apparatus patents, at least where the patent owner or licensee is practicing the patent. 

With a method patent, however, current law entitles a successful plaintiff to collect statutory damages for infringement going back as far as six years without any 

obligation to put the world on notice of its patent and, as Amazon has found, with 

the defendant often having no reasonable way of knowing that it is infringing. If 

a company develops a system that practices a patented method, market research 

will not likely reveal the existence of the patent because marking is not required 

or, in many cases, even possible. And, in addition to being expensive, infringement 

searches are far from reliable: infringement analyses must be performed on a claimby-claim basis and each patent can have dozens or even hundreds of claims, and 

finding the relevant claims in the relevant patents is almost a matter of luck. 

Under this system, a company like Amazon has no realistic, reliable way of discovering a relevant patent or potential infringement until the patent owner decides 

to tell us about it. Patent owners know this difficulty, of course, and thus they can 

intentionally wait until an infringing company has accrued six years worth of damages before bringing the patent to the attention of that company. Patent owners also 

can wait to see which companies succeed, then sue only those that do. And because 

the infringer did not even know about the patent, it had no reason to try to mitigate 

damages. 

For the same reasons that constructive or actual notice is required of the owner 

of an apparatus patent who practices the patented invention, fairness requires notice with regard to method patents. Therefore, for method patents, where constructive notice is not workable, Amazon proposes that the law be rebalanced to require 

actual knowledge of the patent by an infringer before damages can accrue. The actual knowledge requirement should include the receipt by the infringer of actual notice from the patent owner, or knowledge obtained by the infringer independent of 

the patent owner. Only by requiring actual knowledge of the patent by the infringer 

before damages can accrue will companies that respect the intellectual property 

23

rights of others be able to avoid being unfairly blind-sided with costly infringement 

claims. 

In Amazon’s second proposal, we ask that Congress clarify that when courts analyze whether a plaintiff should be entitled to an award of lost profits as a matter 

of law, a plaintiff should be entitled to such an award only if, and for the time that, 

the defendant’s infringing product competes with a product that the plaintiff makes 

or sells. That is, we ask that damages be limited to a reasonable royalty where the 

patent owner does not substantially practice the patent. A plaintiff who does not 

make or sell a product (patented or otherwise) that competes with the defendant’s 

infringing product should not be entitled to seek lost profits as a matter of law. Our 

proposal would address the problem of plaintiffs not substantially practicing the 

patents, yet seeking infringement damages as if they had made the investments and 

taken the risks incident to practicing the patents, and as if their sales had been 

hurt as a result of the infringement. 

The rationale for this clarification is straightforward. An award of lost profits presupposes that the plaintiff would otherwise be collecting profits on some sales but 

for the infringement of the defendant. But it is at least arguable, under current law, 

that a plaintiff who has not invested the time and effort, or risked the resources, 

to develop a product, nonetheless may be able to obtain damages beyond a reasonable royalty. 

Although the general rule is that if a plaintiff is not in the marketplace, it is entitled only to a reasonable royalty, some courts still occasionally allow a plaintiff that 

does not practice the patent nonetheless to argue to a jury that it is entitled to obtain lost profits. These outlier decisions create needless uncertainty and impede or 

artificially inflate the cost of settlements. Therefore, Amazon asks that, without disturbing the other factors that bear on a patent owner’s entitlement to lost profits, 

Congress clarify that patent owners that are not genuinely in the marketplace competing with the defendant are not entitled to lost profits but, instead, to a reasonable royalty. 

In conclusion, Mr. Chairman, by virtue of our experience with patent litigation, 

Amazon.com believes that reform is essential and we are very grateful for your leadership in this area. With the MercExchange case decided, we hope that meaningful 

patent reform can be enacted soon. To the list of several excellent proposals already 

on the table, we would like to add the two suggestions I have described this morning 

to address specific shortcomings in the patent litigation system that we have encountered. 

Thank you again, Mr. Chairman. I look forward to your questions.

Mr. SMITH. Mr. Fish. 

TESTIMONY OF CHUCK FISH, VICE PRESIDENT AND

CHIEF PATENT COUNSEL, TIME WARNER, INC. 

Mr. FISH. Thank you, Mr. Chairman, Ranking Member Berman, 

Members of the Committee for being able to talk to you today 

about the real issue of patent trolls. I think there is consensus on 

the table that it is hard to define the problem and also that it is 

really the behaviors that we ought to focus on and the impact of 

those behaviors. 

But to address the opening statement of the Chairman, Mr. 

Chairman, I think when—if you ask the question what is the degree of prevalence of patent troll behavior, you assume that there 

is an empirical answer, and it is difficult to give you an empirical 

answer unless one can come up with an agreed definition, which 

I think most people would agree is hard to do. I’ll give you, hopefully, some ideas about a negative definition what isn’t a patent 

troll, but I would suggest respectfully, sir, that this really isn’t a 

question that we are going to be able to answer empirically, although there are facts and factoids that are perhaps helpful. 

To address Mr. Berman’s comment about litigation that thrives 

on low-quality patents, we think you are exactly right, sir, and that 

that is a major part of the problem that we see. 

24

We would add that the litigation thrives because it exists in an 

environment that provides incentives for just the sort of behavior 

that turns the patent system on its head. That we think is what 

the several proposals look to change, and we applaud the Committee for its work on those activities. 

As Members of the Committee know, Time Warner is a company 

whose lifeblood is intellectual property. We believe that all forms 

of intellectual property rights are very important to this country. 

In fact, we would agree with the Founders that property rights are 

basic to a society where there are ordered liberties. It is important 

in today’s context that we talk about how important the patent 

right is, because patent rights are also important and it’s important that they are national rights. It’s just as important today as 

it was when James Madison wrote in Federalist 43 that it could 

only be a national right that would protect this, that States 

couldn’t take care of the problem. 

In fact, there is an interesting paper that I would recommend to 

the Committee and others who are interested in the history. Professor Adam Mossoff from Michigan State University Law School 

recently wrote an interesting paper examining the patent privilege. 

He uses the term ‘‘privilege’’ in the 18th century sense of a civil 

right which protects a property right and tries to develop the notion of how have we treated patents in our history. You know, not 

merely in the way that the Supreme Court talked about it in John 

Deere, this notion of a bargain, but actually as a fundamental property right that’s secured by civil rights through the statute. 

So Time Warner agrees these are very important property rights 

and that the property rights shouldn’t be diminished. The issue, 

though, is how are the property rights enforced and how does the 

system work and is it balanced; and we submit respectfully that it’s 

not. In fact, in our view, there is every indication that, whatever 

it is we call the people who are responsible for the trend, there is 

a harmful trend that exists toward speculation and litigation based 

on patents and away from product innovation that is supported by 

strong intellectual property rights. 

Here’s where I’ll give you my negative definition. I think if you 

can find an entity that actually creates technology that is—that invents products rather than inventing patents, if you can find an entity that actually creates prototypes of its products and tries to sell 

those, if you can find an entity that employs engineers and scientists as an engineer and a scientist rather than as a legal assistant who combs through patents looking for claims against others, 

you are looking at someone who is not a patent troll. 

Also, I’ll submit to you that some—this is one of the reasons to 

call people like Mr. Kamen a patent troll, if in fact anybody ever 

did. It just doesn’t make sense. 

So starting with the basis that intellectual property rights are 

important, the thing that we have seen the Committee focusing on 

and what we applaud the Committee for focusing on is the way 

that the patent system operates today. We believe there has been 

an undeniable increase in patent litigation and in patent assertions, many of them brought by former tort lawyers who have 

found patent litigation more interesting than other previous forms 

of litigation. 

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In the brief period that’s left, I would like to say thank you to 

the Committee for your focus on the important issues that exist. 

We recognize that the Supreme Court has helped us with patent 

reform, not only in the eBay case but potentially in this KSR v. 

Teleflex case, as well as in the Microsoft case on worldwide damages. 

We think, though, that it is important for the Committee to examine the way the system operates; and I am very glad to be here 

to help you. 

Mr. SMITH. Thank you, Mr. Fish. 

[The prepared statement of Mr. Fish follows:]

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PREPARED STATEMENT OF CHUCK FISH


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Mr. SMITH. Mr. Reines, let me add just address my first comments to you and next to Mr. Kamen. 

First of all, thank you for your testimony. I find it very helpful, 

and I appreciated your efforts to define troll. I would like to say 

at the outset that I think the definition is oftentimes too broad and 

certainly would not be applied to Mr. Kamen by any definition that 

I would agree with; and I think we are going to make some 

progress today in coming up with a definition, because I think 

we’re in general agreement with what a ‘‘troll’’ is or is not, as Mr. 

Fish just mentioned. 

I also like your six potential areas of reform. You didn’t get to 

go into them in too great extent during your testimony, but maybe 

we could explore a couple of those in a minute. 

But, initially, I wanted to read your complete definition of a patent troll and ask the other witnesses if they agreed or disagreed 

with your testify; and then we’ll come back with a couple of questions. 

