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AMENDMENT IN THE NATURE OF A SUBSTITUTE

TO H.R. 2795, THE ‘‘PATENT ACT OF 2005’’

HEARING

BEFORE THE

SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

ON

H.R. 2795

SEPTEMBER 15, 2005

Serial No. 109–53

Printed for the use of the Committee on the Judiciary

(

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

(II)

COMMITTEE ON THE JUDICIARY 

F. JAMES SENSENBRENNER, JR., Wisconsin, Chairman 

HENRY J. HYDE, Illinois 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

SPENCER BACHUS, Alabama 

BOB INGLIS, South Carolina 

JOHN N. HOSTETTLER, Indiana 

MARK GREEN, Wisconsin 

RIC KELLER, Florida 

DARRELL ISSA, California 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

CHRIS VAN HOLLEN, Maryland 

DEBBIE WASSERMAN SCHULTZ, Florida

PHILIP G. KIKO, General Counsel-Chief of Staff 

PERRY H. APELBAUM, Minority Chief Counsel 

SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

LAMAR SMITH, Texas, Chairman

HENRY J. HYDE, Illinois 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

WILLIAM L. JENKINS, Tennessee 

SPENCER BACHUS, Alabama 

BOB INGLIS, South Carolina 

RIC KELLER, Florida 

DARRELL ISSA, California 

CHRIS CANNON, Utah 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

HOWARD L. BERMAN, California 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

ZOE LOFGREN, California 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

ROBERT WEXLER, Florida 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California

BLAINE MERRITT, Chief Counsel 

DAVID WHITNEY, Counsel 

JOE KEELEY, Counsel 

RYAN VISCO, Counsel 

SHANNA WINTERS, Minority Counsel 

(III)

C O N T E N T S 

SEPTEMBER 15, 2005

OPENING STATEMENT 

Page 

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

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

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

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

Internet, and Intellectual Property .................................................................... 3

WITNESSES 

Mr. Emery Simon, Counsel, the Business Software Alliance (BSA) 

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

Prepared Statement ............................................................................................. 6

Mr. Philip S. Johnson, Chief Patent Counsel, Johnson & Johnson, on behalf 

of the Pharmaceutical Research and Manufacturers of America (PhRMA) 

Oral Testimony ..................................................................................................... 9

Prepared Statement ............................................................................................. 11

Mr. Robert B. Chess, Chairman, Nektar Therapeutics, on behalf of the Biotechnology Industry Organization (BIO) 

Oral Testimony ..................................................................................................... 20

Prepared Statement ............................................................................................. 23

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

Oral Testimony ..................................................................................................... 35

Prepared Statement ............................................................................................. 37

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

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

in Congress from the State of California, and Ranking Member, Subcommittee on Courts, the Internet, and Intellectual Property ......................... 59

Prepared Statement of the Honorable Bob Goodlatte, a Representative in 

Congress from the State of Virginia, and Member, Subcommittee on Courts, 

the Internet, and Intellectual Property .............................................................. 60

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, and Member, Subcommittee on 

Courts, the Internet, and Intellectual Property ................................................ 60

Response to post-hearing questions submitted by the Honorable Chris Cannon, a Representative in Congress from the State of Utah, to Phil Johnson, 

Chief Patent Counsel, Johnson & Johnson ........................................................ 62

Response to post-hearing questions submitted by the Honorable Darrell Issa, 

a Representative in Congress from the State of California, to Phil Johnson, 

Chief Patent Counsel, Johnson & Johnson ........................................................ 67

Letter to the Honorable Zoe Lofgren, a Representative in Congress from 

the State of California, from Phil Johnson, Chief Patent Counsel, Johnson 

& Johnson ............................................................................................................. 69

Page

IV

Letter to the Honorable Lamar Smith, a Representative in Congress from 

the State of Texas, and Chairman, Subcommittee on Courts, the Internet, 

and Intellectual Property, and the Honorable Howard L. Berman, a Representative in Congress from the State of California, and Ranking Member, 

Subcommittee on Courts, the Internet, and Intellectual Property, and Prepared Statement from Bob DeMatteis, Plastic Packaging Systems ................ 189

Prepared Statement of Raymond V. Damadian, President and Chairman, 

Fonar Corporation, Manufacturer of Scanners .................................................. 193

Prepared Statement of Joy L. Bryant, Executive Director, National Association of Patent Practitioners ................................................................................. 196

Prepared Statement of Stephen Wren, Independent Inventor and Actuary ...... 203

Prepared Statement of Ronald J. Riley, President, Professional Inventors 

Alliance USA ........................................................................................................ 207

Letter to the Honorable Lamar Smith, a Representative in Congress from 

the State of Texas, and Chairman, Subcommittee on Courts, the Internet, 

and Intellectual Property, from Christine J. Siwik, Rakoczy Molino Mazzochi Siwik LLP, on behalf of Barr Laboratories, Inc. ...................................... 218

(1)

AMENDMENT IN THE NATURE OF A SUBSTITUTE TO H.R. 2795, THE ‘‘PATENT ACT 

OF 2005’’

THURSDAY, SEPTEMBER 15, 2005

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COURTS, THE INTERNET,

AND INTELLECTUAL PROPERTY, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC.

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

Room 2141, Rayburn House Office Building, the Honorable Lamar 

Smith (Chairman of the Subcommittee) presiding. 

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

First, it’s nice to look out and see a packed house today. That is 

indicative of the importance of the subject matter and of course the 

testimony of our witnesses, which will be forthcoming in just a few 

minutes. But I appreciate the interest. 

While I am mentioning those who are in attendance, I probably 

should apologize in advance to a lot of you all. Not everyone—that 

for good or for bad, what you are going to be hearing about today 

is a fairly arcane subject. It is not only complex, but it is legalistic, 

technical, and I just appreciate everybody’s patience in trying to 

delve into this particular subject. We are going to be talking about 

such things as July substitutes and September redlines and apportionment and venue, and so on and so forth. So a lot of subjects 

we will discuss today, and, again, I appreciate the interest. 

Let me explain also why we have been slightly delayed and 

apologize to those of you all who did not get the word. There was 

a last-minute Republican conference meeting called to ratify the 

choice of the new Homeland Security Chairman, who is Peter King 

of New York. Because of that conference at 10:00, going from 10 

roughly to 10:30, we had to postpone this particular hearing. But 

we will get started immediately. I am going to recognize myself for 

an opening statement, then the Ranking Member, then we will go 

to our witnesses. 

Today marks our fourth hearing on patent reform in the 109th 

Congress. The first two focused on the contents of a Committee 

print and the third on H.R. 2795. Today we will explore the merits 

of an amendment in the nature of a substitute to H.R. 2795, the 

‘‘Patent Act of 2005,’’ that was developed in late July pursuant to 

negotiations among Subcommittee Members, industry representatives, and professional associations. A second document, a SepVerDate 0ct 09 2002 11:36 Oct 28, 2005 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\091505\23434.000 HJUD1 PsN: 23434
2

tember redline to the substitute reflecting further changes, also 

will be discussed. 

To arrive at this point is no small accomplishment, given the 

scope of the bill and the eventual application to so many lives and 

jobs. Notwithstanding our progress to date, the legislation is in fact 

at a crossroads. 

High-tech and financial service companies believe present law 

encourages individuals to acquire poor quality patents. These patent holders, sometimes called trolls, can extort settlements from 

manufacturers by threatening to shut down assembly lines in the 

course of infringement suits. 

It shouldn’t become just another lawyer’s game to divert money 

from purposeful endeavors like manufacturing computers and software, but some of the changes that we have considered may inadvertently hurt other important industries. 

Biotech and brand drug companies, for example, operate under 

very different business models that rely on a legal system that vigorously affects patent rights. Their concerns about profit margins, 

lawsuits and productivity are no less sincere than those of the 

high-tech community. 

In this regard, I hope that Members and witnesses will remain 

especially creative and open-minded as we attempt to thread the 

needle on two key issues, changes to patent litigation venue and 

apportionment of damages. 

In the seeking of compromise on the venue issue, we are taking 

a different approach. Instead of focusing on the frequency with 

which injunctions are issued, why not revise another statute that 

allows frivolous suits to be brought in patent friendly districts? We 

are now exploring the possibilities of allowing these suits to go forward but under more stringent terms; for example, only in districts 

in which the defendant has committed acts of infringement and has 

a regularly established place of business. 

Consistent with this approach, the redline document would require district court to transfer an infringement action to a judicial 

district or to a division that is a more appropriate forum; that is, 

to a district or division where one of the parties has substantial 

evidence or witnesses. 

Concerning apportionment, both the substitute and the redline 

document address the matter of determining the true value of an 

invention in an infringement action. In other words, how much 

value may be attributable to the inventor’s own efforts versus the 

contributions from other sources, including the infringers. 

I am especially interested in learning what the witnesses think 

of the redline draft, which replaces the venue language of the bill 

with the transfer of venue provision. More than 20 companies representing a broad cross-section of industrial interest support this 

provision. The redline text applies apportionment analysis to all inventions, not just combinations, distinguishes contributions arising 

from the patent invention to those attributable to the efforts of the 

infringer and clarifies that an infringed patent may not be credited 

with certain improvements that an infringer has incorporated into 

any infringing product. 

While all issues set forth in both documents are fair game for 

discussion today, I am particularly interested in these two issues, 

3

the venue and the apportionment of damages. I am convinced that 

either version, the July substitute or the September redline, with 

some tweaking will help individuals and companies obtain funds 

for research, commercialize their inventions, grow their businesses, 

create new jobs, and offer the American public products and services that make our country the envy of the world. In fact, that is 

what the patent system is supposed to do. 

That concludes my remarks. I will now recognize the gentleman 

from California, Mr. Berman, for his. 

Mr. BERMAN. Thanks very much, Mr. Chairman. Once again, 

thank you for scheduling this hearing on possible substitute 

amendments to the Patent Reform Act. 

I know, in addition to the amendment in the nature of a substitute, that was circulated in July, a number of individual companies have met together over the summer to try to produce a consensus bill, a draft of which has been circulating as well. In all 

honesty, at this point in the process I would prefer that the Subcommittee be actually marking up a bill, but I understand the situation. 

The witnesses all agree that patents are the foundation of American innovation, and they serve as the underpinning of the American economy. Strong intellectual property protection helps protect 

technology businesses, attract investors, provides incentives for 

drug companies to develop new drugs and allows independent inventors to make significant contributions to society. 

However, while robust property protection presents these benefits, when protection is given to questionable quality patents, the 

foundation begins to show its cracks. This leads to an increase in 

litigation, a decrease in investment, and casts doubt about the effectiveness of our patent system. 

At last week’s hearing regarding oversight of the PTO, we heard 

consensus from all of the witnesses, including the director of the 

agency responsible for administering the patent process, that there 

is a problem with the quality of patents issuing from the Patent 

Office. 

It would be quite an accomplishment if we could reach consensus 

with this panel about the solution to the quality issue. Some of the 

proposed provisions of the original bill, as well as the substitutes, 

begin to address the quality in the initial stages of the examination 

process, such as the ability for third parties to submit prior art to 

the examiner. 

Over the number of years Congressman Boucher and I introduced precursors to this bill, we always agreed that the key to improving quality was providing examiners with the necessary prior 

art resources. Access to better information will yield better decisions by the examiners. 

Other provisions will enhance the quality of patents immediately 

after their issuance, such as the new post-grant opposition procedure. With the opportunity to establish a more comprehensive 

check on a patent’s validity without resorting to an expensive and 

lengthy court proceeding, the bill will improve both the quality of 

specific patents and the patent system as a whole. 

Unfortunately, the goal of providing a true alternative to costly 

litigation, the second window provision, has been omitted from 

4

drafts of a substitute. Clearly a limited second window would shed 

more light on the quality and validity of questionable patents. With 

substitute options that do not contain the injunction provision or 

the second window options, I am left to ponder the fate of questionable quality patents that have already been granted. These patents 

will surely be litigated, but afforded a high presumption of validity, 

and therefore in all likelihood affirmed. 

What will be the effect on the economy that a questionable quality patent; for instance, a software program, can now be the reason 

for barring others from using their own truly inventive products? 

Shouldn’t we consider how to rectify this problem as we discuss one 

of the most extensive patent reform bills since the 1952 act? 

Though there are main issues which still need further discussions such as duty of candor provision and obviously some of the 

disputed provisions in the latest coalition draft, I will look forward 

to hearing from some of the industry witnesses today and see how, 

if at all, their positions have shifted since we began this process. 

I hope to continue working with the group of cosponsors that you 

have put together, Mr. Chairman, to try to create a more perfect 

patent reform. 

Mr. SMITH. Thank you, Mr. Berman. Without objection other 

Members’ openings statements will be made a part the record. Before we begin our testimony, I would like to invite our witnesses 

to stand and be sworn in. 

[Witnesses sworn.] 

Mr. SMITH. Thank you, please be seated. 

Our first witness is Emery Simon, Counsel to the Business Software Alliance, where he advises BSA on a broad range of issues, 

including copyright law, electronic commerce, trade and encryption. 

Mr. Simon received an undergraduate degree from Queens College, a Master’s Degree from Johns Hopkins University and a law 

degree from the Georgetown Law Center. 

Our next witness is Philip S. Johnson, Chief Patent Counsel for 

Johnson & Johnson, who will be testifying on behalf of the Pharmaceutical Research and Manufacturers of America, or PhRMA. He 

serves as the co-chair of PhRMA’s Intellectual Property/Patents 

Focus Group and holds other leadership post in various IP trade 

associations. Mr. Johnson received his undergraduate degree from 

Bucknell University and his law degree from Harvard University. 

