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PATENT REFORM ACT OF 2009 

HEARING 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

ON

H.R. 1260 

APRIL 30, 2009 

Serial No. 111–92 

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 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

DANIEL MAFFEI, New York 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM ROONEY, Florida 

GREGG HARPER, Mississippi 

PERRY APELBAUM, Majority Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

(III) 

C O N T E N T S 

APRIL 30, 2009 

Page 

TEXT OF THE BILL 

H.R. 1260, the ‘‘Patent Reform Act of 2009’’ ......................................................... 2 

OPENING STATEMENTS 

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

State of Michigan, and Chairman, Committee on the Judiciary ..................... 1 

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

of Texas, and Ranking Member, Committee on the Judiciary ......................... 22 

The Honorable Howard Berman, a Representative in Congress from the State 

of California, and Member, Committee on the Judiciary ................................. 24 

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

of Virginia, and Member, Committee on the Judiciary .................................... 24 

The Honorable Brad Sherman, a Representative in Congress from the State 

of California, and Member, Committee on the Judiciary ................................. 26 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Member, Committee on the Judiciary ......................... 26 

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

of California, and Member, Committee on the Judiciary ................................. 27 

The Honorable Louie Gohmert, a Representative in Congress from the State 

of Texas, and Member, Committee on the Judiciary ........................................ 27 

The Honorable Zoe Lofgren, a Representative in Congress from the State 

of California, and Member, Committee on the Judiciary ................................. 28 

The Honorable Ted Poe, a Representative in Congress from the State of 

Texas, and Member, Committee on the Judiciary ............................................. 28 

The Honorable William D. Delahunt, a Representative in Congress from 

the State of Massachusetts, and Member, Committee on the Judiciary ......... 29 

WITNESSES 

Mr. David Simon, Chief Patent Counsel, Intel, Inc. 

Oral Testimony ..................................................................................................... 30 

Prepared Statement ............................................................................................. 32 

Mr. Phillip S. Johnson, Chief Intellectual Property Counsel, Johnson & Johnson 

Oral Testimony ..................................................................................................... 45 

Prepared Statement ............................................................................................. 47 

Mr. John R. Thomas, Professor, Georgetown University Law School 

Oral Testimony ..................................................................................................... 70 

Prepared Statement ............................................................................................. 72 

Mr. Jack W. Lasersohn, Partner, Vertical Group 

Oral Testimony ..................................................................................................... 78 

Prepared Statement ............................................................................................. 81 

Mr. Dean Kamen, Inventor, DEKA Research and Development, Inc. 

Oral Testimony ..................................................................................................... 87 

Prepared Statement ............................................................................................. 89 

Page

IV 

Mr. Mark Chandler, Senior Vice President, Cisco 

Oral Testimony ..................................................................................................... 93 

Prepared Statement ............................................................................................. 96 

Mr. Bernard J. Cassidy, Senior Vice President and General Counsel, Tessera, 

INC. 

Oral Testimony ..................................................................................................... 101 

Prepared Statement ............................................................................................. 103 

APPENDIX 

Material Submitted for the Hearing Record .......................................................... 147 

(1) 

PATENT REFORM ACT OF 2009 

THURSDAY, APRIL 30, 2009 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:16 a.m., in room 

2141, Rayburn House Office Building, the Honorable John Conyers, 

Jr. (Chairman of the Committee) presiding. 

Present: Representatives Conyers, Berman, Boucher, Scott, Watt, 

Lofgren, Jackson Lee, Waters, Delahunt, Johnson, Sherman, Schiff, 

Sa ́nchez, Smith, Sensenbrenner, Coble, Goodlatte, Lungren, Issa, 

King, Franks, Gohmert, Jordan, Poe, and Chaffetz. 

Staff present: Christal Sheppard, Majority Counsel; Blaine Merritt, Minority Counsel. 

Mr. CONYERS. Good morning, ladies and gentlemen. The Committee will come to order. We are here today for the hearing on 

H.R. 1260, the ‘‘Patent Reform Act of 2009.’’ 

You will recall that the Judiciary Committee passed this bill out 

in July of 2007—passed out of the House in September of 2007, but 

it did not receive dispositive action in the other body. So we continue it. 

We welcome the seven witnesses that have joined us today. In 

the time of economic crisis, seems to me that we need patent reform more than ever. And while necessity may be the mother of invention, invention could be the mother of recovery. 

We need a patent system that will help us invent our way out 

of recession. Now, we are aware that the Senate has reached a 

compromise on a number of issues. This body is no more a rubber 

stamp for the Senate than the Senate is a rubber stamp for the 

House. 

And so it is our intention to look at these issues, of which there 

are many, independently and ensure that the bill that comes out 

of the Judiciary Committee will be fair to all parties concerned, or 

as fair as we can get it, and will also serve the public interest. 

In the last Congress, there was an agreement on interparties reexamination. Unless something is arrived at, we expect that that 

will still be the prevailing way that we move this bill forward. The 

United States Patent and Trademark Office even now doesn’t have 

a director. 

We need our leadership to comment on whether this bill has 

been drafted in a way that recognizes the challenges that the patent office faces. And while the bill doesn’t currently contain lanVerDate Aug 31 2005 14:13 Jul 12, 2010 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6601 H:\WORK\FULL\043009\49388.000 HJUD1 PsN: 49388
2 

guage on inequitable conduct, we have made an agreement to work 

with Senator Hatch on this issue, and that agreement is still good. 

Now the Patent and Trademark Office has incredible responsibilities and really rather limited authority to meet them. I think that 

it may be time that we give them the power to set their own fees. 

And finally, it seems important that we keep our trigger on first 

to file language in order to pressure our trading partners to adopt 

grace period language that benefits the United States inventors. 

[The text of the bill, H.R. 1260, follows: 

I 

111TH CONGRESS 

1ST SESSION H. R. 1260 

To amend title 35, United States Code, to provide for patent reform. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 3, 2009 

Mr. CONYERS (for himself, Mr. SMITH of Texas, Mr. BERMAN, Mr. GOODLATTE, and 

Ms. JACKSON-LEE of Texas) introduced the following bill; which was referred to 

the Committee on the Judiciary 

A BILL 

To amend title 35, United States Code, to provide for patent reform. 

Be it enacted by the Senate and House of Representatives of the United States 

of America in Congress assembled, 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Patent Reform Act of 2009’’. 

(b) TABLE OF CONTENTS.—The table of contents for this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Definition. 

Sec. 3. Right of the first inventor to file. 

Sec. 4. Inventor’s oath or declaration. 

Sec. 5. Right of the inventor to obtain damages. 

Sec. 6. Post-grant procedures and other quality enhancements. 

Sec. 7. Definitions; patent trial and appeal board. 

Sec. 8. Study and report on reexamination proceedings. 

Sec. 9. Preissuance submissions by third parties. 

Sec. 10. Venue and jurisdiction. 

Sec. 11. Patent and trademark office regulatory authority. 

Sec. 12. Residency of Federal Circuit judges. 

Sec. 13. Micro-entity defined. 

Sec. 14. Technical amendments. 

Sec. 15. Effective date; rule of construction. 

Sec. 16. Study of special masters in patent cases. 

Sec. 17. Study on workplace conditions. 

Sec. 18. Study on patent damages. 

Sec. 19. Severability. 

SEC. 2. DEFINITION. 

In this Act, the term ‘‘Director’’ means the Under Secretary of Commerce for 

Intellectual Property and Director of the United States Patent and Trademark Office. 

3 

SEC. 3. RIGHT OF THE FIRST INVENTOR TO FILE. 

(a) DEFINITIONS.—Section 100 of title 35, United States Code, is amended by 

adding at the end the following: 

‘‘(f) The term ‘inventor’ means the individual or, if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention. 

‘‘(g) The terms ‘joint inventor’ and ‘coinventor’ mean any 1 of the individuals 

who invented or discovered the subject matter of a joint invention. 

‘‘(h) The ‘effective filing date of a claimed invention’ is— 

‘‘(1) the filing date of the patent or the application for the patent containing 

the claim to the invention; or 

‘‘(2) if the patent or application for patent is entitled to a right of priority 

of any other application under section 119, 365(a), or 365(b) or to the benefit 

of an earlier filing date in the United States under section 120, 121, or 365(c), 

the filing date of the earliest such application in which the claimed invention 

is disclosed in the manner provided by the first paragraph of section 112. 

‘‘(i) The term ‘claimed invention’ means the subject matter defined by a claim 

in a patent or an application for a patent. 

‘‘(j) The term ‘joint invention’ means an invention resulting from the collaboration of inventive endeavors of 2 or more persons working toward the same end and 

producing an invention by their collective efforts.’’. 

(b) CONDITIONS FOR PATENTABILITY.— 

(1) IN GENERAL.—Section 102 of title 35, United States Code, is amended 

to read as follows: 

‘‘§ 102. Conditions for patentability; novelty 

‘‘(a) NOVELTY; PRIOR ART.—A patent for a claimed invention may not be obtained if— 

‘‘(1) the claimed invention was patented, described in a printed publication, 

or in public use, on sale, or otherwise available to the public— 

‘‘(A) more than 1 year before the effective filing date of the claimed invention; or 

‘‘(B) 1 year or less before the effective filing date of the claimed invention, other than through disclosures made by the inventor or a joint inventor or by others who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or 

‘‘(2) the claimed invention was described in a patent issued under section 

151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the 

claimed invention. 

‘‘(b) EXCEPTIONS.— 

‘‘(1) PRIOR INVENTOR DISCLOSURE EXCEPTION.—Subject matter that would 

otherwise qualify as prior art based upon a disclosure under subparagraph (B) 

of subsection (a)(1) shall not be prior art to a claimed invention under that subparagraph if the subject matter had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or others who obtained the subject 

matter disclosed directly or indirectly from the inventor or a joint inventor. 

‘‘(2) DERIVATION, PRIOR DISCLOSURE, AND COMMON ASSIGNMENT EXCEPTIONS.—Subject matter that would otherwise qualify as prior art only under 

subsection (a)(2) shall not be prior art to a claimed invention if— 

‘‘(A) the subject matter was obtained directly or indirectly from the inventor or a joint inventor; 

‘‘(B) the subject matter had been publicly disclosed by the inventor or 

a joint inventor or others who obtained the subject matter disclosed, directly or indirectly, from the inventor or a joint inventor before the effective 

filing date of the application or patent set forth under subsection (a)(2); or 

‘‘(C) the subject matter and the claimed invention, not later than the 

effective filing date of the claimed invention, were owned by the same person or subject to an obligation of assignment to the same person. 

‘‘(3) JOINT RESEARCH AGREEMENT EXCEPTION.— 

‘‘(A) IN GENERAL.—Subject matter and a claimed invention shall be 

deemed to have been owned by the same person or subject to an obligation 

of assignment to the same person in applying the provisions of paragraph 

(2) if— 

‘‘(i) the claimed invention was made by or on behalf of parties to 

a joint research agreement that was in effect on or before the effective 

filing date of the claimed invention; 

4 

‘‘(ii) the claimed invention was made as a result of activities undertaken within the scope of the joint research agreement; and 

‘‘(iii) the application for patent for the claimed invention discloses 

or is amended to disclose the names of the parties to the joint research 

agreement. 

‘‘(B) For purposes of subparagraph (A), the term ‘joint research agreement’ means a written contract, grant, or cooperative agreement entered 

into by 2 or more persons or entities for the performance of experimental, 

developmental, or research work in the field of the claimed invention. 

‘‘(4) PATENTS AND PUBLISHED APPLICATIONS EFFECTIVELY FILED.—A patent 

or application for patent is effectively filed under subsection (a)(2) with respect 

to any subject matter described in the patent or application— 

‘‘(A) as of the filing date of the patent or the application for patent; or 

‘‘(B) if the patent or application for patent is entitled to claim a right 

of priority under section 119, 365(a), or 365(b) or to claim the benefit of an 

earlier filing date under section 120, 121, or 365(c), based upon 1 or more 

prior filed applications for patent, as of the filing date of the earliest such 

application that describes the subject matter.’’. 

(2) CONFORMING AMENDMENT.—The item relating to section 102 in the table 

of sections for chapter 10 of title 35, United States Code, is amended to read 

as follows: 

‘‘102. Conditions for patentability; novelty.’’. 

(c) CONDITIONS FOR PATENTABILITY; NONOBVIOUS SUBJECT MATTER.—Section 

103 of title 35, United States Code, is amended to read as follows: 

‘‘§ 103. Conditions for patentability; nonobvious subject matter 

‘‘A patent for a claimed invention may not be obtained though the claimed invention is not identically disclosed as set forth in section 102, if the differences between the claimed invention and the prior art are such that the claimed invention 

as a whole would have been obvious before the effective filing date of the claimed 

invention to a person having ordinary skill in the art to which the claimed invention 

pertains. Patentability shall not be negated by the manner in which the invention 

was made.’’. 

(d) REPEAL OF REQUIREMENTS FOR INVENTIONS MADE ABROAD.—Section 104 of 

title 35, United States Code, and the item relating to that section in the table of 

sections for chapter 10 of title 35, United States Code, are repealed. 

(e) REPEAL OF STATUTORY INVENTION REGISTRATION.— (1) IN GENERAL.—Section 157 of title 35, United States Code, and the item 

relating to that section in the table of sections for chapter 14 of title 35, United 

States Code, are repealed. 

(2) REMOVAL OF CROSS REFERENCES.—Section 111(b)(8) of title 35, United 

States Code, is amended by striking ‘‘sections 115, 131, 135, and 157’’ and inserting ‘‘sections 131 and 135’’. 

(f) EARLIER FILING DATE FOR INVENTOR AND JOINT INVENTOR.—Section 120 of 

title 35, United States Code, is amended by striking ‘‘which is filed by an inventor 

or inventors named’’ and inserting ‘‘which names an inventor or joint inventor’’. 

(g) CONFORMING AMENDMENTS.— 

(1) RIGHT OF PRIORITY.—Section 172 of title 35, United States Code, is 

amended by striking ‘‘and the time specified in section 102(d)’’. 

(2) LIMITATION ON REMEDIES.—Section 287(c)(4) of title 35, United States 

Code, is amended by striking ‘‘the earliest effective filing date of which is prior 

to’’ and inserting ‘‘which has an effective filing date before’’. 

(3) INTERNATIONAL APPLICATION DESIGNATING THE UNITED STATES: EFFECT.—Section 363 of title 35, United States Code, is amended by striking ‘‘except as otherwise provided in section 102(e) of this title’’. 

(4) PUBLICATION OF INTERNATIONAL APPLICATION: EFFECT.—Section 374 of 

title 35, United States Code, is amended by striking ‘‘sections 102(e) and 154(d)’’ 

and inserting ‘‘section 154(d)’’. 

(5) PATENT ISSUED ON INTERNATIONAL APPLICATION: EFFECT.—The second 

sentence of section 375(a) of title 35, United States Code, is amended by striking ‘‘Subject to section 102(e) of this title, such’’ and inserting ‘‘Such’’. 

(6) LIMIT ON RIGHT OF PRIORITY.—Section 119(a) of title 35, United States 

Code, is amended by striking ‘‘; but no patent shall be granted’’ and all that 

follows through ‘‘one year prior to such filing’’. 

(7) INVENTIONS MADE WITH FEDERAL ASSISTANCE.—Section 202(c) of title 35, 

United States Code, is amended— 

(A) in paragraph (2)— 

5 

(i) by striking ‘‘publication, on sale, or public use,’’ and all that follows through ‘‘obtained in the United States’’ and inserting ‘‘the 1-year 

period referred to in section 102(a) would end before the end of that 

2-year period’’; and 

(ii) by striking ‘‘the statutory’’ and inserting ‘‘that 1-year’’; and 

(B) in paragraph (3), by striking ‘‘any statutory bar date that may occur 

under this title due to publication, on sale, or public use’’ and inserting ‘‘the 

expiration of the 1-year period referred to in section 102(a)’’. 

(h) REPEAL OF INTERFERING PATENT REMEDIES.—Section 291 of title 35, United 

States Code, and the item relating to that section in the table of sections for chapter 

29 of title 35, United States Code, are repealed. 

(i) ACTION FOR CLAIM TO PATENT ON DERIVED INVENTION.—Section 135 of title 

35, United States Code, is amended to read as follows: 

‘‘§ 135. Derivation proceedings 

‘‘(a) DISPUTE OVER RIGHT TO PATENT.— 

‘‘(1) INSTITUTION OF DERIVATION PROCEEDING.—An applicant may request 

initiation of a derivation proceeding to determine the right of the applicant to 

a patent by filing a request which sets forth with particularity the basis for 

finding that an earlier applicant derived the claimed invention from the applicant requesting the proceeding and, without authorization, filed an application 

claiming such invention. Any such request may only be made within 12 months 

after the date of first publication of an application containing a claim that is 

the same or is substantially the same as the claimed invention, must be made 

under oath, and must be supported by substantial evidence. Whenever the Director determines that patents or applications for patent naming different individuals as the inventor interfere with one another because of a dispute over the 

right to patent under section 101, the Director shall institute a derivation proceeding for the purpose of determining which applicant is entitled to a patent. 

‘‘(2) DETERMINATION BY PATENT TRIAL AND APPEAL BOARD.—In any proceeding under this subsection, the Patent Trial and Appeal Board— 

‘‘(A) shall determine the question of the right to patent; 

‘‘(B) in appropriate circumstances, may correct the naming of the inventor in any application or patent at issue; and 

‘‘(C) shall issue a final decision on the right to patent. 

‘‘(3) DERIVATION PROCEEDING.—The Board may defer action on a request to 

initiate a derivation proceeding until 3 months after the date on which the Director issues a patent to the applicant that filed the earlier application. 

‘‘(4) EFFECT OF FINAL DECISION.—The final decision of the Patent Trial and 

Appeal Board, if adverse to the claim of an applicant, shall constitute the final 

refusal by the United States Patent and Trademark Office on the claims involved. The Director may issue a patent to an applicant who is determined by 

the Patent Trial and Appeal Board to have the right to patent. The final decision of the Board, if adverse to a patentee, shall, if no appeal or other review 

of the decision has been or can be taken or had, constitute cancellation of the 

claims involved in the patent, and notice of such cancellation shall be endorsed 

on copies of the patent distributed after such cancellation by the United States 

Patent and Trademark Office. 

‘‘(b) SETTLEMENT.—Parties to a derivation proceeding may terminate the proceeding by filing a written statement reflecting the agreement of the parties as to 

the correct inventors of the claimed invention in dispute. Unless the Patent Trial 

and Appeal Board finds the agreement to be inconsistent with the evidence of 

record, it shall take action consistent with the agreement. Any written settlement 

or understanding of the parties shall be filed with the Director. At the request of 

a party to the proceeding, the agreement or understanding shall be treated as business confidential information, shall be kept separate from the file of the involved 

patents or applications, and shall be made available only to Government agencies 

on written request. 

‘‘(c) ARBITRATION.—Parties to a derivation proceeding, within such time as may 

be specified by the Director by regulation, may determine such contest or any aspect 

thereof by arbitration. Such arbitration shall be governed by the provisions of title 

9 to the extent such title is not inconsistent with this section. The parties shall give 

notice of any arbitration award to the Director, and such award shall, as between 

the parties to the arbitration, be dispositive of the issues to which it relates. The 

arbitration award shall be unenforceable until such notice is given. Nothing in this 

subsection shall preclude the Director from determining patentability of the invention involved in the derivation proceeding.’’. 

6 

(j) ELIMINATION OF REFERENCES TO INTERFERENCES.—(1) Sections 6, 41, 134, 

141, 145, 146, 154, 305, and 314 of title 35, United States Code, are each amended 

by striking ‘‘Board of Patent Appeals and Interferences’’ each place it appears and 

inserting ‘‘Patent Trial and Appeal Board’’. 

(2) Sections 141, 146, and 154 of title 35, United States Code, are each amended— 

(A) by striking ‘‘an interference’’ each place it appears and inserting ‘‘a derivation proceeding’’; and 

(B) by striking ‘‘interference’’ each additional place it appears and inserting 

‘‘derivation proceeding’’. 

(3) The section heading for section 134 of title 35, United States Code, is 

amended to read as follows: 

‘‘§ 134. Appeal to the Patent Trial and Appeal Board’’. 

(4) The section heading for section 146 of title 35, United States Code, is 

amended to read as follows: 

‘‘§ 146. Civil action in case of derivation proceeding’’. 

(5) Section 154(b)(1)(C) of title 35, United States Code, is amended by striking 

‘‘INTERFERENCES’’ and inserting ‘‘DERIVATION PROCEEDINGS’’. 

(6) The item relating to section 6 in the table of sections for chapter 1 of title 

35, United States Code, is amended to read as follows: 

‘‘6. Patent Trial and Appeal Board.’’. 

(7) The items relating to sections 134 and 135 in the table of sections for chapter 12 of title 35, United States Code, are amended to read as follows: 

‘‘134. Appeal to the Patent Trial and Appeal Board. 

‘‘135. Derivation proceedings.’’. 

(8) The item relating to section 146 in the table of sections for chapter 13 of 

title 35, United States Code, is amended to read as follows: 

‘‘146. Civil action in case of derivation proceeding.’’. 

(9) CERTAIN APPEALS.—Section 1295(a)(4)(A) of title 28, United States Code, is 

amended to read as follows: 

‘‘(A) the Patent Trial and Appeal Board of the United States Patent and 

Trademark Office with respect to patent applications, interference proceedings (commenced before the date of enactment of the Patent Reform Act 

of 2009), derivation proceedings, and post-grant review proceedings, at the 

instance of an applicant for a patent or any party to a patent interference 

(commenced before the effective date of the Patent Reform Act of 2009), derivation proceeding, or post-grant review proceeding, and any such appeal 

shall waive any right of such applicant or party to proceed under section 

145 or 146 of title 35;’’. 

(k) EFFECTIVE DATE.— 

(1) IN GENERAL.—The amendments made by this section— 

(A) shall take effect 90 days after the date on which the President 

issues an Executive order containing the President’s finding that major patenting authorities have adopted a grace period having substantially the 

same effect as that contained under the amendments made by this section; 

and 

(B) shall apply to all applications for patent that are filed on or after 

the effective date under subparagraph (A). 

(2) DEFINITIONS.—In this subsection: 

(A) MAJOR PATENTING AUTHORITIES.—The term ‘‘major patenting authorities’’ means at least the patenting authorities in Europe and Japan. 

(B) GRACE PERIOD.—The term ‘‘grace period’’ means the 1-year period 

ending on the effective filing date of a claimed invention, during which disclosures of the subject matter by the inventor or a joint inventor, or by others who obtained the subject matter disclosed directly or indirectly from the 

inventor or a joint inventor, do not qualify as prior art to the claimed invention. 

(C) EFFECTIVE FILING DATE.—The term ‘‘effective filing date of a 

claimed invention’’ means, with respect to a patenting authority in another 

country, a date equivalent to the effective filing date of a claimed invention 

as defined in section 100(h) of title 35, United States Code, as added by 

subsection (a) of this section. 

7 

(3) RETENTION OF INTERFERENCE PROCEDURES WITH RESPECT TO APPLICATIONS FILED BEFORE EFFECTIVE DATE.—In the case of any application for patent 

that is filed before the effective date under paragraph (1)(A), the provisions of 

law repealed or amended by subsections (h), (i), and (j) shall apply to such application as such provisions of law were in effect on the day before such effective 

date. 

(l) REVIEW EVERY 7 YEARS.—Not later than the end of the 7-year period beginning on the effective date under subsection (k), and the end of every 7-year period 

thereafter, the Director shall— 

(1) conduct a study on the effectiveness and efficiency of the amendments 

made by this section; and 

(2) submit to the Committees on the Judiciary of the House of Representatives and the Senate a report on the results of the study, including any recommendations the Director has on amendments to the law and other recommendations of the Director with respect to the first-to-file system implemented under the amendments made by this section. 