You said, such an indicated patent troll has no significant assets 

except patents, produces no products, has attorneys as its most important employees and acquires patents but does not invent technology itself. 

Is there anybody who would disagree with that definition, or is 

that a fairly applicable, valid, narrow definition? 

Fairly good. All right. You are looking quizzical, Mr. Kamen. 

Mr. KAMEN. I don’t know whether in order to fit you need to 

have any or all of those characteristics. There are four of them I 

guess I have. I do create the intellectual property. 

Mr. SMITH. I don’t think any of these would apply to you, if that’s 

what you are worried about, and I think that’s why it is a workable 

definition. 

And, Mr. Reines, do you want to highlight any of those six particular areas as needing more attention than others? 

Mr. REINES. I think I would like to highlight two. One is the 

damages law. 

Mr. SMITH. Right. 

Mr. REINES. The complexity of technology now is different than 

technology when patent law first developed, and I think we need 

to look at ways to ensure that for the portion of damages for the 

contributions. We deal with cases where there are thousands, millions of features of a product and people are seeking large royalties. 

Mr. SMITH. I think Mr. Misener had the same recommendation 

as his first proposal. So that’s a common element here. 

Mr. REINES. And the second thing I guess I would highlight is 

the area of willfulness. The threat of treble damages, as you can 

just imagine, is so significant. And let me just explain a little bit 

about it, because I think it is important to appreciate the 

practicalities of it. 

Basically, if you are informed of a patent and you’re told you are 

infringing or someone thinks you infringe, there is an argument 

you have a burden to go get a legal opinion from an independent 

lawyer, and that alone can be $50,000 and up. What happens often 

is someone will either find not 1 patent but 15 patents or 20 patents, and you don’t know which one’s the real one at the end of the 

day is going to be in dispute. But yet a prudent person might go 

36

and get 15 or 20 opinions for $50,000 each, and that’s just not the 

right way to run a railroad. It creates undue leverage. 

I think some of the proposals that the Committee has come up 

with on that are good ways to get at that to make the standard 

of reality notice the one that, if someone is going to threaten you 

with at any time, you have the ability to take them to court to clear 

the air and you are forced to such a high standard that you have 

an opportunity to set—clear the air and sue them to be free from 

their allegation. 

Mr. SMITH. Good suggestion. I’ll ask the others about those in a 

minute. 

One question I had for you had to do with something in your testimony. You stated that even when some patents are properly 

issued that they can still be abused through litigation. How is that? 

Why aren’t people just asserting their legitimate rights if the patent has been issued correctly? 

Mr. REINES. I hope to cover a series of examples, but one is the 

willfulness example. Just because you’re arguably infringing about 

the patent doesn’t meant that you were willfully doing it without 

disregard to someone’s rights. 

Mr. SMITH. Okay. Thank you. 

Mr. Kamen, I thought you gave a good definition of a troll, and 

I was going to ask the other witnesses if they agreed or disagreed 

with your definition, and you actually came up with two definitions 

of bad actors. One was those who inappropriately assert questionable patents, which is what I would use to define trolls. The other 

one was bad actors who deliberately infringed on legitimate patent 

rights of others. We are really not talking about that quite so 

much. 

Does anyone have any disagreement with the definition of accuracy to inappropriately assert questionable patents as being a patent troll. Mr. Fish? 

Mr. FISH. Yes, sir. I have a quibbling disagreement, but I am a 

patent lawyer, so I hope you’ll forgive me. 

The problem with the definition is that it doesn’t teach us anything. That is to put a term like ‘‘inappropriately assert’’ it doesn’t 

distinguish between patentees who believe that they are being appropriate or something else. So I don’t think—I think it’s descriptively true, but I don’t think it is prescriptively true. 

Mr. SMITH. Unfortunately, you are going to confirm everything 

Mr. Kamen thinks about lawyers by quibbling with this definition. 

But, nonetheless, it is a valid point. 

Mr. Kamen, one last question for you. I’ll come back on a second 

round, and I’ll have questions for the other witnesses. Do you feel—

with regard to injunctions, do you feel they should be granted automatically, or do you agree with the eBay case and its finding? 

Mr. KAMEN. Well, the word ‘‘automatic’’ is a very severe term, 

but——

Mr. SMITH. But a lot of people think that’s the system we have 

been operating under for a number of years. 

Mr. KAMEN. I am not a lawyer, but I know in contracts there is 

one standard; and having a deed to property, for instance, I think 

is a different standard. 

37

I could disagree with a person about some contract, and you can 

go settle that somewhere. But the certainty when I get a deed for 

the property from my house says to me I own this thing, the certainty when I buy a U.S. Government bond that it says will pay 

the borrower—it doesn’t say sometimes. And I don’t think the certainty of the different Government documents—not the deed, 

maybe not the bond but the patent—has that same kind of certainty. If it doesn’t have that, I can’t do business with a large company if they think, well, maybe I’ll have it. 

Mr. SMITH. So you do not quibble with automatic injunctions 

then. 

Mr. KAMEN. I think if I have passed the first test of getting a 

patent and then went to court and both proved it was valid and 

it was infringed, those were three major opportunities for somebody 

to take issue. 

Mr. SMITH. Okay. Good. Thank you, Mr. Kamen. 

Mr. Berman is recognized for his questions. 

Mr. BERMAN. Well, this discussion has taken me off where I 

wanted to question you and decide to focus on something else. 

First of all, I am not sure where this notion of defining a patent 

troll came from. I don’t think that’s particularly going to be a rewarding effort in terms of patent reform. 

The real issue is, are there changes in the system to make sure 

things that shouldn’t have been patented but are being patented—

making changes in that system so that the things that shouldn’t 

have been patented aren’t? And part of that is giving to people who 

do that work a chance to have a broader access to what is out there 

in the world. So to find out if something is novel gives some alternatives to litigation to people who think, wait, that was a big mistake. 

So, yeah, you’ve got uncertainty, but before you get absolute certainty there is a period of time where somebody can come and say 

you shouldn’t have been able to get the deed to that property. 

What if there is somebody on the other side of that river that apparently runs through Manchester, New Hampshire, who doesn’t 

have any engineers, who patents every monkey he kisses, who 

doesn’t have a single engineer working for them and spends not a 

cent on development? All he does is spend his time sitting around 

and waiting to find out if there is somebody anywhere or anywhere 

in the country or in the world who is starting to manufacture and 

produce something that he can make enough of a case that it might 

infringe on his monkey, that somebody will pay him to go away. Is 

that an activity that is essential to innovation in America that 

should be rewarded and that the process should be accepted and 

legitimate? 

Mr. Kamen. 

Mr. KAMEN. No. I think everything you said I would violently 

agree with, and I would characterize it as saying let’s solve the 

problem at its source. Let’s make sure only real inventions—they 

are really novel. They will really not, obviously, get a patent. And 

I would be willing to live in a world where it’s tougher for me to 

get patents if I knew that, in return for reaching a higher standard, I had the certainty that I presumed I’ve had in the past. 

38

Another way to say it, I would agree with you if we should go 

after bad actors, whatever you call them—and, frankly, when bad 

actors game a system, and it happens in every system everywhere, 

I think the people it ends up hurting the most specifically isn’t 

even the public. It is the good actors in that same system, because 

it puts them in question, in doubt, and it typically elicits a response which tries to fix it with a broad brush. 

In this particular case, I think the people that really do invent, 

the people that really do what I think the process was made to do 

will be hurt if these bad actors are allowed to go. But all laws, unlike the physical law, physics, very precise, the laws that I see 

written by humans are always a balance of judgment. Let’s make 

the speed limit 50, not 70, because it is a little safer, but you don’t 

make it 20 because you always have to deal with the balance. 

In this particular focus, everybody’s focusing on one kind of bad 

actor, the troll, or whatever you call somebody who is abusing the 

system by exerting unrealistic, unreasonable, unfair influence. And 

I am sure you could, if you only look at that end of the bad-actor 

scale, fix it by being more Draconian. But there is equally bad potential at the other end, companies that knowingly, willfully violate 

things because they think it is too hard to go after them. It is too 

difficult to get—for the little guy to fight. 

So while you might fix this if that’s the only part of the thing 

we focus on, then, in the balance, what is going to happen if you 

make it relatively easy for somebody to say, I am not going to respect your property rights and if you want me off your property you 

have got a real problem. I think that will cause more people to tend 

to abuse the system on the other end. It will make the courts more 

full of more cases because companies will say, I have no reason to 

settle with you. You’ll have to go through all of these things, all 

of these processes, and then, in the end, all you are going to get 

from me is what you would have gotten in the first place—some 

royalty. 

I think we need to make sure we don’t throw out the baby with 

the bath water. 

Mr. BERMAN. I would think if you create a system which would 

allow large companies to do that with essential impunity, you’d be 

destroying the patent system so—and who’s going to spend the 

time and the energy and inventiveness to go out and figure out 

that innovative solution if that’s what they face? So I couldn’t agree 

with you more. 

My time has expired. 