Our next witness is Robert Chess, Chairman of Nektar Therapeutics, who will be testifying on behalf of the Biotechnology Industry Organization, or BIO. Mr. Chess co-chairs BIO’s Intellectual 

Property Committee. He also teaches entrepreneurship and management of health care innovation at Stanford Graduate School of 

Business. Mr. Chess studied engineering as a graduate student at 

California Institute of Technology and earned a Master’s Degree 

from the Harvard Business School. 

Our final witness is John R. Thomas, Professor of Law, Georgetown University Law Center. Professor Thomas also serves as the 

Visiting Scholar in Economic Growth and Entrepreneurship at the 

Congressional Research Service. He earned his Bachelor’s Degree 

from Carnegie Mellon University, a law degree from the University 

of Michigan, and a Master of Law from George Washington University. 

5

Welcome to you all. We have your entire testimony, which will 

also, without objection, be made a part of the record. We look forward to your testimony today. 

Mr. Simon, we will begin with you. 

TESTIMONY OF EMERY SIMON, COUNSEL,

THE BUSINESS SOFTWARE ALLIANCE (BSA) 

Mr. SIMON. Thank you, Mr. Chairman, Mr. Smith, and Members 

of the Subcommittee. 

My name is Emery Simon, and I appear before you today on behalf of the Business Software Alliance. H.R. 2795 and the amendment in the nature of a substitute would make fundamental important changes to the patent law. 

The BSA has had an opportunity previously to make its views 

known on the full exchange of these issues. Today I will limit my 

comments to a few of the most important changes in the substitute 

as certain proposals advanced by an ad hoc coalition on September 

1, which you referred to, Mr. Chairman, as the redline document. 

Through its recent hearings this Subcommittee has heard that 

changes are needed in three areas, assuring patent quality, curbing 

excessive litigation and promoting international harmonization. 

BSA member companies believe in general the substitute addresses 

each of these key areas in ways that will improve and modernize 

our patent system. 

We urge the Subcommittee to modify the substitute in certain 

limited respects, and I will identify these in the course of my testimony. 

As Mr. Berman just said, the substitute would make a number 

of useful reforms aimed at ensuring patent quality. These include 

establishing a post-grant process to intercept bad patents and providing a workable mechanism aimed at enabling the PTO to receive 

prior art from persons other than the applicant. We believe these 

changes will improve patent quality and mitigate the need for parties to file expensive, disruptive lawsuits. 

With respect to curbing excessive patent litigation, we support 

the approach in the substitute with regard to monetary damages 

and to discouraging plaintiffs from engaging in inappropriate 

forum shopping. 

Specifically, the changes with respect to willful infringement will 

lead to better, more thorough searches by applicants and less litigation. This provision should reduce the need for expensive notice 

and opinion letters by establishing three clearly limited grounds for 

willfulness to be found. 

We also support the approach of the substitute in addressing the 

problem of forum shopping by plaintiffs and the changes proposed 

in the redline on September 1. The substitute would create a viable 

means for the defendant to have the case moved through a more 

appropriate venue. The practice of filing suits in jurisdictions with 

a demonstrated pro-plaintiff bent warps settlement demands and 

undermines confidence in the fairness of adjudicated outcomes. We 

think that the changes proposed in the redline improve upon that. 

On the issue of calculations of damages for infringement, we support the changes proposed in the substitute and oppose the changes 

proposed in the redline on September 1. 

6

The ad hoc coalition, the redline coalition proposal would perpetuate excessive unmerited and unfair damages awards in cases involving computers and software. Under current law, patent damage 

models are not required to focus on the economic value of the inventor’s contribution. Instead damages can be based on the semantics of a cleverly drafted claim. This practice results in jury confusion because damage models can include significant value attributable not only to the new invention, but instead to already existing technology to prior art. 

The court should have the statutory authority to make a determination about what the technological contribution with the patentee is before a party is allowed to present royalty damages models. The statutory language should focus this determination away 

from clever claims and onto the patent. We support the substitute 

because it would provide courts with a statutory basis for requiring 

patentees to present damage calculations based on the proportional 

value of a patent invention alone, not on the cumulative value of 

all features included within a large product, which for a computer 

can be thousands and thousands of features. 

There may well be ways, Mr. Chairman, to improve the language 

in the substitute and we would like to work with you and others 

before full Committee consideration of this bill. 

We oppose, as I said, the ad hoc redline because by changing the 

term ‘‘inventive contribution’’ to ‘‘claimed invention’’ unscrupulous 

parties could well claim damages based on the scope of the claims 

in the patent rather than the fact specific actual use of the invention. 

A provision not now part of the substitute, but which is part of 

the redline, is the repeal of section 271(f). We urge you to make 

this change. Under recent court holdings interpreting 271(f), a copy 

of a computer program made outside of the United States will be 

included in support of the United States damages if the software 

is made from a master disk developed in this country. If the software had been developed outside of the U.S., this rule would not 

apply. We believe this reading of 271(f) creates an unintended incentive to make valuable development activity outside the U.S. and 

should be removed from the law. 

Finally, we note that in the course of your work the Subcommittee has considered a number of other issues, including second window for commencing a post-grant proceeding, limiting 

abuses of continuations of pending applications and additional reforms aimed at mitigating excessive litigation. We recognize the 

Subcommittee has reviewed each of these matters carefully and 

has decided not to address them at this time. These issues remain 

of deep concern to BSA members and to the technology industry as 

a whole. We are prepared at this point to support the Subcommittee reporting favorably the substitute with only the changes 

I have outlined. 

Thank you again. 

[The prepared statement of Mr. Simon follows:]

PREPARED STATEMENT OF EMERY SIMON

Chairman Smith, Mr. Berman and members of the Subcommittee, my name is 

Emery Simon, and I am counselor to the Business Software Alliance. I want to 

thank you for the opportunity to testify. 

7

Mr. Chairman, BSA commends you and the other members of this subcommittee 

for your demonstrated leadership in pursuit of improving our patent system. In our 

view, the amendment in the nature of a substitute represents an important step towards that goal. 

BSA members believe that the patent system is fundamentally sound and works 

well for most innovators, whether they toil in their garage, experiment in a university laboratory, or work for a large corporation that provides goods and services to 

consumers. We believe that a periodic review and recalibration of the patent law 

is not only a good idea, but essential to ensuring that patents remain a vital incentive for innovation. 

BSA members approach patent reform from a pragmatic, problem-solving perspective. Our attention is focused on those areas of law and practice that present specific 

challenges for our companies’ day-to-day conduct of their businesses. 

Through its recent hearings this Subcommittee has heard that changes are needed in three areas: assuring patent quality, curbing excessive litigation and promoting international harmonization. BSA member companies believe that, in general, the Substitute addresses each of these key areas in ways that will improve and 

modernize our patent system. We would urge the Subcommittee to modify the substitute in only limited respects, and I will identify those in the course of my testimony. 

First, the Substitute would make a number of useful reforms aimed at assuring 

patent quality at a time of increasing demands on the patent office:

• It establishes an enhanced post-grant process to provide parties a second 

chance to intercept bad patents. We believe this change will mitigate the need 

for parties to file expensive and disruptive lawsuits.

• It will also provide a more efficient means to challenge bad patents subject 

to the same evidentiary standard used in the granting of the patent, namely 

a preponderance of the evidence.

• And it will provide a workable mechanism aimed at enabling the PTO to receive prior art information from persons other than applicant. This change 

will leverage private-sector resources to provide the examiner with more information upon which to base determinations on the fundamental issue of 

patentability and will help build a contemporaneous record that reflects the 

extent of the examination by the examiner.

BSA supports each of these reforms. 

With respect to curbing excessive patent litigation, we support the approach in 

the Substitute with regard to monetary damages and to discouraging plaintiffs from 

engaging in inappropriate forum shopping. 

As industry representatives have testified previously, the IT industry, like so 

many others, is encountering the enormous costs of dealing with patents of questionable quality. Today, hundreds of patent infringement cases are pending against 

computer software and hardware companies, costing the industry hundreds of millions of dollars each year. The fact that the patent system works well for other industries does not obviate the need to address this very real problem for the technology industry. Our industry is particularly vulnerable to such claims because our 

complex products often have hundreds of patented or patentable features contained 

within them. 

Left unchecked, these practices stand to disrupt the activities of true innovators 

and impede their ability to deliver products and services to consumers. We believe 

the changes contained in the Substitute would constitute an improvement over the 

current situation. 

Specifically, the changes with respect to willful infringement will lead to better 

and more through searches by applicants and less litigation. This provision should 

reduce the need for expensive notice and opinion letters by establishing three clearly 

limited grounds for willfulness to be found. In addition, we believe that disruptions 

and uncertainty will be reduced by requiring courts to first make a determination 

of whether a patent is valid and infringed before it considers willfulness issues, including pleadings, discovery and findings. 

We support the approach of the Substitute in addressing the problem of forum 

shopping by plaintiffs. The Substitute would create a viable means for the defendant 

to have the case moved to a more appropriate venue. The practice of filing suit in 

jurisdictions with a demonstrated pro-plaintiff bent warps settlement demands and 

undermines confidence in the fairness of adjudicated outcomes. It has proven very 

burdensome for technology companies sued in jurisdictions far removed from their 

principal places of business where the bulk of the evidence or witnesses are to be 

found. 

8

While we support the approach of the Substitute, we believe that the goals of promoting litigation efficiency and fairness can be accomplished in a clearer manner 

with certain changes in the wording. In preparing for this hearing your staff has 

directed us to look at proposals that have been developed by an ad hoc coalition of 

companies. We support the language they have developed to improve the Substitute 

on this issue of forum shopping. 

We also support the changes proposed by the Substitute as circulated by your 

staff with regard to the calculation of damages for infringement. Today, when a 

small component of a multi-faceted system or product is alleged to infringe a patent, 

the damage claim often seeks some portion of the value of the product as a whole, 

or the full scope of the claimed invention, such as a computer, rather than being 

limited to only the value of the infringing feature or functionality. In practice this 

means that damages can be calculated as 3 to 5 percent of the value of a $2,000 

computer rather than the value of the item that may be just $1 or $2. This often 

leads to unduly inflated verdicts or settlement demands, and is unworkable when 

thousands of patents can apply to a product. 

We believe the language of the Substitute as circulated by your staff is generally 

correct and appropriate. The Substitute would provide courts with a statutory basis 

for requiring that patentees (and their expert witnesses) present damages calculations based on the proportional value of a patented invention alone, rather than on 

the cumulative value of all features included with a larger product. There may well 

be ways to improve this language, and we would like to work with you, Mr. Chairman, and other Members on this language before full Committee consideration of 

the bill. 

We understand that certain changes to this language have been proposed by an 

ad hoc coalition of interests, and we must state our opposition to their proposal. 

That group has erroneously characterized that language as having the support of 

technology companies. That is not the case. The ad hoc coalition draft ignores a serious issue by which abusers of the patent system can claim damages beyond the 

value of the contribution of the invention. By proposing to change the term ‘‘inventive contribution’’ to ‘‘claimed invention’’, unscrupulous patentees could well claim 

damages based on the scope of the claims in the patent rather than the fact-specific 

actual use of the invention in the instant case. 

For example, in a case involving a built-in modem in a computer, the claim for 

damages was based on the value of the computer. Under the Substitute’s formulation damages would appropriately be measured on the value of the modem. However, if damages were based on the claimed invention as some have proposed—the 

combination of a microprocessor, hard drive, motherboard etc., the royalty would be 

based on the value of the entire computer. 

BSA member companies often face plaintiffs who demand royalties based on the 

cost of the entire computer or the entire software package when their inventive contribution is limited to some minor improvement on some piece of the product involved. For this reason, we pledge our willingness to continue to work on this issue, 

but we must oppose the change proposed by the ad hoc coalition of companies. 

A provision not now part of the Substitute is the repeal of Section 271(f). We urge 

you to make this change. In 1984, Congress added Section 271(f) to prevent companies from manufacturing components of an infringing product in the United States, 

and exporting those parts for assembly abroad to avoid the claim of infringement. 

Today, the provision has been interpreted by the courts in ways that deter domestic 

development of software. Under recent court holdings, a copy of a computer program 

made outside the United States may in some cases nonetheless be included as part 

of United States damages if the software is made from a ‘‘master disk’’ developed 

in the United States. If the software had been developed outside the U.S., this rule 

would not apply. The same issue may exist with respect to development of other information-based products that are made wholly outside the United States based on 

information developed in the United States. We believe this application of the law 

creates an unintended incentive to move valuable development activity outside the 

U.S., and should be removed from the law. 

BSA also supports provisions of the Substitute aimed at harmonizing U.S. law 

with that of other major jurisdictions by establishing a first to file system and requiring publication of all applications 18 months after filing. 

While our members’ businesses and those of a growing number of American companies are global, there is no global patent system. The costs and uncertainty posed 

by a multiplicity of national patent regimes—all sharing the same basic goal, but 

each imposing disparate administrative burdens on inventors—is a matter that merits action. In this environment, it is essential that the U.S. recognize where its system is out of step with the rest of the world. The U.S. ‘‘first-to-invent’’ system is 

an often-cited example. We believe a change to ‘first inventor to file’ is timely. 

9

We also endorse the proposal that all pending applications be published at 18 

months after their initial filing. Adopting full 18-month publication will make the 

patent system more transparent and will complement the goals of the proposed 

third party submission of relevant prior art and post-grant opposition procedures. 

Finally, we note that, in the course of your work, the Subcommittee has considered a number of other issues including a ‘‘second window’’ for commencing a post 

grant proceeding, limiting abuses of continuations of pending applications and additional reforms aimed at mitigating excessive litigation. We recognize the Subcommittee has reviewed each of these matters carefully and has decided not to address them at this time. Although these issues remain of concern to BSA members, 

we are prepared to support the Subcommittee reporting favorably the Substitute 

with only those changes I have outlined. 