SEC. 4. INVENTOR’S OATH OR DECLARATION. 

(a) INVENTOR’S OATH OR DECLARATION.— 

(1) IN GENERAL.—Section 115 of title 35, United States Code, is amended 

to read as follows: 

‘‘§ 115. Inventor’s oath or declaration 

‘‘(a) NAMING THE INVENTOR; INVENTOR’S OATH OR DECLARATION.—An application for patent that is filed under section 111(a), that commences the national stage 

under section 363, or that is filed by an inventor for an invention for which an application has previously been filed under this title by that inventor shall include, or 

be amended to include, the name of the inventor of any claimed invention in the 

application. Except as otherwise provided in this section, an individual who is the 

inventor or a joint inventor of a claimed invention in an application for patent shall 

execute an oath or declaration in connection with the application. 

‘‘(b) REQUIRED STATEMENTS.—An oath or declaration under subsection (a) shall 

contain statements that— 

‘‘(1) the application was made or was authorized to be made by the affiant 

or declarant; and 

‘‘(2) such individual believes himself or herself to be the original inventor 

or an original joint inventor of a claimed invention in the application. 

‘‘(c) ADDITIONAL REQUIREMENTS.—The Director may specify additional information relating to the inventor and the invention that is required to be included in 

an oath or declaration under subsection (a). 

‘‘(d) SUBSTITUTE STATEMENT.— 

‘‘(1) IN GENERAL.—In lieu of executing an oath or declaration under subsection (a), the applicant for patent may provide a substitute statement under 

the circumstances described in paragraph (2) and such additional circumstances 

that the Director may specify by regulation. 

‘‘(2) PERMITTED CIRCUMSTANCES.—A substitute statement under paragraph 

(1) is permitted with respect to any individual who— 

‘‘(A) is unable to file the oath or declaration under subsection (a) because the individual— 

‘‘(i) is deceased; 

‘‘(ii) is under legal incapacity; or 

‘‘(iii) cannot be found or reached after diligent effort; or 

‘‘(B) is under an obligation to assign the invention but has refused to 

make the oath or declaration required under subsection (a). 

‘‘(3) CONTENTS.—A substitute statement under this subsection shall— 

‘‘(A) identify the individual with respect to whom the statement applies; 

‘‘(B) set forth the circumstances representing the permitted basis for 

the filing of the substitute statement in lieu of the oath or declaration 

under subsection (a); and 

‘‘(C) contain any additional information, including any showing, required by the Director. 

‘‘(e) MAKING REQUIRED STATEMENTS IN ASSIGNMENT OF RECORD.—An individual 

who has assigned rights in an application for patent may include the required statements under subsections (b) and (c) in the assignment executed by the individual, 

in lieu of filing such statements separately. 

‘‘(f) TIME FOR FILING.—A notice of allowance under section 151 may be provided 

to an applicant for patent only if the applicant for patent has filed each required 

8 

oath or declaration under subsection (a) or has filed a substitute statement under 

subsection (d) or recorded an assignment meeting the requirements of subsection (e). 

‘‘(g) EARLIER-FILED APPLICATION CONTAINING REQUIRED STATEMENTS OR SUBSTITUTE STATEMENT.—The requirements under this section shall not apply to an individual with respect to an application for patent in which the individual is named 

as the inventor or a joint inventor and that claims the benefit under section 120 

or 365(c) of the filing of an earlier-filed application, if— 

‘‘(1) an oath or declaration meeting the requirements of subsection (a) was 

executed by the individual and was filed in connection with the earlier-filed application; 

‘‘(2) a substitute statement meeting the requirements of subsection (d) was 

filed in the earlier filed application with respect to the individual; or 

‘‘(3) an assignment meeting the requirements of subsection (e) was executed 

with respect to the earlier-filed application by the individual and was recorded 

in connection with the earlier-filed application. 

‘‘(h) SUPPLEMENTAL AND CORRECTED STATEMENTS; FILING ADDITIONAL STATEMENTS.— 

‘‘(1) IN GENERAL.—Any person making a statement required under this section may withdraw, replace, or otherwise correct the statement at any time. If 

a change is made in the naming of the inventor requiring the filing of 1 or more 

additional statements under this section, the Director shall establish regulations under which such additional statements may be filed. 

‘‘(2) SUPPLEMENTAL STATEMENTS NOT REQUIRED.—If an individual has executed an oath or declaration under subsection (a) or an assignment meeting the 

requirements of subsection (e) with respect to an application for patent, the Director may not thereafter require that individual to make any additional oath, 

declaration, or other statement equivalent to those required by this section in 

connection with the application for patent or any patent issuing thereon. 

‘‘(3) SAVINGS CLAUSE.—No patent shall be invalid or unenforceable based 

upon the failure to comply with a requirement under this section if the failure 

is remedied as provided under paragraph (1). 

‘‘(i) ACKNOWLEDGMENT OF PENALTIES.—Any declaration or statement filed pursuant to this section shall contain an acknowledgment that any willful false statement made in such declaration or statement is punishable under section 1001 of 

title 18 by fine or imprisonment of not more than 5 years, or both.’’. 

(2) RELATIONSHIP TO DIVISIONAL APPLICATIONS.—Section 121 of title 35, 

United States Code, is amended by striking ‘‘If a divisional application’’ and all 

that follows through ‘‘inventor.’’. 

(3) REQUIREMENTS FOR NONPROVISIONAL APPLICATIONS.—Section 111(a) of 

title 35, United States Code, is amended— 

(A) in paragraph (2)(C), by striking ‘‘by the applicant’’ and inserting ‘‘or 

declaration’’; 

(B) in the heading for paragraph (3), by striking ‘‘AND OATH’’; and 

(C) by striking ‘‘and oath’’ each place it appears. 

(4) CONFORMING AMENDMENT.—The item relating to section 115 in the table 

of sections for chapter 11 of title 35, United States Code, is amended to read 

as follows: 

‘‘115. Inventor’s oath or declaration.’’. 

(b) SPECIFICATION.—Section 112 of title 35, United States Code, is amended— 

(1) in the first paragraph— 

(A) by striking ‘‘The specification’’ and inserting ‘‘(a) IN GENERAL.—The 

specification’’; and 

(B) by striking ‘‘of carrying out his invention’’ and inserting ‘‘or joint 

inventor of carrying out the invention’’; 

(2) in the second paragraph— 

(A) by striking ‘‘The specifications’’ and inserting ‘‘(b) CONCLUSION.— 

The specifications’’; and 

(B) by striking ‘‘applicant regards as his invention’’ and inserting ‘‘inventor or a joint inventor regards as the invention’’; 

(3) in the third paragraph, by striking ‘‘A claim’’ and inserting ‘‘(c) FORM.— 

A claim’’; 

(4) in the fourth paragraph, by striking ‘‘Subject to the following paragraph,’’ and inserting ‘‘(d) REFERENCE IN DEPENDENT FORMS.—Subject to subsection (e),’’; 

(5) in the fifth paragraph, by striking ‘‘A claim’’ and inserting ‘‘(e) REFERENCE IN MULTIPLE DEPENDENT FORM.—A claim’’; and 

9 

(6) in the last paragraph, by striking ‘‘An element’’ and inserting ‘‘(f) ELEMENT IN CLAIM FOR A COMBINATION.—An element’’. 

SEC. 5. RIGHT OF THE INVENTOR TO OBTAIN DAMAGES. 

(a) DAMAGES.—Section 284 of title 35, United States Code, is amended to read 

as follows: 

‘‘§ 284. Damages 

‘‘(a) IN GENERAL.—Upon finding for the claimant the court shall award the 

claimant damages adequate to compensate for the infringement but in no event less 

than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court, subject to the provisions of this 

section. 

‘‘(b) DETERMINATION OF DAMAGES; EVIDENCE CONSIDERED; PROCEDURE.—The 

court may receive expert testimony as an aid to the determination of damages or 

of what royalty would be reasonable under the circumstances. The admissibility of 

such testimony shall be governed by the rules of evidence governing expert testimony. When the damages are not found by a jury, the court shall assess them. 

‘‘(c) STANDARD FOR CALCULATING REASONABLE ROYALTY.— 

‘‘(1) IN GENERAL.—The court shall determine, based on the facts of the case 

and after adducing any further evidence the court deems necessary, which of 

the following methods shall be used by the court or the jury in calculating a 

reasonable royalty pursuant to subsection (a). The court shall also identify the 

factors that are relevant to the determination of a reasonable royalty, and the 

court or jury, as the case may be, shall consider only those factors in making 

such determination. 

‘‘(A) ENTIRE MARKET VALUE.—Upon a showing to the satisfaction of the 

court that the claimed invention’s specific contribution over the prior art is 

the predominant basis for market demand for an infringing product or process, damages may be based upon the entire market value of that infringing 

product or process. 

‘‘(B) ESTABLISHED ROYALTY BASED ON MARKETPLACE LICENSING.—Upon 

a showing to the satisfaction of the court that the claimed invention has 

been the subject of a nonexclusive license for the use made of the invention 

by the infringer, to a number of persons sufficient to indicate a general 

marketplace recognition of the reasonableness of the licensing terms, if the 

license was secured prior to the filing of the case before the court, and the 

court determines that the infringer’s use is of substantially the same scope, 

volume, and benefit of the rights granted under such license, damages may 

be determined on the basis of the terms of such license. Upon a showing 

to the satisfaction of the court that the claimed invention has sufficiently 

similar noninfringing substitutes in the relevant market, which have themselves been the subject of such nonexclusive licenses, and the court determines that the infringer’s use is of substantially the same scope, volume, 

and benefit of the rights granted under such licenses, damages may be determined on the basis of the terms of such licenses. 

‘‘(C) VALUATION CALCULATION.—Upon a determination by the court that 

the showings required under subparagraphs (A) and (B) have not been 

made, the court shall conduct an analysis to ensure that a reasonable royalty is applied only to the portion of the economic value of the infringing 

product or process properly attributable to the claimed invention’s specific 

contribution over the prior art. In the case of a combination invention 

whose elements are present individually in the prior art, the contribution 

over the prior art may include the value of the additional function resulting 

from the combination, as well as the enhanced value, if any, of some or all 

of the prior art elements as part of the combination, if the patentee demonstrates that value. 

‘‘(2) ADDITIONAL FACTORS.—Where the court determines it to be appropriate 

in determining a reasonable royalty under paragraph (1), the court may also 

consider, or direct the jury to consider, any other relevant factors under applicable law. 

‘‘(d) INAPPLICABILITY TO OTHER DAMAGES ANALYSIS.—The methods for calculating a reasonable royalty described in subsection (c) shall have no application to 

the calculation of an award of damages that does not necessitate the determination 

of a reasonable royalty as a basis for monetary relief sought by the claimant. 

‘‘(e) WILLFUL INFRINGEMENT.— 

‘‘(1) INCREASED DAMAGES.—A court that has determined that an infringer 

has willfully infringed a patent or patents may increase damages up to 3 times 

10 

the amount of the damages found or assessed under subsection (a), except that 

increased damages under this paragraph shall not apply to provisional rights 

under section 154(d). 

‘‘(2) PERMITTED GROUNDS FOR WILLFULNESS.—A court may find that an infringer has willfully infringed a patent only if the patent owner presents clear 

and convincing evidence that acting with objective recklessness— 

‘‘(A) after receiving written notice from the patentee— 

‘‘(i) alleging acts of infringement in a manner sufficient to give the 

infringer an objectively reasonable apprehension of suit on such patent, 

and 

‘‘(ii) identifying with particularity each claim of the patent, each 

product or process that the patent owner alleges infringes the patent, 

and the relationship of such product or process to such claim, 

the infringer, after a reasonable opportunity to investigate, thereafter performed 1 or more of the alleged acts of infringement; 

‘‘(B) the infringer intentionally copied the patented invention with 

knowledge that it was patented; or 

‘‘(C) after having been found by a court to have infringed that patent, 

the infringer engaged in conduct that was not colorably different from the 

conduct previously found to have infringed the patent, and which resulted 

in a separate finding of infringement of the same patent. 

‘‘(3) LIMITATIONS ON WILLFULNESS.— ‘‘(A) IN GENERAL.—A court may not find that an infringer has willfully 

infringed a patent under paragraph (2) for any period of time during which 

the infringer had an informed good faith belief that the patent was invalid 

or unenforceable, or would not be infringed by the conduct later shown to 

constitute infringement of the patent. 

‘‘(B) GOOD FAITH ESTABLISHED.—An informed good faith belief within 

the meaning of subparagraph (A) may be established by— 

‘‘(i) reasonable reliance on advice of counsel; 

‘‘(ii) evidence that the infringer sought to modify its conduct to 

avoid infringement once it had discovered the patent; or 

‘‘(iii) other evidence a court may find sufficient to establish such 

good faith belief. 

‘‘(C) RELEVANCE OF NOT PRESENTING CERTAIN EVIDENCE.—The decision 

of the infringer not to present evidence of advice of counsel is not relevant 

to a determination of willful infringement under paragraph (2). 

‘‘(4) LIMITATION ON PLEADING.—Before the date on which a court determines that the patent in suit is not invalid, is enforceable, and has been infringed by the infringer, a patentee may not plead and a court may not determine that an infringer has willfully infringed a patent.’’. 

(b) REPORT TO CONGRESSIONAL COMMITTEES.— 

(1) IN GENERAL.—Not later than 2 years after the date of enactment of this 

Act, the Director shall report to the Committee on the Judiciary of the House 

of Representatives and the Committee on the Judiciary of the Senate, the findings and recommendations of the Director on the operation of prior user rights 

in selected countries in the industrialized world. The report shall include the 

following: 

(A) A comparison between patent laws of the United States and the 

laws of other industrialized countries, including the European Union, 

Japan, Canada, and Australia. 

(B) An analysis of the effect of prior user rights on innovation rates in 

the selected countries. 

(C) An analysis of the correlation, if any, between prior user rights and 

start-up enterprises and the ability to attract venture capital to start new 

companies. 

(D) An analysis of the effect of prior user rights, if any, on small businesses, universities, and individual inventors. 

(E) An analysis of legal and constitutional issues, if any, that arise 

from placing trade secret law in patent law. 

(2) CONSULTATION WITH OTHER AGENCIES.—In preparing the report required 

under paragraph (1), the Director shall consult with the Secretary of State and 

the Attorney General. 

(c) DEFENSE TO INFRINGEMENT BASED ON EARLIER INVENTOR.—Section 273(b)(6) 

of title 35, United States Code, is amended to read as follows: 

‘‘(6) PERSONAL DEFENSE.—The defense under this section may be asserted 

only by the person who performed or caused the performance of the acts necessary to establish the defense as well as any other entity that controls, is conVerDate Aug 31 2005 14:13 Jul 12, 2010 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 H:\WORK\FULL\043009\49388.000 HJUD1 PsN: 49388
11 

trolled by, or is under common control with such person and, except for any 

transfer to the patent owner, the right to assert the defense shall not be licensed or assigned or transferred to another person except as an ancillary and 

subordinate part of a good faith assignment or transfer for other reasons of the 

entire enterprise or line of business to which the defense relates. Notwithstanding the preceding sentence, any person may, on its own behalf, assert a 

defense based on the exhaustion of rights provided under paragraph (3), including any necessary elements thereof.’’. 

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to any 

civil action commenced on or after the date of enactment of this Act. 

(e) REVIEW EVERY 7 YEARS.—Not later than the end of the 7-year period beginning on the date of the enactment of this Act, and the end of every 7-year period 

thereafter, the Director shall— 

(1) conduct a study on the effectiveness and efficiency of the amendments 

made by this section; and 

(2) submit to the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate a report on the results 

of the study, including any recommendations the Director has on amendments 

to the law and other recommendations of the Director with respect to the right 

of the inventor to obtain damages for patent infringement. 

SEC. 6. POST-GRANT PROCEDURES AND OTHER QUALITY ENHANCEMENTS. 

(a) CITATION OF PRIOR ART.—Section 301 of title 35, United States Code, is 

amended to read as follows: 

‘‘§ 301. Citation of prior art 

‘‘(a) IN GENERAL.—Any person at any time may cite to the Office in writing— 

‘‘(1) prior art consisting of patents or printed publications which that person 

believes to have a bearing on the patentability of any claim of a particular patent; 

‘‘(2) written statements of the patent owner filed in a proceeding before a 

Federal court, the Patent and Trademark Office, or the United States International Trade Commission under section 337 of the Tariff Act of 1930 (19 

U.S.C. 1337), in which the patent owner takes a position on the scope of one 

or more patent claims; or 

‘‘(3) documentary evidence that the claimed invention was in substantial 

public use or on sale in the United States more than 1 year prior to the date 

of the application for patent in the United States. 

‘‘(b) SUBMISSIONS PART OF OFFICIAL FILE.—If the person citing prior art, written 

submissions, or documentary evidence under subsection (a) explains in writing the 

pertinence and manner of applying the prior art or documentary evidence to at least 

one claim of the patent, the citation of the prior art or documentary evidence (as 

the case may be) and the explanation thereof shall become a part of the official file 

of the patent. 

‘‘(c) PROCEDURES FOR WRITTEN STATEMENTS.— 

‘‘(1) SUBMISSION OF ADDITIONAL MATERIALS.—A party that submits written 

statements under subsection (a)(2) in a proceeding shall include any other documents, pleadings, or evidence from the proceeding that address the patent owner’s statements or the claims addressed by the written statements. 

‘‘(2) LIMITATION ON USE OF STATEMENTS.—Written statements submitted 

under subsection (a)(2) shall not be considered for any purpose other than to 

determine the proper meaning of the claims that are the subject of the request 

in a proceeding ordered pursuant to section 304 or 313. Any such written statements, and any materials submitted under paragraph (1), that are subject to 

an applicable protective order shall be redacted to exclude information subject 

to the order. 

‘‘(d) IDENTITY WITHHELD.—Upon the written request of the person making the 

citation under subsection (a), the person’s identity shall be excluded from the patent 

file and kept confidential.’’. 

(b) REQUEST FOR REEXAMINATION.—The first sentence of section 302 of title 35, 

United States Code, is amended to read as follows: ‘‘Any person at any time may 

file a request for reexamination by the Office of any claim on a patent on the basis 

of any prior art or documentary evidence cited under paragraph (1) or (3) of subsection (a) of section 301 of this title.’’. 

(c) REEXAMINATION.—Section 303(a) of title 35, United States Code, is amended 

to read as follows: 

‘‘(a) Within three months following the filing of a request for reexamination 

under section 302, the Director shall determine whether a substantial new question 

12 

of patentability affecting any claim of the patent concerned is raised by the request, 

with or without consideration of other patents or printed publications. On the Director’s own initiative, and at any time, the Director may determine whether a substantial new question of patentability is raised by patents and publications discovered by the Director, is cited under section 301, or is cited by any person other than 

the owner of the patent under section 302 or section 311. The existence of a substantial new question of patentability is not precluded by the fact that a patent or 

printed publication was previously considered by the Office.’’. 

(d) REQUEST FOR INTER PARTES REEXAMINATION.—Section 311(a) of title 35, 

United States Code, is amended to read as follows: 

‘‘(a) IN GENERAL.—Any third-party requester at any time may file a request for 

inter partes reexamination by the Office of a patent on the basis of any prior art 

or documentary evidence cited under paragraph (1) or (3) of subsection (a) of section 

301 of this title.’’. 

(e) CONDUCT OF INTER PARTES PROCEEDINGS.—Section 314 of title 35, United 

States Code, is amended— 

(1) in the first sentence of subsection (a), by striking ‘‘conducted according 

to the procedures established for initial examination under the provisions of sections 132 and 133’’ and inserting ‘‘heard by an administrative patent judge in 

accordance with procedures which the Director shall establish’’; 

(2) in subsection (b), by striking paragraph (2) and inserting the following: 

‘‘(2) The third-party requester shall have the opportunity to file written comments on any action on the merits by the Office in the inter partes reexamination 

proceeding, and on any response that the patent owner files to such an action, if 

those written comments are received by the Office within 60 days after the date of 

service on the third-party requester of the Office action or patent owner response, 

as the case may be.’’; and 

(3) by adding at the end the following: 

‘‘(d) ORAL HEARING.—At the request of a third party requestor or the patent 

owner, the administrative patent judge shall conduct an oral hearing, unless the 

judge finds cause lacking for such hearing.’’. 

(f) ESTOPPEL.—Section 315(c) of title 35, United States Code, is amended by 

striking ‘‘or could have raised’’. 

(g) REEXAMINATION PROHIBITED AFTER DISTRICT COURT DECISION.—Section 

317(b) of title 35, United States Code, is amended— 

(1) in the subsection heading, by striking ‘‘FINAL DECISION’’ and inserting 

‘‘DISTRICT COURT DECISION’’; and 

(2) by striking ‘‘Once a final decision has been entered’’ and inserting ‘‘Once 

the judgment of the district court has been entered’’. 

(h) POST-GRANT OPPOSITION PROCEDURES.— 

(1) IN GENERAL.—Part III of title 35, United States Code, is amended by 

adding at the end the following new chapter: 

‘‘CHAPTER 32—POST-GRANT REVIEW PROCEDURES 

‘‘Sec. 

‘‘321. Petition for post-grant review. 

‘‘322. Timing and bases of petition. 

‘‘323. Requirements of petition. 

‘‘324. Prohibited filings. 

‘‘325. Submission of additional information; showing of sufficient grounds. 

‘‘326. Conduct of post-grant review proceedings. 

‘‘327. Patent owner response. 

‘‘328. Proof and evidentiary standards. 

‘‘329. Amendment of the patent. 

‘‘330. Decision of the Board. 

‘‘331. Effect of decision. 

‘‘332. Settlement. 

‘‘333. Relationship to other pending proceedings. 

‘‘334. Effect of decisions rendered in civil action on post-grant review proceedings. 

‘‘335. Effect of final decision on future proceedings. 

‘‘336. Appeal. 

‘‘§ 321. Petition for post-grant review 

‘‘Subject to sections 322, 324, 332, and 333, a person who is not the patent 

owner may file with the Office a petition for cancellation seeking to institute a postgrant review proceeding to cancel as unpatentable any claim of a patent on any 

ground that could be raised under paragraph (2) or (3) of section 282(b) (relating 

13 

to invalidity of the patent or any claim). The Director shall establish, by regulation, 

fees to be paid by the person requesting the proceeding, in such amounts as the Director determines to be reasonable. 

‘‘§ 322. Timing and bases of petition 

‘‘A post-grant proceeding may be instituted under this chapter pursuant to a 

cancellation petition filed under section 321 only if— 

‘‘(1) the petition is filed not later than 12 months after the issuance of the 

patent or a reissue patent, as the case may be; or 

‘‘(2) the patent owner consents in writing to the proceeding. 

‘‘§ 323. Requirements of petition 

‘‘A cancellation petition filed under section 321 may be considered only if— 

‘‘(1) the petition is accompanied by payment of the fee established by the 

Director under section 321; 

‘‘(2) the petition identifies the cancellation petitioner; 

‘‘(3) for each claim sought to be canceled, the petition sets forth in writing 

the basis for cancellation and provides the evidence in support thereof, including copies of patents and printed publications, or written testimony of a witness 

attested to under oath or declaration by the witness, or any other information 

that the Director may require by regulation; and 

‘‘(4) the petitioner provides copies of the petition, including any evidence 

submitted with the petition and any other information submitted under paragraph (3), to the patent owner or, if applicable, the designated representative 

of the patent owner. 

‘‘§ 324. Prohibited filings 

‘‘A post-grant review proceeding may not be instituted under section 322 if the 

petition for cancellation requesting the proceeding— 

‘‘(1) identifies the same cancellation petitioner and the same patent as a 

previous petition for cancellation filed under such section; or 

‘‘(2) is based on the best mode requirement contained in section 112. 