Mr. SMITH. Thank you, Mr. Berman. 

The gentleman from California, Mr. Issa, is recognized for his 

questions. 

Mr. ISSA. Thank you, Mr. Chairman. 

I, too, share the frustration that a troll is whoever is coming 

after me sometimes. There are 50 percent of all lawyers I found are 

good. They work for me. All of my patents were pioneer. I doubt 

the authenticity or certainly the originality has been asserted 

against me. It is a lifetime phenomenon that, Dean, I know that 

someday you are going to run into me on the receiving end. You 

are not always going to be coming up with great innovations. 

39

As a matter of fact, probably two generations of Segway from 

now, somebody anticipating where you are going will have patented 

some feature that they think you are going to want. And that is 

the challenge, that is the challenge of the patent system. 

I can only say that this Committee is committed to, one, tightening up what it takes to get a patent; two, dealing beyond mark 

men with early discovery of what a patent actually means, what it 

is really limited to. 

I have always said that, although I respect the right of an inventor to have 5,000 dependent claims if he wants and at a reasonable 

price—and I’ve had more than a few go-rounds with the PTO on 

their theory that you should be punitive if somebody has more 

claims—that the claims, whenever possible, should be penalized for 

having more words in them than necessary. 

On that note, I want to do one thing, because I think this Committee should set a tone, and I would like each of your comments 

on it with the limitations of the Constitution. Just quickly, I’ll remind everyone that the only guidance we have under a body of law 

that we cannot change, which is the Constitution, we cannot 

change alone, is that it says to promote the progress of science and 

useful arts by securing for limited times to authors, inventors, the 

exclusive right to the respective writings and discoveries. 

We can take out the authors for a moment, but before we do 

that, it is interesting to note that exclusive is an absolute right in 

the copyright which falls from this. Yet we have mandatory licensing arrangements and we, on the dais, deal with that, with that 

exact problem with a former Member. Sonny Bono wrote, I’ve Got 

You Babe, but the radio stations got it without his permission 

under a theory of law that they’re promoting his product and they 

didn’t pay him for it. Fortunately, the record companies did; and 

so, on balance, he did okay. 

But we have gone away from pure exclusive. When we talk about 

eliminating the injunctive relief or somehow further limiting it, I 

always am back to the question of don’t we still have the obligation 

of exclusive that is here? So going back to the whole question of 

trolls, which is the subject for today, to the extent that somebody 

is called a troll, what do we do to limit—constitutionally limit what 

they can be awarded? Should this Committee provide a balance, 

evaluation to the judge and the jury that would allow them to 

somehow reduce the amount paid if somebody could be defined as 

a troll? 

And before you answer, I might remind you that if a woman is 

raped, the first thing the plaintiff—the defendant does is describe 

her as promiscuous in order to somehow minimize the crime that 

was committed against her. 

So with that terrible analogy, but I think necessary, what would 

you have us do if someone is shown to be a troll of a valid patent? 

And I’ll start with Mr. Kamen, because, obviously, you have described yourself as—misdescribed as a troll, and I agree that you 

were misdescribed by anyone who would say that. 

Mr. KAMEN. Well, again, I don’t envy people that have to live in 

the vagaries of laws of people, not the laws of physics. They’re not 

precise. But my point was that, at least in my situation, the ability 

to give a company who I’m asking to uniquely and exclusively pay 

40

for the development, manufacturing, distribution of a good idea, the 

only thing I can offer them in return is that I will exclusively give 

it to them, and I can only make that promise to them and deliver 

on it if I believe and they believe that my patent can do that. 

So I think exclusivity is extremely important at one ends of this 

debate. At the other end, if it’s abused, since it is a very powerful 

thing, it presents a problem. I think all rules created by man have 

that problem. I think you have a number of ways, however, to prevent that from happening. They exist today, and we should be very, 

very cautious about trying to focus on this one issue—and we can 

argue about how big this issue really is, or however big it is. If we 

only look at the issue of what a troll might do and snuff it out by 

some change, like you can’t have exclusive right and injunctions, 

what will be the impact, the overwhelming impact, on a 200-year 

history of using patents to create the most innovative society on 

the planet. 

Mr. ISSA. Thank you, Mr. Chairman. 

If the others could answer briefly if they have a comment. 

Mr. SMITH. Okay. Very briefly. We are going to have another 

round of questions. The gentleman’s time has expired, but does any 

other witness have a brief answer to Mr. Issa’s question? 

Mr. MISENER. Mr. Issa, just very briefly. It seems to me that it 

would be very difficult to take that approach in litigation itself, because then the first step in litigation would be the defendant trying 

to define and prove to the court what the plaintiff is or is not. It 

would be better, in our view, to try to define and proscribe behaviors rather than trying to—instead of a system where we would be 

as a defendant in the position of having to prove what the plaintiff 

is. 

Mr. SMITH. Mr. Fish. 

Mr. FISH. Yes, sir. Very briefly, I think one other thing, Mr. Issa, 

if you look at the way that damages law is applied in patent cases, 

and you applied it fairly, it isn’t about labeling the patent owner. 

And, in fact, I think rape shield laws have hopefully moved toward 

fixing that problem in other areas. It’s about looking at the harm 

which comes to them, and components of that harm include what 

was the value of what they actually created? How were they hurt 

if they were a competitor or not? If those rules were generally applicable, you know, are there worldwide damages available when it 

only happened in the United States—if those rules were applicable, 

I think it could work, sir. 

Mr. ISSA. Okay. Thank you. 

Mr. SMITH. The gentlelady from California Ms. Lofgren is recognized for her questions. 

Ms. LOFGREN. Thank you, Mr. Chairman. 

And, Mr. Kamen, I think the last time I saw you you were in San 

Jose in front of about 500 screaming teenagers at the FIRST Robotics, so thank you very much for all that you’ve done for young people across the United States. I know many of the kids in San Jose 

who got so excited about science and technology through Robotics, 

and it’s a wonderful contribution that you’ve made to our country 

and deserves more recognition than you’ve got. 

As I’ve listened to the testimony and questions here today, it’s 

interesting that—you know, we’ve really taken our time here, and 

41

I think that’s right. We’re trying to sort through a very complicated 

subject so that we don’t—first, do no harm, but also, we do recognize there are some abusive situations going on here, and we want 

to make sure that we have a positive impact on them. Luckily—

it’s like quantum physics; you can’t observe it without changing it. 

And so I think just the fact that we’ve had these hearings has 

had some positive impact. And luckily the Supreme Court has 

woken up a little bit. I don’t know if that’s because of our hearings—I wouldn’t presume that we would have that impact on the 

Justices—but I do think that the eBay case is going to force the 

courts to look at the merits before issuing a temporary injunction 

is a positive thing. And I have suggested, too—all of the things that 

we’ve looked at really have been about process, they’ve been about 

remedies. They haven’t been about the substantive law. And I actually made a suggestion—it wasn’t me, actually, some academics 

made some suggestions about a year and a half ago that we take 

a look at the substantive law. There was no real interest in doing 

that in the patent community, so I dropped that. But I think the 

obviousness issue is part of the problem here. And the fact that the 

court is going to be taking a look at that may help us. And I’m perfectly satisfied to let the courts take that on since we are not going 

to, and perhaps for very good reasons. 

The question in my mind is now that we have the eBay case, you 

know, we don’t need to change everything in the remedies. What 

one or two other things might kind of set this on its right course? 

If you had to pick two other things that we would impact by way 

of either—assuming that we—you know, the Patent Office is doing 

its best. We’re getting them more resources, they’re implementing 

their plan, but the job that they face is just an overwhelming one, 

and I think that the Patent Office is filled full of people who are 

doing their best. But if we leave that office to one side, would it 

be willfulness, would it be postgrant review, would it be apportionment of damages? If you had to do just two things that might tinker the balance to right this course, what two things for each of 

you would it be? 

Mr. FISH. I would say I think you’re right, ma’am. Hopefully it 

would be good if the Supreme Court actually does take cert in the 

KSR case or an appropriate case. We don’t have that yet. 

I would say that following eBay, there are two issues—maybe 

two and a half. The first issue is that, as a result of eBay returning 

us to what the patent statute says and traditional equity jurisprudence, the role of the district courts is more important. So following 

eBay, venue becomes a very important issue. And we would applaud balanced, careful——

Ms. LOFGREN. To the venue issue. 

Mr. FISH. The venue issue, yes, ma’am. Or perhaps dealing with 

it procedurally, as Mr. Issa and others have recommended. 

The second one I would say is damages in general. And the subparts of that would be—if I’m allowed to sort of make more than 

two—willfulness first; apportionment second so that you don’t assume that every patent is, in fact, a pioneering patent. You know, 

in fact, the discussion back and forth on that, it strikes me as very, 

very interesting. Because we’re told that it’s a bad thing to do to 

focus on the difference between the thing that was claimed and the 

42

prior art, that that somehow messes up the system. It seems to me, 

though, if it’s true what we’re told by our opponents, that most patents are this sort of incremental approach, that they’re just a little 

bit beyond that which is known, then shouldn’t the general rule be 

that most patents don’t go to the entire value of a product or a 

service, most patents are not pioneering? 