Again, thank you for this opportunity to testify.

Mr. SMITH. Thank you, Mr. Simon. 

Mr. Johnson. 

TESTIMONY OF PHILIP S. JOHNSON, CHIEF PATENT COUNSEL, 

JOHNSON & JOHNSON, ON BEHALF OF THE PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA 

(PhRMA) 

Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Chairman, and 

other distinguished Members of the Subcommittee, I am Phil Johnson. I am Chief Patent Counsel of Johnson & Johnson. I am here 

to testify today both on behalf of PhRMA and Johnson & Johnson. 

We appreciate the opportunity to provide this testimony on this 

important issue of patent law reform. Johnson & Johnson is a family of more than 200 companies and is the world’s largest manufacturer of healthcare products. 

Taken collectively, Johnson and Johnson’s companies represent 

the largest maker of medical devices in this country. We represent 

the second largest biotechnology business and the fourth largest 

pharmaceutical business. 

Johnson & Johnson companies employ 55,000 people in the 

United States, 7,000 of them in California alone. In reliance on the 

promises of rewards from the patent system, Johnson & Johnson 

companies this year expect to invest nearly $5.7 billion in research 

and development. 

Mr. Chairman and the Subcommittee, with your introduction of 

the substitute H.R. 2795, we all took a great step forward toward 

meaningful patent reform. By eliminating provisions relating to injunctions, continuations and so-called second window post-grant opposition, while retaining many of the other provisions of the National Academy suggestions, you have moved our patent reform discussions much closer to consensus. 

During the Congressional recess, as has been noted, work continued to close the remaining gaps, especially those relating to the 

CREATE Act and the substitute’s venue and damages provisions. 

As you know, a coalition text is the result, a coalition text which 

is now supported by some 33 companies, and I am now pleased to 

report that as of Tuesday also by the IPO, the broad-based Association of Intellectual Property Owners. 

While there seems to be general agreement among many of the 

witnesses today on the coalition text approach to venue, the same 

is obviously not true of the damages apportionment provision. At 

the outset, it should be noted that the National Academy of 

Sciences made no recommendation to revise the matter in which 

10

damages are assessed in patent cases. To many, including Johnson 

& Johnson, such a provision is simply unnecessary to patent reform. The current case law which applies Georgia-Pacific factor 13, 

among other factors, is seen to be working just fine. 

To others, Georgia-Pacific factor 13 is not being uniformly applied by the courts and should be codified. This latter approach appears to have been the intent behind the damages apportionment 

language in the substitute as it is in the coalition text. 

The problem with the language in the substitute is its use of the 

term ‘‘inventive contribution.’’ this is a term which is susceptible to 

many different interpretations where the language of the coalition 

text is not. Georgia-Pacific factor 13 establishes an analytical approach for determining the realizable profit or value that should be 

credited to a patent invention in the context of a reasonable royalty 

determination. 

In determining that value under Georgia-Pacific, the profit or 

value stemming from the claimed invention is distinguished from 

the realizable profit or value added to the accused product or process by the infringer. The coalition text is true to this approach. 

Johnson & Johnson and many other companies oppose the suggestion that in determining patent damages only partial credit 

should be given to the realizable profit or value added by the patented invention taken as a whole. Such an approach would be unworkable and unprecedented in patent damages law. Patent damages would be trivialized in most cases and unfairly awarded in almost all. 

A patented invention should not be dissected into its subparts or 

subelements and then evaluated piecemeal in an effort to isolate 

whether inventive contributions might be present in some of these 

subparts and, if so, where they are. The reason is because to do so 

the true value of the invention will likely be lost. 

At some level all patented inventions are combinations of old elements. They are patentable precisely because as a whole they are 

more valuable than the sum of their parts. Under the inventive 

contribution analysis suggested by some, such synergies would 

never be recognized. Moreover, to ignore the value of the invention 

taken as a whole would undermine the principal purpose of the 

patent system, which is to reward inventors for the entirety of 

what their inventions have given to society. 

In conclusion, because of the Subcommittee’s open and inclusive 

process, meaningful patent reform, as embodied by the coalition 

text, may now be within reach. Johnson & Johnson hopes that it 

is. 

I want to thank you for this opportunity to testify and stand 

ready to answer any questions you might have. 

[The prepared statement of Mr. Johnson follows:]

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PREPARED STATEMENT OF PHILIP S. JOHNSON


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APPENDIX


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Mr. SMITH. Thank you, Mr. Johnson. 

Mr. Chess. 

TESTIMONY OF ROBERT B. CHESS, CHAIRMAN, NEKTAR 

THERAPEUTICS, ON BEHALF OF THE BIOTECHNOLOGY INDUSTRY ORGANIZATION (BIO) 

Mr. CHESS. Chairman Smith and Members of the Subcommittee, 

I am pleased to testify before you today regarding the pending patent reform legislation, the amendment in the nature of a substitute 

to H.R. 2795. I would like to thank the Subcommittee for its continued leadership issues related to strengthening the foundation of 

American innovation, intellectual property. 

I am Rob Chess, Executive Chairman of Nektar Therapeutics, 

and I am here representing the Biotechnology Industry Organization. BIO is involved in the research and development of 

healthcare, agricultural, industrial and environmental biotech 

products. The industry is one of the most innovative industries in 

the U.S. economy, filing more than 40,000 biotechnology patent applications in 2003 alone. 

I base my comments today based on 14 years of experience as executive of a top biotech company that is successful because of the 

strength and predictability of the patents. I am not a patent lawyer. Rather, I am an executive who will explain how important patents are to biotech and what may occur if the wrong reforms are 

enacted. 

Perhaps no other industry is as dependent as the biotech industry. A majority of biotech companies have no products on the market, but they do have patented innovative discoveries which may 

be translated into life-saving products over the course of years. 

To illustrate, I point to my own company, Nektar. Nektar has 

been in existence since 1991. We have had 17 rounds of financing 

and have several products on the market. Yet we are still not profitable. It is our intellectual property that has allowed us to gain 

the capital necessary to survive over those many years. 

One of Nektar’s exciting products is Exubera, an inhaled insulin 

powder developed in collaboration with Pfizer. It is the first 

noninjectable form of insulin and could be a major advance in therapy for the 18 million Americans who suffer from diabetes. Their 

product, this product was recommended by an FDA advisory committee for approval last week but a key patent covering the product 

was granted in 2000. 

Upon word of the issuance of the patent covering inhaled insulin 

in dry powder form, Nektar’s stock valuation increased by 20 percent. I have actually brought the product here today. Don’t leave 

home without one. But this is it right here. 

Basically, what it does, I hope you don’t mind if I give you a 

demo. 

Mr. SMITH. Show and tell is fine. 

Mr. CHESS. What the basic problem is there are about 5 million 

diabetes in the U.S. who take insulin, another 3 million who 

should. The key to controlling your diabetes is taking insulin 3 to 

6 times a day. The average diabetic only takes it right now twice 

a day because of fear of injections. What we have done is basically 

done a way so they won’t have to take meal-time injections anyVerDate 0ct 09 2002 11:36 Oct 28, 2005 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\091505\23434.000 HJUD1 PsN: 23434
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more. What you do is you basically take this blister here that has 

the powdered insulin in it. Open it up just like this. Then stick it 

in right here just like you would your ATM card, pump it once, fire. 

See that powder there. You actually see that. That’s actually—insulin is smoke. You just breathe that in by just opening the chamber 

like this, rather than taking a shot. 

I think it’s actually going to make a huge difference in the lives 

of people and frankly solve—the biggest problem in diabetes therapy right now is getting people to comply with their insulin therapies. 

Nektar’s story is similar to the story of hundreds of U.S. biotech 

companies in the United States. Investors will only invest in ideas 

if they are adequately protected by strong patents. 

Turning to the amendment, we are pleased that it is a substantial improvement over the introduced bill. We note that provisions 

that would have severely weakened the ability of innovators to obtain and enforce patent protection have been eliminated. 

Specifically the current provision does not contain harmful and 

permanent injunction reforms, a dangerous second window and 

post-grant and damaging limitless continuation of practice reforms. 

BIO members have legitimate needs for filing continuations. I can 

certainly tell you that from our country we just filed continuations 

in almost every patent that we do. 

Continuation practice allowed biotech inventors to obtain adequate protection for the full scope of their inventions. The practice 

is common in our industry because it can take 12 to 15 years to 

bring a product to market. During the patent examination process, 

the inventor is likely to obtain a patent only on one aspect of his 

discovery. The issued patent will allow the inventor to seek capital 

investment to further the product development while he files continuations, applications, commensurate with the scope of the full 

discovery. 

The amendment, however, contains a venue provision which is 

cause for significant concern for BIO members because it shifts the 

advantage in patent litigation in favor of the defendant. It would 

only allow a lawsuit to commence in the district where the defendant resides or is located. BIO opposes this because resource limited 

biotech companies may be forced to file lawsuits far outside of their 

normal jurisdiction where small biotech companies may find it difficult to assert their patent rights. 

We urge you to eliminate this provision. That said, BIO supports 

many provisions in the substitute bill, including a first inventor to 

file system, allowing its signees to file for a patent, eliminating the 

best mode requirement, eliminating the inequitable contact defense, providing pre-grant submissions of prior art, simplify the 

definition of prior art and requiring publication within 18 months 

of filing, and reforming willfulness standards. 

I can see I am over time a little bit, probably because I did the 

demo. Should I continue here or——

Mr. SMITH. Without objection, please take an extra minute because of that demo. I never had anybody use that as an excuse before, but we will allow that today. 

Mr. CHESS. I just can’t resist. 

22

Mr. SMITH. Maybe we ought to charge you for that little free advertising, I don’t know. 

Mr. CHESS. Actually, well, I hope not but some of you may end 

up using our product one day. 

While our members agree on many provisions of the substitute 

bill, there are areas where our members are decided. One disagreement concerns a standard of proof required to invalidate a patent 

in the proposed post-grant opposition procedure. As you know, the 

current substitute requires that a patent challenger show by a preponderance that the patent is still valid. We are basically divided 

on this between preponderance of evidence and clear and convincing standards. 

Let me just say a few words on the Coalition for Patent Reform 

proposal. We recently became aware of the proposal and have been 

apprised of their concepts. The proposal differs from your amendment in that it includes a new transfer of venue provision, repeals 

section 271(f), revises the previous provision of apportionment of 

damages and clarifies the conditions for patentability taking into 

account the CREATE Act. Like the substitute, we view the proposal as a substantial improvement over H.R. 2795. 

On the apportionment damages, what I can tell you is that we 

have not achieved a consensus yet, and we are still studying the 

proposal. 

On the transfer of venue provision in the coalition draft, we note 

that the draft removed the onerous venue provisions from the substitute amendment and replaces it with a transfer of venue provision. However, the primary objection to the coalition approach 

within our membership is the belief that transfer of venue motions 

will delay and divert patent infringement actions. 

In conclusion, BIO supports and applauds the continuing efforts 

of this Subcommittee to improve the patent system, yet urges caution that the delicate balance of the system may be maintained. 

Thank you, and I appreciate you allowing a little extra time. 

[The prepared statement of Mr. Chess follows:]

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PREPARED STATEMENT OF ROBERT B. CHESS


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Mr. SMITH. Thank you, Mr. Chess. 

Mr. Thomas. 

TESTIMONY OF JOHN R. THOMAS, PROFESSOR,

GEORGETOWN UNIVERSITY LAW CENTER 

Mr. THOMAS. Mr. Chairman and Members of the Subcommittee, 

my name is Jay Thomas. I am delighted to have the opportunity 

to testify at this hearing in my individual capacity as a concerned 

observer of the patent system. By no means should my remarks be 

construed as representing the views of Georgetown University or 

the Congressional Research Service. 

The Subcommittee deserves congratulations for its perseverance 

in its efforts to reform the legal regime that is widely regarded as 

America’s engine of innovation. Your leadership in advancing these 

reforms has been remarkable, and we remain confident that you 

will achieve the interest of patent owners, innovative industry, and 

the public. 

As the legislation continues to mature, the Subcommittee may 

wish to consider what has been described as its foundations, recent 

studies by the National Academies, Federal Trade Commission and 

most recently the National Academy of Public Administration. 

In addition, as originally presented, H.R. 2975 appeared to build 

on a number of themes, including reducing trolling, curbing practices that lead to cost and delays in patent litigation, adopting best 

practices from peer patent systems, and of course addressing perceived shortfalls in patent quality. 

The Subcommittee may wish also to consider the extent to which 

subsequent versions of the bill fulfill these basic goals. I am going 

to offer a few examples. New to the more recent provisions of H.R. 

2795 are provisions directed toward venue and patent litigation. 

For policy reasons that remain obscure, Congress has enacted a 

specialized venue statute for patent cases and subsequent developments in the Federal Circuit have construed them in a liberal fashion, essentially making venue conterminous for personal jurisdiction. The result is a great deal of flexibility for patent plaintiffs. 

One of the versions of the bill would in fact define more stringent 

venue standards. Another would require or allow transfers of 

venue. A few observations could be made about the competing approaches, both of which have their merits. 

First, we have a Federal Circuit. We have one, the Patent Appeals Court, that hears most, if not all, patent appeals in this country. So forum shopping doesn’t really involve the search for more 

favorable alternative interpretations of the law, but rather different judicial levels of expertise as well as distinct docket management systems that imply a different pace of litigation. 

Finally, one of the major themes of the bill is to reduce the cost 

and complexities of patent cases. The Subcommittee may wish to 

consider whether the September 1 proposal, which provides standards for transfer of venue, is in keeping with the remainder of the 

bill, which generally limits resource-intensive satellite determinations in patent cases. 

Let me also turn now to continuation applications. Predecessor 

versions of the bill delegated authority to the PTO to regulate. 