‘‘§ 325. Submission of additional information; showing of sufficient grounds 

‘‘(a) IN GENERAL.—The cancellation petitioner shall file such additional information with respect to the petition as the Director may require. For each petition submitted under section 321, the Director shall determine if the written statement, and 

any evidence submitted with the request, establish that a substantial question of 

patentability exists for at least one claim in the patent. The Director may initiate 

a post-grant review proceeding if the Director determines that the information presented provides sufficient grounds to believe that there is a substantial question of 

patentability concerning one or more claims of the patent at issue. 

‘‘(b) NOTIFICATION; DETERMINATIONS NOT REVIEWABLE.—The Director shall notify the patent owner and each petitioner in writing of the Director’s determination 

under subsection (a), including a determination to deny the petition. The Director 

shall make that determination in writing not later than 60 days after receiving the 

petition. Any determination made by the Director under subsection (a), including 

whether or not to institute a post-grant review proceeding or to deny the petition, 

shall not be reviewable. 

‘‘§ 326. Conduct of post-grant review proceedings 

‘‘(a) IN GENERAL.—The Director shall prescribe regulations, in accordance with 

section 2(b)(2)— 

‘‘(1) establishing and governing post-grant review proceedings under this 

chapter and their relationship to other proceedings under this title; 

‘‘(2) establishing procedures for the submission of supplemental information 

after the petition for cancellation is filed; and 

‘‘(3) setting forth procedures for discovery of relevant evidence, including 

that such discovery shall be limited to evidence directly related to factual assertions advanced by either party in the proceeding, and the procedures for obtaining such evidence shall be consistent with the purpose and nature of the proceeding. 

In carrying out paragraph (3), the Director shall bear in mind that discovery must 

be in the interests of justice. 

‘‘(b) POST-GRANT REGULATIONS.—Regulations under subsection (a)(1)— 

‘‘(1) shall require that the final determination in a post-grant proceeding 

issue not later than one year after the date on which the post-grant review proceeding is instituted under this chapter, except that, for good cause shown, the 

Director may extend the 1-year period by not more than six months; 

14 

‘‘(2) shall provide for discovery upon order of the Director; 

‘‘(3) shall provide for publication of notice in the Federal Register of the filing of a petition for post-grant review under this chapter, for publication of the 

petition, and documents, orders, and decisions relating to the petition, on the 

website of the Patent and Trademark Office, and for filings under seal exempt 

from publication requirements; 

‘‘(4) shall prescribe sanctions for abuse of discovery, abuse of process, or any 

other improper use of the proceeding, such as to harass or to cause unnecessary 

delay or unnecessary increase in the cost of the proceeding; 

‘‘(5) may provide for protective orders governing the exchange and submission of confidential information; and 

‘‘(6) shall ensure that any information submitted by the patent owner in 

support of any amendment entered under section 329 is made available to the 

public as part of the prosecution history of the patent. 

‘‘(c) CONSIDERATIONS.—In prescribing regulations under this section, the Director shall consider the effect on the economy, the integrity of the patent system, and 

the efficient administration of the Office. 

‘‘(d) CONDUCT OF PROCEEDING.—The Patent Trial and Appeal Board shall, in accordance with section 6(b), conduct each post-grant review proceeding authorized by 

the Director. 

‘‘§ 327. Patent owner response 

‘‘After a post-grant proceeding under this chapter has been instituted with respect to a patent, the patent owner shall have the right to file, within a time period 

set by the Director, a response to the cancellation petition. The patent owner shall 

file with the response, through affidavits or declarations, any additional factual evidence and expert opinions on which the patent owner relies in support of the response. 

‘‘§ 328. Proof and evidentiary standards 

‘‘(a) IN GENERAL.—The presumption of validity set forth in section 282 shall not 

apply in a challenge to any patent claim under this chapter. 

‘‘(b) BURDEN OF PROOF.—The party advancing a proposition under this chapter 

shall have the burden of proving that proposition by a preponderance of the evidence. 

‘‘§ 329. Amendment of the patent 

‘‘(a) IN GENERAL.—In response to a challenge in a petition for cancellation, the 

patent owner may file one motion to amend the patent in one or more of the following ways: 

‘‘(1) Cancel any challenged patent claim. 

‘‘(2) For each challenged claim, propose a substitute claim. 

‘‘(3) Amend the patent drawings or otherwise amend the patent other than 

the claims. 

‘‘(b) ADDITIONAL MOTIONS.—Additional motions to amend may be permitted only 

for good cause shown. 

‘‘(c) SCOPE OF CLAIMS.—An amendment under this section may not enlarge the 

scope of the claims of the patent or introduce new matter. 

‘‘§ 330. Decision of the Board 

‘‘If the post-grant review proceeding is instituted and not dismissed under this 

chapter, the Patent Trial and Appeal Board shall issue a final written decision addressing the patentability of any patent claim challenged and any new claim added 

under section 329. 

‘‘§ 331. Effect of decision 

‘‘(a) IN GENERAL.—If the Patent Trial and Appeal Board issues a final decision 

under section 330 and the time for appeal has expired or any appeal proceeding has 

terminated, the Director shall issue and publish a certificate canceling any claim of 

the patent finally determined to be unpatentable and incorporating in the patent 

by operation of the certificate any new claim determined to be patentable. 

‘‘(b) NEW CLAIMS.—Any new claim held to be patentable and incorporated into 

a patent in a post-grant review proceeding shall have the same effect as that specified in section 252 for reissued patents on the right of any person who made, purchased, offered to sell, or used within the United States, or imported into the United 

States, anything patented by such new claim, or who made substantial preparations 

therefor, before a certificate under subsection (a) of this section is issued. 

15 

‘‘§ 332. Settlement 

‘‘(a) IN GENERAL.—A post-grant review proceeding shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, 

unless the Patent Trial and Appeal Board has issued a written decision before the 

request for termination is filed. If the post-grant review proceeding is terminated 

with respect to a petitioner under this paragraph, no estoppel shall apply to that 

petitioner. If no petitioner remains in the proceeding, the panel of administrative 

patent judges assigned to the proceeding shall terminate the proceeding. 

‘‘(b) AGREEMENT IN WRITING.—Any agreement or understanding between the 

patent owner and a petitioner, including any collateral agreements referred to in the 

agreement or understanding, that is made in connection with or in contemplation 

of the termination of a post-grant review proceeding, must be in writing. A postgrant review proceeding as between the parties to the agreement or understanding 

may not be terminated until a copy of the agreement or understanding, including 

any such collateral agreements, has been filed in the Office. If any party filing such 

an agreement or understanding requests, the agreement or understanding shall be 

kept separate from the file of the post-grant review proceeding, and shall be made 

available only to Government agencies on written request. 

‘‘§ 333. Relationship to other proceedings 

‘‘(a) IN GENERAL.—Notwithstanding subsection 135(a), sections 251 and 252, 

and chapter 30, the Director may determine the manner in which any reexamination proceeding, reissue proceeding, interference proceeding (commenced with respect to an application for patent filed before the effective date provided in section 

3(k) of the Patent Reform Act of 2009), derivation proceeding, or post-grant review 

proceeding, that is pending during a post-grant review proceeding, may proceed, including providing for stay, transfer, consolidation, or termination of any such proceeding. 

‘‘(b) STAYS.—The Director may stay a post-grant review proceeding if a pending 

civil action for infringement of a patent, or a pending proceeding before the United 

States International Trade Commission under section 337 of the Tariff Act of 1930 

(19 U.S.C. 1337), addresses the same or substantially the same questions of patentability raised against the patent in a petition for the post-grant review proceeding. 

‘‘(c) EFFECT OF COMMENCEMENT OF PROCEEDING.—The commencement of a postgrant review proceeding— 

‘‘(1) shall not limit in any way the right of the patent owner to commence 

an action for infringement of the patent; and 

‘‘(2) shall not be cited as evidence relating to the validity of any claim of 

the patent in any proceeding before a court or the International Trade Commission concerning the patent. 

‘‘§ 334. Effect of decisions rendered in civil action or ITC proceeding on 

post-grant review proceedings 

‘‘If a final decision is entered against a party in a civil action arising in whole 

or in part under section 1338 of title 28, or a determination made by the United 

States International Trade Commission against a party in a proceeding under section 337 of the Tariff Act of 1930 (19 U.S.C. 1337) has become final, establishing 

that the party has not sustained its burden of proving the invalidity of any patent 

claim— 

‘‘(1) that party to the civil action or proceeding (as the case may be) and 

the privies of that party may not thereafter request a post-grant review proceeding on that patent claim on the basis of any grounds, under the provisions 

of section 321, which that party or the privies of that party raised or could have 

raised; and 

‘‘(2) the Director may not thereafter maintain a post-grant review proceeding that was requested, before the final decision was so entered or final determination was so made (as the case may be), by that party or the privies of 

that party on the basis of such grounds. 

‘‘§ 335. Effect of final decision on future proceedings 

‘‘If a final decision under section 330 is favorable to the patentability of any 

original or new claim of the patent challenged by the cancellation petitioner, the 

cancellation petitioner may not thereafter, based on any ground that the cancellation petitioner raised during the post-grant review proceeding— 

‘‘(1) request or pursue a reexamination of such claim under chapter 31; 

‘‘(2) request or pursue a derivation proceeding with respect to such claim; 

‘‘(3) request or pursue a post-grant review proceeding under this chapter 

with respect to such claim; 

16 

‘‘(4) assert the invalidity of any such claim in any civil action arising in 

whole or in part under section 1338 of title 28; or 

‘‘(5) assert the invalidity of any such claim in defense to a proceeding 

brought under section 337 of the Tariff Act of 1930 (19 U.S.C. 1337). 

‘‘§ 336. Appeal 

‘‘A party dissatisfied with the final determination of the Patent Trial and Appeal Board in a post-grant proceeding under this chapter may appeal the determination under sections 141 through 144. Any party to the post-grant proceeding shall 

have the right to be a party to the appeal.’’. 

(i) CONFORMING AMENDMENT.—The table of chapters for part III of title 35, 

United States Code, is amended by adding at the end the following: 

‘‘32. Post-Grant Review Proceedings 

321’’. 

(j) REPEAL.—Section 4607 of the Intellectual Property and Communications Omnibus Reform Act of 1999, as enacted by section 1000(a)(9) of Public Law 106–113, 

is repealed. 

(k) EFFECTIVE DATES.— 

(1) IN GENERAL.—The amendments and repeal made by this section shall 

take effect at the end of the 1-year period beginning on the date of the enactment of this Act. 

(2) APPLICABILITY TO EX PARTE AND INTER PARTES PROCEEDINGS.—Notwithstanding any other provision of law, sections 301 and 311 through 318 of title 

35, United States Code, as amended by this section, shall apply to any patent 

that issues before, on, or after the effective date under paragraph (1) from an 

original application filed on any date. 

(3) APPLICABILITY TO POST-GRANT PROCEEDINGS.—The amendments made by 

subsections (h) and (i) shall apply to patents issued on or after the effective date 

under paragraph (1). 

(l) REGULATIONS.—The Under Secretary of Commerce for Intellectual Property 

and Director of the United States Patent and Trademark Office (in this subsection 

referred to as the ‘‘Director’’) shall, not later than the date that is 1 year after the 

date of the enactment of this Act, issue regulations to carry out chapter 32 of title 

35, United States Code, as added by subsection (h) of this section. 

SEC. 7. DEFINITIONS; PATENT TRIAL AND APPEAL BOARD. 

(a) DEFINITIONS.—Section 100 of title 35, United States Code (as amended by 

section 3 of this Act), is further amended— 

(1) in subsection (e), by striking ‘‘or inter partes reexamination under section 311’’; and 

(2) by adding at the end the following: 

‘‘(k) The term ‘cancellation petitioner’ means the real party in interest requesting cancellation of any claim of a patent under chapter 31 of this title and the 

privies of the real party in interest.’’. 

(b) PATENT TRIAL AND APPEAL BOARD.—Section 6 of title 35, United States 

Code, is amended to read as follows: 

‘‘§ 6. Patent Trial and Appeal Board 

‘‘(a) ESTABLISHMENT AND COMPOSITION.—There shall be in the Office a Patent 

Trial and Appeal Board. The Director, the Deputy Director, the Commissioner for 

Patents, the Commissioner for Trademarks, and the administrative patent judges 

shall constitute the Patent Trial and Appeal Board. The administrative patent 

judges shall be persons of competent legal knowledge and scientific ability who are 

appointed by the Secretary of Commerce. Any reference in any Federal law, Executive order, rule, regulation, or delegation of authority, or any document of or pertaining to the Board of Patent Appeals and Interferences is deemed to refer to the 

Patent Trial and Appeal Board. 

‘‘(b) DUTIES.—The Patent Trial and Appeal Board shall— 

‘‘(1) on written appeal of an applicant, review adverse decisions of examiners upon application for patents; 

‘‘(2) on written appeal of a patent owner, review adverse decisions of examiners upon patents in reexamination proceedings under chapter 30; 

‘‘(3) conduct derivation proceedings under subsection 135(a); and 

‘‘(4) conduct post-grant opposition proceedings under chapter 32. 

Each appeal and derivation proceeding shall be heard by at least 3 members of the 

Patent Trial and Appeal Board, who shall be designated by the Director. Only the 

Patent Trial and Appeal Board may grant rehearings. The Director shall assign 

17 

each post-grant review proceeding to a panel of 3 administrative patent judges. 

Once assigned, each such panel of administrative patent judges shall have the responsibilities under chapter 32 in connection with post-grant review proceedings.’’. 

SEC. 8. STUDY AND REPORT ON REEXAMINATION PROCEEDINGS. 

The Director shall, not later than 2 years after the date of the enactment of 

this Act— 

(1) conduct a study of the effectiveness and efficiency of the different forms 

of proceedings available under title 35, United States Code, for the reexamination of patents; and 

(2) submit to the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate a report on the results 

of the study, including any of the Director’s suggestions for amending the law, 

and any other recommendations the Director has with respect to patent reexamination proceedings. 

SEC. 9. PREISSUANCE SUBMISSIONS BY THIRD PARTIES. 

Section 122 of title 35, United States Code, is amended by adding at the end 

the following: 

‘‘(e) PREISSUANCE SUBMISSIONS BY THIRD PARTIES.— 

‘‘(1) IN GENERAL.—Any person may submit for consideration and inclusion 

in the record of a patent application, any patent, published patent application, 

or other publication of potential relevance to the examination of the application, 

if such submission is made in writing before the earlier of— 

‘‘(A) the date a notice of allowance under section 151 is mailed in the 

application for patent; or 

‘‘(B) either— 

‘‘(i) 6 months after the date on which the application for patent is 

published under section 122, or 

‘‘(ii) the date of the first rejection under section 132 of any claim 

by the examiner during the examination of the application for patent, 

whichever occurs later. 

‘‘(2) OTHER REQUIREMENTS.—Any submission under paragraph (1) shall— 

‘‘(A) set forth a concise description of the asserted relevance of each 

submitted document; 

‘‘(B) be accompanied by such fee as the Director may prescribe; 

‘‘(C) include a statement by the person making such submission affirming that the submission was made in compliance with this section; and 

‘‘(D) identify the real party-in-interest making the submission.’’. 

SEC. 10. VENUE AND JURISDICTION. 

(a) VENUE FOR PATENT CASES.—Section 1400 of title 28, United States Code, is 

amended by striking subsection (b) and inserting the following: 

‘‘(b) Notwithstanding section 1391 of this title, in any civil action arising under 

any Act of Congress relating to patents, a party shall not manufacture venue by assignment, incorporation, or otherwise to invoke the venue of a specific district court. 

‘‘(c) Notwithstanding section 1391 of this title, any civil action for patent infringement or any action for declaratory judgment may be brought only in a judicial 

district— 

‘‘(1) where the defendant has its principal place of business or in the location or place in which the defendant is incorporated or formed, or, for foreign 

corporations with a United States subsidiary, where the defendant’s primary 

United States subsidiary has its principal place of business or is incorporated 

or formed; 

‘‘(2) where the defendant has committed substantial acts of infringement 

and has a regular and established physical facility that the defendant controls 

and that constitutes a substantial portion of the operations of the defendant; 

‘‘(3) where the primary plaintiff resides, if the primary plaintiff in the action is— 

‘‘(A) an institution of higher education as defined under section 101(a) 

of the Higher Education Act of 1965 (20 U.S.C. 1001(a)); or 

‘‘(B) a nonprofit organization that— 

‘‘(i) qualifies for treatment under section 501(c)(3) of the Internal 

Revenue Code (26 U.S.C. 501(c)(3)); 

‘‘(ii) is exempt from taxation under section 501(a) of such Code; and 

‘‘(iii) serves as the patent and licensing organization for an institution of higher education as defined under section 101(a) of the Higher 

Education Act of 1965 (20 U.S.C. 1001(a)); or 

18 

‘‘(4) where the plaintiff resides, if the sole plaintiff in the action is an individual inventor who is a natural person and who qualifies at the time such action is filed as a micro-entity pursuant to section 123 of title 35. 

‘‘(d) If a plaintiff brings a civil action for patent infringement or declaratory 

judgment relief under subsection (c), then the defendant may request the district 

court to transfer that action to another district or division where, in the court’s determination— 

‘‘(1) any of the parties has substantial evidence or witnesses that otherwise 

would present considerable evidentiary burdens to the defendant if such transfer were not granted; 

‘‘(2) such transfer would not cause undue hardship to the plaintiff; and 

‘‘(3) venue would be otherwise appropriate under section 1391 of this title.’’. 

(b) INTERLOCUTORY APPEALS.—Subsection (c) of section 1292 of title 28, United 

States Code, is amended— 

(1) by striking ‘‘and’’ at the end of paragraph (1); 

(2) by striking the period at the end of paragraph (2) and inserting ‘‘; and’’; 

and 

(3) by adding at the end the following: 

‘‘(3) of an appeal from an interlocutory order or decree determining construction of claims in a civil action for patent infringement under section 271 

of title 35. 

Application for an appeal under paragraph (3) shall be made to the court within 10 

days after entry of the order or decree. The district court shall have discretion 

whether to approve the application and, if so, whether to stay proceedings in the 

district court during pendency of the appeal.’’. 

(c) TECHNICAL AMENDMENTS RELATING TO VENUE.—Sections 32, 145, 146, 

154(b)(4)(A), and 293 of title 35, United States Code, and section 21(b)(4) of the Act 

entitled ‘‘An Act to provide for the registration and protection of trademarks used 

in commerce, to carry out the provisions of certain international conventions, and 

for other purposes’’, approved July 5, 1946 (commonly referred to as the ‘‘Trademark 

Act of 1946’’ or the ‘‘Lanham Act’’ (15 U.S.C. 1071(b)(4)), are each amended by striking ‘‘United States District Court for the District of Columbia’’ each place that term 

appears and inserting ‘‘United States District Court for the Eastern District of Virginia’’. 

SEC. 11. PATENT AND TRADEMARK OFFICE REGULATORY AUTHORITY. 

(a) FEE SETTING.— 

(1) IN GENERAL.—The Director shall have authority to set or adjust by rule 

any fee established or charged by the Office under sections 41 and 376 of title 

35, United States Code or under section 31 of the Trademark Act of 1946 (15 

U.S.C. 1113) for the filing or processing of any submission to, and for all other 

services performed by or materials furnished by, the Office, provided that such 

fee amounts are set to reasonably compensate the Office for the services performed. 

(2) REDUCTION OF FEES IN CERTAIN FISCAL YEARS.—In any fiscal year, the 

Director— 

(A) shall consult with the Patent Public Advisory Committee and the 

Trademark Public Advisory Committee on the advisability of reducing any 

fees described in paragraph (1); and 

(B) after that consultation may reduce such fees. 

(3) ROLE OF THE PUBLIC ADVISORY COMMITTEE.—The Director shall— 

(A) submit to the Patent or Trademark Public Advisory Committee, or 

both, as appropriate, any proposed fee under paragraph (1) not less than 

45 days before publishing any proposed fee in the Federal Register; 

(B) provide the relevant advisory committee described in subparagraph 

(A) a 30-day period following the submission of any proposed fee, on which 

to deliberate, consider, and comment on such proposal, and require that— 

(i) during such 30-day period, the relevant advisory committee hold 

a public hearing related to such proposal; and 

(ii) the Director shall assist the relevant advisory committee in carrying out such public hearing, including by offering the use of Office 

resources to notify and promote the hearing to the public and interested stakeholders; 

(C) require the relevant advisory committee to make available to the 

public a written report detailing the comments, advice, and recommendations of the committee regarding any proposed fee; 

19 

(D) consider and analyze any comments, advice, or recommendations 

received from the relevant advisory committee before setting or adjusting 

any fee; and 

(E) notify, through the Chair and Ranking Member of the Committee 

on the Judiciary of the House of Representatives and the Committee on the 

Judiciary of the Senate, the Congress of any final decision regarding proposed fees. 

(4) PUBLICATION IN THE FEDERAL REGISTER.— (A) IN GENERAL.—Any rules prescribed under this subsection shall be 

published in the Federal Register. 

(B) RATIONALE.—Any proposal for a change in fees under this section 

shall— 

(i) be published in the Federal Register; and 

(ii) include, in such publication, the specific rationale and purpose 

for the proposal, including the possible expectations or benefits resulting from the proposed change. 

(C) PUBLIC COMMENT PERIOD.—Following the publication of any proposed fee in the Federal Register pursuant to subparagraph (A), the Director shall seek public comment for a period of not less than 45 days. 

(5) CONGRESSIONAL COMMENT PERIOD.—Following the notification described 

in paragraph (3)(E), Congress shall have not more than 45 days to consider and 

comment on any proposed fee under paragraph (1). No proposed fee shall be effective prior to the end of such 45-day comment period. 

(6) RULE OF CONSTRUCTION.—No rules prescribed under this subsection may 

diminish— 

(A) an applicant’s rights under this title or the Trademark Act of 1946; or (B) any rights under a ratified treaty. 

(b) FEES FOR PATENT SERVICES.—Division B of Public Law 108–447 is amended 

in title VIII of the Departments of Commerce, Justice and State, the Judiciary, and 

Related Agencies Appropriations Act, 2005, in section 801(a) by striking ‘‘During fiscal years 2005, 2006 and 2007’’, and inserting ‘‘Until such time as the Director sets 

or adjusts the fees otherwise,’’. 

(c) ADJUSTMENT OF TRADEMARK FEES.—Division B of Public Law 108–447 is 

amended in title VIII of the Departments of Commerce, Justice and State, the Judiciary and Related Agencies Appropriations Act, 2005, in section 802(a) by striking 

‘‘During fiscal years 2005, 2006 and 2007’’, and inserting ‘‘Until such time as the 

Director sets or adjusts the fees otherwise,’’. 

(d) EFFECTIVE DATE, APPLICABILITY, AND TRANSITIONAL PROVISION.—Division B 

of Public Law 108–447 is amended in title VIII of the Departments of Commerce, 

Justice and State, the Judiciary and Related Agencies Appropriations Act, 2005, in 

section 803(a) by striking ‘‘and shall apply only with respect to the remaining portion of fiscal year 2005, 2006 and 2007.’’. 

(e) RULE OF CONSTRUCTION.—Nothing in this section shall be construed to affect 

any other provision of Division B of Public Law 108–447, including section 801(c) 

of title VII of the Departments of Commerce, Justice and State, the Judiciary and 

Related Agencies Appropriations Act, 2005. 

(f) DEFINITIONS.—In this section: 

(1) DIRECTOR.—The term ‘‘Director’’ means the Director of the United 

States Patent and Trademark Office. 

(2) OFFICE.—The term ‘‘Office’’ means the United States Patent and Trademark Office. 