Ms. LOFGREN. So if there is a lot of prior art, it would actually 

have an impact in a way on the damages; if there is none, it’s 

breakthrough. 

Mr. FISH. Yes, ma’am. I think that if we started at the general 

rule that in general you don’t get to claim the whole product or the 

whole service, rather you have to show an entitlement to that, that 

would be good. So my two would be venue and the fixing of damages. 

Mr. MISENER. Thanks, Ms. Lofgren. 

We would also agree that fixing the damages circumstance in today’s law would be the principal way to rebalance the system. You 

know, you have the inventor of the Segway on this panel, so he 

knows more about rebalancing than I. Thank you. But it is the 

case, though, that we have come across these circumstances in our 

litigation where there are things that are just inflated and not realistic. 

It is a fiction, for example, for us to have—for there to be a 

marking of a method patent. So a lot of times we’ve just simply 

been surprised; it wasn’t like we were trying to do anything wrong 

or infringe, we just were surprised by even the relevance of the 

patent. 

The other fiction that’s out there is that many of the plaintiffs 

we’ve come up against have sought lost profits when we are not in 

competition with them in any form. They’re not either practicing, 

or we’re in a completely different business. 

And so if those two aspects of damages were rebalanced, we 

would see those would be the most important reforms. 

Mr. SMITH. Thank you, Ms. Lofgren. 

The gentleman from California Mr. Schiff is recognized for his 

question—oh, I’m sorry. Were there other witnesses who wanted to 

respond to that question? I didn’t see any—I’m not sure—we’re 

waiting to see whether any witnesses wanted to—I didn’t detect 

any interest in any more response, but Mr. Kamen. And then Mr. 

Cannon would be recognized next. 

Mr. KAMEN. Well, you asked for two, and you said but put aside 

that they do quality patents. I’m a member of the PPAC group 

that’s been trying to work with the Patent Office, and I can tell you 

that I don’t think you can put that one aside because it’s like, other 

than that, Mrs. Lincoln, how was the show? 

There is a pendency now of 500,000 patents. As we all know, 

there is an explosion in the number of people trying to get patents, 

which I think is a good thing. As someone has pointed out, sophistication is going way up in probiotics and genomics. It’s harder and 

harder. I think we really do have to give them better ways to hire 

and retain—you’ve given them more money. They might not even 

spend all the money you gave them this year, but they tell me they 

can’t use it in a way that can give bonuses or do things to attract 

and retain good people, which is an inefficient system. 

43

Ms. LOFGREN. With the indulgence of the Chair, I will very 

quickly—I just wanted that to be put aside for the purposes of this 

question. We very much understand that there is an issue in the 

office. There is a plan to improve it. We want to implement that 

plan. I mean, it’s only for the purposes of this question. And my 

time is——

Mr. SMITH. Okay. Mr. Reines has a brief response as well. 

Mr. REINES. Yeah. I just say willfulness, and again, it’s 

rightsizing it, not eliminating it, in case there’s any ambiguity 

about that. And then I think apportionment. If you come up with 

a new rear-view mirror, the patent claim can claim it as a new car 

with a new rear-view mirror. The royalty shouldn’t be on the whole 

car just because that’s the form of claiming. And those are the kind 

of issues we need to address. 

Mr. SMITH. Thank you, Ms. Lofgren. 

The gentleman from Utah Mr. Cannon is recognized for his questions. 

Mr. CANNON. Thank you, Mr. Chairman. 

First of all, I would just like to thank Mr. Kamen for coming 

today. It’s refreshing to get the insight of someone actually who is 

involved in these issues, and your insights have been very, very 

helpful. So thank you. 

I’d also like to just note for the record that in an apparent attempt, Mr. Misener, to contain our prurient tendencies, we’re talking about trolls rather than the Swedish model today. 

But for you, Mr. Misener, and also for Mr. Reines, I’d like to get 

some elaboration for the record about—I don’t even know what to 

call it. It’s like a doctrine, it’s like a set of religious briefs that 

we’ve developed in the tech community that has resulted in a world 

where you can take an incredibly advanced device—I mean, this 

thing probably has 2,000 patents, but I expect not 50 bucks in patent royalties, because there is this kind of religious brief that what 

we ought to be doing is creating new products and winning in the 

market rather than focusing on royalties for our innovations that 

other people pick up and use. And so we have a huge cross-licensing. 

Micron is now one of the major patent players. My view of 

their—I’m saying this, this is not their position, but I suspect the 

reason they’re so aggressively involved in, and that is because 

they’re the last DRAM manufacturer. And by fewer devices, because it costs more money because we have patents out there, we’re 

going to have a slowing of the growth of—in DRAM, and that will 

hurt their long-term profitability. So they’re investing in maintaining this kind of religiosity, this religious set of beliefs involved 

around cross-patenting or cross-licensing. And that set of beliefs is 

fundamental and very, very important for the development of technology not only here in America, but in the world. 

Now I may be overstating that, but I would like to have your insights into what’s going on. But the reality is, in the development 

of innovation, and the cross-licensing, and the lack of charging for 

those things, and what that’s doing to the world, and why that’s 

important, if I’m right in my assessment, why that’s important for 

what’s happening with the technological development of the world. 

Thank you, Mr. Misener and Mr. Reines. 

44

Mr. REINES. I mean, I think what you’re describing is what we 

call in the trenches the ‘‘patent thicket,’’ that there is just a thicket 

of patents, and how do you work your products through that. And 

I think your device there probably is covered by a lot more than 

thousands, it’s probably hundreds of thousands, and I think part 

of that is just the advancement of technology. And complexity is 

unavoidable, but part of it is not letting excesses make the ability 

to license and cross-license effectively and release products, be able 

to do that more efficiently, and I think some of the areas that the 

Committee is looking at will do that. 

Mr. MISENER. Thank you, Mr. Cannon. And just to add to that, 

it seems to us that we are trying to innovate in a number of different ways, as well as our competitors are, and we’re all within 

a few months of each other in many different areas of innovation. 

If they’re all out there practicing, as we are, in marketing and providing services to their customers as we do to ours, I think crosslicensing is a very efficient way to manage the development and deployment of innovations. 

The problem arises largely when entities are not practicing, and 

there is sort of this—we’re up against sort of an unequal circumstance where we’re at risk of losing something. They are not 

at risk because they’re not practicing it. We settled last year, as I mentioned before, for $40 million on 

patents that we question their validity. We still do. We also question whether we were infringing. But the fact of the matter was 

that the patent at issue went to our shopping cart, and Amazon 

without a shopping cart is not a particularly useful thing for consumers. And so as a result we were anxious to settle in a way that 

would not have occurred if the patent had been held by one of our 

competitors. 

Mr. CANNON. In the case of Amazon, you guys sell books, and 

now many other things, but you’re relevant today because you do 

it in an environment of technology. You know, I’m a big fan of your 

company because I love the shopping cart that allows you to buy 

a bunch of stuff, and with two clicks I’m out of there. I’m not a very 

good typist, and typing in my credit card number is something that 

is daunting to me. 

So your company exists in a world that is highly dependent upon 

many other activities for success, and your success is really actually good for the world, because I just—if I might talk about a 

book, I read a book recently, and autobiographical piece, by a guy 

named James Watson, who was a majority whip in the House and 

then became a majority whip in the Senate, a great guy, and it’s 

a wonderful book, and it’s out of print. So I popped on to Amazon 

and found a bunch of copies. And, by the way, you linked to other 

sellers where there were more copies. 

So the richness of the environment—and I don’t mean to just 

pump Amazon.com, the environment that we live in today—oh, my 

red light is flashing. 

Mr. SMITH. The Chairman is recognized an additional 2 minutes. 

Mr. CANNON. I just hate when people are waiting to talk, and I 

don’t want to take time from Mr. Schiff, but just let me say that 

this is a moral issue. The patent issue is a moral issue that affects 

not only my life and the richness of my life, but the lives of people 

45

worldwide. I can do Amazon.com on this device; I couldn’t on other 

earlier devices. This is a world that we don’t want to slow down 

by stupid decisions. On the other hand, it comes back to what I 

think Mr. Kamen way saying: It’s a matter of balance, so we hope 

to do the right thing. 

And I yield back what time I don’t have, Mr. Chairman. 

Mr. SMITH. Mr. Schiff will use it. Thank you, Mr. Cannon. 

The gentleman from California Mr. Schiff is recognized for his 

questions. 

Mr. SCHIFF. Thank you, Mr. Chairman. 

Having just bought a book through Amazon that was also out of 

print, where I was connected to a private seller, I certainly didn’t 

want to interrupt that point. 

I wanted to explore a little bit more the analogy, Mr. Kamen, 

that you made, and I think you have the advantage of all of us, 

not being a lawyer, because you somehow are able to express these 

complex subjects in ways that people can actually understand. 