That language has now been deleted. In the meantime the recently 

36

issued National Academy of Public Administration report recommended that limitations be imposed on the number of continuations that could be filed and developments in the courts proceeded 

apace. 

On September 9, the Federal Circuit decided Symbol Technologies v. Lemelson Medical, Education & Research Foundation,

affirming a judgment that a patent was invalid for prosecution 

laches. Continuation practice is a long-standing feature of U.S. patent law and to some extent may even be required by the Paris Convention, which is a treaty the United States signed in the 19th century. Nonetheless, considerable concern both in the NAPA report 

and commentary by academics and scholarly practitioners have 

voiced concerns over potential abuses in connection with a limitless 

refiling of applications. As a result, the Subcommittee may wish to 

persist in its efforts to determine whether restrictions ought to be 

imposed upon continuations or not. 

With respect to oppositions, predecessor versions of the bill allowed oppositions to be brought 9 months after the patent issued 

or 6 months after the patentee brought a charge of infringement. 

More recent versions of the bill eliminate that latter alternative. 

Setting time limits for the instigation of a proposed grant proceeding requires a careful balancing of interests. The current proposal is in line with the established foreign practice which ordinarily requires an opposition to be brought, I think, either 6 to 9 

months of patent issuance. These time limits prevent harassment 

or at least reduce potential for harassment of the patentee and provide stability for the proprietary right. 

On the other hand, the current U.S. equivalent to opposition, the 

reexamination proceeding, allows a request to be brought at any 

time during the life of a patent. Further, unlike foreign counterpart 

legislation, H.R. 2795 places strict limits on the length of opposition proceedings, might also reduce the opportunity to harass a 

patent owner. 

More liberal time restrictions may better highlight the U.S. 

PTO’s role as a U.S. public service organization and best ensure 

the quality of patents that were not immediately believed to be of 

interest to affect this industry. As a result, the Subcommittee may 

wish to pay careful attention to time restrictions by use of oppositions for members of a public. 

I see that my time has just about drawn to a close. I very much 

thank the Committee for allowing me to testify. To your credit you 

have consistently solicited a wide range of use. I know that I speak 

for a wide number of legal academics and say we will remain available to you for technical assistance as you continue to plumb what 

you have properly described as an arcane field of law. 

Thank you very much. 

[The prepared statement of Mr. Thomas follows:]

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PREPARED STATEMENT OF JOHN R. THOMAS


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Mr. SMITH. Thank you very much, Professor Thomas. 

Let me direct my questions first to Mr. Simon. As I mentioned 

in my opening statement, I am going to focus on venue and apportionment. Actually what we did was a breakdown and a chart on 

both issues. It looks like to me that there is not any strong opposition to the redline venue. Most folks seem to find it acceptable. In 

the case of PhRMA some members are on the one side, some members are on the other. But it looks like the September 1 draft is 

not necessarily objectionable. So let me focus on apportionment initially. 

Mr. Simon, my question for you is going to really be why do you 

support the July versus the September version. But I think you answered that in your testimony. 

Let me ask you this, without your volunteering to negotiate in 

open court over any details, do you think that a compromise is possible on apportionment? 

Mr. SIMON. I think it’s fair to say, Mr. Chairman, that technology 

companies and BSA have been nothing but ready to compromise in 

this process. 

Mr. SMITH. Okay. 

Mr. SIMON. I think it’s also fair to say that there are certain 

places where we cannot go, where the support of our industry for 

this legislation should not be taken for granted. This is an extraordinarily important issue for us. Are there different ways to formulate it? Yes. But there is a core issue here that is really separating 

the parties. 

For our industry to look at products as a whole implicates an 

enormous exposure to damages, and that is simply not a place 

where we can go. 

Mr. SMITH. Thank you. Mr. Johnson, in regard to apportionment, 

it is my understanding that initially PhRMA agreed to the July 

version and then I think must have changed. You must have 

changed your mind because you now support the September redline 

instead of the July substitute. Is that true that you initially did approve the July substitute? 

Mr. JOHNSON. Mr. Chairman, I am wearing two hats today. I will 

say that I don’t think that PhRMA agreed either to the July 

version or to the coalition text as it is now for this matter. However, I do think that they did not express opposition to the coalition—rather, to the July 26th draft on apportionment as much as 

on venue. I know that they reached the second—however, in my 

written testimony I do point out that even some of the people in 

the coalition drafters, negotiators if you will, have the damages 

language that—the inventory contribution language in some of 

their earlier drafts, when they were, I believe, under the impression that the purpose of that text was to codify Georgia-Pacific factor 13. 

It only became apparent, really in the summer, in August, to 

many of those involved, that the provision that was being sought, 

at least the interpretation that was being sought for the inventive 

contribution language was this subpart or sub-element approach to 

dissect the invention down to its subparts and to then inquire 

which of those subparts had, if any, inventive contribution. 

43

That really has become—this is not just a semantic difference in 

language, this is really a fundamental difference in that I think the 

coalition supporters and many others really feel that would go to 

the very heart of patent damages. 

Mr. SMITH. Okay. We may follow up with you on that particular 

subject. I appreciate that point of view. 

Mr. Chess, in your testimony, you may not have so intended, but 

your testimony quite frankly reminded me of just how much has 

been taken out of the original bill and how much has been compromised and how much has been jettisoned and how many concessions have been made. Like I say, that might not have been the 

intent of your testimony, but it just reminded me of how far we 

have come, if you want to look at it that particular way. 

The other thing, is it a correct reading of BIO’s stand that mainly, mainly because of having 1,000 member companies, that you 

really haven’t taken a hard position on either venue or apportionment? I notice that you said some member companies support the 

September 1 draft in regard to that very issue. Others support the 

September draft in regard to apportionment. But because of the 

multitude of interest, that you represent, you haven’t taken a hard 

position on either venue or apportionment. Is that a fair description? 

Mr. CHESS. First of all, let me respond to the first thing you said. 

Actually, we have beenappreciative of the work, working with you 

and the others of the Committee, and how much progress has been 

made here. So we actually believe that the work that has been 

done——

Mr. SMITH. One person’s progress is another person’s concession. 

Mr. CHESS. Yes, because you know, in our industry, as I think 

you gathered from my testimony and discussions that you have 

had, intellectual property is probably as important or more important to our industry than any other, because it’s the very heart of 

what we are doing because the long development times and the certainty of being able to protect what you have developed 10, 15, 20 

years out. 

Mr. SMITH. Okay. 

Mr. CHESS. In regards to the two specific questions you asked on 

apportionment and on venue, of those two issues the venue issue 

is a far more important one to us than the apportionment issue. 

On the apportionment we have different views within the industry. 

Some view that codifying one out of, I guess, 13 different ways of 

doing apportionment, you know, would be somewhat unusual and 

maybe cause the other ones to be less important. Others view it as 

just codifying something that frankly is done by judicial review 

anyway. So that is not a critical issue. 

On the venue, the venue is a very important issue to our industry. The key concern there is twofold. One of them is using provisions such as being proposed in the coalition as a delay tactic, so 

delaying the time that you are able to get injunctive relief, and also 

a great deal of concern, particularly from smaller companies like 

my own, of the difficulty of basically having venue chosen in some 

ways by the defendants in places that are far away and difficult 

for you to both work in. 

44

That said, we are still studying the September 1 draft and have 

not come to a—— Mr. SMITH. I have you down as open to considering the language, 

is that right? 

Mr. CHESS. I think we are open to considering, open to discussion 

on it. 

Mr. SMITH. Thank you, Mr. Chess. 

Professor Thomas, my time is up on questions, but I will take the 

liberty of making a quick observation on your testimony. It was unusual, it was subtle, it was understated. I thought it was effective, 

mostly persuasive or persuasive in many cases. But I appreciated 

your suggestions and comments. 

Now, you may not like this comparison, or maybe you will, but 

it reminded me a lot of what I have seen of Judge Roberts’ writings. So depending on which side you are on, you may or may 

not consider that to be a compliment, but it is intended to be as 

such. 

The other thing regarding your testimony that I can’t let pass, 

and that is that anyone, as you did on page 5, who refers to the 

plural of forum, which most of us would say forums, as fora, f-or-a, the Latin plural, can’t be all bad. 

So anyway, we appreciate your testimony. 

The gentleman from California, Mr. Berman, is recognized. 

Mr. BERMAN. Well, thank you, Mr. Chairman, some can see it as 

similar to Judge Roberts, others can see it as patting your back on 

the one hand and picking your pocket with the other. 

Mr. SMITH. Oh, that is too harsh, Mr. Berman. 

Mr. BERMAN. The reason I say that is we have a redline version 

with some—we have a bill which, to my way of thinking, has 

stripped out very significant reforms in the process. There are 

many still in it, but it has stripped out some very important reforms. 

It has gone the way that I gather a number of your member companies like in the way of apportionment. It has diluted the venue 

provision. That happens to be a dilution that I like. But I think it’s 

better than the original venue provision that I saw in the July 

draft. And at least based on your answer to the Chairman, neither 

PhRMA nor BIO support the bill, even though all these changes 

have been made at the behest of BIO and PhRMA. What is going 

on? 

Mr. JOHNSON. I suppose I will volunteer to try to answer that. 

As for PhRMA, PhRMA has only more recently become involved in 

this and was not one of the original movers behind the legislation. 

They didn’t submit text. It wasn’t one of the organizations that was 

doing that. 

As for the redline, there simply hasn’t been enough time since 

September 1 for, to my knowledge, any of the organizations that 

are larger professional associations and trade organizations to sit 

down and go through the procedures that are necessary for them 

to accept or reject as a whole. It was coincidental that IPO had its 

annual meeting on this over this past weekend and was able to do 

that. 

However, I would note that a number of PhRMA member companies are supporters of the coalition text. And I am not a politician, 

45

so I don’t perhaps want to prognosticate what that would mean, 

but I would certainly—it shows that a number of pharmaceutical 

companies are supportive, as are companies from many other industries. 

Mr. CHESS. As, you know, you can tell with the work that has 

been going on with the Committee, this is an area that is, as I 

mentioned earlier, absolutely critical to our industry, and we have 

put a lot of work as an industry into developing positions here. I 

don’t think we would have put that much work in it if we don’t ultimately like to see a bill move forward and see a deal struck that 

is acceptable to all parties. 

That said, I mean, developing a position within BIO with our 

thousand members is very difficult on something where it is so critical to so many different companies, and there’s often divergent 

business viewpoints on that. We have worked very hard within BIO 

to come to a consensus view. We actually at our executive committee meeting in August, patent reform in the various proposals, 

were focused on it. We had a call in September that our board 

members joined on, and we are still working to sort of come up 

with a unified position. 

Some of the latest redline areas that Chairman Smith discussed, 

we are still studying and trying to come up with viewpoints, but 

we are working very hard to come up with a unified position among 

many different areas so we can work with the Committee in developing a bill. 

Mr. BERMAN. Well, all I know is Chairman Smith has convened 

a number of meetings with the representatives of PhRMA and BIO 

since last May. It seems like—and I know there have been countless meetings separate from us or with our staffs. It just seems to 

me that organizations as sophisticated and agile as the ones that 

comprise your organization members, if there isn’t some process 

that allows decisions to be made over that period of time in the 

context of what constitutes necessary changes to get the organization support and what doesn’t, there is something missing. 

Let me ask one last question on this time. I guess perhaps it’s 

to Mr. Chess. 

We have taken out, I guess in the July draft, the second window. 

I think it’s no surprise, I think that weakened the effectiveness of 

the reforms we sought. The argument was not to allow that second 

bite at the apple. 

At the same time, Mr. Chess, the reason I guess I am asking this 

question is, you sort of very strongly and emphatically came out for 

the continuations process unchanged, the right—which apple is the 

second bite not appropriate at? You want to have it—unfettered 

ability to file continuation, file successive patents, but heavens forbid that someone who is totally unaware of the existence of the 

patent until they were sued or be sent a letter of infringement now 

wanted to utilize the post-grant opposition that they had their 

chance. Whether they knew it or not, it doesn’t matter. They had 

their chance, if it passes, that’s it. 

Do you see what I mean? There seems like there is an inconsistency, depending on which ox is getting gored. 

Mr. CHESS. Well, let me explain. You know, at least in the context of our industry, which is, first of all, on the post-grant, and 

46

I will sort of tie the two together in the second window, we need— and I can speak to our company—for bringing this product to mar- ket we have needed to raise $1.2 billion. The key to be able to do 

that for us is the certainty of the intellectual property. There is no 

way we would have been able to raise that kind of money if people 

thought our intellectual property wouldn’t hold up. 

Having a second window where 8 years, 10 years, 15 years out, 

somebody can come back by a lower standard than what would 

have held up in a court and have a chance to basically invalidate 

our intellectual property would be a huge issue for investors, and 

I think that would make a major difference in the amount of 

flowback coming in. 

Mr. BERMAN. Let’s just state that accurately. Someone who 

comes in at a point where they have been told that they are—it is 

alleged that they are infringing on a patent that they may have 

had no knowledge of and only has to show by a preponderance of 

the evidence that the patent never should have been granted in the 

first place, that’s not what I would call a low standard. 

Mr. CHESS. It certainly—as you know, sir, it’s a lower standard 

than would be, you know, in a court. And certainly in our industry, 

you know, the patents are all published, people can read them and 

they have plenty of opportunity to look at the literature, you know, 

before embarking on an area. 

On the continuation in parts, in the biotech industry it takes 

many years to perfect an invention, particularly for smaller companies where you don’t have the full resources to develop all the aspects of that. That’s why in our company and many others you see 

many continuation of parts. They are not separate patents. They 

are basically taking the invention and basically fleshing it out over 

time so you are able to get the full value out of it. 