(3) TRADEMARK ACT OF 1946.—The term ‘‘Trademark Act of 1946’’ means an 

Act entitled ‘‘Act to provide for the registration and protection of trademarks 

used in commerce, to carry out the provisions of certain international conventions, and for other purposes’’, approved July 5, 1946 (15 U.S.C. 1051 et seq.) 

(commonly referred to as the Trademark Act of 1946 or the Lanham Act). 

SEC. 12. RESIDENCY OF FEDERAL CIRCUIT JUDGES. 

Section 44(c) of title 28, United States Code, is amended by striking the second 

sentence. 

SEC. 13. MICRO-ENTITY DEFINED. 

Chapter 11 of title 35, United States Code, is amended by adding at the end 

the following new section: 

‘‘§ 123. Micro-entity defined 

‘‘(a) IN GENERAL.—For purposes of this title, the term ‘micro-entity’ means an 

applicant who makes a certification under either subsections (b) or (c). 

20 

‘‘(b) UNASSIGNED APPLICATION.—For an unassigned application, each applicant 

shall certify that the applicant— 

‘‘(1) qualifies as a small entity, as defined in regulations issued by the Director; 

‘‘(2) has not been named on 5 or more previously filed patent applications; 

‘‘(3) has not assigned, granted, or conveyed, and is not under an obligation 

by contract or law to assign, grant, or convey, a license or any other ownership 

interest in the particular application; and 

‘‘(4) does not have a gross income, as defined in section 61(a) of the Internal 

Revenue Code, exceeding 2.5 times the median household income, as reported 

by the Bureau of the Census, in the calendar year immediately preceding the 

calendar year in which the examination fee is being paid. 

‘‘(c) ASSIGNED APPLICATION.—For an assigned application, each applicant shall 

certify that the applicant— 

‘‘(1) qualifies as a small entity, as defined in regulations issued by the Director, and meets the requirements of subsection (b)(4); 

‘‘(2) has not been named on 5 or more previously filed patent applications; 

and 

‘‘(3) has assigned, granted, conveyed, or is under an obligation by contract 

or law to assign, grant, or convey, a license or other ownership interest in the 

particular application to an entity that has 5 or fewer employees and that such 

entity has a gross income, as defined in section 61(a) of the Internal Revenue 

Code, that does not exceed 2.5 times the median household income, as reported 

by the Bureau of the Census, in the calendar year immediately preceding the 

calendar year in which the examination fee is being paid. 

‘‘(d) INCOME LEVEL ADJUSTMENT.—The gross income levels established under 

subsections (b) and (c) shall be adjusted by the Director on October 1, 2009, and 

every year thereafter, to reflect any fluctuations occurring during the previous 12 

months in the Consumer Price Index, as determined by the Secretary of Labor.’’. 

SEC. 14. TECHNICAL AMENDMENTS. 

(a) JOINT INVENTIONS.—Section 116 of title 35, United States Code, is amended— 

(1) in the first paragraph, by striking ‘‘When’’ and inserting ‘‘(a) JOINT

INVENTIONS.—When’’; 

(2) in the second paragraph, by striking ‘‘If a joint inventor’’ and inserting ‘‘(b) OMITTED INVENTOR.—If a joint inventor’’; and 

(3) in the third paragraph, by striking ‘‘Whenever’’ and inserting ‘‘(c) 

CORRECTION OF ERRORS IN APPLICATION.—Whenever’’. 

(b) FILING OF APPLICATION IN FOREIGN COUNTRY.—Section 184 of title 35, 

United States Code, is amended— 

(1) in the first paragraph, by striking ‘‘Except when’’ and inserting ‘‘(a) FILING IN FOREIGN COUNTRY.—Except when’’; 

(2) in the second paragraph, by striking ‘‘The term’’ and inserting ‘‘(b) APPLICATION.—The term’’; and 

(3) in the third paragraph, by striking ‘‘The scope’’ and inserting ‘‘(c) SUBSEQUENT MODIFICATIONS, AMENDMENTS, AND SUPPLEMENTS.—The scope’’. 

(c) REISSUE OF DEFECTIVE PATENTS.—Section 251 of title 35, United States 

Code, is amended— 

(1) in the first paragraph, by striking ‘‘Whenever’’ and inserting ‘‘(a) IN

GENERAL.—Whenever’’; 

(2) in the second paragraph, by striking ‘‘The Director’’ and inserting ‘‘(b) 

MULTIPLE REISSUED PATENTS.—The Director’’; 

(3) in the third paragraph, by striking ‘‘The provision’’ and inserting ‘‘(c) APPLICABILITY OF THIS TITLE.—The provisions’’; and 

(4) in the last paragraph, by striking ‘‘No reissued patent’’ and inserting 

‘‘(d) REISSUE PATENT ENLARGING SCOPE OF CLAIMS.—No reissued patent’’. 

(d) EFFECT OF REISSUE.—Section 253 of title 35, United States Code, is amended— 

(1) in the first paragraph, by striking ‘‘Whenever’’ and inserting ‘‘(a) IN

GENERAL.—Whenever’’; and 

(2) in the second paragraph, by striking ‘‘in like manner’’ and inserting ‘‘(b) 

ADDITIONAL DISCLAIMER OR DEDICATION.—In the manner set forth in subsection 

(a),’’. 

(e) CORRECTION OF NAMED INVENTOR.—Section 256 of title 35, United States 

Code, is amended— 

(1) in the first paragraph, by striking ‘‘Whenever’’ and inserting ‘‘(a) CORRECTION.—Whenever’’; and 

21 

(2) in the second paragraph, by striking ‘‘The error’’ and inserting ‘‘(b) PATENT VALID IF ERROR CORRECTED.—The error’’. 

(f) PRESUMPTION OF VALIDITY.—Section 282 of title 35, United States Code, is 

amended— 

(1) in the first undesignated paragraph, by striking ‘‘A patent’’ and inserting ‘‘(a) IN GENERAL.—A patent’’; 

(2) in the second undesignated paragraph, by striking ‘‘The following’’ and 

inserting ‘‘(b) DEFENSES.—The following’’; and 

(3) in the third undesignated paragraph, by striking ‘‘In actions’’ and inserting ‘‘(c) NOTICE OF ACTIONS; ACTIONS DURING EXTENSION OF PATENT TERM.— 

In actions’’. 

SEC. 15. EFFECTIVE DATE; RULE OF CONSTRUCTION. 

(a) EFFECTIVE DATE.—Except as otherwise provided in this Act, this Act and the 

amendments made by this Act shall take effect upon the expiration of the 12 month 

period beginning on the date of the enactment of this Act and shall apply to any 

patent issued on or after that effective date. 

(b) CONTINUITY OF INTENT UNDER THE CREATE ACT.—The enactment of section 

102(b)(3) of title 35, United States Code, under section 3(b) of this Act is done with 

the same intent to promote joint research activities that was expressed, including 

in the legislative history, through the enactment of the Cooperative Research and 

Technology Enhancement Act of 2004 (Public Law 108–453; the ‘‘CREATE Act’’), the 

amendments of which are stricken by section 3(c) of this Act. The United States Patent and Trademark Office shall administer section 102(b)(3) of title 35, United 

States Code, in a manner consistent with the legislative history of the CREATE Act 

that was relevant to its administration by the United States Patent and Trademark 

Office. 

SEC. 16. STUDY OF SPECIAL MASTERS IN PATENT CASES. 

(a) IN GENERAL.—Not later than 1 year after the date of the enactment of this 

Act, the Director of the Administrative Office of the United States Courts shall conduct a study of, and submit to the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate a report on, the use 

of special masters in patent litigation who are appointed in accordance with Rule 

53 of the Federal Rules of Civil Procedure. 

(b) OBJECTIVE.—In conducting the study under subsection (a), the Director of 

the Administrative Office of the United States Courts shall consider whether the 

use of special masters has been beneficial in patent litigation and what, if any, program should be undertaken to facilitate the use by the judiciary of special masters 

in patent litigation. 

(c) FACTORS TO CONSIDER.—In conducting the study under subsection (a), the 

Director, in consultation with the Federal Judicial Center, shall consider— 

(1) the basis upon which courts appoint special masters under Rule 53(b) 

of the Federal Rules of Civil Procedure; 

(2) the frequency with which special masters have been used by the courts; 

(3) the role and powers special masters are given by the courts; 

(4) the subject matter at issue in cases that use special masters; 

(5) the impact on court time and costs in cases where a special master is 

used as compared to cases where no special master is used; 

(6) the legal and technical training and experience of special masters; 

(7) whether the use of special masters has an impact on the reversal rate 

of district court decisions at the Court of Appeals for the Federal Circuit; and 

(8) any other factors that the Director believes would assist in gauging the 

effectiveness of special masters in patent litigation. 

SEC. 17. STUDY ON WORKPLACE CONDITIONS. 

The Comptroller General shall, not later than 2 years after the date of the enactment of this Act— 

(1) conduct a study of workplace conditions for the examiner corps of the 

United States Patent and Trademark Office, including the effect, if any, of this 

Act and the amendments made by this Act on— 

(A) recruitment, retention, and promotion of employees; and 

(B) workload, quality assurance, and employee grievances; and 

(2) submit to the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate a report on the results 

of the study, including any suggestions for improving workplace conditions, together with any other recommendations that the Comptroller General has with 

respect to patent reexamination proceedings. 

22 

SEC. 18. STUDY ON PATENT DAMAGES. 

(a) IN GENERAL.—The Director shall conduct a study of patent damage awards 

in cases where such awards have been based on a reasonable royalty under section 

284 of title 35, United States Code. The study should, at a minimum, consider cases 

from 1990 to the present. 

(b) CONDUCT.—In conducting the study under subsection (a), the Director shall 

investigate, at a minimum, the following: 

(1) Whether the mean or median dollar amount of reasonable-royalty-based 

patent damages awarded by courts or juries, as the case may be, has significantly increased on a per case basis during the period covered by the study, taking into consideration adjustments for inflation and other relevant economic factors. 

(2) Whether there has been a pattern of excessive and inequitable reasonable-royalty-based damages during the period covered by the study and, if so, 

any contributing factors, including, for example, evidence that Federal courts 

have routinely and inappropriately broadened the scope of the ‘‘entire market 

value rule’’, or that juries have routinely misapplied the entire market value 

rule to the facts at issue. 

(3) To the extent that a pattern of excessive and inequitable damage 

awards exists, measures that could guard against such inappropriate awards 

without unduly prejudicing the rights and remedies of patent holders or significantly increasing litigation costs, including legislative reforms or improved 

model jury instructions. 

(4) To the extent that a pattern of excessive and inequitable damage 

awards exists, whether legislative proposals that would mandate, or create a 

presumption in favor of, apportionment of reasonable-royalty-based patent damages would effectively guard against such inappropriate awards without unduly 

prejudicing the rights and remedies of patent holders or significantly increasing 

litigation costs. 

(c) REPORT.—Not later than 1 year after the date of the enactment of this Act, 

the Director shall submit to the Congress a report on the study conducted under 

this section. 

SEC. 19. SEVERABILITY. 

If any provision of this Act or of any amendment or repeals made by this Act, 

or the application of such a provision to any person or circumstance, is held to be 

invalid or unenforceable, the remainder of this Act and the amendments and repeals 

made by this Act, and the application of this Act and such amendments and repeals 

to any other person or circumstance, shall not be affected by such holding. 

Æ 

Mr. CONYERS. And now I turn to my friend, the Ranking Member, Lamar Smith, for his comments. 

Mr. SMITH. Thank you, Mr. Chairman, and thank you for your 

opening statement as well. 

Mr. Chairman, our Committee’s jurisdiction over patent law is 

described in Article 1, Section 8 of the Constitution. The foresight 

of our founders, particularly Thomas Jefferson, in creating an intellectual property system, demonstrates their understanding of how 

patent rights ultimately benefit the American people. 

In the previous two Congresses, we laid a substantial foundation 

for patent reform by passing bills in the House. We have continued 

that momentum this year with the introduction of H.R. 1260, the 

Patent Reform Act of 2009. Chairman Conyers and I have discussed the text of this legislation, and we agree that modifications 

need to be made when appropriate, but we do not want to amend 

an otherwise sound bill. 

We support the core principles that have animated our work 

these past 5 years. We must enact a bill that enhances patent qualVerDate Aug 31 2005 14:13 Jul 12, 2010 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6601 H:\WORK\FULL\043009\49388.000 HJUD1 PsN: 49388
23 

ity, discourages frivolous litigation, harmonizes international patent principles, and enforces core rights. 

Frankly, our bill promotes these goals better than the Senate 

version. In terms of individual issues, I am concerned about the 

Senate Judiciary Committee’s treatment of damages, post-grant opposition, and venue. 

On damages, the key sticking point in our debate during previous years, the House bill acknowledges the difficulty with which 

courts and juries have struggled with evaluating the actual contributions made by patent holders defending their rights versus 

contributions made by other. 

The Senate gate keeper treatment needs more review. I am concerned that it may result in confusion for jurors when called upon 

to apportion value fairly when calculating damages. Concerning 

post-grant opposition, one of the achievements from the 110th Congress was the compromise we struck to create a robust 1-year window of review coupled with an enhanced interparties reexamination construct that would substitute for a second window. 

I know there are parties who want to jettison reexamine in favor 

of a limitless second window. Unless the principles and the stakeholders can unanimously agree to this change, I think we may end 

up going backwards on an issue of significant importance. 

As for venue, many of us are digesting the recent court cases, especially In re TS Tech, which may obviate the need to legislate in 

this area. But TS Tech didn’t address a complicated factual scenario or require highly nuanced legal reasoning. 

Given the simple fact at issue in TS Tech, we may need to insist 

on a legislative response that provides greater guidance and clarity 

about time, litigant presence, and behavior to a particular judicial 

district. 

This Committee has taken the initiative because patent law 

changes are necessary to bolster the U.S. economy and our Nation’s 

global competitiveness and to improve the quality of living for all 

Americans. 

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

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

and represent 40 percent of our economic growth. 

These industries provide millions of Americans with well-paying 

jobs. This progress will end unless we address frivolous patent litigation against high-tech companies, which has doubled in the last 

5 years. This bill eliminates the legal gamesmanship, and it rewards lawsuit abuses over genuine innovation and creativity. 

It enhances the quality of patents and increases public confidence and their integrity. All industries directly or indirectly affected by patents including finance, automotive manufacturing, 

high tech, bio tech, and pharmaceuticals will benefit. 

H.R. 1260 will help all legitimate enterprises from the lone inventor in their garage to a high-tech company that files 1,000 patents each year and all business in between. 

Mr. Chairman, I look forward to hearing from our witnesses 

today and to working with you and others on this legislation in the 

weeks ahead, and I will yield back the balance of my time. 

24 

Mr. CONYERS. Thank you for an excellent statement. Does any 

other Member feel the desire to make a brief comment before we 

start? 

Yes. Well, let me look this side first. 

Mr. Berman? Have you an opening comment? 

Mr. BERMAN. If you are going to open it up for comments, I have 

an opening comment. 

Mr. CONYERS. Open for comment. 

Mr. BERMAN. Okay. First I want to thank you really very much 

for taking on and leading the effort on this complex and thorny and 

not always exciting issue. 

Congressman Boucher and I were concerned about poor patent 

quality and started some of these reform efforts, we think, 6 or 7 

years ago. As we get older, our memory is—well, never mind. 

But we got a lot of bolstering on that notion from the National 

Academies of Science report and the FDC report, and as you said, 

we think a robust patent protection promotes innovation, but we 

want patents to protect only those inventions that are truly innovative. 

If a patent system allows questionable patents to issue and 

doesn’t provide adequate safeguards about patent abuses, the system stifles innovation and interferes with the competitive market 

forces. 

So I felt last year we really tried very hard to find a compromise 

on almost every single issue. We addressed an issue that was 

pushed by a number of witnesses here, Mr. Johnson, to deal with 

what was viewed at—we talk about frivolous litigation, but you 

made a case for frivolous defenses and the inequitable conduct defense and the abuse and the cost. 

And I notice in the Senate bill there is not a word of reform on 

what for you, at that time, was a huge burden and an unfair burden. So I wanted that dig. And then I think the Chairman would 

like me to close. Mr. Smith, as well as the Chairman, we have all 

been heavily involved in all of this. 

On the damages issue, I will just say this: There are problems 

of overbroad claiming, juries not having adequate guidance, costs 

of litigation versus settlement, and the case for some valuation of 

the nature of the infringement in the context of the total product. 

Is the gate keeper system a way of dealing with those problems, 

or is it just simply a formalized codification of existing law. 

I think that is going to be a big issue for our Committee as we 

look at it, and I think the Chairman made reference at the end of 

his comments, which I just want to reaffirm this whole notion of 

the budget deficit at PTO, the backlog, all the problems caused 

there, we got to find a way of number one, insuring against the diversion, and ensuring that that system is adequately financed to 

not let our innovation suffer because of the time it takes for an inventor to get a patent approved. 

Thank you. 

Mr. CONYERS. Thank you. 

Bob Goodlatte? 

Mr. GOODLATTE. Thank you, Mr. Chairman. I want to thank you 

and Ranking Member Smith. We have been working for many 

years to update our patent laws to ensure that the incentives our 

25 

framers envisioned when they wrote Article 1, Section 8 of our Constitution remain meaningful and effective. 

The U.S. patent system must work efficiently if America is remain the world leader in innovation. It is only right that as more 

and more inventions with increasing complexity emerge, we should 

examine our Nation’s patent laws to ensure that they still work efficiently, and that they still encourage and not discourage innovation. 

However, it is becoming increasingly clear that current patent 

laws and the court’s interpretation of those laws do not sufficiently 

contemplate the complexities of today’s economy. Cottage industries are springing up that seek to take advantage of this complexity as well as loopholes in our patent laws to extort money 

from companies both large and small. 

To be sure, these problems are not limited to the high-tech industry. Inventors in all industries are increasingly facing these types 

of problems. The solutions to these problems involve both insuring 

that quality patents are issued in the first place and ensuring that 

we take a good hard look at patent litigation and enforcement laws 

to make sure that they do not create incentives for opportunists 

with invalid claims to exploit. 

H.R. 1260 addresses both of these concerns. It would create a 

new post-grant opposition system in which interested parties would 

request the U.S. PTO to review the scope and validity of a patent 

after its issuance. It also includes provisions to ensure that patent 

litigation benefits those valid claims but not those opportunists 

who seek to abuse the litigation process. 

The Senate is also working on this issue, and I am encouraged 

by the Senate Judiciary Committee’s action on patent reform this 

year. The Senate Judiciary Committee has reported out legislation 

that tackles many big problems that innovators face in today’s 

economy. 

I look forward to seeing the final version that emerges from the 

Senate floor. However, I would caution the House against automatically taking up the Senate bill on the House floor. While that 

bill goes a long way, it needs further improvement. 

One area in particular that needs additional work is the damages 

section. The Senate legislation takes positive steps forward by requiring determinations on the record as to the appropriate methodologies used to calculate damages; however, I believe further 

guidance is needed in order to bring more predictability to the process. 

While I am sympathetic to the arguments of those who work in 

fields where there are relatively few patents involved in any one 

product, I also believe that the advent of products comprised of 

hundreds and even thousands of patented inventions requires that 

more attention be given to the apportionment of damages. I look 

forward to working with all the parties to come up with language 

that addresses this issue. 

Another issue that is missing in the Senate and House bills this 

year is the controversial award of tax strategy patents. Increasingly, individuals and companies are filing patents to protect tax 

strategy. When one individual or business is given the exclusive 

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creases the cost and complexities for every other citizen or tax preparer to comply with the tax code. 

It is not difficult to foresee a situation where taxpayers are 

forced to choose between paying a royalty in order reap the best 

tax treatment and complying with the tax code in another less favorable way. These types of disincentives add additional costs and 

complications to an already overly complex process. 

I play to join Representative Boucher in reintroducing legislation 

addressing tax strategy patents, and it is my hope that this issue 

can be addressed in H.R. 1260 as well. 

Again, I applaud you, Mr. Chairman, and Ranking Member 

Smith for holding this important hearing, and I look forward to 

working closely with you as we seek to improve our Nation’s patent 

laws. 

Mr. CONYERS. Thank you, Mr. Goodlatte. 

Brad Sherman? 

Mr. SHERMAN. Thank you, Mr. Chairman. I want to echo the 

comments of the gentleman from California that we need the patent office to be funded properly and without diversion and echo the 

comments of the gentleman from Virginia on tax strategy patents 

but perhaps with a slightly different viewpoint. 

The purpose of patent law is to encourage useful innovation. 

There is some cost to the taxpayer in operating a patent system. 

We do that to encourage useful innovation. Why we should use taxpayer money to encourage the innovation of tax avoiding strategies 

is something I have yet to figure out. 

And so while there is one circuit court opinion that may close the 

door on these absurd tax strategy patents, we ought to shut the 

door completely, bolt it, and do it in this bill if at all possible. I 

yield back. 

Mr. CONYERS. Thank you. 

Howard Coble? 

Mr. COBLE. Mr. Chairman, I thank you. I will not take 5 minutes, Mr. Chairman. You and Mr. Sensenbrenner and Mr. Berman 

and I have been exposed to this issue for a long, long time, and I 

recall, Mr. Chairman, some years ago when we were on the House 

floor, we had Democrats fighting Democrats and Republicans fighting Republicans on this issue. 

And I shared this with Howard, a reporter from the west coast 

called me, and he said, the law of patents is the most dull, boring 

area of the law. He said it induces sleep, but he said until now it 

is interesting, because they had each other fighting one another. 

Hopefully, we can avoid that this time. But, Mr. Chairman, as 

we all know, patent reform is a national priority. It is important 

to all aspects of our economy, and we should be concerned about 

changing the system without a new captain in the wheelhouse. 

Now, I know that the Obama administration has had a full plate, 

but I hope they can fully appreciate the urgency and importance 

of installing the new undersecretary at the U.S. Patent and Trademark Office. It is difficult for us, Mr. Chairman, in the Congress 

to bolster our patent system and address the needs of the patent 

office without an office to promote their policies, which its experts 

believe will best serve the people. 

27 

And I thank you, Mr. Chairman, for calling this hearing and 

thank the witnesses for being here. I yield back. 

Mr. CONYERS. Thanks for all of your work in this, Mr. Coble. 

Darrell Issa? 

Mr. ISSA. Thank you, Mr. Chairman, and thank you for leading 

this bipartisan effort to find the right balance. And I must admit 

that I have been a cosponsor of the bill in the past with Ranking 

Member Smith, Mr. Coble, yourself, and Mr. Berman. 

You have been very generous in allowing me to have positive 

input that appears in this bill. I am not a cosponsor in this Congress not because I lack enthusiasm for the legislation, but because 

I am quite concerned that we need to make sure that there are 

some honest brokers who have a price that they want to extract in 

order to get their vote. 

And in this case, the price that I would extract is that it has to 

be on the House side something which I believe the Senate can embrace at least in a conference. And so I will work with the Chairman and the Ranking Member and Mr. Berman, of course, to get 

to that point to make sure that what leaves the House is something 

that we have come to an understanding with the Senate that 

whether we can come to a full bill or not always remains to be 

seen. 

But I do not want to have repeat of what we had in the last Congress where we put together a bill that we knew was not perfect. 

We moved it out in a dutiful way, in a bipartisan way, only to have 

it languished in the Senate. 

So I look forward to finding the best possible bill. I might note 

that in the last Congress I encouraged that perhaps less of a bill 

would be the better bill to move and things to come back to. I am 

pleased to report that in the Senate, they saw the bill that we 

passed unanimously on patent pilot as so good that they included 

it in their version of the legislation. 

So perhaps I will have to consider if it becomes law that more 

could be better at times too in addition to less. I thank the leadership at the dais and yield back. 