If we’re talking about too many deaths on the highway, there are 

a lot of remedies for that. You can lower the speed limit, not to 20, 

but maybe to 55; you can require people to wear seatbelts, as we 

have; and maybe go beyond that, you can also require the automakers to make safer cars and build in airbags. And the question 

is, so what combination do we do here? 

I think everyone at the table would agree and everyone here 

would agree that the consensus answer, and probably the largest 

piece of the puzzle, is improving the quality of the patent process, 

the issuance of the patents, make sure they’re good patents, and 

we are trying do that. And part of that is money, part of that is 

management, but none of that will be—none of us will be deterred 

from doing that by any other remedies we look at. 

Congressman Berman has also thought about ways to improve 

the process where maybe if a patent isn’t issued so well on the 

front end, there is a way to come in and challenge that after the 

fact. 

What I was interested in exploring, and maybe this is already—

one of my Committee Members can correct me—maybe this is already a component of existing law, but in the broader legal practice 

where we have problems with vexatious litigants, many States 

have statutes that go after vexatious litigants who have been repeatedly shown to be a problem. And I wanted to ask what you 

would think about some kind of a vexatious patent litigant where 

you have courts find repeatedly that someone is pursuing patents, 

and they are ultimately deemed to be a troll, so you go after the 

worst culprits on the one end. And then I’d like to ask my friends 

on the other side, what about vexatious infringers? Should we look 

at having a three strikes you’re out when courts find it was done 

with malice? Anyway, I’d love to hear your thoughts on that. 

Mr. KAMEN. I guess what I was going to answer Congresswoman 

Lofgren of the second most important thing was that there ought 

to be penalties for people that game the system. And I think the 

whole general process that you people should be looking at is not 

how to figure out how to put a bigger burden on the potential victims, but go after the people that are doing the bad things. And 

instead of undermining the rights of good people that have propVerDate 0ct 09 2002 11:58 Jul 20, 2006 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\061506\28201.000 HJUD1 PsN: DOUGA
46

erty, because if it was abused, their right would have been too 

strong, you go after these people. 

You pointed out that it was a bunch of lawyers that, in fact, were 

these trolls. Somebody else pointed out that it was a company that 

didn’t have engineers. What I learned from this is what I already 

knew: Inventers are good people, lawyers are bad people. But 

you’ve now figured out how to——

Mr. SCHIFF. So you’re saying vexatious litigant is redundant. 

Mr. KAMEN. Well, for instance, I would say that really in all the 

different kinds of gaming of systems that you see, eventually the 

legal system figures out how to parse words and do things, these 

imprecise things. We know that the cost in every field, whether it’s 

torts, the cost of litigation is so high, we hear that companies will 

willingly pay because it’s a good business decision. But that’s like 

saying we do negotiate with terrorists, and that just causes more 

of that activity. 

The companies shouldn’t pay if they’re not guilty, but then the 

people that can sue with these marginal and sometimes, we all 

know, invented positions don’t have much of a downside. That’s the 

problem with a lot of the gaming in not just patents, but other 

kinds of legal issues this country is facing. So one of the ways to 

deal with that is some form of loser pays. There ought to be a way 

to penalize people that are abusing this system, not take the people 

that aren’t abusing the system and keep throwing more burdens on 

us. Go after the people that are the bad actors at both ends. And 

if there’s a big company that has repeatedly just disregarded people’s rights, they are as bad as the trolls at the other end that are 

clogging up the system. But you people ought to focus on getting 

rid of the bad actors and supporting the good ones. 

Mr. SCHIFF. If I could ask the other witnesses, is there anything 

in current law that has kind of a three strikes effort against the 

vexatious patent litigants? And what do you think about where you 

find the company three times maliciously, willfully violating a patent, whether there ought to be some sanction on that end as well? 

Mr. REINES. I can address that. There is a provision exceptional 

case which says—if there is an exceptional case on either end of 

the spectrum, in other words, exceptionally bad, there is a lack of 

basis on either side—there can be an attorneys’ fees shifting, and 

there can be increased damages in the case of a plaintiff. 

So it’s not whether you’ve done it three or four times, but on a 

per-case basis that judgment can be made. I think the point that 

the reset on that is—so that’s there for someone that’s acting really 

bad. But the reset is that there’s a lot of actions that a patent 

owner can take that can make it such a pain in the butt to deal 

with it that you will give them $30,000 or $40,000 to go away so 

you don’t have to pay $50,000 just to protect yourself from a willfulness allegation. And there are instances of people, it’s not uncommon, that send out 300 letters or 400 letters and explicitly say, 

I am asking you for a royalty that is less than what it will take 

you to get one of your in-house people—forget outside lawyers—to 

look at the problem. That happens; that happens a fair amount. 

And the question is, Dean raises a good point, well, don’t negotiate with hostages; but the problem with that is that the number 

of demand letters at these places—nastygrams is what they’re 

47

called, and Ms. Lofgren knows about this from the constituents in 

the Silicon Valley area, I mean, they get dozens and dozens a year. 

You can’t fight every battle, and $30,000 can eliminate a problem. 

Mr. MISENER. Mr. Schiff, I would only add that it seems 

to me it still would be very difficult to have to define and prove 

at each turn the vexatious litigant, either a plaintiff or defendant. 

And we just believe that if we were to address the damages forum 

that we’ve suggested and others have suggested, that you actually 

take away the incentive for vexatious litigation rather than trying 

to define and punish the vexatious litigants. It seems to me it 

would be a burden on the other party to sit there and have to define whether or not the opposing party had participated in such activities in the past——

Mr. SCHIFF. I want to just interrupt. If there is an existing provision, as the shifting of costs, et cetera, you can simply define it as 

where an attorney has had that happen in three different cases, 

where the judges found it to be a sufficiently unmeritorious claim 

or offense that they have shifted fees three times. 

Mr. MISENER. But again, it would be the other party in the position of having to dig up that evidence, present it to the court, have 

the court find it—either that, or some sort of a commission that 

keeps track of it. Again, if the incentives for vexatious litigation are 

removed, then there would not be the vexatious litigation or vexatious litigants. 

Mr. FISH. If I may, sir, I would point out two things. The first 

one is this sort of concept of three strikes and you’re out or something is a concept that I would say makes sense in the criminal 

context, but not in the civil context. And so if we have a rule which 

exists, and we do, that says if it’s an exceptional case, attorneys’ 

fees, which, of course are massive in patent cases, can be shifted. 

The problem is that the rule doesn’t operate to protect—it doesn’t 

operate the same for plaintiffs and defendants. If you’re found to 

be a willful infringer, it’s not at all uncommon that you also pay 

attorneys’ fees for the plaintiff. If you bring a case that’s frivolous, 

it’s very rare that it works out. So that could be balanced. 

The other problem I would point out, and this is perhaps one of 

the distinctions between civil behavior and criminal behavior, is 

that it’s really not as clear as it might be in the civil context. So 

if you don’t know beforehand, if there’s a legitimate dispute about 

what does the patent cover, whether you’re a plaintiff or you’re a 

defendant, it seems to be much more draconian to punish people 

after the fact, after the courts have told them you were right, Mr. 

Defendant, you were wrong; Mr. Plaintiff, for example. 

Mr. SMITH. Thank you, Mr. Schiff. 

Mr. Misener, let me address a couple of questions to you, but on 

the way there what I want to do is read to the other witnesses a 

proposal that you made and ask them to comment on that proposal 

and then give you the last word. 

And, Mr. Reines, we’ll ask you to comment first on this proposal. 

Congress allows successful claimants with method patents to obtain damages only back to the point that the defendant had actual 

notice or knowledge of alleged infringement, and as under current 

law, in no case back more than 6 years before the complaint was 

filed. Is that clear? Okay. What is your comment on that? 

48

Mr. REINES. I mean, I think basically that’s a notice requirement 

for damages for method claims, and I think that works. My only 

caution about that is that virtually any claim that’s cast in terms 

of method can be cast in terms of apparatus, and vice versa. And 

so I’d want to look at addressing it on the apparatus side to make 

sure we’re not just having everybody flock to one form or another, 

but it sounds like something worth considering. 

Mr. SMITH. Thank you, Mr. Reines. 

Mr. Kamen. 

Mr. KAMEN. I’m not competent to—I am sure that the lawyers 

will find the unintended consequence and make it more important 

than what you’re trying to do. That’s a subtlety, I’m not——

Mr. SMITH. Okay. Thank you. 

Mr. Fish. 

Mr. FISH. Yes, sir. I think it’s correct to characterize it as a notice requirement, and it’s a good idea. The main reason I think it’s 

a good idea is because there’s a fiction that exists that it’s possible 

for complicated systems and for standards in recovery operability, 

for example, that it’s possible to search the Patent Office records 

to find all the patents that one might infringe. In fact, it’s not humanly practically possible. 

There is an interesting paper that Professor Doug Lichtman from 

the University of Chicago published just about a month ago that 

talks about patents and standards and makes exactly that point 

that, in fact, in these industries it is not something that can be 

done. And so more notice makes it better, sir. 