Mr. SMITH. Thank you, Mr. Berman. The gentleman from Florida, Mr. Keller, is recognized for Committee questions. 

Mr. KELLER. Thank you, Mr. Chairman. 

Mr. Chess, you are the chairman of a company that’s been in 

business for 14 years and is still not profitable. 

Mr. Simon, you are the counsel for a group that you call the BS 

Alliance. With that background, why aren’t you guys running for 

Congress? 

My first question. I am going to be directing most of my questions to the issue of litigation reform. But before I do, just looking 

at other parts of the bill, I can’t help but notice, Mr. Chairman, 

that section 5 of this bill is called the duty of candor. So Congress 

is now telling private citizens that they have a duty to be candid. 

Isn’t that a bit like Colonel Sanders telling people they have a duty 

to be nice to chickens. 

I think it may be subjective and a bit tough to bring some enforcement in that section, but I remain open minded in that section 

and every other one. 

With respect to litigation reform, let me begin with 

Mr. Simon. Do you think there should be additional reforms in 

this bill aimed at reducing excessive or frivolous litigation and, if 

so, what do you think they should be? 

Mr. SIMON. It’s a tough committee, Mr. Keller, because we have 

throughout this process identified a number of areas where we 

47

would like to see reform. For a variety of reasons this Subcommittee has decided at this time not to take up all of those 

areas. But the problem of excessive litigation continues to spiral 

out of control in our industry. 

If I may, let me just read to you the first sentence of an article 

in yesterday’s ‘‘Wall Street Journal’’ by Bill Buckley. He writes: In 

one of Douglas Fuey’s early business ventures he provided phony 

new vehicle titles for stolen cars. His partner Larry Day is a onetime Blackjack dealer in Las Vegas. Together, the two men have 

found a more active line of work suing cell phone companies for 

patent infringement. Earlier this year their company got $128 million in damages from Boston Communications. 

That’s an example of what I think we are confronting that is 

going to become more and more of a problem. I think this bill will 

make a difference. I think that some of these issues have to be reconsidered by you over time. 

Mr. KELLER. Okay. Mr. Johnson, do you think there are additional reforms aimed at reducing excessive or frivolous litigation 

that we might consider ? 

Mr. JOHNSON. I think there are. I couldn’t estimate whether or 

not they would be politically acceptable. They are something that 

could be accomplished. We have considered a great many of them 

during our conversations. One that we have considered and rejected as probably not possible would be to adopt the English system of awarding attorneys fees to the prevailing party and as a 

way for deterring frivolous litigation. 

Mr. KELLER. You considered that but didn’t think ultimately that 

would fly? 

Mr. JOHNSON. Well, actually, I personally did, but I was advised. 

This is part of a larger process, and others advised me that was 

probably not something that could be accomplished. 

Mr. KELLER. What about the idea of bigger sanctions for frivolous 

litigation? Did you all ever consider that? 

Mr. JOHNSON. Well, that would fall in that same category. 

Mr. KELLER. Not really, because the loser pays. You can lose and 

still not have a frivolous suit, you know. You just have to pay the 

other side. There are some people that have legitimate suits, you 

know, just bad, bad ideas. 

Mr. JOHNSON. Yes. Well, we already have now in the patent laws 

the abilities for the courts to award trebled damages in attorneys 

fees but especially attorneys fees in exceptional cases, and that apparently is not sufficient to deter as many frivolous suits as we 

would like. 

Mr. KELLER. Okay. Mr. Chess, of course, both of you gentlemen 

know I was joking about your respective backgrounds there. But do 

you have any ideas of any additional reforms that we might consider that would reduce frivolous litigation? 

Mr. CHESS. Yes. Actually just on the note, the average biotech 

company, you might be interested, it takes about 15 years to gain 

profitability. That includes sort of the successful one like 

Genentech and Amgen. It is a long road. 

Mr. KELLER. I know, I am just kidding. 

Mr. CHESS. I know. 

Mr. KELLER. Okay. 

48

Mr. CHESS. The one thing I can tell you—unlike the other people 

here I am not a patent attorney, so I can’t give you probably kind 

of specific concepts here. The one I probably can reinforce is the importance of being able to enforce the patent, you know, in our industry, given the amount of, you know, investment we make. But 

I will sort of leave it to the others and perhaps if we can get back 

to you in writing on specific ideas on this area. 

[11:32 a.m.] 

Mr. KELLER. Mr. Chairman, the final—if Mr. Thomas could 

also—or Professor Thomas, give us your thoughts. More sanctions 

for attorney fees, prevailing party get their fees paid, any other 

ideas that you think would help with reducing frivolous litigation. 

Mr. THOMAS. I’m not in a specific position to advocate reforms 

before the Subcommittee. However, I can report scholarly discussion on three points. One is, of course, adoption of the English rule 

for fee shifting, which may reduce asymmetries in litigation risk 

profiles between troll plaintiffs and for innovative firms. 

Another possibility is that the patent system currently uses a 

specialized court at the appellate level. There may be an option for 

having magistrates, special masters who are more specialized at 

the trial court level. 

Finally, I think it’s fair to say it’s pretty widely believed that arbitration in the patent field has been a quiet failure, and the Federal circuit is currently embarking upon an arbitration proposal. 

Perhaps the Subcommittee could use its good offices to encourage 

arbitration as a means of reducing transaction costs associated 

with dispute resolution in the patent field. 

Mr. KELLER. Thank all of you, Mr. Chairman. Yield back. 

Mr. SMITH. Thank you, Mr. Keller. 

The gentlewoman from California Ms. Lofgren. 

Ms. LOFGREN. Thank you, Mr. Chairman. As always, this has 

been a useful and enormously interesting hearing, and I appreciate 

that the witnesses would take so much time and explain their 

viewpoint on it. I’m struck again by the disagreements that are 

really rooted in some cases by the different business models that 

are present before us. And I think it is important and that we’ve 

had this spirit throughout that with whatever reform we have, we 

make sure that we nurture every element of our economy. It’s important for all of us that biotechnology and IT, that everything 

flourish for the whole good of the American economy. 

Having said that, however, I remain frustrated that we have not 

yet reached an agreement where I think in some areas we could. 

And I was listening, Mr. Simon, to your testimony and your problem with the coalition print language on calculation of damages. 

And I’m wondering if you could provide examples of real situations 

you have encountered where a court awarded excessive damages to 

a patentee unfairly based on the whole product subject to the patent rather than simply the inventive contribution so we can understand your point of view a little bit better. 

Mr. SIMON. Thank you, Ms. Lofgren. 

There have been a whole series of cases. We had a case some 

years ago where General Electric was sued over its magnetic resonance device, where a very small element of it was infringing, and 

the damages were calculated based on the entire MRI machine, 

49

which is millions of dollars, as I understand it. We had a case just 

a couple of years ago where Bose was being sued by JBL Speaker 

Manufacturers. What was at issue was an input into the speaker, 

how the analog information comes in. Again, the damages were 

based on the entire speaker rather than the patented port. Last 

year we had a case in Procom v. Symbol, which is a wireless technology which we now all use, the 80211 standard. At issue was a 

power-saving feature in the chip. Again, the damages were calculated not just on the basis of the power-saving feature, but on 

the transmitter, the receiver, the entire technology. 

So if you’d like, I’d be happy to submit for the record specifics 

on these cases and many others. 

So we have a pattern where courts—where juries are awarding 

damages based upon entire products. And as you well know, for example, a computer may have as many as 2,000 or 3,000 or 4,000 

patents that read on to it. Well, if you award 1 percent damages 

per patent, you end up with damages potentially swamping the entire value of the product. That’s the threat that we confront. 

Ms. LOFGREN. I think it would be helpful to the Committee if you 

could submit details for us to study. 

Mr. SIMON. We’d be happy to. 

Ms. LOFGREN. I would appreciate that. 

Mr. Thomas, I understand from your testimony that you believe 

that existing law under Georgia Pacific allows courts to—already— to apply an apportionment principle in patent cases. What do you 

think of how the court apportions damages based on facts in the 

cases just disclosed or mentioned by Mr. Simon? Do you have— what’s going wrong here? 

Mr. THOMAS. My experience at the Congressional Research Service has taught me to see both sides of many issues. It’s fair to say 

that this is already a part of our law, at least with respect to reasonable royalties. There may be a lack of appreciation of that point. 

There may be disagreements as to the factual dispute. The notion 

is, well, why is someone buying this product? Are they buying it 

because of a particular advantage? They’re probably not buying a 

car because of a patented windshield wiper, but they may be buying a speaker because of a patented woofer. So there’s simply going 

to be independent factual determinations that have to be made on 

a case-by-case basis, and there will also often be disagreements 

about particular facts in particular cases. I can describe the problem as really no more than that. 

Ms. LOFGREN. It was a number of months ago now, I submitted 

a memorandum that were suggestions not that I had made, but 

that had been made to me by academics, and I would never support 

the English rule when it comes to ordinary tort law, number one, 

because that’s up to the States, not up to the Federal Government. 

And, number two, you can have injured parties that lack the 

means to actually hire counsel and seek justice in courts. Those rationales don’t apply in this case because it is Federal jurisdiction, 

and you have people of means for the most part who can have the 

ability to protect or assert their rights. 

I’m wondering, Mr. Johnson, you talked briefly, in answer to my 

colleague’s question, about the—adopting the copyright standard 

for attorneys’ fees. How much do you think would that change the 

50

dynamic in terms of frivolous lawsuits? Actually, I’m over, but perhaps we could get a comment from others. 

And then the other suggestion made to me was to mandate attorneys’ fees for defendants who respond to demand letters that subsequently invalidates the patent in court. I’m wondering if anyone 

has a perspective of how much that might heal the problems that 

face us. 

Mr. JOHNSON. May I respond? 

Mr. SMITH. Yes. Mr. Johnson. 

Mr. JOHNSON. I think that adoption of the English rule would 

substantially deter the bringing of frivolous actions, and it would 

allow the bringing of some actions which now are not brought because the enormous cost of patent litigation may in some situations 

overshadow the recovery that’s likely. I think if you envision what 

the BSA folks might refer to as trolls bringing an action against 

a large software company, for example, knowing that if they go to 

final judgment and lose, that they may have to pay the attorneys’ fees incurred in such an action, that there probably would be a 

very different dynamic. 

Ms. LOFGREN. Mr. Chairman, I know my time is up, and I appreciate Mr. Johnson’s response. Could we just ask Mr. Simon to briefly comment, and then I’ll yield back. 

Mr. SMITH. Why don’t we have one more response, and then you 

can also follow up with written questions, which I’m sure they’ll be 

happy to answer as well. 

One more response, Mr. Thomas. 

Ms. LOFGREN. Actually, I was wondering if Mr. Simon and 

BSA—— Mr. SMITH. Sorry; Mr. Simon. 

Mr. SIMON. Mr. Chairman, with respect to the English rule that 

has been suggested, we think it would make a difference. The problem with frivolous litigation and attorneys’ fees being paid by a 

frivolous plaintiff is you have got to have a real entity there. What 

we have in a lot of situations right now is the entities are suing 

are operations much like the one that Bill Buckley described in this 

article yesterday. So for entities like that, having to—at the end of 

the day having to pay potential legal fees, is not going to make that 

much of a big difference. If the suit is between two established entities, Johnson & Johnson and GE, there’s a real disincentive there. 

So I’m not negating the fact it would have an impact, I’m just 

not sure—— Ms. LOFGREN. It just doesn’t deal with the issue of stopping products shipping because of the exposure. 

Mr. SIMON. That’s one of the elements of it, too. I just didn’t 

want to go down the injunction path with you. 

Ms. LOFGREN. I understand. 

Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Ms. Lofgren. 

The gentleman from Utah Mr. Cannon is recognized for questions. 

Mr. CANNON. Thank you, Mr. Chairman. If I could just follow up 

on this discussion about the English rule, which I always have disliked. I note that the Chairman has introduced a bill called the 

Litigation Abuse Reduction Act, LARA, which is in my SubVerDate 0ct 09 2002 11:36 Oct 28, 2005 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\091505\23434.000 HJUD1 PsN: 23434
51

committee, so we’re working complementarily here. The idea behind that bill is we actually put teeth in rule 11 sanctions, which 

seems to me might actually go a long ways. 

Mr. Thomas in particular, or any other panelist who would like 

to talk about it, does rule 11 sanctions actually—do they work in 

this case, and would that improve the situation? 

Mr. THOMAS. Again, there are a couple sides to every issue, but 

generally speaking, I think rule 11 has not historically proven to 

be a tremendous success in curbing abusive litigation practices. 

Mr. CANNON. Definitely not historically, but is it possible? Are 

you familiar with the bill we call LARA? 

Mr. THOMAS. Yes, I’ve reviewed it. Generally speaking, patent 

litigation is very unpredictable; very difficult for individuals to determine in a jury trial system exactly what is going to happen. And 

so I think there often is a plausible argument of infringement and 

validity. I suspect I’m a little suspicious of the approach. Thank 

you. 

Mr. CANNON. By that you mean you don’t think the approach 

would be effective, or you think given the vagaries of a jury trial, 

that it might not produce the justice from a judge making a decision about the frivolous nature of the case as compared with a 

jury? 

Mr. THOMAS. For all those reasons you have described. 

Mr. CANNON. Mr. Johnson, do you want to comment on that one? 

Mr. JOHNSON. Yes. I think that there’s quite a difference between 

expecting that a rule 11 sanction would be applied or might be applied when you finally get to trial and the dynamics that are involved in bringing suits and negotiating settlements in advance. 

The English rule, as we’ve discussed, would establish the certainty 

that the prevailing party would get its attorneys’ fees, and that will 

change the dynamics in the settlement negotiations that take 

place. 