Mr. CONYERS. Thank you. 

Judge Gohmert? 

Mr. GOHMERT. Thank you, Chairman Conyers. And I will surprisingly be brief as well. Like Ranking Member Smith indicated, 

the founders of this country recognized that there was one area 

where we felt like monopoly would be okay, and that would be 

copyright and patent. 

To protect intellectual property, we would give you such time to 

recoup all of the ingenuity that went into the design—to the creation, and so as the patent system has evolved over the years, and 

as we look at trying to tweak it further to get it to where it is even 

more effective, I just want to encourage we have got to be careful 

that we do not hurt the system in our zealousness to help the system. 

We don’t need patent trolls gaming the system. At the same 

time, we need to be careful on venue, and perhaps the TS Tech is 

helpful in this area, but we don’t need to force cases to go to the 

most reversed circuit in the country where cases may be drug out 

for many, many years so that it takes forever to get to trial, and 

28 

once you get to trial, you have the best chance of being reversed 

and having to retry it again. 

We don’t need to change damages so substantially that even 

after years of litigation in a rifle case, there is no chance of recovering enough to make it worth while. And then that would lead to 

the situation so that the movie ‘‘Flash of Genius’’ would be just 

that. It would be a flash. There would be no compensation. It would 

not be the incentives for people to create and have that creation 

protected. 

And so I appreciate both sides of the aisle being concerned about 

that issue so that we don’t have people who created their inventions, got wealthy, and I am grateful for it, and then pulled up the 

ladder behind them so that others could not follow. 

And I appreciate the opportunity to work with others in getting 

to that point. Thank you, Mr. Chairman. 

Mr. CONYERS. Thank you very much, and my appreciation for not 

naming the circuit that you had in mind. 

Mr. BERMAN. [Presiding.] Oh, more opening statements. 

Judge Poe? 

Oh, Ms. Lofgren. Forget everything. We have had a couple of 

gentlemen from that side of the aisle. 

Mr. Scott? Did you have opening, no? 

Ms. Lofgren is recognized. 

Ms. LOFGREN. I will be brief, because I want to hear from the 

witnesses. I think obviously everyone in the room is in favor of 

strong patent protections, high quality patents, the prevention of 

litigation abuses. The problem is, having agreed on the details, how 

do we achieve that? And I think in the end it is in a way more important where we end up than where we started. 

I think this hearing is certainly a positive step forward to hear 

from the various perspectives about what the Senate did, what the 

thoughts are in terms of whether we have achieved that overarching goal. As I look at the witness stand, I think I am pretty 

familiar with most of the people here. They are smart people with 

great knowledge but in different elements of the whole issue. 

So I am sure that we will know more at the end of this hearing 

than we do at the beginning, and I yield back, Mr. Chairman. 

Mr. BERMAN. Thank the gentlelady. 

And the gentleman from Texas is recognized. 

Mr. POE. Thank you, Mr. Chairman. I appreciate the witnesses 

that have been here. Patent law is difficult. That is why like my 

friend from Massachusetts, we chose criminal law where things are 

a whole lot simple, stealing and killing. 

But I am concerned about four issues: The small entrepreneurs 

who I think have fueled advancement in this country since our beginning, that we don’t kill their work. I am concerned about the 

length of time it takes to get a patent. It takes forever. You know, 

the OJ Simpson trial lasted a shorter time than some of these patents do to get a patent. 

And thirdly, I am concerned about diminishing the value of patents to persons who actually have those patents in the country. For 

example, and fourthly, I am very concerned about the transfer of 

wealth from the United States to other countries, and I hope that 

we don’t do anything to tinker with that and make it harder on 

29 

Americans that have patents by the wealth going to foreign countries. 

So with that, I yield back. Thank you, Mr. Chairman. 

Mr. BERMAN. The gentleman from Massachusetts. 

Mr. DELAHUNT. Yes. Thank you, Mr. Chairman. I just simply 

want to associate myself with everything that everybody has said. 

With that, I yield back. 

Mr. BERMAN. Is there anything left to say? If not, we will go to 

the people who know what they are saying. 

I am pleased to introduce the witnesses for today’s hearing. The 

first is David Simon, who is chief patent counsel for Intel, where 

he is involved in running intellectual property matters. Prior to 

joining Intel in 1996, Mr. Simon was in private practice in Los Angeles for 15 years specializing in intellectual property matters, licensing and high technology law. 

Second is Phillip Johnson, chief intellectual property counsel for 

Johnson & Johnson. Mr. Johnson’s also president of the IPO Education Foundation and chairman of the board of AIPLA’s Educational Foundation and heads AIPLA’s Patent Litigation Committee. 

We will hear from J. Thomas, once again, professor at Georgetown University Law School. Professor Thomas served as the visiting scholar in economic growth and entrepreneurship at the Congressional Research Service. 

His extensive patent experience includes clerking for Chief Judge 

Helen Nies at the Federal circuit, teaching at George Washington 

University, Cornell, and the University of Tokyo, a visiting fellowship at the Max Planck Institute in Germany, and serving as a research scholar at the Institute of Intellectual Property in Tokyo, 

Japan. He has also been in private practice and has published numerous articles and five books on intellectual property law. 

Next will be Jack Lasersohn, a partner with the Vertical Group, 

a venture capital fund and here representing the National Venture 

Capital Association. Mr. Lasersohn serves on the board of directors 

of Kyphon, Incorporated, a NASDAQ listed medical technology 

company as well as on the boards of directors of a number of privately held medical device companies. 

Fifth is Dean Kamen, an inventor and engineer who has testified 

2 years ago whose inventions include the Segway Electric Transporter, the first portable insulin pump, and a prototype wheelchair 

called the iBot that allows users to climb stairs and raise themselves upright. 

He founded and is now president of DEKA Research and Development Corporation to develop internally generated inventions and 

conduct R and D for corporate clients. Mr. Kamen also founded 

FIRST, standing for, For Inspiration and Recognition of Science 

and Technology. 

FIRST is a program to encouraging young scientists and inventors using wholesale marketing and media techniques to motivate 

the next generation to learn about science and technology. It hosts 

national robotics championships each year at Walt Disney World’s 

EPCOT Center that break attendance records. 

Mr. Kamen also served on the Patent Public Advisory Committee 

for the U.S. Patent and Trademark Office and has won numerous 

30 

awards and honors and been dubbed the pied piper of technology 

by Smithsonian Magazine. 

Sixth is Mark Chandler, senior vice president and general counsel and secretary of Cisco Systems. Previously, he was managing 

attorney for Europe, the Middle East, and Africa based in Paris 

and before that, he was general counselor for StrataCom, which 

Cisco acquired in 1996. 

Mr. Chandler also serves on the board of visitors of Stanford Law 

School and the advisory council of the Woodrow Wilson International Center for Scholars in Washington. 

And last, we will hear from Bernard Cassidy, senior vice president and general counsel and secretary of Tessera Technologies. 

Mr. Cassidy held a similar position at Tumbleweed Communications Corp, and before that, was in private practice for 10 years. 

Thank you all for being with us today. It is an unusually large 

panel, and without objection, your written statements will be 

placed in the record. It would be very appreciative if you would 

limit your oral remarks to 5 minutes. We have a lighting system 

that starts with a green light, at 4 minutes, it turns yellow, then 

red at 5 minutes, and then the gavel. 

Mr. Simon? Will you proceed with your testimony? 

TESTIMONY OF DAVID SIMON, CHIEF PATENT COUNSEL, 

INTEL, INC. 

Mr. SIMON. Thank you, Congressman Berman. I would like to 

thank the Chairman and Ranking Member Smith and the other 

Members of this Committee for this opportunity to come here and 

testify on a subject near and dear to my heart, patent reform. 

I think you were right, Congressman Berman, that it was about 

6 years ago that you held hearings in this room on patents, and 

I think it was like two or three Members of the Committee, then 

two or three patent attorneys each trying to get my business and 

a bunch of homeless people. Things have changed a little bit. So this is a vitally important issue to Intel. We spend over $5 

billion a year on R&D every year. We are currently in the process 

of investing over $7 billion in our manufacturing capacity. In the 

United States they are—on our new line products, and these products, which are each the size of roughly your fingernail, have over 

a billion transistors in them. 

And you can just imagine how many different parts beyond those 

billion transistors are in there. As a result, we had gone through 

the exercise some years ago—this isn’t even for our latest product—that one of our then state-of-the-art processors had over 1,500 

patents in it and that wasn’t the limit, we just stopped counting 

at that point. 

We make very complex products, and because of the complexity 

of the products, the system creates lots of problems for us currently. Many of the members write the comment about some of the 

difficulties in the patent office and the quality issues that over the 

years hampered the patent office. 

The Patent and Trademark Office is an extremely difficult job to 

deal with the 400,000 plus patent applications they get a year and 

the amount of resources that are available to them to examine 

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ents that are quite frankly problematic, and those are the patents 

that we then see in the litigation system and then become subject 

to abuse. 

Currently, just to give the Committee some idea of the amount 

of money and effort that is pursuing this, there is over three-anda-half billion dollars, and I actually believe it is substantially more 

than that, of funds being put into the purchase of patents for licensing and bringing of lawsuits, and many of those will eventually 

make their way to Intel. 

In 2007 alone, the number of defendants doubled in patent 

cases—not the number of cases doubled, but the number of defendants doubled, because what we now have is a phenomena with 

cases having many defendants. 

I have a list of cases in my written testimony, which by the way, 

for example, in the Odum case, there are 28 software companies 

being sued. In the Clearwoods Computers case, there are, I think, 

two cases, but there are 52 companies being sued in one case for 

a patent. 

Now, we all know patents tend to be a very complex, and I will 

apologize, sometimes dull subject, but the issue that we have is 

that when you have a complex subject matter with lots of defendants, all of whom do things somewhat differently, this leads for further complexity in the case. 

And then you have the problem that in a typical case, you have 

a relatively short time period for actual trial testimony. Our Federal courts have many other pressing matters that need to be 

heard. As much as patents are important to me, I think one of the 

congressmen was right to comment that there are other pressing 

issues that the courts are faced with. 

As a result, there is a limited amount of time that courts can 

hear a case, and it is a limited amount of time that the jury can 

get educated on the both technical complexity and the business 

issues that are involved. And this is further exacerbated by the 

current standard that we have for damages, which is on reasonable 

royalties, it is the—Georgia-Pacific factors. 

The Federal circuit has made it clear that if you instruct the jury 

on those 15 factors, they will not reverse a case on damages unless 

the jury verdict is ‘‘monstrous.’’ They have yet to see a verdict that 

is monstrous. 

As a result, we—and although the patent cases themselves are— 

actually go through trial and go through—including damages are 

relatively small percentage—in most cases settle. Those jury verdicts do drive the settlement values of the cases. As a result, this 

is something that we find increasingly difficult. 

In addition, the other issue that I wanted to touch briefly on is 

venue. Many of the members have rightly commented on TS Tech, 

but there is another decision that has come down after TS Tech, 

a published decision called In re Telular on venue. And in that 

case, because there were witnesses in—the parties were in Illinois, 

witnesses in Atlanta, the court said, well, it is not clearly more convenient to be in Illinois than some place else, so we are going to 

leave the case where it is. 

[The prepared statement of Mr. Simon follows:] 

32 

PREPARED STATEMENT OF DAVID SIMON


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Mr. BERMAN. I am sorry. The time has expired. 

And, Mr. Johnson, welcome back, and look forward to your testimony. 


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TESTIMONY OF PHILLIP S. JOHNSON, CHIEF INTELLECTUAL 

PROPERTY COUNSEL, JOHNSON & JOHNSON 

Mr. JOHNSON. Thank you. Distinguished Members of the Committee, we very much appreciate the opportunity to be here today 

on behalf of the 21st Century Coalition. 

We strongly agree with the sponsors of H.R. 1260 and many of 

the Members who have spoken here today that patent reform is 

really all about stimulating our economy through innovation and 

the creation and maintenance of jobs. 

Within Johnson & Johnson, we conservatively estimate that 

60,000 of our 118,000 employees jobs depend on patents. We estimate that during their 20-year lives, each of our patents preserves 

and protects 150 job years. During the past 3 years, Johnson & 

Johnson companies have invested an average of $7.5 billion per 

year in R&D, or about $15 million for each patent granted. 

These R&D expenditures resulted in well-paying jobs for thousands of people throughout the United States. We want to preserve 

and protect the patent systems incentives to invest heavily in R&D 

so we can keep these jobs and hopefully create many, many more. 

But to do this in this challenging economic environment, we need 

to make it clear to inventors and investors alike that our patent 

system will live up to its promise. They need to know that it will 

protect the deserving inventions that come out of the R&D, and 

that the resulting U.S. patents will serve as a solid base upon 

which to build future businesses. 

To accomplish these goals, we need to strengthen not weaken the 

value of American patents. Now we can do this, as many of the 

speakers have already mentioned, by improving the quality of the 

original patent examination so that the patents issued by our patent office are readily and reliably enforceable against those who 

don’t respect them. 

This should be accomplished by immediately harmonizing our 

patent system with the rest of the world, not waiting for a trigger 

that may never come to pass, and by giving our patent office a reliable source of adequate funding to get the job right. 

Now H.R. 1260 goes a long way toward reaching these goals but 

not yet quite far enough. But we shouldn’t stop there. A balance 

needs to be struck between the public’s interest in questioning a 

patents validity, and the public’s desire to induce continued investment in the patented technology. 

A system that overly favors continuing third party patent challenges destroys the quiet title that is needed to stimulate further 

investment. Our coalition believes that the post-grant provisions of 

H.R. 1260, which are based on the hard work of the Members of 

this Committee in this and the last Congress, comes very close to 

striking the proper balance. 

It allows an initial period of post-grant opposition followed by life 

of the patent reexaminations. But contrary to how H.R. 1260 is 

now written, the basis under which examinations may be brought 

should be limited as they were in H.R. 1908. The question is based 

on prior patents and printed publications not prior uses and sales. 

When it comes to patent damages, we do urge the Committee to 

adopt the gate keeper compromise that is now included in S. 515 

as ordered reported. After years and years of trying, this damages 

46 

compromise has the most support of any proposed during years and 

years of stakeholder wrangling. 

It will provide fairness and uniformity to the way reasonable royalty damages issues are handled in the courts, and ensure that orderly development of the case law may continue on contentious 

issues such as the proper application of the entire market value 

rule, regular and established royalties, and apportionment. 

Most importantly, it will not pick winners and losers among different stakeholders. All will benefit from the gate keeper approach. 

Other patent damages alternatives that at their hearts rely upon 

prior—subtraction are ill advised and politically untenable. It 

makes no sense to base reasonable royalty awards on less than all 

of these elements that were shown to be required to achieve the 

patent. 

During the original patent examination, opposition, reexamination and in the validity and infringement phases of the patent trial, 

all of the elements of the patents claimed are deemed essential. 

Having thus proven entitlement to protection of the entirety of 

what is claimed, there is no justification for awarding damages on 

anything less. 

Valuation that the invention contributes, however, is quite a different matter. Here the question is what is the invention worth, 

and this is best addressed, as the law does, by looking to a willing 

licensee, willing licensor model. 

My time is up, but I do very much appreciate the opportunity to 

testify today as does our coalition, and our coalition looks forward 

to working with the Committee in order to achieve a bill that can 

quickly be enacted into law. 

Thank you very much. 

[The prepared statement of Mr. Johnson follows:] 

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PREPARED STATEMENT OF PHILLIP S. JOHNSON


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Mr. BERMAN. Thank you, Mr. Johnson. 

And, Professor Thomas? 

TESTIMONY OF JOHN R. THOMAS, PROFESSOR, 

GEORGETOWN UNIVERSITY LAW SCHOOL 

Mr. THOMAS. Distinguished Members of the Committee, I am 

grateful to testify today on my own behalf as a concerned member 

of the public and as a concerned observer of the patent system. 

Allow me to thank you and your staff for your many years of hard 

work on patent-related issues. 

Expanded efforts to derive value from patents have increased demand for greater precision in patent law damages principles. Unfortunately, the perception is widely shared that the rules pertaining to damages are less certain than many other patent doctrines. Many observers believe that the substantive law of patent 

damages is undisciplined and indefinite. 

The lack of a coherent standard for assessing reasonable royalties and not leaning toward over compensation are among the 

areas of concern. The result has been insufficiently predictable 

awards that served the purposes of the patent system poorly. 

To address these concerns, two types of patent damages reforms 

have been proposed before the 111th Congress. Proposed evidentiary reforms, while potentially valuable, appear largely to 

focus attention upon existing standards. 

Patent trial practice already allows for extensive discovery into 

the litigants’ theories of damages, the discovery exchanges of expert reports, depositions of relative witnesses and experts. Accused 

infringers may file daubert motions or a post-verdict motions to the 

extent they feel there were evidentiary short comings. 

Despite these standards and procedures, many innovative firms 

have continued to voice concerns about the state of patent damages 

law. So absent reforms of substantive law that then applies the 

facts of individual cases, evidentiary reforms may ultimately 

work—improvement to the current environment of patent damages. 

In addition, inherent limitations upon the judiciary appear to 

render the legislature the more appropriate venue for achieving 

meaningful reforms to damages law. The prominent use of juries 

in patent trials, the differential standard of review that they receive and the limited time one has to state arguments on appeal 

don’t place the Federal circuit or other judicial fora in an enviable 

position to work meaningful reforms to damages law as compared 

to other doctrines. 

Now prevailing substantive reforms as I have mentioned have 

been criticized for their indeterminacy and logical shortcomings. 

Experience suggests simply that the Georgia-Pacific factors are difficult to apply consistently. Although, the Georgia-Pacific case provides a long list of ingredients, it provides no recipe, no guiding 

principle or mechanism for weighing one of the seemingly randomly 

ordered elements more heavily than the others. 

Indeed, the laundry list of Georgia-Pacific factors often include 

several subcomponents with each factor. They can’t plausibly consider it a standard at all. The result has been a grab bag of factors 

that experts may apply with virtually unlimited discretion. 

71 

The hypothetical negotiation framework also possesses shortcomings, because in theory, two people come to the bargaining 

table and both walk away with something valuable. Yet judicial decisions at times seem to have lost sight that a bargain for exchange 

is supposed to offer a benefit to both negotiating parties. 

Several judicial opinions issues quite recently during discussions 

on the Hill on this issue of ordered royalties that are higher than 

the infringements in that profit margin. So for these and other reasons, damages rulings are widely viewed as unpredictable and difficult to review but also as tending toward overcompensation. 

A promising first step toward patent damages reform would be 

to replace the hypothetical negotiating issues of Georgia-Pacific 

with ostensible rule that tracks real-world decision making. And in 

my opinion, that is what the House bill does. 

Now faced with the choice of using a proprietary technology and 

manufactured to size, what advantage would accrue through the 

use of that technology in comparison with the next best alternative 

including public domain technology, designing distinct technology 

itself or not incorporating that functionality into the adjudicated infringement at all. 

The difference in that value is between the patented technology 

and the next best alternative should comprise the maximum 

amount of the damages award and the amount that the patent 

owner would effectively share through the payment of a reasonable 

royalty from one party to the next. 

Let me close by noting that patent damages reform is an important element in ensuring a strong patent system that meets modern needs and can ensure that the patent system remains robust 

but also recognize that in patent law, one person’s incentive is another person’s limitation. 

I believe that both evidentiary and substantive reforms would ultimately bring greater rationality and predictability to the patent 

system. 

Thank you. 

[The prepared statement of Mr. Thomas follows:] 

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PREPARED STATEMENT OF JOHN R. THOMAS


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Ms. LOFGREN. [Presiding.] Thank you, Professor. 

And we would love to hear from you, Mr. Lasersohn. 

TESTIMONY OF JACK W. LASERSOHN, PARTNER, 

VERTICAL GROUP 

Mr. LASERSOHN. Distinguished Members, thank you very much 

for inviting us to testify. 


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My name is Jack Lasersohn. I have been a venture capital investor since 1981 in high tech, clean tech and bio tech. I am also a 

board member of the National Venture Capital Association, the 

NVCA, which represents over 460 venture firms across the country. 

It is my privilege to be here today to representing the NVCA to 

share our views on the patent reform proposals. Venture backed 

companies currently account for more than 10 million jobs and $2.3 

trillion dollars in U.S. revenue, representing 10 percent of U.S. sector employment and 20 percent of U.S. GDP. 

Most of the semiconductor, networking, personal computer, software, Internet, medical device, and bio tech industries were created 

based upon the support of the venture capital system. More recently clean tech has become one of the fastest-growing areas for 

investment for us. 

Many household names including many at this table, Genentech, 

AMJEN, Intel, Cisco, Google, Medtronic, Microsoft, eBay were 

started with venture capital dollars. Their need for fundamental 

breakthroughs is increasing out of the millions of patents that will 

be filed, only a few are really going to affect the future in enormously important ways—inventions to cure cancer, inventions to 

address obesity, diabetes, and Alzheimer’s disease; inventions that 

treat pandemics; inventions that end our dependence on foreign oil. 

If history is any guide, these inventions will likely come from 

small venture backed entrepreneurial companies and, indeed, I can 

tell you that we are working on all of these projects right now. All 

of them are highly dependent on a very strong U.S. patent system. 

This vial contains crude oil made by algae from carbon dioxide 

extracted from the atmosphere. It has already powered an airplane, 

of course, a very small airplane, but the venture capital firms that 

invested more than $150 million in this project have relied completely on the strength of our patent system to justify this investment. 

It is one of the reasons that the United States has been at the 

center of all major technological innovations. And, in fact, the relatively weaker patent systems in other countries are an important 

reason why they lag so far behind us. I would like to discuss damages in particular. 

In general, the venture capital community believes the current 

methodology for calculating damages is appropriate and working. 

And that patentees are not systematically overcompensated. I hope 

that we can all accept the longstanding principle that an inventor 

is entitled to the fuel economic value of his invention and that 

damages should reflect that. 

However, we understand that there have been outlier infringement cases that have involved excessive damage awards. However, 

a large number of larger technology companies have proposed a 

change to patent law on damages so that damages will only reflect 

the incremental value of an infringement product that is attributable to specific contribution over the prior art and not the full 

economic impact of the invention as under current law. 

NVCA believes that the value of the patent features is almost always difficult to separate from its impact on the value of the whole 

product. Almost all innovation takes place in small incremental 

steps and is combined with prior art. 

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And while the incremental step can appear modest, especially 

compared to the complexity of the underlying product, the change 

can result in dramatic shifts in market shares for the combined 

product, creating much more value than just the incremental improvement. 

A new coating on a solar cell that increases its conversion efficiency just a little bit can dramatically shift the market through 

the entire multi-billion dollar solar energy plant. A more effective 

drug on a drug looting stint can shift the entire stint market. In 

both cases the question is, who is entitled to what share of the 

profits arising from those shifts, the inventor or the infringer? 

As these examples illustrate, there is no simple answer. Apportioning damages as proposed in the bill appears to be designed to 

deprive patent owners of the true full economic value of their patents and will lead to tremendous uncertainty about the value of 

patent. Determining its value is extremely complicated and manufacturers in circumstances, in fact, need to be considered. 

As Albert Einstein famously said, ‘‘You should make something 

as simple as possible but no more.’’ We support an approach to calculating these damages which would maintain the current GeorgiaPacific multi-factored analysis for the majority of cases and incorporate language directing an enhanced gate-keeper function. 

We also believe the most important reform we can make is to improve the quality of patents. If the patent’s office consistently 

issued high quality patents, many of these problems would disappear. To this end, we support increased funding and the end of 

the diversion. We do support a limited 12-month window after a 

patent is granted to allow time for challenges to file opposition, but 

we must realize that many large competitors will use this system 

to delay issuances of patents by small startups, and the system 

must avoid these abuses. 