Mr. SMITH. Okay, thank you. 

And, Mr. Fish, that leads to my next question I wanted to address to both you and Mr. Misener, and it is this: What does Amazon.com, what do Time Warner do to try to avoid the infringement 

lawsuits? Do you conduct clearance searches? What do you try to 

do to limit our liability and limit your exposure? 

Mr. MISENER. Yes, thanks, Mr. Chairman. We do. We conduct 

the searches. We employ a lot of smart outside counsel and inside 

counsel to help us and our technical team examine the possible—

the intellectual property that could apply to what we’re trying to 

do, the patents that may be out there. 

The notice requirement really goes to the issue of something 

being so distant and hard to find that we’re trying to encourage the 

communication between the patent owner and a practitioner like 

our company. And so let that communication happen, let them tell 

us that they think it may apply. They can send us a letter. We may 

disagree with them, but that would be the point when the damages 

could start accruing if we turned out to be wrong, but at least let 

us know about it. If it’s in a completely different area, and it’s not 

markable—I mean, this is part of the fiction that Mr. Fish mentioned, for this apparatus patents there is this marking, and you 

will presumably discover the patent by looking at your competitor’s 

product or relevant products, but with a method, there is nowhere 

to market, and if it’s so distant that we wouldn’t know where to 

look, we’re just asking for us to be notified that this intellectual 

property is out there. 

Mr. SMITH. Okay. Mr. Fish, anything to add to that? 

49

Mr. FISH. Yes, sir. I would point out two things, without talking 

about privileged matters that I, as an attorney for the corporation, 

couldn’t and wouldn’t talk about. Time Warner and all of the various Time Warner companies provide their products oftentimes 

through integrating the technologies that others have developed. 

And so we go to vendors who sell us, for example, cable set top 

boxes, or pieces of software that AOL incorporates into its client or 

whatever. 

One of the things that we do our best to do is to get the vendors 

of that technology to clear it before they sell it to us. And so there 

are requirements in our contracts and things that say you have the 

rights, and you sell it to us, and you will indemnify us. And that 

becomes increasingly difficult in an increasingly complex world 

where there’s more and more that’s combined. 

Secondly, we try to be reasonable, erring on the side of caution. 

Since we’re a company that depends on intellectual property rights, 

we think it’s vital that we respect other people’s intellectual property rights. And so we do clearances where we can. We try to figure 

out where there are issues, and we try to use our limited resources 

to be as respectful of other people’s rights as we can, sir. 

Mr. SMITH. Thank you, Mr. Fish. 

And, Mr. Misener, one last question for you. This goes to the 1-

Click patent for which Amazon.com is becoming famous. And of 

course it’s under review by PTO. But—I know your answer, but 

could not Amazon.com be accused of being a troll for patenting the 

1-Click? 

Mr. MISENER. Oh, we have for about 6 years now. But it’s inaccurate, and here are the reasons why. First of all, there’s been a 

lot of complaint about whether or not it was an innovation. And 

truly it’s not innovative only in hindsight. At the time it was a radical departure from the shopping cart model which was ubiquitous 

on the Web. But more to the point, we have exercised this patent 

only against a competitor who at the time we exercised it had publicly announced their intention to crush our business. This was not 

some scheme to hit up small users of 1-Click or similar technologies, it was really to get at a competitor who had not invested 

anything in developing this technology and had, again, avowed to 

crush us. 

Mr. SMITH. Okay. Thank you, Mr. Misener. And thank you all. 

Mr. Berman, do you have any additional questions? Mr. Berman 

is recognized. 

Mr. BERMAN. Thank you. 

Paul Barton David, one of Amazon.com’s founding programmers, 

called the 1-Click patent an extremely obvious technology. And Tim 

O’Reilly, who’s been involved in shaping Internet trends, describes 

the 1-Click patent as an attempt to——

Mr. SMITH. Mr. Misener, we did not coordinate our questions 

here. 

Mr. BERMAN [continuing]. Has not gotten up to speed on the 

state of the art in computer science. It’s been a raging controversy, 

and I have no idea whether it’s valid or not—because I’m a lawyer. 

But the controversy itself was one of the issues that got at least 

a few of us 5 or 6 years ago thinking about some issues of reform. 

50

Let’s talk about in your testimony you state last year for $40 million we settle with Soverain, owner of a host of broad e-commerce 

patents, nearly two dozen of which were purchased for less than a 

million dollars. We settled for 40 million. Did you believe these patents to be invalid because they were too broad? 

Mr. MISENER.We still believe them to be invalid. 

Mr. BERMAN. Because they were too broad? 

Mr. MISENER.In part because they were too broad. 

Mr. BERMAN. Did you attempt to initiate a reexamination? 

Mr. MISENER.Yes, we did. And it was not going to be completed 

in time to be relevant to the case. 

Mr. BERMAN. Do you consider this company a patent troll because they purchased the patents for less than a million dollars, 

which presumably didn’t represent the value of the patents? 

Mr. MISENER.I’ve shied away as defining them as a troll or not. 

We were——

Mr. BERMAN. Nobody has shied away from calling you a troll 

over one claim. 

Mr. MISENER.That’s true. We worked, by the way, with Mr. 

O’Reilly; we came and met with Members of Congress 6 years ago 

because we agreed that there were areas to improve the patent system at the time. We got it immediately. And I will say that there 

was a large bounty put on 1-Click, I think it was about 2001, 2002, 

and there was essentially this contest with a large reward to find 

prior art, and none was found. This has been one of the best known 

patents around for the past 6 years and still no prior art has surfaced. So I think that goes to whether or not this particular patent 

was novel. 

Mr. BERMAN. Although isn’t it fair at this point to note that the 

Patent Office, within the last month, has granted a reexamination 

and request based on substantial new questions of patentability 

based on a prior art reference? 

Mr. MISENER. Absolutely. And we’re not surprised by it. And the 

only, perhaps, surprise is it took so long to get to that point, but 

we’ve looking forward to the reexamination.

Mr. BERMAN. On the Soverain case, would you have settled if the 

eBay decision had come out? 

Mr. MISENER.As a hypothetical, it’s hard to imagine, 

but it was a concern to us that we could see a major part of our 

business——

Mr. BERMAN. Because of the automatic injunction. 

Mr. MISENER. Exactly. And again, Amazon without the shopping 

cart is not a particularly good business. 

Mr. BERMAN. All right. I think—well, let me just ask Mr. Fish 

one question in my remaining time. 

You talk about sort of the patent courts, or Mr. Issa’s proposal 

regarding creating some patent judge specialists to try and create 

better expertise in the patent area among our Federal judges. Is it 

possible—to what extent will the problem be compounded? What if 

one of the pilot projects for testing this out was the Eastern District of Texas, and so that plaintiffs now—that that became a specialized court and plaintiffs ran there. Could this process aggravate 

the problem of forum shopping? 

51

Mr. FISH. Well, Mr. Berman, I actually am not here to argue 

with the Eastern District as a venue. It’s been the case, I think——

Mr. BERMAN. You must have a case there, huh? 

Mr. FISH. We have, I think, actually several. It’s been a case, 

since we had a patent system, that forum shopping has happened. 

I mean, you can go back to the steamboat patents and look at people who are making allegations about forum shopping. 

I think that either the kind of proposal that we have floated, 

which is an article I patent specialist court for pretrial matters 

that would return the case to article III courts and maintain the 

jury right would work. And we find one of the great things about 

the patent reform debate is, you know, you have Time Warner and 

also the EFF telling you that there are such things as patent trolls. 

You have Time Warner and Nathan Myhrvold agreeing—saying 

that specialized patent courts might be a good idea. So it’s fun that 

that happens. 

In either case, though, I think, sir, either if you have Mr. Issa’s 

proposal, which we understand to be improving the process sort of 

through self-selection and adoption of resources, or through taking 

the article I route and making it more like the Court of Federal 

Claims, we think it would be better because you could get a higher 

quality of decision up to the Federal Circuit, so the Federal Circuit 

could produce higher quality opinions, and as a system it should 

work, yes, sir. 

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

Mr. SMITH. Thank you, Mr. Berman. 

On the way to recognizing the gentleman from California Mr. 

Issa, let me just say that this Subcommittee is going to be having 

a hearing on his idea of a specialized court in July; so that is a subject that we will be looking into pretty soon. 

The gentleman from California Mr. Issa. 

Mr. ISSA. Thank you, Mr. Chairman. 

And thank you, Mr. Berman, for continuing that continuity between each of us. 

Mr. Fish, since we did broach that subject of what we might for 

today call augmentation of our court system, because the pilot is 

intended to do five districts in which you will have, as you said, 

self-selection of interested judges, at least one of whom is not on 

senior status, and obviously the resources, particularly when it 

comes to the support systems—you know, there is a strange phenomenon in our district courts which is that you can have all the 

clerks you want, but the judge makes the decision. So then the balance is can we make a judge understand Mr. Kamen’s latest invention, or, for that matter, the genome—you know, I mean, where do 

we draw the line on, you know, DNA testing, et cetera? 