And we have to remember that the vast majority of these kinds 

of disputes are never tried. One case in thirteen or even less than 

that actually gets to trial. The possibility that rule 11 sanctions 

would be applied in the cases that get to trial would be sufficiently 

remote, so I’m afraid it wouldn’t change the dynamics. 

Mr. CANNON. I think the nice thing about LARA is it can be applied at any stage. So if it becomes clear to a judge that a case is 

frivolous—what do we need to do to LARA to make it actually bite 

the guy who brings that frivolous case and then it’s paid out of 

court? 

Mr. JOHNSON. If I may, the cases are sufficiently complex that 

in the pretrial stage it’s unlikely the judges would develop the degree of familiarity and confidence to want to go and sanction one 

party or the other prior to trial. I think that’s something courts 

would be reluctant to do. 

Mr. CANNON. They certainly have been reluctant to do that in 

the past. I think we need a change of view among our jurists today 

to get in, look at a case, see if it’s got substance, and then sanction 

people. And that’s what I hope LARA will do at some point in time. 

I think that is a duty that we need to start imbuing into the judiciary. I think LARA is a good step in that direction. I’m relatively 

passionate about that. That’s why I’m asking these questions, beVerDate 0ct 09 2002 11:36 Oct 28, 2005 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\091505\23434.000 HJUD1 PsN: 23434
52

cause I want the judges to be thinking about what their responsibility is. 

Mr. Simon, let me go to you for a moment. In your testimony you 

support the repeal of section 271(f). There are companies in the 

U.S. that contend it is intended to protect intellectual property 

from overseas infringement. If intellectual property protection is 

the goal of our bill, does the repeal of 271(f) affect that goal? 

Mr. SIMON. No, I don’t believe so, Mr. Cannon. The provision was 

added to the U.S. Law in the 1980’s, 1984, I believe, where we had 

a situation where folks were gaming the system. They were assembling parts that if they had been put together in complete product 

would have been infringing in the U.S., but the parts individually 

were not. What they were doing is shipping those products outside 

the U.S. to avoid the patent infringement in the U.S. and 271’s 

added the law to make sure those folks could not get away with 

that. 

What we have now is an aberration, which is what we have now 

is if you do your full development of a computer program in the 

U.S., and you ship that master disk outside, and you actually install it in a new PC or phone or whatever outside the U.S., it reads 

271(f) onto that situation. Nobody in the U.S. is trying to avoid patent infringement in the U.S. if that software is infringing in the 

U.S., it’s infringing in the U.S. So what we have is an unfortunate 

incentive to do development outside the U.S. because 271 does not 

reach that situation as opposed to doing it here. 

So I don’t think it has any impact on domestic—in fact, it would 

have a positive impact on innovation. 

Mr. CANNON. Positive affect on domestic, but isn’t there a significant possibility that people in the U.S., companies in the U.S., will 

take software and have it developed outside, just like you would 

put a package of components together and make a device; isn’t 

there a temptation to send software development outside the 

United States so that pieces can be brought together and not be 

subject to the same kind of infringement that there would be if it 

was developed in the U.S.? Isn’t it two sides of a coin here? 

Mr. SIMON. There are two sides to a coin, of course. I think what 

we have is a situation where the current law as it has been read 

by two separate court opinions acts as a disincentive to domestic 

development. The fact that companies do development both domestically and abroad has a lot more to do with business reasons right 

now, and we’d like to keep it at a business reason level rather than 

an aberration of the law. 

Mr. CANNON. Mr. Chairman, I cannot believe how quickly that 

light goes red. As I yield back, I just want to say one thing. That 

is, people in Bangladesh can buy air time to make a telephone call 

anywhere on Earth for a penny a minute. What we’re doing here 

is not just about the health of American companies, which is very, 

very important, but it’s about an environment in which technology 

can flourish and affect the poorest people on Earth. Never in the 

history of mankind has the ability of a poor nation to leapfrog into 

the next generation been so great as it is today. I think this is a 

time of great moral importance to America and to the world, and 

I want to thank our panel for the input on the topics today. Thank 

you. 

53

Mr. SMITH. Thank you, Mr. Cannon. Mr. Cannon, thank you for 

also mentioning such a great piece of legislation. 

The gentleman from California Mr. Issa is recognized. 

Mr. ISSA. Thank you, Mr. Chairman. First, I’d like to thank you, 

Mr. Chairman. I’d like to thank Mr. Boucher, certainly Ranking 

Member Berman, and Mr. Goodlatte for being an intellectual trust 

that has done so much of this for—don’t be smiling, Bob. The truth 

is that I’m humbled to come to a Committee and work with people 

who have spent so many years, worked so hard to understand 

issues which are complex. And I know this is a hearing today, but 

the truth is that every once in a while I have to recognize that a 

few people in Congress have put inordinate time in to understand 

the issues better than others. 

I particularly want to follow up on what Mr. Berman said. And 

I know the red light will come on for me just as quickly. 

In my practical experience, and I have not studied law, so I had 

to pay for it one legal bill at a time, but I paid greatly, more than 

your Harvard degree actually. If we were to have a single reexamination by a single party, and that leads to an estoppel, one time, 

no second window, just to follow up on Mr. Berman, then from a 

practical standpoint, if you wanted to be Machiavellian, not that a 

lawyer would ever choose to recommend that a client do that, why 

not choose a weak opponent, let them file a weak re-exam, but 

throw in—and I use the word reexam because I’m older, I guess— but throw in all kinds of information, but do it poorly, compile it 

poorly, not particularly in the process? Then wouldn’t you have 

what we already have in a reexamination process that already is 

available, and under the old law you would have all of the information there, a presumption that it was considered and evaluated 

fully, even though it’s just sitting in the incoming record, and it follows the water for somebody who later is accused of infringement, 

is a significant potential infringer, believes that the art properly 

presented would be shown to be, you know, prior art that would 

102 or 103 the patent, why in the world shouldn’t there be an opportunity for a different defendant to have a different opportunity 

to present similar or, in some cases, the same information, but in 

a more—what they believe to be a more appropriate and cohesive 

fashion? 

Mr. Johnson, you have the biggest smile. You get it first. 

Mr. JOHNSON. Well, I think that both texts at the moment envision that there will be multiple opposers who will be able to file 

at the same time, and that if there are multiple oppositions, that 

they’ll be consolidated. 

I also believe that the estoppel provisions only pertain to those 

who choose to participate and not to those who don’t choose to participate, so that if someone wanted to file an opposition, and do a 

bad job at it at their own peril, I suppose that’s possible. But none 

of the proposals foreclose the possibility of a later challenge in 

court, so that even regardless of what has been said in the opposition or what the conclusion of the opposition is, with the exception 

of those who have chosen to participate, and then only limited to 

the issue that is actually decided and the facts necessary for that 

decision, but with what exception, that narrow exception, those 

issues may be, in fact, relitigated later in litigation. 

54

Mr. ISSA. I don’t think that was Mr. Berman’s question. His 

question really had to do with a repeat administrative action. 

Mr. JOHNSON. If I may respond to that. The reason that there is 

such opposition, broad opposition, to a repeat procedure is simply 

because the opposition procedure as it’s now proposed was intended 

to be a fairly quick quality check on—inexpensive quality check on 

the quality of patents issuing from the Patent Office. It was not designed to be a replacement for patent litigation. It doesn’t mean 

that at the end of the opposition period, though, that the public is 

without the ability to challenge the validity of a patent. Reexamination—the reexamination procedure which we have now will continue to be in place, and, of course, later on should there become 

a real dispute and there be litigation——

Mr. BERMAN. Would the gentleman yield? 

Mr. ISSA. I certainly would, Mr. Berman. 

Mr. BERMAN. How would you feel if no second window and all 

that, but the district court judge had the ability to say, we refer 

this matter back to the Patent Office for a determination on whether its obviousness or novelty or any other elements of having a 

valid patent—the district court would have the discretion to make 

that referral. 

Mr. JOHNSON. In the reexamination context, district court judges 

don’t have the authority at the moment to refer, but, in fact, it happens quite frequently. That is——

Mr. BERMAN. You’re talking to a postgrant kind of procedure 

where there’s discovery and more of a process. 

Mr. JOHNSON. Yes. If you look today without the law at what 

happens in litigation, quite frequently after there is some considerable discovery in litigation, one party or the other may elect to go 

back into reexamination, and it happens actually fairly frequently. 

And at that time motions are brought frequently by the party going 

back into reexamination to stay the case pending the outcome of 

the reexamination. The judges weigh that and, generally speaking, 

grant those motions for stay unless they’re brought on the eve of 

trial or—or there are other circumstances and then wait for the 

outcome of the reexamination in order to restart the case. 

Mr. SMITH. Mr. Johnson, I’d like to move on if we can. The gentleman’s time has expired. I’d like to give Mr. Goodlatte from Virginia the opportunity to ask a couple of questions. 

Mr. GOODLATTE. Mr. Chairman, thank you for holding this hearing, and thank you for your fortitude in pursuing this issue. We’ve 

been down a long and arduous road, but making progress on this 

issue, and I thank you for that. 

I thank the gentleman from California for his kind words as well. 

I don’t know that they’re merited or not, but they are certainly well 

taken. 

I’d like to ask Mr. Chess and Mr. Johnson and Mr. Simon, as 

this legislative process moves forward, are you open to hearing and 

working on additional ways to tackle the injunction language and 

other litigation reform proposals, some of which we’ve talked about 

a little bit here, in a way that helps the technology community 

while not harming other traditional patent holders? 

Start with you, Mr. Chess. 

55

Mr. CHESS. Obviously it’s hard to answer a general question like 

that without understanding the specifics of what you have in mind. 

And clearly from the point of view of our industry, the current system from the biotechnical industry actually on injunctions actually 

works quite well. And so—— Mr. GOODLATTE. You understand, though, it doesn’t work well for 

other people. 

Mr. CHESS. I understand the technology situation, and actually 

I used to be in the technology industry. I started my career at Intel 

a long time ago. So I understand and am sensitive to some of the 

issues. So obviously we’d have to understand specifically what we 

have in mind, providing we can protect what we have that’s important to Biotech. 

Mr. GOODLATTE. Let Mr. Johnson answer that. 

Mr. JOHNSON. We’re always willing to talk to anyone about anything that might lead to better results. But the fact of the matter 

is that we have spent a huge amount of time, and injunctions are 

fundamental to the patent right. When we’re talking about injunctions, we’re not talking about frivolous plaintiffs, we’re talking 

about people who have won the lawsuits. We’re talking in the permanent injunction context normally about someone who’s not only 

won at the district court level, but also won on appeal. 

I think the idea that someone who has established their right 

under the patent so that it’s been tested through the court system 

and found to be valid and infringed is entitled to an injunction. 

That’s a fundamental basis of the property right we offer to patentees. 

Mr. GOODLATTE. Mr. Simon. I’m going to follow up with their 

comments in just a second. I know your answer, so be brief so I 

can follow up. 

Mr. SIMON. Sure. We’re always willing to talk about it. I’ll just 

put one other thing before you. There is a petition now before the 

Supreme Court to hear the MercExchange-eBay case, and this is 

exactly the issue that the Supreme Court has been asked to decide. 

So whether this Subcommittee, this Committee, or this Congress 

ultimately get to this important issue, there’s a possibility that we 

can get a Supreme Court ruling on it. 

We’ll talk more. 

Mr. GOODLATTE. Let me ask the three of you this question that 

does get to a little more precision. Doesn’t the plain meaning of the 

current injunction statute require that a judge weigh the equities 

when deciding whether to grant an injunction? And if you agree 

with that comment, how can anyone object to language in a bill 

that would ensure that the courts are carrying out the plain meaning of the current law? 

Start with you, Mr. Chess. 

Mr. CHESS. As you’re—I’m the nonpatent attorney in this group. 

You’re probably getting into kind of technical specifics. 

Mr. GOODLATTE. You asked me to get into the specifics. 

Mr. CHESS. So I’d like the opportunity to confer with the bio folks 

and have the chance to respond back. 

Mr. GOODLATTE. We’ll try Mr. Johnson. 

Mr. JOHNSON. I believe courts do consider principles of equity in 

deciding whether to grant permanent injunctions. 

56

Mr. GOODLATTE. Should we require them to lay them out step by 

step so it’s clear to the parties in the case that the judge has indeed done that, as opposed to just hoping that they’ve done that 

when they issue an injunction? 

Mr. JOHNSON. Normally what happens is that when an injunction is sought, briefing is received by the court, and the court will 

hold a hearing. I know especially in the areas that we work, we 

don’t, even if we win, always receive permanent injunctions, or 

they may be limited in scope in one way or another. And I know 

that the same is true on the other side. We have had situations 

where we’ve had cases where we have been allowed to continue to 

sell our products when it was deemed to be in the public interest 

to do so. So I believe it does work and that the courts do consider 

the public interest. 

Mr. GOODLATTE. Mr. Simon. 

Mr. SIMON. I found surprising in Biotech Industries’ testimony a 

line on this specific issue, Mr. Goodlatte. On page 6 at the very bottom, the written testimony says: If you allowed courts to weigh equities and balance hardships, our patent system would be weakened, and research and development would suffer. 

I didn’t make that up, that’s in their testimony. I think courts 

do weigh them. I don’t think they give enough weight to them right 

now. 

Mr. GOODLATTE. Thank you. 

Mr. Chairman, I know our time has expired here. I do have a 

statement that I would ask be made part of the record. 

Mr. SMITH. Without objection, the opening statements will be 

made a part of the record. 

The gentleman from California Mr. Issa would like to direct a 

question that he would like responded to in writing. Mr. Issa. 

Mr. ISSA. Thank you, Mr. Chairman. I’ll be very brief. It will 

take some time and some thought to get the answers, but based on 

what I’ve heard here today, I’d really appreciate it. 