Thank you very much for your attention. 

[The prepared statement of Mr. Lasersohn follows:] 

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PREPARED STATEMENT OF JACK W. LASERSOHN


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Mr. CONYERS. [Presiding.] Thank you, sir. 

Mr. Dean Kamen? Welcome. 


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TESTIMONY OF DEAN KAMEN, INVENTOR, 

DEKA RESEARCH AND DEVELOPMENT, INC. 

Mr. KAMEN. First, I would like to thank you for specifically pointing out in your opening remarks that we should be inventing a way 

out of problem. 

I think this whole debate, sadly, has come to be a discussion of 

all of the costs of patents—all of the costs, some of which everybody, I think, agrees are appropriate, some of which, in fact, some 

people think are inappropriate, and they may be right. 

But collectively, the costs of all these patents, I think, pales in 

comparison to the value of them, and I don’t think anybody in this 

room would question that. Look at this country, look at our wealth, 

look at the rest of the world. There is a reason. We have 

innovators; we have inventors; we take risks, and I think the 

founding fathers got it right. 

That clause in the Constitution is one of my favorite things. I 

hope you guys don’t screw it up. So I would just like to very quickly 

explain maybe an issue that I first found out about the first time 

I was asked to come here. 

I listened to a bunch of people speak about this problem, and I 

found out that I am a troll, because I heard that the definition of 

a troll is somebody who doesn’t build and sell their product. I am 

happy to hear that phrase has gone away, but there is a new 

phrase, which are NPEs, nonpracticing entities. 

I am not sure if becoming an NPE today is going to be a step 

up or down from being a troll, but I think I am one of those two. 

I will explain to you why I think that is not so bad, and why I am 

concerned if you do anything substantial to further weaken the patent system. 

I had a business when I wasn’t an NPE. I started it in high 

school. I had an older brother who is a brilliant guy, an MD-Ph.D. 

student at the time, treating babies with cancer. He needed ways 

to deliver drugs to these kids. 

I started building on that stuff in the basement of my parent’s 

house. It turned into a business. I was building these things mostly 

for his little research applications, but later it turned out I had 

some big applications like treating large populations of people, for 

instance, with diabetes. 

After a number of years, nearly a decade, it had become a pretty 

big business from my perspective, and I realized that 80 or 90 percent of the people involved in that business were doing manufacturing, marketing, sales, support, purchasing, worrying about global reach, worrying about supply chain management. That is not my 

strength. 

I sold that business knowing I probably could have made more 

if I held onto it, but I sold it because I thought I should get back 

to doing what I do well, work on inventing. There is no shortage 

of big problems out there. In fact, I also got to see the big companies are very good, very good at cost effectively, efficiently, reaching out, getting products to people way more than I could with the 

small product line that had to support a whole manufacturing operation and a whole distribution operation. 

So I sold that to one of the big medical companies, and said I am 

going to go back to doing what I do well then I will partner up with 

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these guys and make a win-win-win out of it. And in the last 25 

years, my little company, which no longer does the manufacturing, 

sales, marketing, distribution has grown to 300 technology people 

and engineers, and I am working in virtually—I don’t know this 

man, but we are working on diabetes, obesity, energy systems. We 

work on lots of things that we hope that these other companies will 

bring to market to make the world a better place. 

But I have spent on all these products many tens of millions of 

dollars, and in the end, all I ever end up with is a patent, and 

every once in a while, those patents turn out to be valuable, because I can show up at the door of these big companies and say, 

here it is. I can promise you the exclusive right to put this in production, which will cost them in many cases $50 or $100 or $200 

million in return for giving us some royalties. 

And oh, by the way, what we use those royalties for is to go on 

and invest in the next thing that most of these, in fact, large companies are sometimes reluctant to do. In the last 7 or 8 years, my 

little company has invested in excess of $50 million trying to develop systems to deliver water to the developing world, to develop 

electricity to the developing world. 

We hope our patents on those will be good. We hope the products 

will work, and we hope to go out to some of these big companies 

and ask them to put in the enormous amounts of money it is going 

to take to bring these things to market. 

The only thing I show up with when I sit across the table from 

some big company is a patent. And if I can’t be sure that that is 

going to be reliable, I can’t run my business. I can’t get support. 

I can’t sell my ideas to the world, because if you can have them 

for free, nobody will pay for them. And you can do a lot of work 

to reduce the cost of patents, but when you finish doing that, you 

might have protected nothing. There will be nothing left. 

I have to stop. 

[The prepared statement of Mr. Kamen follows:] 

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PREPARED STATEMENT OF DEAN KAMEN


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Mr. CONYERS. Those bells weren’t for you. 

Mr. Mark Chandler, senior vice president, Cisco. 

TESTIMONY OF MARK CHANDLER, SENIOR VICE PRESIDENT, 

CISCO 

Mr. CHANDLER. Chairman Conyers, Ranking Member Smith, 

Members of the Committee, thanks for the opportunity to appear 

before you today. Nearly 2 years ago, patent reform legislation was 


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reported by this Committee and passed by the House with a strong 

bipartisan majority. 

The bill before you today is very similar to the earlier bill and 

should be approved by this Committee. CISCO believes in a strong 

patent system, because our success as a company is a direct result 

of successful and continuous innovation starting from two people on 

a university campus 24 years ago. Today, we hold over 5,200 U.S. 

patents, have another 5,000 pending, and we spend $4 billion a 

year on research and development. 

We have over 14,000 engineers working in the United States to 

develop and support new product. The patent law should ensure 

that in case of infringement of valid patents, the inventor should 

and must receive fair compensation. But by the same token, those 

who are developing and manufacturing real product should not be 

forced to pay a patent holder if a patent wasn’t properly granted 

or be forced to pay damages based on value not commensurate with 

the innovation described in the patent. 

Yet that is what is happening. At a time of economic crisis, the 

flaws in our current patent law drain resources away from R&D 

manufacturing and toward defending unjustified patent suits with 

overblown damage requests. 

I will focus my oral testimony on the importance of clarifying 

vague patent litigation damages rules, because reform in this area 

is essential to eliminate burdens on innovation that are preventing 

job creation. For technology companies, patent litigation means 

spending increasing amounts on increasing number of infringement 

claims. 

I can choose to spend millions of dollars per case on defense fees, 

millions of dollars per case on settlement payments or both, but it 

is virtually certain that every new claim whether justified or not 

will require the expenditure of millions of dollars. 

The number of these claims has been increasing. Royalty requests are up 650 percent over 4 years. Litigation measured by 

total number of patent defendants has increased significantly in 

that time as well. Total litigation costs born by technology companies have doubled in that period to an estimated $4.6 billion. 

In my own company, we have gone from defending three infringement suits a decade ago, all involving competitors, to over 30 

today with only a small fraction involving companies that actually 

produced a product. Patent litigation expenses are now the single 

biggest cost in my legal budget. We have got literally hundreds of 

royalty demands as well. 

Increasingly, our courts have become a magnet for suits by foreign patent holders who prefer to sue in our courts rather than in 

their own countries where the patents were originally issued. In 

the last 5 years, French, German, Australian, Canadian, Finnish, 

and Israeli patent holders with no products of their own have 

broadly sued across the entire industry including my company 

draining my company and our country of important R&D resources. 

Why is this happening? The reason is that the imbalance in patent litigation rules has triggered the creation of well-funded litigation syndicates that purchase patents not to develop innovative 

products but rather to obtain licensing payments from companies 

that have brought innovative products to market. 

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Fully 88 percent of the patent claims against technology companies are asserted by folks who don’t make any product. Unlike the 

typical model for the small inventor, the one that Mr. Kamen described who seeks to license intellectual property to those who can 

develop a product and build a market, these syndicates typically lie 

in wait until an industry is developed, often get going after those 

who are relying on established industry standards with far fetched 

claims that leverage the uncertainty and the possibility of a jury 

jackpot award. 

The patent systems litigation rules were designed when claims 

typically were filed by manufacturers such as Cisco’s patent for 

being infringed by a competitor. The built-in protections that prevented against unjustified opportunistic claims are not effective 

against the syndicate. 

Just as flaws in financial services regulation led to financial engineering that lacked economic substance, today’s dysfunctional 

patent litigation rules have produced a new form of patent engineering instead of product engineering, which is a task on those 

who are actually building products and employing people. 

Key among the culprits is a vague test for calculating reasonable 

royalty damages. The litigation syndicates don’t seek lost profits 

since they don’t manufacture a product. They leverage a vague 15- 

factor test that threatens large jury verdicts; they run a volume 

business suing numerous defendants at a time as they attack an 

entire industry. 

The threats coerce settlement payments from defendants unwilling to spend millions in litigation costs and run the risk of a jackpot verdict. 

In conclusion, in our sector alone, reform of the reasonable royalties standard will create tens of thousands of jobs over the next 5 

years, and if nothing is done, research shows our economy can lost 

tens of thousands of jobs from continued adverse effect of the legal 

standards. 

We have this effect in Cisco today. But this issue is not simply 

about jobs, it is about our continued technological leadership. Less 

resources for research and development at Cisco in the U.S. means 

the next key innovation is more likely to come from a competitor 

in Europe, in India, in China, not in our country. 

Thank you, and I look forward to answering the Committee’s 

questions. 

[The prepared statement of Mr. Chandler follows:] 

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PREPARED STATEMENT OF MARK CHANDLER


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Mr. CONYERS. Before we go for a vote on the rule on the credit 

card bill, we will hear from the senior vice president and general 

counsel of Tessera, attorney Bernard Cassidy. 

TESTIMONY OF BERNARD J. CASSIDY, SENIOR VICE 

PRESIDENT AND GENERAL COUNSEL, TESSERA, INC. 

Mr. CASSIDY. Thank you, Chairman Conyers, Ranking Member 

Smith and distinguished Members of the Committee. 

Tessera is a high-tech company, nearly 300 of our 400 employees 

are engaged in research and development. We develop innovative 

technologies to make consumer products faster, better, and cheaper. If you have a cell phone that fits in your pocket, you are using 

our technology. 

Rather than talk about damages, I will defer to the testimony of 

Mr. Johnson, Mr. Lasersohn, and Mr. Kamen and my written testimony. I would like to take up the lonely and perhaps painful task 

of addressing post-grant review. 

I understand the Congress, the House at least, has done a lot of 

hard work on this topic and may not wish to reopen it, but notwithstanding that hard work, we urge Congress to look at post-grant 

review with a fresh eye. 

The reason is the slew of cases from the Supreme Court and Federal circuit that have come down since those provisions were drafted that have significantly tilted the balance in favor of patent users 

rather than patent holders. 

At a policy level, patent reexamination and other forms of postgrant review are designed as a limited safety valve to catch and repair the agency level patents that were inadvertently or improvidently granted. 

The idea is similar to en banc review by a court of appeals. In 

neither case is the extra review process designed to be a lengthy 

or a disdainful reaction to the initial review process that preceded 

it. 

The epilog should not be longer than the book. In practice, however, even the current re-exam process has become an instrument 

of abuse and patent nullification. Patents, of course, are time 

bound property rights. Specialist law firms have emerged to brag 

about their ability to use the re-exam process to nullify patents. 

Let me offer you two quotes from a white paper one such law 

firm in California has published. The firm can proceed anonymously to ‘‘create a simulated swell of opposition to the patent. 

This can hide your identity and even draw the patent owners higher toward your competitors.’’ 

Secondly, ‘‘By creating uncertainty about a patent and tying it up 

in a long re-exam process, the firm can effectively nullify the patent.’’ That is the system today without the bill. At a high level, the 

cumulative effect of the bill’s proposed procedures would be to create a post-grant review system that heavily favors the interest of 

the challenger regardless of the challenger’s motives. 

A challenger would be permitted to initiate a PGO proceeding 

with no meaningful evidence of invalidity to attack the patent’s validity on any ground, to tie up the patent holder in expensive discovery and evidentiary proceedings, and to invalidate the patent 

according to a very low evidentiary standard of proof. 

102 

And after a patent holder manages to survive this unbalanced 

system, she will remain vulnerable to successive attacks by the 

same challengers and different ones as well. 

So specifically, we oppose the bill’s expansion of reexamination to 

permit challengers based on prior public use or sell. This provision 

is unfair to patent holders. The prior use and sell language was not 

part of the compromise bill that this House passed in the last Congress and has been deleted from the compromised Senate bill reported out of the Senate Judiciary Committee. We urge the same 

here. 

Second, the bill should preserve the existing estoppel effect applicable to interparties reexamination. Estoppel is necessary to encourage efficient and proper use of the limited reexamination proceedings and to prevent serial attacks against the patent. 

Third, the bill should establish a firm 12-month deadline for completion of interparties proceedings. Current average is about 33 

months. Without a firm statutory deadline, the interparties reexamination process will subject the patent holders to a lengthy and 

costly proceeding and serve, in effect, as a rolling nullification of 

legitimately issued patents. 

Fourth, the bill should impose a more rigorous threshold test for 

initiating interparties and post-grant opposition challenges. The 

current threshold, ‘‘a substantial question of patentability,’’ sounds 

impressive, but it is not meaningful in practice. 

The PTO grants an estimated 97 percent of reexamination requests based on this test. A higher standard is necessary. Fifth, the 

bill should affirm that a patent is presumed valid when challenged 

in a post-grant proceeding. 

It is completely unreasonable to strip an issued patent of its presumption of validity by merely filing a piece of paper. A system 

that creates such a whimsical vulnerability would immediately devalue all U.S. patents as an asset class, whether or not a particular 

patent is challenged. 

And finally, the bill should explicitly allow the PTO to extend the 

patent term of a challenge patent simply out of fairness to the patent holder. 

In short, the current proposal is troubling. It would allow repeated frivolous challenges to U.S. patents resulting in increased 

costs, decreased certainty and lower value patents for the entire 

asset class. That, in turn, will undermine patent rights, threaten 

the jobs that depend upon them, and discourage investment in new 

technology. 

Thank you, Mr. Chairman. 

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Mr. CONYERS. Thank you. We will examine the credibility of your 

persuasiveness when we return. 

Thank you all. We will immediately return after this one vote. 

There are cafeterias and feeding places on the B level if you think 

you can grab a sandwich in the next 20 minutes or so. 

The Committee stands in recess. 

[Recess.] 

Mr. CONYERS. The Chair recognizes Lamar Smith for questions. 

Mr. SMITH. Thank you, Mr. Chairman. Mr. Chairman let me direct my first question to Mr. Chandler, and also ask Mr. Simon, 

Mr. Johnson, and Professor Thomas if they would respond very 

briefly as well. 

This goes to the subject of damages, no surprise. And what I 

want to mention, Mr. Chandler, to you is that a compromise has 

been proposed, and it would define a reasonable royalty as an appropriate share of the value of the patented technology over the 

next best alternative. 

I am not necessarily promoting it, I just want to put the idea and 

see what kind of a response we get for that kind of a compromise. 

Mr. CHANDLER. Thanks. The Senate bill is an important but not 

a sufficient step to address what is going on with the damage 

awards, and we are real concerned that the gate keeping provision 

while advising the judge to take a more active hand—fixes some of 

the procedural problems in the way things are given to the jury but 

doesn’t really help in setting a substantive standard that would be 

available for appeal and put some certainty into the system. 

We also think that that gate keeper function should occur earlier 

in the litigation. The Senate bill says it should occur no later than 

the final pre-trial order, but we would like to move it forward. In 

terms of nearest not available alternative, I will just say intuitively 

to me, one of the problems that that potentially raises is the number of cases that we have that are based on industry standards 

where it is unclear how you do an alternative. 

What I would say though is there is a—I think David Simon, 

who you mention in your question, will do a better job on that. 

There is a good reason that my title is general and his is intellectual. 

Mr. SMITH. Okay. Thank you. 

The compromise I mentioned is actually not in the Senate bill. 

That is it is a new concept that—Mr. Simon? Real quickly. 

Mr. SIMON. Thank you. I would like to echo Mr. Chandler’s comments on the importance of more than a gate keeper. If I may, the 

issue you get into is really fundamentally an issue of complexity. 

From my view, you would have to do this at the time the design 

is occurring, and if you—in other words, you know, once we have 

already designed something into the product and it is out there, 

and sometimes we get sued on a patent that issues years after our 

products have first embodied whatever we are being sued on. It 

can, you know, taking it out of products, and particularly if there 

are other products that rely on it, is very difficult. 

So you really have to go back in time to look at when it was designed in. And then you get into some other issues such as, you 

know, at that time, nobody is sure which technique is going to 

work. And you get into—I have sat in design meetings—— 

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Mr. SMITH. More complicated than we might think. 

Mr. Johnson? Real quickly. 

Mr. JOHNSON. Georgia-Pacific factor number nine already relates 

to the—advantages of the patented property over the old modes or 

devices if any that have been used for working out similar results. 

So it is a factor, and it is a good factor. But whether how important 

the factor is depends upon the circumstances between the parties. 

Are they competitors, you know, what is the impact of infringing 

and so on? 

Mr. SMITH. Okay. 

Professor Thomas? Any thoughts? 

Mr. THOMAS. I favor that approach, because I believe it best 

mimics what happens in the real world when technologists make 

decisions about whether these are proprietary rights or not. 

Mr. SMITH. Okay. That is helpful. Thank you. Next question, Mr. 

Cassidy, you mentioned this in your testimony, the post-grant opposition system. Just a real practical question, do you think PTO 

is able to handle a post-grant opposition system? 

Mr. CASSIDY. I believe we have been told by the PTO that they 

are overburdened already, and this is a very serious step to create 

another layer of administrative patent judges and so forth. I think 

it is with great caution the Congress should go ahead and create 

a new system. 

Mr. SMITH. My time couldn’t possibly be up, Mr. Chairman. 

Mr. Kamen? Real quickly, and I am going to sneak in one more 

question if I can to Professor Thomas. Do you think they could— 

PTO can handle—do you agree with Mr. Cassidy on that? 

Mr. KAMEN. As a former member of the PPAC, I can tell you we 

spent a lot of time there trying to figure out how to deal with all 

the strains their under now. They have a pendency of three-quarters of a million patents. Some of them are 4 years old. The last 

thing we need to do is give them another burden. 

Mr. SMITH. Okay. 

Mr. KAMEN. So I would say no. 

Mr. SMITH. And that is not a surprising answer. Thanks. 

Professor Thomas? Last question for you real quickly. A lot has 

been made about the excessive royalties, the unfair damages, some 

people claim that is exaggerated. What do you think about it? And 

Mr. Chandler, you did a lot in your testimony to answer the question as well, but I wanted to see what Professor Thomas had to 

say. 

Mr. THOMAS. I believe that the uncertainty may be the biggest 

problem at this point. However, I believe that there is a tendency 

toward overcompensation. The average award—but are reported 

are high, and when rates are rewarded in court rooms that are 

higher than our—would be bargained for in board rooms, it promotes speculation and litigation. 

Mr. SMITH. Okay. Thank you. Thank you, Mr. Chairman. 

Mr. CONYERS. Thank you very much, Lamar. 

Zoe Lofgren? 

Ms. LOFGREN. Well thank you, Mr. Chairman. I just have a couple of questions, and as I said in my brief opening remarks, this 

has been an interesting process over the past, I think it is almost 

10 years now of sorting through these issues, and the frustrating 

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thing, I think, for all of us is that there are—all the witnesses said 

some things that were actually in conflict with each other, and how 

do we get to a point that really works for the American economy 

in a very vigorous way. 

Along those lines, Mr. Simon, you talk about non-practicing entities and the meritless litigation brought by some of them that 

weakens the patent system. And I know that in some cases that 

is correct, and yet, we also know that there are non-practicing entities that license—that are legitimate businesses, and so how do you 

make that distinction if you are trying to approach this in a legislative way? 

Mr. SIMON. Well, I frankly don’t think that you can make that 

distinction in a legislative way of saying these non-practicing entities are good other than that their leader’s name starts with Dean, 

and these others are not so good. 

I think what you really have to do is you have to have, from my 

view, some objective standards that remove uncertainty, and if you 

do that, I think you go a long way to helping the system. 

A big part of the problem is that just the cost are so tilted to one 

side in a patent litigation today with contingency fee cases that, 

you know, we have had instances where it has cost us $10 million 

just to produce the electronic documents. And, you know, the other 

side doesn’t bare any of those—— 

Ms. LOFGREN. No, I am aware of that. 

Mr. SIMON [continuing]. And that creates—you know, that is part 

of it. And there is—— 

Ms. LOFGREN. Well, it pushes to settle whether it is meritorious 

or not just because of the cost of litigation. 

Mr. Chandler? Do you have any thoughts on that same subject? 

Mr. CHANDLER. I think that we need to recognize that liquidity 

in the patent system is very important. People need to be able to 

enter into transactions to license their patents, and I think Dean 

Kamen’s stories of his creative activity and invention and the way 

he has helped bring those products to market by being able to do 

transactions with companies that can then do that for him in terms 

of marketing and sales and all the other things that go into it—— 

Ms. LOFGREN. Yes, legitimate. 

Mr. CHANDLER. Legitimate and critical, and it is also critical that 

if others try to piggyback on that without the right to do so under 

his patent that there be an ability to stop them or to force them 

to pay compensation. So that is purely legitimate. 

What we are the issue is uncertainty. And I don’t think that— 

I can’t speak for Mr. Kamen, but I don’t get any sense that he benefits from uncertainty in being able to value patent rights. I think 

we all do. I think there are people who want to enforce patents who 

think that the biased toward overcompensation that comes from 

uncertainty is people will pay a premium to avoid risk is what is 

the issue in the system. 

And those who like the idea that the idea that—like a hiker on 

a trail who makes himself very large to scare off the bear, people 

who are doing that like the idea that they may seem larger than 

they really are, and yet, there is a huge economic impact when we 

allow the law to let people look larger than they really are. 

126 

And I think the problem will be solved in a way that protects 

people like Mr. Kamen who are doing what they are doing and 

eliminate the people who are leveraging the system if we simply 

come up with a clearer set of rules. The non-practicing entities are 

a symptom. They are not the disease. 

Ms. LOFGREN. Mr. Kamen? Do you have opinions on that? 

Mr. KAMEN. I violently agree with everything. Uncertainty is the 

biggest issue. The reason I am sitting here today is if the uncertainty that already exists, which is problematic some of if it due 

to the you wait 5 years to get your patent. So I would urge you 

whatever you do, make sure the patent office has the resources to 

respond quickly. 

We couldn’t run banks where they wait 5 years to tell you where 

your money is or you couldn’t build houses if you needed 5 years 

to get your title to your deed or that if you had after your deed a 

post-deed review where they said, after you build your house, we 

will come back in a year or 2 with some different rules, and maybe 

the deed’s good and maybe we will take your land away. Your deed 

has to have certainty. 

The timing has to be efficient. The certainty is critical to me, and 

one of my concerns is, well intentioned as they are, some of these 

things that we are talking about in perhaps unintended consequences are going to add uncertainty. The second window adds 

uncertainty. Some of these issues add uncertainty. 

I would ask you to think about the fact that right now you may 

be trying to solve an insoluble problem if you want a one size fits 

all. I really do believe that if you have got billion dollar investments and making a dive, it takes 5 years to do, you have got 1,500 

patents, clearly, people have demonstrated and everybody is sympathetic to the fact that people are gaming the system. We ought 

to go after the bad actors. 

But when you have got a great system, and you have got a few 

bad actors, the goal should be take out the bad actors, don’t bring 

down the system. And right now, we see that there is real issues 

here. We have got a fire in a wastebasket and it is blazing. But 

you don’t flood the house to put out that fire. 

I would say, as the Chairman said, we need invention here. 

Maybe the invention is a fire extinguisher. You ought to find a way 

to deal with the specific problems that exist without taking some 

of the fundamental systems and making them more uncertain and 

putting them into a system where there is more change especially 

at a fragile time like this. 