The answer, obviously, is a balance between the two. And hopefully by giving the resources and by having at least five of the busiest districts in the pilot, we’re going to try to prevent forum shopping. 

But I do have a question which is related to specifically trolls. 

Assuming for a moment a troll is not how they purchased, how 

they got how many engineers they have—I might mention that 

more than in passing, I have 37 patents, and I’m not a degreed engineer. So one might say I didn’t employ engineers, and therefore 

52

I was a troll, and at least one of my patents I never actually created the product, but only because I didn’t make cell phones. 

The question, though, is, if getting trolls quickly off your back 

needs to be part of the process, meaning somebody who hands you 

up 20 patents that they’ve purchased for $20, that they say even 

though the title and everything in there doesn’t seem to read on 

your product,that, in fact, it’s in there, sort of like Prego, go into 

that tomato sauce and somewhere you will find meat—not that you 

have ever actually seen the meat—the question is, if, in fact, we 

empowered or maybe even sought language that would embolden 

the courts to consistently bifurcate their cases into a what-doesthe-patent-mean as quickly as possible—and this beyond just saying Markman shall be done before the jury is empanelled—but, in 

fact, force that issue to be an issue before other issues could be 

brought forward, before they discover how much money you made 

last year, before they look at every other discoverable item; if we 

did that, and if at the same time that decision—and we’ll just refer 

to it as a Markman for now, although it might be a different 

level—if that were the beginning of any question of willfulness, if 

knowing what the patent means became, by a court of independent 

jurisdiction, not by the inventor who says it means everything and 

you say it means nothing—if that first time a patent is brought 

against a product, either yours or a substantially similar, that you 

would have to have that first process in order to cross willfulness, 

and, by the way, in order to cross the question of injunctive relief, 

would that substantially change how you would view the danger of 

trolls and the risk to your company and so on? 

And I’ll start with Mr. Fish. 

Mr. FISH. Yes, sir. I think that would be a very helpful thing. 

You know, whether it were adopted by the judiciary as a rule, you 

know, in local rules or some sort of national procedural rule, or if 

the Committee were to indicate it, I think determining what the 

patent rights are, making it more like, you know, we hear a patent 

right is a property right just like a deed, and the problem is that 

surveying is an old art. People know how to do it, you get a deed, 

and you can actually read it, and you can actually walk the line 

and decide if something is a trespass or not. 

Mr. ISSA. This is a little more like water rights though. 

Mr. FISH. It’s like water rights, or perhaps even worse; because 

it’s water rights that pop up, and nobody knew where they came 

from. So I think it would be a very helpful thing. 

I mean, I would add that it won’t entirely fix the problem. We 

had an occurrence this week that shows you what happens. There 

is a company called USA Video that sued MovieLink, the biggest 

downloader of movies, 21⁄2 years ago in Delaware. The patent was 

very questionable. They lost on summary judgment. Last week, Friday, the Federal Circuit handed down their opinion, and that loss 

on summary judgment was affirmed. This week, Tuesday, they 

sued the entire cable industry in Marshall, Texas, on the same 

questionable patent, and the problem was that the invalidity motions were found by the first judge to be moot because there was 

such a clear case of noninfringement. 

53

And so what I’m saying is that there could be still be serial troll 

behavior going on, but the proposal that you make, I think, would 

be very helpful, sir. 

Mr. ISSA. Yes, Mr. Reines. 

Mr. REINES. Yeah, thank you. I sit on the Patent Rules Committee for the Northern District of California, and there is good 

work being done in the different districts to come up with rules 

that make sense. 

Mr. ISSA. Mr. Chairman, I want to note that that’s good work 

being done in the Ninth Circuit. 

Mr. REINES. But the takeaway is that I think we’ve got to be 

careful about a one-size-fits-all that doesn’t let the different district 

judges who have experience and different experiences come up with 

sets of rules and adopt sets of rules for specific situations. So that’s 

just a caution. 

Mr. ISSA. Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Issa. By the way, it’s an exception 

to the rule regarding the Ninth Circuit. 

The gentlelady from California Ms. Lofgren is recognized. 

Ms. LOFGREN. I thank you, Mr. Chairman. 

I was actually intrigued by Mr. Schiff’s suggestion on vexatious 

litigants. I remember when I was in local government, the county 

would get sued by people who had mental problems. I mean, 50, 

hundreds of lawsuits that were fantasies, and we did actually use 

vexatious litigant statutes to go where the court had to approve 

their lawsuit before they were allowed to file it. It really helped a 

lot. 

But I don’t know that it would work in this area, because when 

you think about it, it’s not just litigation, it is the steps precedent 

to litigation. You send out 400 demand letters, you really can’t deal 

with that in the same way as a vexatious litigant. But I like the 

concept of having some kind of scrutiny, and maybe that’s something that we could pursue down the line. 

I’m interested—my prior question, the consensus seemed to be 

that willfulness and damage issues were ones that we should pay 

particular attention to. And if you take a look at the draft bill that 

we have before us that I think all of us have co sponsored, been 

working with, section 6 addresses the issue of damages in two 

ways. It amends 284 of the Patent Act that authorizes the court 

to award treble damages for willfulness conduct, and imposes a 

threshold notice requirement that applies in any case in which an 

accused infringer did not intentionally copy an invention known to 

be patented, and an infringer could still rely upon the advice of 

counsel as a defense, but it would prevent an adverse inference if 

that had not occurred. 

And then as to damages, the bill says that the damages will be 

based on the portion of the realizable profit that should be credited 

to the invented contribution, as distinguished from other features 

of the combination, the manufacturing process, business risk, or 

significant features or improvements added by the infringer. 

In your judgment, do these two provisions adequately address 

the willfulness and damage issues that you have identified as important? And could we start with you, Mr. Reines? 

54

Mr. REINES. I think on the willfulness front, those are good steps. 

On the damages apportionment front, I think it’s a really difficult 

problem. I’m concerned that that doesn’t go far enough in terms of 

really addressing the magnification of the patent. If there is a patent in trial, there is so much focus on that one patent that sometimes you get exaggerations. So I think additional steps on the apportionment issue is worth looking at. 

Ms. LOFGREN. Mr. Kamen. 

Mr. KAMEN. Well, what little I know about the willfulness business seems to be, again, another opportunity by which people end 

up—the good people end up doing work they shouldn’t have had to 

do, and the bad ones game it, because it literally is like what I 

hope is perceived as a humorous statement that somebody says I’m 

so sick and tired of reading about the link between smoking and 

cancer, I’m going to just have to give up reading. And if, as I understand it, you’re forced to get all these opinions which cost a lot 

of money, and worse than that, now companies are telling their inventors and engineers, don’t read all of those things, then you’ll be 

aware of these things, that seems to me to have exactly the opposite intent of what the patent system was about, which is this 

Faustian deal that the Government made with me; the reason 

they’re going to give me for a limited time a monopoly is because 

I’m educating the world about new ideas. That methodology that 

was imposed with the best of intentions has the consequence of 

having people not do patents. 

Ms. LOFGREN. That’s a very good point. We talked about litigation, but bringing it back to the constitution of the deal is that we 

want to incent you not just for your benefit, but for the benefit of 

the broader society so that future inventors can build upon your invention to the greater benefit of mankind. 

Mr. KAMEN. So anything that you do should be in the spirit of 

that disclosure being broadly read and not narrowly being prevented from being used by the gamers of the system. 

Ms. LOFGREN. Mr. Misener. 

Mr. MISENER. Yes, ma’am. The sections in the bill on willfulness 

and apportionment reform are important. We welcome them, we 

thank you for them, they’re great, and we hope that they’re enacted 

soon. 

We also just suggest these two other aspects of damages that 

have borne out of our corporate experience without—so we didn’t 

even know or had no realistic way of knowing about the applicability or the potential applicability of some patents, and also this 

fiction of lost profits when we’re not competing in any way with the 

plaintiff. And if those four aspects of damages were fixed, we would 

be very happy. Thank you. 

Mr. FISH. I think you’re hearing some more consensus, ma’am. 

Time Warner would say that the willfulness proposals in really all 

of the versions of bills that we’ve seen look great. The problem I 

think with the apportionment proposals, which vary or are missing 

in some points, I would say is twofold. The first one is if you look 

at the damages, the current patent damages statute, it’s written at 

a very high level, I think, for a good reason. It wasn’t substantially 

changed in 1952, and the courts have developed the notion of the 

patentee will have at a minimum a reasonable royalty on an caseVerDate 0ct 09 2002 11:58 Jul 20, 2006 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\061506\28201.000 HJUD1 PsN: DOUGA
55

by-case basis. And through the development of common law, there 

has been largely good progress—perhaps the Federal circuit could 

have done a little bit more, but it’s been largely good. 