When we discussed 271(f), I believe I heard very clearly that it 

was an outcome that would occur, and it had occurred, that we 

tried to correct with the 271(f) in the ’80’s. We’re now looking at 

stripping it away because we don’t like the outcome, we want a different outcome. 

As fair and long-reaching as each of you can be in your positions, 

can you tell me, should we adopt in Congress a policy of calculating 

what the outcome would be, how it would affect business, and then 

put our law in effect in order to achieve that? Not just in 271, but 

obviously if we do it here, do we begin saying, let’s change this? 

For example, should we arbitrarily reduce the length of a patent 

or type of patent because it would encourage business, or extend 

it because it would help one industry? Should I look at Biotech as 

getting a different length patent than other industries? Should I 

start doing that based on what amount of business occurs in the 

United States? 

And if you would give me that further discussion that will take 

a few paragraphs, I would appreciate it, because that’s my question 

on 271 is do I do it because of the business outcome. 

Mr. SMITH. Good question. Thank you, Mr. Issa. 

57

We have only 5 minutes left to vote, so we’re going to need to 

adjourn. And on the way there, thank you all again for your testimony. It’s been very helpful. And we will continue our discussions 

about the legislation. Thank you. 

[Whereupon, at 12 noon, the Subcommittee was adjourned.] 

(59)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE HOWARD L. BERMAN, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF CALIFORNIA, AND RANKING MEMBER, SUB- COMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

Mr. Chairman, 

Thank you for scheduling this hearing on possible substitute amendments to the 

Patent Reform Act. In addition to the amendment in the nature of a substitute from 

July, I know a number of individual companies have met together over the summer 

to try and produce a consensus bill—a draft of which has been circulating as well. 

However, in all honesty, by this point in the process I would have preferred that 

this subcommittee actually be marking up the bill. 

The witnesses all agree that patents are the foundation of American innovation 

and therefore serve as the underpinning of the American economy. Strong intellectual property protection helps technology businesses attract investors, provides incentives for drug companies to develop new drugs, and allows independent inventors 

to make significant contributions to society. However, while robust intellectual property protection presents these benefits, when protection is given to questionable 

quality patents, the foundation begins to show its cracks. This leads to an increase 

in litigation, a decrease in investment, and casts doubt about the effectiveness of 

our patent system. 

At last week’s hearing regarding Oversight of the PTO, we heard consensus from 

all of the witnesses, including the Director of the agency responsible for administering the patent process, that there is a problem with the quality of patents 

issuing from the Patent Office. It would be quite an accomplishment if we could 

reach consensus with this panel about the solution to the quality issue. 

Some of the proposed provisions of the original bill, as well as the substitutes, 

begin to address quality in the initial stages of the examination process, such as 

the ability for third-parties to submit prior art to the examiner. Over the past number of years, as Congressman Boucher and I introduced the precursors to this bill, 

we always agreed that the key to improving quality was providing examiners with 

the necessary prior art resources. Access to better information will yield better decisions by the examiners. 

Other provisions will enhance the quality of patents immediately after their 

issuance, such as the new post-grant opposition procedure. With the opportunity to 

establish a more comprehensive check on a patent’s validity, without resorting to 

an expensive and lengthy court proceeding, the bill will improve both the quality 

of specific patents and the patent system as a whole. 

Unfortunately, the goal of providing a true alternative to costly litigation—‘‘the 

second window provision’’ has been omitted from drafts of a substitute. Clearly, a 

limited second window would shed more light on the quality and validity of questionable patents. With substitute options that do not contain the injunction provision or the second window options, I am left to ponder the fate of questionable quality patents that have already been granted. These patents will surely be litigated, 

but afforded a high presumption of validity and therefore, in all likelihood, affirmed. 

What will be the effect on the economy that a questionable quality patent (a software program) can now be the reason for barring others from using their own truly 

inventive products? 

Shouldn’t we consider how to rectify this problem as we discuss one of the most 

extensive patent reform bills since the ’52 Act? 

There remain issues which still need further discussion such as the duty of candor 

provision and obviously some of the disputed provisions in the latest coalition draft. 

I look forward to hearing from some of the industry witnesses today and see how, 

if at all, their positions have shifted since we began this process. I hope to continue 

60

working with the group of co-sponsors for this bill to try and create a more perfect 

patent reform. 

PREPARED STATEMENT OF THE HONORABLE BOB GOODLATTE, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF VIRGINIA, AND MEMBER, SUBCOMMITTEE ON

COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

Thank you, Mr. Chairman, for holding this important hearing to examine the 

amendment in the nature of a substitute to H.R. 2795. 

Article I Section 8 of our Constitution lays the framework for our nation’s patent 

laws. It grants Congress the power to award inventors, for limited amounts of time, 

exclusive rights to their inventions. The Framers had the incredible foresight to realize that this type of incentive was crucial to ensure that America would become 

the world’s leader in innovation and creativity. 

These incentives are just as important today as they were at the founding of our 

country. As we continue our journey into the digital age, we must make sure that 

the incentives our Framers put into our Constitution remain meaningful and effective. The U.S. Patent system must work efficiently if America is to 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. 

One industry sector which is beginning to showcase the potential problems inherent in our nation’s patent system is the high tech industry. In today’s economy, 

many high tech products involve hundreds, and even thousands, of patented ideas. 

Technological innovators must work to ensure that they obtain the lawful rights to 

use the patents of others, through licenses and other lawful mechanisms. However, 

it appears that a cottage industry is emerging that seeks to take advantage of the 

complexity of these products and loopholes in our patent laws to extort money from 

high tech 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 solution to these problems involves both ensuring 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. 

The substitute would create a new post-grant opposition system in which any 

member of the public could request the USPTO to review the scope and validity of 

a patent within nine months from the date of its issuance. In addition, the substitute allows submission of prior art within six months after the date of publication 

of the patent application. These provisions will help ensure that interested parties 

have the incentive to challenge questionable patents at the beginning of the process 

and thus help ensure that only quality patents are issued. 

The substitute also contains many important litigation reform measures to help 

ensure that patent litigation benefits those with valid claims, but not those opportunists who seek to abuse the litigation process. Specifically, the bill creates a clear 

standard for ‘‘willful infringement,’’ helps ensure that damage awards are fair, and 

contains new venue provisions to discourage opportunistic forum shopping. I look 

forward to working with Subcommittee to ensure that the damages language is 

structured to reward legitimate damages claims while discouraging frivolous and inflated damage claims. 

All inventors will reap the rewards of a streamlined patent system that ensures 

that good quality patents are issued, and that opportunists cannot take advantage 

of loopholes in our enforcement laws. 

Thank you again, Mr. Chairman for holding this hearing. I look forward to hearing today from our witnesses. 

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN, AND MEMBER, SUBCOMMITTEE ON

COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

I am happy to see that the private negotiations on patent reform have led to 

progress. While I also am pleased that some of the troubling provisions in the introduced bill have been discarded, I am concerned that new issues have been raised 

that would harm small patent owners and set a dangerous precedent for plaintiffs’

rights. 

61

Let me say that I was an original cosponsor of the underlying legislation because 

I believe we need to make major changes to the patent system. It is important for 

our economy to harmonize our patent system with those of other countries. To this 

end, we should establish a system that awards the patent to the first-inventor-tofile. We also should make it easier for third parties to challenge patents after they 

have issued as long as the process has some finality to it. 

At the same time, however, I did have concerns with several of the provisions in 

the bill. One specific provision made it more difficult for legitimate patent owners 

to enforce their rights. I believe that proposal would have undermined the purpose 

of our intellectual property laws, which is to encourage investment into innovation. 

While this new draft does not include that proposal, it does contain new language 

that limits where patent owners may bring lawsuits against those who steal their 

inventions. Specifically, the bill says owners may bring lawsuits only in the defendant’s principal or regular place of business. This is a significant departure from existing law, which permits suits anywhere the infringing product is sold. 

This idea would harm the rights of small businesses and independent patent owners, who may not have the resources to track down the defendant’s place of business 

and to initiate litigation far from home. 

It also sets a dangerous precedent. I am concerned that other industries may 

come forward to limit where lawsuits against them could be brought. This would 

be a blow to plaintiffs’ rights in the areas of gender discrimination, labor rights, and 

civil rights, just to name a few.

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RESPONSE TO POST-HEARING QUESTIONS SUBMITTED BY THE HONORABLE CHRIS CANNON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH, TO PHIL JOHNSON, CHIEF PATENT COUNSEL, JOHNSON & JOHNSON


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RESPONSE TO POST-HEARING QUESTIONS SUBMITTED BY THE HONORABLE DARRELL

ISSA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA, TO PHIL

JOHNSON, CHIEF PATENT COUNSEL, JOHNSON & JOHNSON


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LETTER TO THE HONORABLE ZOE LOFGREN, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF CALIFORNIA, FROM PHIL JOHNSON, CHIEF PATENT COUNSEL, JOHNSON & JOHNSON


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LETTER TO THE HONORABLE LAMAR SMITH, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TEXAS, AND CHAIRMAN, SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY, AND THE HONORABLE HOWARD L. BERMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA, AND RANKING MEMBER, SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY, 

AND PREPARED STATEMENT FROM BOB DEMATTEIS, PLASTIC PACKAGING SYSTEMS


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PREPARED STATEMENT OF RAYMOND V. DAMADIAN, PRESIDENT AND CHAIRMAN, FONAR CORPORATION, MANUFACTURER OF SCANNERS

Please accept my testimony regarding H.R. 2795, the Patent Elimination Act of 

2005. 

In 1972 I filed the first patent on MR scanning that originated the technology 

that is today called MRI. I think it is true that the original scientific discovery that 

I made while I was a university professor, and the patent it gave rise to, has proven 

its value as a betterment for mankind, a result for which I am truly grateful. For 

whatever appreciation the public may have for the invention I believe most of that 

appreciation is owed the U.S. Patent System. Unique in the world, the U.S. Patent 

System crafted by the Founding Fathers, achieved for the first time in all history 

that unique collaboration of the law and technology that enabled the individual of 

ordinary circumstance to dream great dreams, and be provided the means to protect 

his product and get it to the marketplace. 

I think in this vein it is important to appreciate that the MRI machine was not 

the product of either a Multi-National Corporation or a Japanese conglomerate with 

great amassed reserves of disposable capital. Instead it was the product, after the 

initial discovery, of an individual scientist and his graduate students, toiling underfunded in a university laboratory with only the hope of the U.S. Patent to rescue 

them if the insurmountable mountain of technological obstacles that stood in the 

way of such a scanner could ever be overcome. Indeed if H.R. 2795 existed in its 

present form when we were developing the MRI, MRI would never have come to 

pass. 

Our story is not unique. It is but one more of the many spectacular triumphs of 

that most extraordinary entity of human history and human law which we call the 

U.S. Patent System. We cherish it for what it has enabled us to accomplish. We 

cherish it for the protection it gave us, the ‘‘little guy’’, when mammoth multi-nationals sought to take our invention from us when it was finally complete after ten 

years. Thus when the U.S. Patent System that protected us and our MRI invention 

comes under attack by legislation like H.R. 2795 I quite naturally rise to protect 

the Patent System that protected us. In so doing we believe fervently we are protecting America. Hopefully you will forgive us when our passion for the U.S. Patent 

causes us to construe lawmakers who seek its destruction by legislation like H.R. 

2795 as adversaries that have mounted an attack on America’s very heart and soul. 

Perhaps our view comes from having fully engaged the U.S. Patent System, from 

having personally exercised all aspects of this majestic doctrine, and from having 

personally experienced its numerous ingenious attributes. 

Thus, when our first prototype MRI scanner was completed in 1977 and performed the first scan of the live human body, and when we left the university to 

form the first MRI company, we needed to find investors who would invest in our 

fledgling enterprise to create the first commercial MRI product and bring it to market. Needless to say, the first question from investors was what will secure our investment in your start-up MRI enterprise called Fonar? The only answer we had 

to give was that we held the original patent. It was the only answer but it was sufficient. We received the investor capital we needed, Fonar was born, and three years 

later we introduced the first commercial MRI scanner to the medical world. 

Within a few years we were joined in the marketplace by a host of Japanese companies and Multi-National Corporations with scanners of their own, who ignored our 

patent, even while they themselves had made no technical contribution during the 

ten years of labor it took us to get from the first test tube experiments to the first 

commercial magnet. We resorted to the U.S. Patent. It rescued us! 

Our American judiciary gave no quarter to the size of the mammoth Multi-National Companies that had appropriated little Fonar’s technology. They adjudicated 

with the same even hand for which American jurisprudence is famous and meted 

out fairly the dictates of our patent laws to the infringers of Fonar’s patents. When 

the day was done all infringers admitted that Fonar had not been treated fairly and 

while none could say they were pleased to have to pay little Fonar, none argued 

that Fonar’s contribution had not been major and none contended that Fonar in its 

35 years of labor to bring MRI to reality and improve it, was not eminently deserving of the justice it was now receiving. 

Fonar had earned its place in the world. U.S. Patent Law saw to it that the holder 

of one of America’s patents was protected from usurpers of its technology irrespective of their size. Fonar was helpless without that protection. U.S. Patent Law rescued America’s MRI. Little Fonar, as a result, can continue to create the many lifesaving benefits that lie ahead in the field of MRI. 

From this 35 year right of passage involving intimate experience with our patent 

laws, in action, we feel that we can come before your committee, usefully Mr. MerVerDate 0ct 09 2002 11:36 Oct 28, 2005 Jkt 000000 PO 00000 Frm 00197 Fmt 6601 Sfmt 6621 G:\WORK\COURTS\091505\23434.000 HJUD1 PsN: 23434
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ritt, with our experience, and comment firsthand regarding our impressions of H.R. 

2795. 