Ms. LOFGREN. Mr. Chairman, I know my time has expired. I 

don’t know if there is going to be a second round, but I guess I 

have to yield back. 

Mr. CONYERS. If you have a last final urgent question, we will 

entertain it. Well, I had two, but maybe I will have to choose between them. 

Let me just ask this: Mr. Johnson, you have spoken favorably of 

the first to file concept. Mr. Kamen has expressed grave reservations about that system. I wonder if the two of you could address 

whether it is possible to reconcile those competing points of view. 

Mr. JOHNSON. I think it is, because I think Mr. Kamen’s concerns 

relate as much as to an orderly transition to first to file as to an 

127 

objection to first to file itself. I see he is nodding yes, so I will yield 

my time to Mr. Kamen. 

Mr. KAMEN. I would agree with that. Of all the issues out there 

now, that one if it is carefully implemented, if the transition is well 

taken care of, but I would point out that you have some of the icon 

of the tech industry, of the bio tech, of the medical products companies of the world here, I think the individual inventors, rightly or 

wrongly, the inventors around the country have a knee-jerk reaction by which they are very concerned. 

And in some cases, I think, appropriately concerned that unless 

some accommodation is made, the individual inventor is going to 

see that I have got to run to the patent office every time I have 

a good idea, because if it is first to file, I am in trouble, and the 

little inventor then is going to (A) swamp the patent office with 

marginally prepared patents, it is going to cost them a fortune. 

So even though I might admit I could deal with some of this, I 

think dealing with your real small individual inventors, they ought 

to have a voice. 

Ms. LOFGREN. The other question I was going to ask and maybe 

I will just have to ask for—I don’t know if there is time, but—— 

Mr. ISSA. I guess we continue enjoying her second round, right? 

Ms. LOFGREN. Bilski. You know, there was discussion had—some 

of the Members talked about patenting, you know, tax preparation. 

I mean, there is a lot of angst about some of the stupid stuff that 

is going on here, honestly. But there still is, in my judgment—well, 

I mean, take a look at Oracle, I mean, there is a role for patents 

in the software arena. 

I think Bilski moves us in a direction but it is still a little 

spongy, and it has been suggested that perhaps we might use this 

opportunity to put a little more certainty onto Bilski. I am not sure 

that is correct, and I am wondering if anybody has a firm view on 

that? 

Mr. JOHNSON. I think that the nature of case law is when you 

make a major change, which Bilski is that good case law develops 

by not trying to decide everything in one decision, because we have 

a very complex technological landscape here, and I think as the 

case law goes on, these individual issues will come up to the courts 

and be handled appropriately. 

It is quite different, of course, in legislation where you have to 

do one rule and that is it, and you are done. So I would agree with 

you. Spongy isn’t the word I would have used, but not completely 

defined is probably better. But I do have great faith that as the 

courts then take up individual additional cases in that framework 

that we will have substantial improvement in the area. 

Mr. LASERSOHN. Just one aside, not directly on the question of 

methods for tax preparation, but the whole business method question is a very important question and the method question is a very 

important question and so, I can tell you that many, many patents 

that the venture capital community relies on in starting companies 

are based on methods. 

Some of them begin to spill over to business methods, and drawing those lines about what is a business method versus say a technical method can be very difficult. I will point out in Europe, where 

128 

method patents are just generally not allowed, many industries 

don’t exist for that reason. 

And so we have to be very, very careful not, again, to draw those 

lines very carefully. 

Mr. CONYERS. Darrell Issa? 

Mr. ISSA. Thank you, Mr. Chairman. I make note that our unwillingness to properly protect designer dresses and suits in our 

patent law has been a source of problems for us and not the 

French. 

Mr. KAMEN. And not for me. 

Mr. ISSA. Dean, I must say that when you wear timeless clothes, 

you know, no one need question that. 

First of all, I would like to say although I saw this is as a hearing about what we had already all heard about it, it is never a bad 

idea to have a gathering of brain trusts in one room that is this 

great to bounce ideas off of, particularly since Thomas Jefferson is 

long since dead, you are the next best thing. Perhaps with Dean 

here maybe the same thing. 

The questions that come today, particularly as to the gate keeper—I think, Mr. Chandler, I will lead off with you. Knowing that 

Markman decisions are supposed to be decided early but not always decided early, and since they are something with a judge 

much comes to grips with and most often, a good Markman causes 

both sides to see their product and patent and dispute differently. 

Should we consider linking those two inseparably in the discovery process so that both are encouraged by the judge so that 

then a potential quiet period of reflection could lead to settlement 

often? 

Mr. CHANDLER. Moving that function earlier in the process than, 

for instance, is reflected in the Senate bill as reported by the Judiciary Committee, would be positive. The Markman is one possible 

place to link it, but I wouldn’t necessarily adopt the word ‘‘inseparably’’ that you posed in the question—— 

Mr. ISSA. Well I posed it for a reason—— 

Mr. CHANDLER [continuing]. To do it. 

Mr. ISSA. If there is no Markman, can you really—if you have not 

yet defined the patent and the product, then without a Markman, 

can you do the gate keeper? 

Mr. CHANDLER. I certainly think it would be hard to do before 

the Markman. I just would need to think about it some more to decide whether the word ‘‘inseparably’’ should be part of that. 

But certainly the goal of having decision making as early in the 

case that give guidance to the parties as to the factors that are 

going to be relevant in determining damages, will then remove the 

jackpot element and allow the parties to have a successful negotiation, and that is what we believe the patent system should aim to 

look like a good functioning commercial—system where people can 

negotiate to transfer rights at prices they can agree on. 

Mr. ISSA. Okay. 

Mr. Johnson? You clearly want to weigh in on this. 

Mr. JOHNSON. Thank you. I wouldn’t link them because I think 

that the Markman frequently would be earlier than you could do 

the gate keeper. The nature of the development of a pretrial action 

requires the fact discovery to be completed before the experts can 

129 

really opine on what the evidence is, and the gate keeper really 

comes as a pretrial procedure. 

You need the experts testimony that would then be challenged in 

gate keeper. So you are pretty far down the line, and so—— 

Mr. ISSA. So you buy them as sequential but not inseparable? 

Mr. JOHNSON. No, because what you would be doing is you would 

be delaying the Markman, and I don’t think you want to delay the 

Markman. 

Mr. ISSA. I do not ever want to delay the Markman, trust me. 

Mr. JOHNSON. So I think you shouldn’t link them. 

Mr. ISSA. Okay. The question came up on the post-grant review, 

and this whole window and whether the PTO was equipped to handle it. 

What I heard and, Mr. Kamen, I think I will choose you. You 

often are very smart at showing why people throwing a lot of 

money at something do not necessarily reach the conclusion that 

somebody throwing a better idea at is does. 

So let me pose it this way: Since we generally only throw money 

at things and perhaps some rules of the road that help from time 

to time, if, in fact, the money were made available either through 

the fee process, eliminating fee diversion completely or through additional fees, is there any reason to believe that the PTO could not 

develop the ability to be the best place should this law pass as it 

is to do it rather than some other entity, whether it be modeled 

after the ITC over at Commerce or men and women in black robes. 

Is there any inefficiency that you see there, because wherever we 

put this, we want to fund it, but also wherever we put this, I am 

sure we want to make sure we put it in the most efficient place. 

Mr. KAMEN. I can’t comment on all the other places you could 

put it and what would be the intended and unintended consequences. I could say as a general statement, I just believe that 

whenever you have a problem of any kind—instead of putting 

Band-Aids on it or patches over it, you ought to first—and it is generally the hardest part of solving any problem is defining it well. 

And if we absolutely believe that we could give the patent office 

right up front the best resources, the best technology, the best 

training, the incentives to keep their people—up until a few years 

ago, the turnover among young people there was so extraordinary 

that you would see why they have such great pendency now. 

If the pendency has left the problem, if the quality has left a sea 

of problems, trying to put other systems around is putting BandAids on there. You go back, and you say, let’s make sure that they 

have the right tools, they have a right amount of time, they are 

trained properly, and they give you a good patent quickly. 

After that, to the extent that there needs to be something done, 

I think it should be done by those people in one place, cost effectively and quickly, and I would beg you all to make sure whatever 

you have them do it is—that is such a rigid timeframe on it, and 

it has got such a clear definition to it that we don’t make it a 

source of more mischief and more cost and more uncertainty. 

Until you deliver the guy his patent or the woman her patent 

that says, it is real, I can count it, you are adding tremendous 

problems to the system, and adding other agencies, I don’t 

think—— 

130 

Mr. ISSA. Thank you, Mr. Chairman. I have just 35 more questions, but I will limit it to one, if I may? 

Mr. CONYERS. You always do. 

Mr. ISSA. Thank you, Mr. Chairman. 

And, Dean, by the way, I spoke to two graduating classes at the 

PTO on Monday, and you said it better than I did, but mine was 

a prepared speech. 

The earlier comment on—and I think rightfully so—on people 

who invest tens or hundreds of millions or even billions of dollars 

in a new product go along, produce the product and then intrinsically in this product and follow ons become some feature which is 

later claimed successfully in a patent. 

Do you believe—and it is not in the legislation—do you believe 

that as we look at the history of laches developing, that we should 

put into this legislation some sort of protection for—and some has 

been done by eBay but for the threat of a injunctive relief being 

limited when, in fact, by definition, these known technologies have 

been allowed to develop, investments made, and they have gone a 

very far along, because today, as we all know, you can sit on your 

rights a substantial period of time, then make the claim and have 

little or now harm done to the moving party. 

Well, many of you know that you can be in a jackpot when they 

make the claim. So is that something that is not in the legislation 

that should be spoken to above or below the line in order to provide 

further guidance to the courts? 

Yes, Mr. Lasersohn? 

I will let you all answer if the Chairman will. 

Mr. LASERSOHN. I would say that we would have to be very, very 

careful about a system like that. I think the key question is did the 

inventor, in fact, invent it or not? 

And if the inventor, in fact, really did invent it, there are many 

reasons, as you know even better than I, why it may not be in the 

first issued patent or why the patent may take time to issue. 

As Dean points out, the issuance of the patent, the timing of the 

issuance is not within our control. And so, I think the operative 

question gets back to the main point, which is who really invented 

it? If the inventor, in fact, did invent that, he or she is entitled to 

the economic value of that. 

Mr. ISSA. And I want you all to be able to answer, but I want 

to make sure the question is properly narrowed. I am only speaking to the injunctive relief further guidance. There is no question 

that we must make sure the actual inventor is entitled to fair compensation. What we are speaking of is the Intel chip, for example, 

that is 4 years down the road and second generation and somebody 

gains a patent on it, and a whole industry and even standards have 

been built on that technology. 

Is it a reasonable royalty as a matter of law or is injunctive relief 

an appropriate hammer, and like I say, the court’s been deciding 

some, should we weigh in because we have further guidance that 

we might need to give. 

Mr. LASERSOHN. I would just say injunctive relief is a major, 

major question for us and for our companies. eBay has already created a high level of uncertainty about when we are entitled to inVerDate Aug 31 2005 14:13 Jul 12, 2010 Jkt 000000 PO 00000 Frm 00134 Fmt 6633 Sfmt 6601 H:\WORK\FULL\043009\49388.000 HJUD1 PsN: 49388
131 

junctive relief. And very often, that is in fact the bargaining chip 

that allows an inventor—— 

Mr. ISSA. And now from the other side, a little bit, please. 

Mr. LASERSOHN [continuing]. The economic benefit. 

Mr. SIMON. If I may? The specific issue brought to mind an incidence of a few years ago, Congressman Issa, where we were presented with a pending application that had been filed over a decade 

before, never claimed anything like what they were claiming, and 

then, very late in the process, stuck in a claim even though the 

patent was going to expire not that far into the future if these 

claims would have issued on fundamental memory technology that 

was used in every single computer. 

We solved the problem. We bought the patent. It took care of it, 

and we have never asserted it either. 

Mr. ISSA. By the way, a problem is defined as something which 

money cannot solve. So you solved it, it must not have been a problem, it was a business decision. 

Mr. SIMON. My boss doesn’t quite view that the same way. Certainly not my CFO. There is a problem here. I am not sure that 

the injunction is necessary the right way. There used to be a doctrine in some circuits before the advent of the Federal circuit called 

the doctrine of late claiming, which is—and disfavored for a variety 

of reasons. 

Whether that might be a solution, whether there might be some 

other laches type solution, all of them should be considered. I 

mean, there is an evidentiary issue of how do you show, did they 

really claim this when they filed the application or did they later 

on say, we didn’t reclaim something here, but you know, we have 

seen what industry has done. 

If they have done it 10, 15 years after the fact, I don’t think they 

invented it, quite frankly. 

Mr. ISSA. Mr. Cassidy? 

Mr. CASSIDY. Congressman, I think the eBay case does solve a 

great deal of the problems, especially the prong of the equitable 

test of does this harm the public interest. If something is placed 

in the commerce and the public is largely dependent upon it, it is 

very difficult for a court today, after eBay, to enjoin the use of that 

product. 

Mr. ISSA. Thank you very much, Mr. Chairman. I would say that 

we have jurisdiction over the courts, and they agree with us mostly. We do not have jurisdiction over the ITC, and they do not yet 

agree with us. 

Thank you. 

Mr. CONYERS. Thank you. 

Sheila Jackson Lee? 

Ms. JACKSON LEE. Thank you very much, Mr. Chairman. As 

usual, I appreciate, I think, what is certainly a detailed hearing 

and, Mr. Chairman, I hope that we will make a home run this session with respect to, I think, helping to ensure the inventiveness 

of America. 

I would like to focus my questions on this concept of reasonable 

royalty damages. And I would appreciate comments from a willing 

witness that wants to make the argument that there needs to be 

a more definitive language and possibly a language that suggests 

132 

Federal damages and/or in another form. So that is my first question. 

I would like to pointedly ask Mr. Lasersohn the question dealing 

with the apportionment of damages based on a patent-specific contribution over the prior art. It is suggested that you feel that that 

would encourage infringement rather than licensing arrangements 

for the product. So it would not do what I think we would want 

it to do. 

And then to Dean Kamen, forgive me for approving of your comfortable attire, you give off the signals of an inventor. And we need 

more of you. I would appreciate your sort of ending your testimony—and you thought the bell ended—but I would like you to 

give one addition to this legislation that would create the vast or 

the more attractive atmosphere. 

I think we have a very solid document here, but that would open 

up even more for our inventors. And I will just end on this note 

as I offer—I would like some volunteers on my first question on the 

reasonable damages. But I think in the light of the economy that 

we have now, and this whole opportunity of turning around the 

economic engine. 

It will be based upon the next generation of inventions, and I 

want to see as vast an opportunity as possible and as fair an opportunity as possible, and I do think we are on a very positive track 

with the underlying bill, H.R. 1260. 

Mr. Simon, and others? Would you like to comment on this reasonable damage question, please? 

Mr. SIMON. Sure. Thank you. So I do think there is something 

that we clearly need to do on having a meaningful damages standard rather than to say, here is the key factors. When I was at the 

FDC hearings a few weeks ago, they had five economists who basically all said the same thing. I can reach any result you want from 

the 15 factors. 

As to the idea of treble damages, their currently is a provision 

in the law about the treble damages, as I think you are aware, but 

that is for really bad conduct—infringement. You have to be careful 

in sending the appropriate remedies. 

If you make patent damages too low, you have the problem that 

you are not protecting invention, but if you make it too high, you 

stifle innovation because people will not invent around patents or 

avoid patents or try to come up with their own inventions for fear 

that if they didn’t do it well, they are going to get hit with a punitive type damage. 

Ms. JACKSON LEE. So you argue for tightening the language? 

Mr. SIMON. Yes. 

Ms. JACKSON LEE. Okay. 

Mr. JOHNSON. Johnson. 

Ms. JACKSON LEE. Johnson, everybody is seated in a different— 

Mr. Johnson, thank you. 

Mr. JOHNSON. The problem when you talk about damages is that 

it is a very complex business world out there, and Mr. Simon, in 

his written testimony, for example, has spent a lot of time explaining to us the particular circumstances of his business and what 

they face when they receive charges, but that is only one business. 

That is only one setting. 

133 

And there are literally millions of settings out there, and when 

you come down and try to write one rule, one rule that will fit everything, what we found in years of trying is it is difficult to impossible to write a rule for patent damages that will fit everybody is 

business circumstance. 

Yet, I think most of the witnesses on this panel would agree that 

it should be business appropriate what the damages are. Mr. 

Simon just said it. Others have said it that it should be market 

based, and so right now, we do have 15 factors. 

I don’t agree with the people Mr. Simon mentioned who say they 

can come out anywhere, because the one thing that businesses are 

really good at is figuring out how much they are likely to make by 

selling a product and how much they are making if they sell a 

product, and if somebody comes in and interferes with that, and 

they infringe the patent, they are also pretty good at figuring out 

how much they really lose from it. 

And that is with the current flexibility in the law, which is, indeed, using the Georgia-Pacific factors. You can take into account 

all these business realities and come up with, I think, the overwhelming number of cases, you come up with a pretty fair result. 

And I think there is actually pretty widespread agreement to that. 

Ms. JACKSON LEE. Mr. Lasersohn? Thank you. 

Thank you, Mr. Chairman, for letting them answer the questions. 

Mr. LASERSOHN. With respect to your specific question, I think 

my answer is that our understanding is that an apportionment of 

damage type test as the only test would reduce damage awards, 

and that would lower the cost of infringement, and therefore, there 

would be more infringement. 

In fact, we were very surprised to see an article last year in the 

middle of this debate coming from the head of the Chinese patent 

court who wrote a paper reviewing the legislation—this particular 

idea—suggesting that that would, in fact, be the case. That is, it 

would enable Chinese companies to infringe with much less risk. 

With respect to the broader question, the answer really is that 

Georgia-Pacific is complicated because the question is complicated. 

You can’t make it any less complicated than it actually is. Figuring 

out when I negotiate patent royalties or patent arrangements or 

deals between a small company and a large company, this goes on 

for weeks and months, and it is an enormously complicated negotiation where all of these factors in Georgia-Pacific, in fact, come 

into play. 

This isn’t a hypothetical case at all. They actually enter into our 

negotiations almost every single one of them. We weigh them, and 

sometimes, one is more important than the other. Sometimes five 

are more important than three, but it is simply that complicated, 

because it is that complicated. 

Ms. JACKSON LEE. Mr. Kamen? Thank you. 

Mr. KAMEN. You asked a couple of things. I thank you for that, 

by the way. One of them, you asked what are we going to do to 

ensure the next generation of great innovators and inventors, and 

I think that is the only real solution this country is going to count 

on. 

134 

I did deliver to the counsel to the Chairman a bunch of pieces 

of data, Congresswoman Lofgren, actually, hopefully will be a supporter here, but we started an organization, a not-for-profit, 16 

years ago with 20 some odd of these companies sponsoring high 

schools around the country to help teach them how to be inventive 

and creative. 

It has grown such that this year we have 16,000 schools. We took 

over the Georgia Dome for our finals last week. That is what this 

is. But I can tell you that women and minorities in the United 

States are not underrepresented; they are virtually unrepresented 

in the world of patents, and it is really quite outrageous to me. And 

39 percent of the kids we have on these teams doing science and 

technology are women. So we are working on that separately. 

To your other question, what one thing would I do? I think it is 

sort of what I would say to Congressman Issa, let’s get back to the 

basic problem. If we don’t trust the patents that we get—if they are 

going to be attacked, and sometimes rightly so, if people are going 

to act inappropriately, the first thing we got to do is make sure 

that the patent office is properly equipped to deal, frankly, with the 

good news that so many people are filing so many patents. 

Again, as Congressman Issa pointed out, we ought to run this 

thing like a business. Not too many businesses out there would be 

saying, whoa is me; what am I going to do? I have got 750,000 orders I just can’t ship. I think GM and Ford would love to have that 

problem today. 

But the patent office is sitting there now saying we have a problem. We have pendency. Well, if we know that there are more and 

more patents being filed, and we know people are willing to pay to 

get these things done, the idea that they have got a backlog of 

700,000 of them is hurting everybody everywhere. 

It is hurting the people that need to know what they got to protect against. It is hurting the people that could be adding these 

great solutions to the economy. So I would say, no matter what else 

you put in this reform bill, let’s add some stuff to make sure that 

the patent office gets all the resources it needs to make the highest 

quality patents and reject all the crummy ones, but make the highest quality patents as fast as you can. Get them out there, but then 

leave us with something we can trust when we are done. 

And, you know, I really have to continue to say, I am genuinely 

sympathetic to unique problems, but they are unique problems. If 

you got a fire in that waste basket, let’s not assume that we got 

to write a law that floods the building to put it out, and let’s focus 

on solving the problem. 

And, again, this might sound a little callous, but if those industries are now so big that somehow even your own numbers point 

out it is a few billion dollars, and trust me, I know that is a lot 

of money—never have that kind of money—but in context, of all 

the other places our economy is dealing with money, if somebody 

said to you, our $16 trillion economy now has $3 billion that has 

gone out in these kinds of cases, let’s say 50 percent of which might 

not have gone out appropriately, you got a billion or $2 billion that 

people are gaming the system of which we have a national economy 

of $15 trillion or $16 trillion, 60 percent of which is purely based 

on innovation. 

135 

I am not sure I would put at risk the large part of that $16 trillion to try to make this other thing perfect. We got to deal with 

this situation in context and innovation and finding ways to keep 

creating more incentive for innovation and rewarding it is more important than ever and solving this little problem by destroying a 

magnificent process and model we have in this country. 

I would just ask you to focus more on the value than on the cost. 

Mr. CONYERS. Mr. Kamen? Were you a salesman before you were 

an inventor? Or are you a salesman and an inventor? 

Mr. KAMEN. Both. Mr. Chairman, I am just afraid that my ability 

to continue to keep 300 people working on projects could be dramatically reduced or eliminated if I can’t go out to these companies 

and say, here, I have got something that is going to be valuable to 

you. 

Ms. JACKSON LEE. Very crucial issue, Mr. Chairman. I don’t 

know if Mr. Chandler wanted to answer the treble damages or the 

reasonable damages really quickly if the Chairman will indulge? 

Mr. CHANDLER. Sure. Thank you for the question. We certainly 

support—— 

Ms. JACKSON LEE. Thank you—— 

Mr. CHANDLER [continuing]. The treble damages in cases of willfulness, and that is a very important part of the law. It is a strong 

disincentive to infringement. I think we have to remember that 

patent infringement does not require any kind of copying. 

One infringes simply by doing something that someone is able to 

prove to a jury looks enough like what is in the patent that a finding is made of infringement. What we do need is to have that willfulness standard so that people who set out to infringe someone 

else’s intellectual property will be made to stop. 

And we support that. We view that as a separate question from 

figuring out what the appropriate damages should be for nonwillful 

infringement. 

Ms. JACKSON LEE. Thank you. 

Mr. Cassidy? Do you have any comments? 

Mr. CASSIDY. Thank you, Congresswoman. Yes, I think it is important to focus on the data. The data that we have is over the last 

5 years, there is about 100 cases per year that go to conclusion and 

patent arena. Those are resolved at an average price when there 

is a grant of an award of $5 million. If you include cases where the 

plaintiff loses, it is $2 million. 

So that is the data. It is not a national calamity that 1 percent 

of our Federal cases deal with patent issues. It is not a calamity 

that the average award at the end of those cases is $2 million. The 

cost is $5 million. So we need to keep that in mind and not just 

the giant figures that the other witnesses are tossing around. 

Thank you. 

Ms. JACKSON LEE. You want to quickly? 

Mr. CHANDLER. If I might. I think that looking at the cases that 

are in court that result in judgment is looking at the very tip of 

an iceberg and trying to define what the iceberg looks like. There 

is a huge amount of settlement activity that is based on threat and 

leverage. 