To move the statute down by mandating certain factors and not 

others is problematic, as we’ve heard in the discussion, for example, from the people who hate the idea of apportionment. So I 

would suggest that if you legislate at an appropriately high level 

to allow development by the courts—so, for example, by using some 

of the suggestions that Mr. Misener mentions, or just incorporating 

the apportionment principle in a mandatory fashion into the statute and letting the courts decide, you know, is this a Georgia Pacific type of a case, or is this a case where something else should 

work, I would think that that would probably fix the problem, 

ma’am. 

Ms. LOFGREN. Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Ms. Lofgren. 

The gentleman from California Mr. Schiff. 

Mr. SCHIFF. Thank you. I’ll be very brief, Mr. Chairman. 

Zoe really asked what I wanted to follow up on as well. The only 

remaining question I had was on the issue of forum shopping. And, 

Mr. Kamen, I just want to get your thoughts. If the forum was 

more limited in the sense of suing where the defendant has their 

principle place of business or where the infringement took place or 

whatnot, is that something you could live with? 

Mr. KAMEN. Again, I think there is this incredible fine art in the 

legal profession of knowing all the subtleties. I don’t do that. I’m 

happy to say in 30 years of business, I’ve never been sued over a 

patent, I’ve never sued anybody over a patent. I don’t have a lot 

of direct experience, but when you hear as a laymen or a business 

person about these things, they all seem to have this issue of the 

unintended way of, whether it’s the lawyer or the troll, gaming the 

system. And if you put a rule in which in the end makes it easier 

and cheaper and faster to get smart judges to get to good decisions, 

everybody has to win. And if you can create these special courts, 

if you can do anything to prevent these various forms of gaming, 

I would be in favor of it. 

The concern I continue to have is that inevitably the unintended 

consequence is every time you guys put a patch somewhere, given 

enough time, people play with it, so you have to be careful to get 

back to the basics. And the basics to me are that intellectual property is valuable and important, it’s responsible for a lot of great 

things, and we’re here talking about all these different versions, including that one, of looking at other issues, and if we get back to 

making sure that when there are bad actors that are abusing a system, you don’t go after the system, you go after the bad actors. Our 

system of intellectual property is a good one. 

Mr. SCHIFF. Is it your sense, Mr. Kamen, that any changes on 

the presumptions regarding injunctions would be too blunt an instrument and do more harm than good? 

Mr. KAMEN. Again, as I said, I’m not a lawyer, but the certainty 

of our system, people, again, take advantage of banking. If I have 

a deed or I have a bond, if you do anything that makes me less 

confident in my ownership of that deed or return that I’m supposed 

to get from that financial institution or the Government, whatever 

56

other problem you are fixing, you might be unleashing a huge set 

of issues. 

If people can’t count on owning intellectual property, the investment by all sorts of individuals, large corporations, the willingness 

for people to go forward and take risk will be, I think, so dramatically hindered—maybe not by intent—that when we look back at 

trying to go after trolls, which you might successfully do in some 

way, I think it would be like you flooded the building to put out 

a fire in a wastepaper basket. 

Mr. REINES. Mr. Schiff, just let me address one thing so that the 

Committee is clear just on the venue issue. There are some granular issues with it, but at the big-picture level, the current venue 

statute for patents provides effectively that you can sue anywhere 

that the products are sold. So we’ve got millions of Mr. Kamen’s 

tubes going around. Anyplace in this 50 States and territories that 

they go, you can initiate your case there. That’s effectively the rule. 

And I just think we need to think about whether a more focused 

venue statute that doesn’t let someone that’s doing business in 

New Hampshire that’s a relatively small company, has some tubes 

that go up to Alaska, and all of a sudden they can be sued—under 

the statute there is a right to seek to transfer for which the presumption is against you—but gets sued in Alaska, and Mr. Kamen 

all of a sudden has to go up to Alaska. 

Mr. SCHIFF. What do you think about changing that presumption, Mr. Reines? 

Mr. REINES. Well, that’s what the general transfer statute says, 

that the party seeking transfer has the burden of demonstrating 

that the plaintiff’s choice of forum shall be overcome. And that’s a 

basic principle of the law that I don’t think we’re going to change 

anytime soon. 

Mr. SCHIFF. And I don’t know whether it makes sense to have 

a more specific venue statute for patent cases, but you could, in 

theory, do that. 

Mr. REINES. You could handle it by making it——

Mr. SCHIFF. You can have the current, sort of generalized—you 

can bring the case anywhere the product is sold, but remove the 

presumption in terms of transfer of venue if the equities favor 

transfer, or you could change the venue statute to limit the jurisdictions where you can bring suit. 

Mr. REINES. Any of those approaches would work and I think are 

worthy of the attention of the Committee. 

Mr. FISH. There is one other possibility. You could create a special patent removal right and give it to both parties. So if Mr. 

Kamen finds himself in Alaska, he has a right to remove either Mr. 

Issa’s patent courts or some other place’s. That would be a possibility as well. 

Mr. SCHIFF. Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Schiff. 

This has been a particularly informative panel and interesting 

subject, and I appreciate the contributions that everybody has 

made today. 

We stand adjourned. 

[Whereupon, at 11:06 a.m., the Subcommittee was adjourned.] 

(57)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE HOWARD L. BERMAN, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF CALIFORNIA, AND RANKING MEMBER, SUB- COMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

Mr. Chairman, 

Thank you for scheduling this hearing so quickly after the e-bay decision. As we 

have tried to move forward with patent reform, our efforts have been stymied by 

the many groups clinging to the notion that there was an entitlement to an automatic injunction upon a finding of infringement. I am hopeful that as a result of 

the Supreme Court’s findings we will be able to progress with legislation. 

Congressman Boucher and I introduced our patent bill 2 months ago, believing 

that the Federal Circuit’s interpretation of the injunction statute invited abuse. We 

said that if we could merely underline or bold the current words in the statute guiding the grant of injunctions, words like may—and—equities—and—reasonable we 

would have done so. Our goal was to achieve what the Supreme Court has now done 

for us: a return to the standard originally intended—that of providing courts with 

discretion and requiring a weighing of the equities. Therefore, I do not believe at 

this time there is any further need to legislate on the injunction issue. However, 

the concurrence in the e-bay decision raises additional issues relating to ‘‘an industry [newly] developed in which firms use patents not as a basis for producing and 

selling goods, but instead primarily for obtaining licensing fees.’’

Perhaps the place to start at this hearing is not the question of whether patent 

trolls are ‘‘fact or fiction’’ but rather the definitional question of—‘‘what is a patent 

troll?’’ Justice Kennedy asked it best—‘‘is the troll the scary thing under the bridge, 

or it is a fishing technique?’’ Depending on where you are standing, the view from 

the bridge may render the same entity either a patent holder, who is simply trying 

to enforce their rights, or a patent troll, who is unfairly leveraging their newly acquired property. 

In part, some of the irony surrounding the analogy to a troll—is that if I remember my fairy tales correctly, the troll usually loses in the end contrary to what occurs in the marketplace today with patents. 

While I can provide no clear definition, I can tell you that in undertaking an effort 

to clarify aspects of the patent law to prevent abuse of the system...

• there is no attempt to impose a use requirement on a patentee

• there is no attempt to prevent general licensing; and

• there is no attempt to weaken intellectual property rights

I have concerns about those who take advantage of the current patent system to 

the detriment of future innovation. Whether called trolls, entrepreneurs or ‘‘those 

that shall not be named’’ there is a significant problem if the patent being asserted 

is of questionable validity. 

I firmly believe that robust patent protection promotes innovation. However, I 

also believe that the patent system is strongest, and that incentives for innovation 

are greatest, when patents protect only those inventions that are truly inventive. 

When functioning properly, the patent system should enable and encourage inventors to push the boundaries of knowledge and possibility. If the patent system allows questionable patents to issue and fails to provide adequate safeguards against 

patent abuses, the system itself may stifle innovation and interfere with competitive 

market forces. 

When considering these principles together, I introduced a bill which provides the 

reform necessary for the patent system to achieve its intended goal of promoting innovation, including amendments to the willfulness standard, submission of third 

58

party prior art and a post-grant opposition procedure. These reforms are clearly not 

the only possibilities and I look forward to hearing from the witnesses as they describe other alternatives and suggestions. As the New York Times has pointed out, 

‘‘[t]here is legislation in the House to address th[e] issue[s], and it needs to be taken 

up.’’ I hope that introduction of the bill in combination with the recent Supreme 

Court decision and these hearings will facilitate the necessary advancement of patent reform legislation. 

High patent quality is essential to continued innovation. Litigation abuses, especially those which thrive on low quality patents, impede the promotion of the 

progress of science and the useful arts. Thus, we must act quickly during this 109th 

Congress to maintain the integrity of the patent system.

59

LETTER FROM MARK T. BANNER, BANNER & WITCOFF, LTD, INTELLECTUAL PROPERTY

LAW, WITH ATTACHMENT FROM CHIEF JUDGE PAUL R. MICHEL, TO THE HONORABLE

LAMAR SMITH AND THE HONORABLE HOWARD BERMAN


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