And in the case of my own company, that amounts to hundreds 

and hundreds of millions of dollars from situations where you are 

136 

trying to avoid a jackpot situation. You can’t. This is a very real 

and significant problem with these syndicates that have set up that 

leverage uncertainty in the system. 

And I think it is a complete red herring to look only at cases that 

are reported in court and ignore the rest of the environment that 

we are all trying to operate in today. 

Ms. JACKSON LEE. Thank you very much, Mr. Chairman. My last 

word in concluding is of the Mr. Lasersohn’s comment about a very 

large competitor of sorts, China. And whatever we do in this bill, 

I hope that we will protect the ingenuity and the inventiveness of 

America as we share it with the world. 

I yield back, Mr. Chairman. 

Mr. CONYERS. Mr. Brad Sherman? 

Mr. SHERMAN. Thank you, Mr. Chairman. I believe I am last. I 

am certainly least in my knowledge of patent law. I know as much 

about patent law as the average tax attorney. 

So I may be asking questions that are just kind of discordant 

with the way people who do know about patent law think about 

these issues. 

First, Mr. Chairman, the one thing everybody seems to agree on 

is that the patent office be adequately funded. And I hope that we 

pass full patent reform soon, but perhaps we want a separate piece 

on that to go through more quickly, and I know the appropriators 

love the opportunity, or at least some of them, to steal money from 

the patent fees. 

I can’t think of anything stupider to do. We spend tens of billions 

of dollars having an investment tax credit that may or may not 

generate patents and, you know, I think it does, but to underfund 

the patent office in order to allow the appropriators to spend $5 or 

$10 or $50 million dollars more is—I mean, it is tough to do the 

absolute stupidest thing that is done in Washington to the economy, but that might be it. 

So perhaps a bill that allows the patent office to set fees and prohibit those feels from being stolen could be passed expeditiously. 

Mr. ISSA. Would the gentleman yield? 

Mr. SHERMAN. I will yield. 

Mr. ISSA. The gentleman, I don’t know was on the Committee the 

last time we dealt with this. We are less stupid than we used to 

be, because we used to just divert, and in the beginning of the 

Bush administration, they asked for huge increase, all of which 

would have been diverted. 

But the Senate is—— 

Mr. SHERMAN. So that is the inventor tax. Any country that has 

an investment tax—no, not investment tax, excuse me, an R&D tax 

credit. I was referring to the R&D tax credit earlier. But, yes. 

Mr. ISSA. For the gentleman’s edification, the Senate is working, 

and we will be working with them and the appropriators to find a 

fix for this backlog and the shortage of funds the PTO now has and 

possibly we can use the remaining fee diversion, because there is 

some that is legacy in order to do it. 

But the amazing thing is you should have been here in 2000 

when we found out how dumb we used to be. 

Mr. SHERMAN. Well, I am grateful for the improvement, and I 

would point out I think we ought to have a patent office that has 

137 

speakers going out to colleges saying, we are waiting for more applications rather than the other way around. 

There has been discussion here of, in effect, our trade deficit and 

how this affects American jobs as opposed to others. And it seems 

to me that there are kind of three elements here. 

You have got invention, marketing integration, and manufacturing. We are pretty good at invention, perhaps even better at 

marketing and integration, and manufacturing, we have pretty 

much figured out a way to destroy in this country. 

Likewise, we have a lot of assets in invention. Americans own a 

lot of patents. We own a lot of trademarks and marketing machines, and if we have any manufacturing plants, we are in the 

process of dismantling them. 

So I can see how protecting patents is in our interest vis a viz 

other countries, but is there anything in our law that gives ore of 

an incentive to a guy in a basement in the United States versus 

tin the basement of Calcutta? 

Is there anything we could do in our patent law that would help 

us vis a viz our trade deficit and the rest in the global system other 

than just recognize that at least at this stage, we are better at inventing than we are at this other stuff so, we better protect invention one way or the other? 

Does anybody have a comment? 

Yes, Mr. Lasersohn? 

Mr. LASERSOHN. I think it is a very, very important question, 

and I think part of the answer is that, in fact, those inventors— 

and there are clearly issues around this, but many of those inventors in Calcutta and China where there are, in fact, extraordinarily 

weak patent systems where they cannot protect their inventions 

come here and start—— 

Mr. SHERMAN. Well, yes, they don’t have to come here, they just 

have to send their patent application here. 

Mr. LASERSOHN. Well in many cases, at least in Silicon Valley 

and the companies that we finance, I can tell you many of those 

entrepreneurs today are, in fact, coming here and starting companies. They are not just sending their patents. They are coming here 

and starting companies. 

One reason is that they find starting the company in their home 

territories won’t necessarily give them the patent protection that 

they—— 

Mr. SHERMAN. But wouldn’t it be just as perfectly fine business 

plan to say we are going to have a Calcutta based research company who is going to get all its money by filing patents in the 

United States? 

Mr. LASERSOHN. You would think so, but it doesn’t work that 

way. 

Mr. SHERMAN. There is just a tendency for people who view the 

U.S. market and the U.S. patent system as their revenue source. 

Mr. LASERSOHN. And it is an echo system, so I don’t mean to suggest the only factor, obviously, the patent. But it is a major factor. 

The whole echo system—the fact that we have Silicon Valley, that 

we have a venture capital industry, that we support and frankly 

honor inventors in ways here that they don’t necessarily in other 

places. All of that goes into that decision. 

138 

Mr. SHERMAN. The boogey man here is the outfit that buys a patent or even the inventor that develops a patent never intending to 

do anything with it except hope that somebody else invents something pretty much along the same lines and then sue them. 

Can we add something to our patent laws that just says, you get 

far less in damages? We will let Mr. Simon write the damage provision calculation and the venue provision for any inventor or patent 

holder who has failed diligently to try to exploit their inventions? 

Yes, Mr. Johnson? 

Mr. JOHNSON. I would redefine who that boogey man is, and I 

would say it is people who collect patents to assert not because of 

the merits of the patent but simply to trigger the tremendous cost 

on defendants that comes for defending against those claims. 

Mr. SHERMAN. Well, are you saying that a Chinese should have 

less rights than—— 

Mr. JOHNSON. No, not at all. I think that, in fact, it might be 

that Mr. Kamen could have an excellent invention, and that he 

may need to sell it to Mr. Lasersohn who may need to enforce it, 

because he raises the venture capital to make it a business, and 

I don’t want to see Mr. Lasersohn not be able to give Mr. Kamen 

what is fair, because I want Mr. Kamen to come up with more inventions. 

Because sitting at this table, J&J may be the party—— 

Mr. SHERMAN. So the boogey man would be an assignee who has 

no intention to exploit except through the court system? 

Mr. JOHNSON. I would say it would be anyone who is gaming the 

litigation system when they have a frivolous suit—— 

Mr. SHERMAN. You are using pejorative terms like gaming and 

frivolous—— 

Mr. JOHNSON. Okay, I will—— 

Mr. SHERMAN. I mean we could just say low damages to bad 

plaintiffs. 

Mr. JOHNSON. No. 

Mr. SHERMAN. That doesn’t—— 

Mr. JOHNSON. I would say it is someone who brings a suit not 

intending to have that suit decided on the merits of their rights, 

but rather one who intends to use it to settle out at less than the 

cost of litigation cost, which is what I understand happens about 

75 percent of the time in some—— 

Mr. SHERMAN. I don’t know how we could write a statute that 

focused on what was going on in the mind of the plaintiff, because 

I guarantee you every plaintiff will put in their pleadings, we are 

bringing this lawsuit for the purpose of winning. And a few of the 

times, they will win. 

If they had no chance of winning, you guys wouldn’t settle. 

Mr. JOHNSON. When they bring a claim against us for $50 million—— 

Mr. SHERMAN. Right. 

Mr. JOHNSON. And then, when you sit down to talk about settlement, and they say, well, it is going to cost you $5 million to defend, we will settle this lawsuit for $2 million; pay us $2 million, 

and we will be on our way, one does—no matter how—— 

139 

Mr. SHERMAN. Let’s put it this—I don’t think a statute that prohibits plaintiffs from telling you in negotiations what your cost of 

defense is going to be—— 

Mr. JOHNSON. No, no—— 

Mr. SHERMAN [continuing]. Is going to make your lives any easier. 

Mr. JOHNSON. And I wasn’t suggesting any of that. 

Mr. SHERMAN [continuing]. And they will all be able to—— 

Mr. JOHNSON. I was suggesting what the problem is that we perceive. 

Mr. SHERMAN. Yes. Obviously, in any kind of lawsuit, somebody 

brings a frivolous lawsuit for the purpose of collecting not based on 

the merits of the lawsuit but based on the cost of defense. I if there 

was a way to stop that, we would want to stop it. 

Mr. JOHNSON. But it is a uniquely difficult problem as Mr. Simon 

points out, because it can cost the defendant $20 million or so to 

defend. 

Mr. SHERMAN. Does anyone else have a way to define the kind 

of plaintiff who should be getting lower damages because, while 

they do own a patent, they can show infringement. They were not 

doing anything to allow—I mean, the purpose of the patent is to 

encourage people to do things that are going to be useful. 

So if you put the patent in the drawer, maybe you are entitled 

to far less ownership. Does anyone else have a comment? 

Yes, Mr. Lasersohn? 

Mr. LASERSOHN. I would just suggest, I mean, the one problem 

is what if the invention really matters? 

So if Dean Kamen invents something extraordinarily important 

but for whatever set of reasons he chooses that he doesn’t want to 

pursue it as a development project, and he licensed it to somebody 

else—— 

Mr. SHERMAN. Well, I am not—I mean, there are many ways to 

exploit an invention—licensing, trying to license are all ways to exploit an invention. I mean Kamen here may never invent anything. 

I mean, correction, he may never manufacture anything, but he is 

going to invent an awful lot of things and work very hard to exploit 

them. 

Mr. LASERSOHN. Right. 

Mr. SHERMAN. But what we are talking about here is the person 

who owns a patent and has no intention of having that patent be 

useful to the manufacturing process. 

Mr. LASERSOHN. But he is interested in making money, and to 

make money—— 

Mr. SHERMAN. But, yes, one way to make money is to invent 

something and then to have all your inventive work be absolutely 

useless to society. To take your invention, put it in a drawer, do 

nothing to exploit it, and then wait and hope that somebody else 

invents it, and then you can sue them. 

And the question is, should that person get the same level of 

damages as someone who invents something and diligently tries to 

get it manufactured one way or another. 

Mr. LASERSOHN. I am just pointing out that the problem with 

looking at the nature of the entity that is bringing the lawsuit is 

140 

that, I think, what really ultimately matters is the value of the 

patent. 

So there can be cases where the value is enormous, but you 

don’t—there is all sorts of reasons the inventor has chosen not to 

pursue the development of it—has chosen, for example, to want to 

license it to somebody—— 

Mr. SHERMAN. I am including people who diligently try to get it 

licensed. I am talking about the inventor who puts it in the drawer, 

doesn’t go around trying to find somebody to buy it, license it, manufacture it or uses it—who has as only one business plan, and that 

is to wait for somebody else to invent the same thing, and then sue 

them. 

What do we do with that business plan. 

Mr. LASERSOHN. I am just pointing out that these organizations 

in many cases are, in fact, attempting to get the economic value of 

the invention through a negotiation with these companies who are 

using—they didn’t invent it; Dean invented it first, so he is the inventor. 

They are using the invention, and these organizations are simply 

trying to get the economic value. All of these discussions—what the 

other side forgets to tell you, is that these discussions start with 

the licensing negotiation. The so-called trolls go to these organizations and say, will you please license this for whatever—— 

Mr. SHERMAN. Right, but will you license something—will you 

pay us for a license on an invention where our inventive efforts 

have done nothing to help society, because, in fact, while we invented something useful, upon inventing it, we put it in a drawer. 

We told no one. We made no effort to license it to anyone. We waited for years. 

Mr. Johnson? 

Mr. JOHNSON. Well, when you apply for a patent, it becomes public knowledge, and in fact, the reason that a patent is granted is 

because you make your invention known. And depending on what 

the invention is, it could be the invention of the laser. People read 

patents. They come out. They are available on the Internet. 

They may then rush to their laboratory and build them. They 

may build plants, and so on, taking advantage of someone’s invention. The patent system doesn’t require that the inventor become 

the manufacturer, and he is not putting it in a drawer. He is putting it up for the world to see. 

Mr. SHERMAN. Maybe just filing for the patent is a marketing 

plan, although, not a very aggressive one. 

Mr. JOHNSON. He could invent the laser and, indeed, stick it in 

a drawer and keep it secret, and that would be terrible for society 

because we wouldn’t get it, and the original historical foundations 

of the patent system came from exactly that in medieval Europe 

with the guilds where they would not share information. 

So the basis of patents is the public disclosure of information. 

Mr. SHERMAN. Okay. I think I am well over time—questions. 

Thank you. 

Mr. CONYERS. Thank you very much. 

The Chair recognizes the gentlelady from California, Linda Chavez who, as the most imminent mother in the Congress, has all of 

us on pins and needles for these last 21⁄2 weeks. 

141 

Ms. SA ́ NCHEZ. Thank you, Mr. Chairman. I have been following 

the discussion with some degree of interest also in the back room, 

and I appreciate all of our panelists for being here and the different perspectives that you lend to this complex issue. 

I am sort of going to go off in a different direction here, because 

I know that, sort of, the emphasis in trying to reform patents is 

to trying to keep innovation alive and well in the United States 

and trying to make sure that American innovation and technology 

leads in the world. 

But, sort of, scratching the surface, one thing that I have become 

aware of and this is what I specifically want to ask all of our panelists about, is—and in particular, I am concerned about business 

methods patents, especially because of late, it has been brought to 

my attention that there are business method patents that are being 

awarded for tax strategies, some of which don’t even comply with 

U.S. tax law, which I find highly amusing. 

So I am interested in knowing from our panelists, and I am just 

going to have each of you respond, in kind, what your thoughts on 

business method patents are, generally speaking, whether or not 

you that there are patents that are too broad for business methods 

that are being issued? How would each of you address those kinds 

of patents in a less costly and more effective and efficient alternative to legislation? 

I am just, sort of, trying to get, generally speaking, all of your 

thoughts on that, and we can just go down the line. 

Mr. SIMON. Thank you. So briefly, I just want to be very careful 

here. For example, the way that you would tune a radio used to 

be with physical components called resisters, capacitors, inductors. 

That has all now changed to, in almost all instances, to what you, 

in essence, call a software patent—computer implement invention—called filtering electronically. Filtering is done mostly on computer these days. And so we want to be very careful that we don’t 

take out areas of things that I think most people would agree 

should be patentable. 

If it is purely, gee, how you feel out the form, I think the Bilski 

decision goes a long way to fixing that problem. but you have to 

be careful if you know—and I think there is some other cases that 

have said, or at least suggested that all you have done is computerize something that was already out there. That is not good 

enough to be patentable from an obvious standard. 

But I think we want to be very careful about how we deal this, 

because it is very—and you can actually find instances where filtering functions can be used in taxes as bizarre as that may seem. 

So we need to be somewhat careful about that. 

And with that, I apologize, Mr. Chairman, I am under strict orders from the chairman of my household to be home tonight. I have 

to leave—if I may leave? 

Mr. CONYERS. Of course. 

Mr. SIMON. Thank you. 

Mr. JOHNSON. I think the Bilski decision went along way toward 

solving some of the concerns, many of the concerns, about business 

method patents. I would comment on the tax strategy part that I 

think there is a long tradition that the patent office can deny the 

142 

grant of a patent if it is not in the public interest. You, for example, can’t get patents on ways to commit crimes and the like. 

Mr. THOMAS. Congresswoman, I share your concerns about business method patents. Patents on marketing, finance, insurance, 

sports methods have clogged up the patent rules. They have made 

the United States look like a laughing stock compared to our trading partners. They have been inflicted upon industries with no 

grace period. 

The patent office just grants patents that pertain to these fields, 

and there is no waiver or notice. We just do it. That is the way we 

roll in the patent system. I am less confident than some that the 

Bilski opinion has taken care of all of these problems. 

Because I believe the Bilski opinion still leaves room for clever 

patent drafters—you don’t have to be that clever simply to draft 

something that looks more machine based, that looks more apparatus oriented even though what you have truly done is invented 

something that lies with outside traditional technological areas. 

So I believe there is still room for legislation, and particularly in 

targeted areas like tax legislation or tax patent legislation. Thank 

you. 

Mr. LASERSOHN. I am very happy to be able to agree with Mr. 

Simon on something, and that is, obviously, patents that are illegal, that practice in something that is illegal, we should just throw 

out, and the obviousness test is critical here. Again, filling out a 

form is obvious and should be able to be thrown out on that basis. 

However, it is complicated. I am sorry? 

Ms. SA ́ NCHEZ. I don’t think—oh, there we go. Sometimes, though, 

that can take a lot of litigation before something that is clearly obvious to most people like peanut butter and jelly sandwiches without the crust, you know, gets litigated to the point where they say, 

oh, this was pretty obvious. 

Mr. LASERSOHN. And that is, I think, exactly where I was going 

here, which is one of the way we do support post-grant review. 

There really is a need to improve the quality of patents that are 

issued. 

We should do something, and I think if we had more money for 

the patents office, we all are in favor of that, and some type of a 

limited carefully managed post-grant review that many of these 

really silly patents would never really see the light of day, but we 

have to be very careful about throwing out the method concept as 

a whole. 

It is really very critical and gives us a competitive advantage in 

many industries versus, for example, Europe and countries that do 

not have method patterns. 

Ms. SA ́ NCHEZ. Okay. 

Mr. KAMEN. All I would say, not to risk sounding like the broken 

record, but get the quality up. Obviously, I include in that package 

of quality, as you were saying, overly broad claims. I mean, speaking against my own interests here, every time I try to get a patent, 

I think I have invented something great, and they keep coming 

back at you with this and this and this, and as long as everybody 

is judged the same way, and as long as when you finally get it in 

the end, it shouldn’t be overly broad. 

143 

So it will be not that—it shouldn’t be obvious. It shouldn’t be not 

in the best interest of the—it should meet all those standards, but 

all of those standards are encompassed in give us the capability to 

get smart people on the other side to grant a high quality patent, 

and I think all those issues really will dramatically, dramatically 

fade. 

Mr. CHANDLER. I agree with everybody else. 

Ms. SA ́ NCHEZ. I think I found common ground among all of our 

panelists. Do I get a gold star for that, Mr. Chairman? 

Mr. CASSIDY. We propose a gold star for the congresswoman. We 

agree Bilski was an important step in the direction of avoiding ridiculous patents. Personally, I would favor that this not be a subject of legislation. The courts have this well in hand and should be 

allowed to develop this in the case law arena rather than trying to 

get it right on the legislative front and possibly not getting it 

right—— 

Ms. SA ́ NCHEZ. So if I am hearing you correctly, you trust the judiciary more than you do your Members of Congress? 

Mr. CASSIDY. I trust the judiciary to resolve problems that it has 

created, which it did in—— 

Ms. SA ́ NCHEZ. Very diplomatically put. I yield back, Mr. Chairman. 

Mr. CONYERS. Thank you very much, Ms. Sa ́nchez. 

Howard Coble? 

Mr. COBLE. Mr. Chairman, I apologize to you and to the witnesses. I had three previously scheduled hearings today. I am late 

getting here, but I have four very short questions, Mr. Chairman, 

if I may? 

Mr. Cassidy? I am a longtime opponent of diversion of patent 

fees from the patent office. Application filings have decreased, as 

we all know, because of the soft economy. And now the office must 

deal with pending applications and close this new funding gap. 

Should we include a provision in H.R. 1260 to prevent the diversion of patent fees from the patent office? Mr. Cassidy? I looked at 

the wrong end of the table. 

Mr. CASSIDY. I have a simple answer, absolutely, if the appropriators will allow you to include it—— 

Mr. COBLE. That is the problem. I concur with you. 

Mr. Johnson? Your testimony raises a number of concerns with 

the bill as introduced specifically with the damages provision. Is 

there language that you would support, and how does it differ from 

what is in the present bill? 

Mr. JOHNSON. We would support the language which is in S. 515 

as ordered reported, which is the gate keeper solution. And it differs from the language in the bill in that the language in the bill 

relies on a prior art subtraction approach and forces a methodology 

that steps through that would not allow people to rely on the existing breadth of the case law to handle individual circumstances to 

get to the right result. 

Mr. COBLE. I thank you, sir. 

Mr. Chandler? Has the best mode requirement outlived its efficacy, and should it be left alone, amended, or eliminated? 

Mr. CHANDLER. I believe the best mode is a useful way to ensure 

that patents are granted with the inventor having to show why the 

144 

invention is useful and the best way that it can be applied as part 

of the teaching process of patents to explain to the world why it 

is a valuable invention and how to use it. So that when it does expire, it can be best exploited. 

Certainly, that is an area where I think there is room for discussion as we move the bill forward. There are a number of defenses 

that those accused of patent infringements have available to them 

that have taken on a life of their own through judicial decision 

making, where as part of a comprehensive patent reform, it is 

worth looking at them and figuring out what really makes sense. 

And there are other areas in addition to best mode that we could 

look at modifying to achieve that end of a more rational patent system. Right now, we have a system where each side tries to amass 

as many nuclear weapons as it can instead of trying to rationally 

function like a commercialized system would to encourage trading 

of rights and economic development, which is what our patent system should be about. 

Mr. COBLE. I thank you, sir. 

And, Mr. Chairman, one final question to Mr. Kamen. 

Mr. Kamen? You invent things. You are an inventor and hopefully that, in turn, creates jobs. In your opinion, which provisions 

of H.R. 1260 will encourage innovation? 

Mr. KAMEN. Sadly, I think, this bill in its entirety is focusing on 

getting rid of problems, some of which to some extent are real and 

people can vary on how real they are, but I think what this bill in 

its entirety is missing is the other half, and I said a couple of times 

today, they are focusing on the cost of patents, and some of them 

are unreasonable and bad costs. 

There is nothing in that bill that recognizes or focuses on the 

value of the system that drives innovation in this country. 

A simple one that somebody recommended, Congressman Sherman, that I think everybody agreed with was at the very least let’s 

make a bill or even go so quickly make it a separate bill that we 

fund the whole patent office. 

And frankly, while they are down now in new applications, don’t 

let them let some of their workforce go. They have 1,200 or 1,500 

examiners, use this golden opportunity to quickly get rid of all this 

pendency, and bring them to a new standard where nothing takes 

more than a year or at most 2 years to review. 

None of you would live in a place where you wait 2 years to find 

out whether there is a deed for that lot you want to build your 

house on. 

But then I would say to each and every provision in this bill, if 

you could make sure when you step back and look at it, did it add 

certainty so that at least when you got your patent, it is something 

that we know how to value and move into commerce. So if there 

is a second window, make it clear, make it short, make it once. If 

there is issues about the damages—if anything you do, in any way, 

can encourage somebody to make the rational business decision 

that the penalties aren’t so bad for essentially infringing, I will just 

do it and as Congressman Issa said, it is the cost of business. 

It is going so far in the wrong direction, it will instigate more 

lawsuits. It will burden the system even more. It will take good actors and put them in a suit with bad actors, and I think all the 

145 

stuff about damages is adding more uncertainty and less clarity to 

something that is desperately in need—— 

Mr. COBLE. Well, Mr. Kamen, I want to beat that red light before 

the Chairman gets on me. I want to thank the Chairman for having called this hearing and thank you all for participating. 

Thank you, Mr. Chairman. 

Mr. CONYERS. And I thank the witnesses for their intellect and 

their stamina, and we declare this hearing adjourned. 

[Whereupon, at 1:05 p.m., the Committee was adjourned.] 

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