In general it must be obvious to even the most casual reader, that H.R. 2795 is 

the unqualified enemy of small business and the small business inventor. It seeks 

to void most of the protections upon which small start-up technology businesses like 

Fonar have relied on for two centuries. It is not fair for the proponents of this bill 

to argue, as they have, that this bill is good for the inventor. If H.R. 2795 is so good 

for the small business inventor as its supporters have repeatedly represented, why 

then am I filing my testimony opposing it? Surely the distinguished gentlemen who 

are sponsoring it do not mean to suggest that I as a scientist am unable to determine for myself what is good for me and what is not. Regarding the Patent Elimination Act of 2005, H.R. 2795. 

I think it critical to remind reviewers of this bill that the US Patent is the heart 

and soul of the American Economy. Absent the patent; the telephone, the electric 

light, the computer, the internal combustion engine, the airplane, the radio and the 

vast array of other technologies the US Patent brought to life, American Industry 

and the American Economy that rests on it would not exist. Consequently America’s inventors and the patents they depend on are America’s lifeblood. To dismember the 

system that birthed them as the Management Amendment of H.R. 2795 intends, is 

to initiate a frontal assault on the U.S. economy itself. While it will be tempting 

to some to characterize this generalization as an overstatement it is not. Dismembering the U.S. Patent, as H.R. 2795 does, constitutes dismembering the very 

soul of U.S. economy. Its consequences cannot be overstated. Arguments that H.R. 

2795 does not darken the soul of the U.S. economy will inevitably originate from 

corporate employees whose sole intent is to broaden the powers of infringement on 

behalf of their corporate employers, which corporate employees have never themselves crafted an invention and tried to start a company from scratch with the U.S. 

Patent as their only asset, as Thomas Edison, Alexander Bell, the Wright Brothers, 

Morse and the other legends of American Economic history did. 

While many of the provisions of the Manager’s Amendment to H.R. 2795, especially after they have been mischaracterized as ‘‘reforms’’ when they are eliminations, may be abstract to Congressmen and staff who are distant from the processing of defending one’s patent in a courtroom, they are, in fact, virile in their intent and intentionally so. 

Speaking generally, as an inventor who has been through the entire courtroom 

process of getting a patent upheld against a conglomeration of multi-national enterprises intent on infringement the inventor needs not only EVERY provision the ‘‘as- piring infringers’’ are seeking to remove, he needs more. 

Indeed, except by firsthand experience of direct courtroom infringer assault, it is 

difficult to discern, given the legalistic lexicon in which the provisions H.R. 2795 are 

encoded, to comprehend the full measure of their malignancy. Thus granting the requested Limitations of Injunctive Relief when decoded into plain English is the 

literal enactment of a ‘‘license to steal’’. It is a blunt elimination of the patentee’s 

right to say ‘‘No’’ (injunction) to the thief, ‘‘You can’t copy my invention and sell it 

as your own.’’ It is self-evident that a patent without the right to say ‘‘No, you can’t 

make my invention and sell it’’ is no patent at all. The First to File provision, another noxious initiative, plainly stated is another ‘‘license to steal’’ for an amply financed corporate giant, like a Japanese conglomerate. It fully enables, for example, 

the well practiced craft by Japanese corporate employees of visiting university laboratories and other research facilities with their cameras and interrogating naive 

researchers on their discoveries and leaving the premises to immediately file patents on the inventor’s new discoveries before the inventor himself. First to File

eliminates the inventor’s proof by laboratory notes and records that he is the true 

inventor and thus voids his right to his inventions. The Third Party Pre-grant

review is a further provision for potential infringers or their designees to inspect 

a patentee’s invention, prior to its allowance as a patent, which provision possesses 

the obvious deficiency that the invention can now be copied by the inspecting party 

before it issues as a patent, thereby avoiding literal infringement. Pre-grant Review further enables the inspecting party to intrude in the patent approval process 

itself and seek impedance of the application or even total blockage of it. Third 

Party Reexamination of Post-Grant Review means that an infringer, if this 

provision is granted by H.R. 2795, will be able to postpone his request for a reexamination of the inventor’s patent by the Patent Office until after trial. By so doing 

he grants himself the power to challenge validity of the inventor’s patent twice, 

once in the courtroom and once again, after court if the inventor is upheld and he 

loses. 

More importantly it enables the infringer to duck courtroom scrutiny of his invalidity argument and avoid full adversarial argument by opposing attorneys on the 

195

merits of his invalidity case in front of the Court and trial judge. Thus the infringer, 

by his Post-Grant Reexamination procedure, can avoid the risk of subjecting his 

invalidity argument to the full scrutiny of a detailed courtroom proceeding and save 

it for a second bite of the apple beyond the scrutiny of the court and trial judge once 

the patentee has won his case. Furthermore, since the Post-Grant opposition provision removes key protections for the inventor, his patent under the new provision 

can be challenged in Post-Grant oppositions by a limitless number of potential infringers up to the very date of its expiration 17 years after it’s issuance. The patentee then, under this new provision will never unequivocally own a patent. He will 

thus be unable to secure finances from investors to initiate a commercial enterprise. 

The Best Mode requirement which H.R. 2795 seeks to scrap, is fundamental to the 

very rationale for a patent authorized by government. As Jefferson and Washington 

envisioned it, the patent was a limited exclusivity that could be awarded and enforced by government in exchange for full disclosure. Full disclosure would give the 

public access to the invention so others could improve on it and advance the state 

of the art of the technology. The Best Mode Disclosure requirement ensures and 

requires full disclosure of the patentee’s invention in exchange for exclusivity. Compromising Best Mode Disclosure, by deleting the requirement that the best specific 

embodiment of the invention be disclosed, cheats the public of its right to that full 

disclosure in exchange for the public exclusivity to the inventor. Without full disclosure it becomes unduplicatable by ‘‘one skilled in the art’’ and the public is cheated of the use of that art. It further fails to force the inventor to specify his invention and therefore specify what will become the prior art for future inventions. 

The absence of a fully disclosed and fully specified prior art enables inventors to 

claim innovations at a later date in later patents, thereby falsely extending their 

patent’s lifetime with innovations that were genuinely part of the original invention 

but left undisclosed (and unspecified) by the elimination of the Best Mode requirement. The remaining provisions, Prior Rights, Assignee Filing, Eradication, 

Limiting Damages, Removing the Inequitable Conduct Decision from 

Courtroom Adjudication, Limiting Damages and Limiting the User Scope of 

Applications, all possess onerous terms for the prospects of the inventor getting 

his patents upheld and his new business protected. 

These provisions and H.R. 2795 must not be enacted. Despite their characterization to the contrary there is not a single provision for the benefit of the inventor. 

All are designed to benefit the infringer.

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PREPARED STATEMENT OF JOY L. BRYANT, EXECUTIVE DIRECTOR, NATIONAL

ASSOCIATION OF PATENT PRACTITIONERS


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PREPARED STATEMENT OF STEPHEN WREN, INDEPENDENT INVENTOR AND ACTUARY

Mr. Chairman, Ranking Member Berman and other distinguished Members of the 

House Judiciary Subcommittee on Intellectual Property, 

Thank you for holding this September 15, 2005 hearing on proposed changes to 

the U.S. patent system—the best and strongest in the world. I am submitting my 

testimony in writing with the hope that it will become part of the public record by 

way of this hearing because it is apparent that the voice of the independent inventor 

concerning this legislation has been heard little if at all to date. 

There are many witnesses who have testified before this committee this year that 

have claimed to speak on behalf of independent inventors, small businesses and others entities who clearly will be harmed by the Amendment in the Nature of a Substitute to H.R. 2795, the Patent Act of 2005. To my knowledge, there has been little 

testimony on this legislation before this committee from actual inventors who have 

substantial first-hand experience with the U.S. patent system and the inner workings of the U.S. Patent and Trademark Office. 

I am an inventor with such experience as relates to the issues before the subcommittee. Quite frankly, my patience with the system has run its course. Unless 

real and positive changes are made within the U.S. Patent and Trademark Office, 

my present invention will be my last. Getting a patent in today’s patent system is 

just too hard, too time consuming, too frustrating, too expensive, and too risky. 

REFORM THE PATENT OFFICE BEFORE CHANGING THE UNDERLYING LAW

In my view the problems inventors currently face are within the USPTO and not 

in our underlying patent laws. This differs radically from nearly all of the testimony 

previously presented. How many of those previously testifying have had personal experience? 

The USPTO is in a crisis. The problem for inventors and small companies is that 

application pendency—the time it takes to get a patent allowed and issued—is far 

too long. I, for example, have patent applications with a pendency of over 13 years. 

Mr. Chairman, inventors, universities, and small companies simply cannot and will 

not continue to innovate with such long pendencies. It places a terrible burden on 

us to fund research and development and greatly increases our patent related expenses. Such pendencies make the patent system a sport of kings and eliminates 

independent inventors and small firms from participating. Moreover, legal changes 

in the 1990s such as changing patent term to 20 years from ‘‘date of filing,’’ only 

further erode the value of a patent. By the time it issues with these lengthy 

pendencies there can be hardly any patent term left. There may be none. With these 

pendencies alone, by the time your patent issues your technology is most often outdated and worthless. 

PATENT QUALITY IS NOT THE TRUE AIM OF THE MANAGER’S AMENDMENT

Many supporters of this legislation speak of problems with patent quality. However, based on litigation results over the past few years decisions have been pretty 

well split 50/50 between patentee and infringer. That result suggests there is no 

great problem with patent quality in terms of the USPTO issuing invalid patents. 

Proponents who use this argument are simply not supported by the facts. 

Rather, the problem from my experience is that the USPTO is too hesitant to 

issue patents, not that they are issuing them too hastily. That theory would in part 

explain why pendencies have increased so substantially. If the committee would survey practitioners and applicants anonymously, I believe you will find they too feel 

long pendency is a significant problem. Many have told me so confidentially. It is 

difficult to believe, but the USPTO has to my knowledge and with all whom I have 

spoken, failed to survey applicants and their attorneys for feedback on many important matters. How can they faithfully serve their customers and the public if they 

do not know what customers want and need? 

Therefore, contrary to what proponents claim regarding quality of patents issued 

being the problem, it is those patents that are not issued where the true problems 

lie. The changes therefore being proposed by the Intellectual Property Owners Association (IPO), AIPLA, the Business Software Alliance and others—mainly large corporations or alliances of them—are at best unnecessary and at worst dangerous as 

many provisions would only further erode the patent system and act as a disincentive to invent for independent inventors and small companies. This is a very important segment of our intellectual property society—the part most often responsible 

for breakthrough technologies which open new fields. 

My belief is this false issue of patent quality is being promoted before this subcommittee by large, multi-national companies to push for changes in U.S. patent 

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law which will not strengthen it and therefore encourage innovation, but rather 

weaken it and thereby discourage innovation. As I review the Manager’s Amendment I feel there are several portions that will have a substantial negative impact 

on the capabilities of small entities to benefit from the patent system. Further, I 

understand that with the Manager’s Amendment revenues that have been diverted 

from the USPTO, fees that all entities—large and small—pay, will hereafter completely go to the agency instead of to other non-patent/trademark related issues. It 

will then be a true user fee instead of a hidden tax on inventors. With this funding 

change about to be instituted, why would Congress even consider changing the 

strongest and best patent system in the world before first seeing how the funding 

change will affect the system? The funding change alone may significantly reduce 

the need for if not eliminate any further legitimate need for changes in patent law. 

MANY WHO CLAIM TO SPEAK ON BEHALF OF INVENTORS AND SMALL BUSINESS DO NOT

Testimony from this year and from years past has caused me to try and help educate anyone connected to the U.S. patent system. As I indicated earlier, many organizations that have testified before this committee and before the Senate have stated they represent ‘‘small business and individual inventor members.’’ Specifically, 

the Intellectual Property Owners Association claim they represent small businesses 

and independent inventors. They do not. 

In viewing the composition of the IPO’s committees, only large firms are represented (Microsoft, Xerox, Intel, . . .), as well as the large law firms (Kenyon & 

Kenyon, Howrey Simon, Drinker Biddle, . . .) who represent them. IPO, therefore, 

is merely a trade organization of large companies. It does not represent small companies and individual inventors to any meaningful degree. Consequently, organizations such as IPO that claim to speak on the ‘‘little guy’s’’ behalf are misleading the 

committee at best. 

WHAT PATENTS MEAN TO THE INDEPENDENT INVENTOR

Some proponents speak of patents ‘‘being used to suppress competition.’’ They are 

correct. That’s the point of patents in the first place. The idea was always to grant 

to an inventor for a limited time exclusive use of their invention—e.g. a monopoly—

as a reward for the advantages society receives from the invention. 

Out of thousands of patents issued by the Patent Office each year, some will unavoidably be bad. However, if patents are of poor quality—bad—they likely will lose 

in court, or far more likely never make it to court and therefore be of no consequence. On the other hand, if patents are valid they will suppress infringers to 

the benefit of both the inventor and society, which was the purpose of the patent 

system. If a patent really is ‘‘junk’’ it is highly unlikely anyone will attempt to enforce it. Contingent attorneys, for example, will quickly see these facts and not 

waste their time on a lost cause. Contingent attorneys who cannot tell the difference 

between good and bad patents will not be in practice for long. 

I am sincerely curious whether those who support these so-called reforms and 

make such broad statements have ever personally tried to enforce a patent? Do they 

speak from experience or do they just wail away at what they don’t understand like 

bloggers? Ignorance is bliss. More disturbingly, other proponents have their own 

agenda, and it is not to encourage innovation. These shadowy figures lurking, not 

always in the background, if left unchecked will cripple America’s technological edge 

and thereby its long-term economic outlook. 

Likewise, many supporters of the bill rally around the concept that people are 

concerned about suspect and overly broad patents. As above, if a patent is overly 

broad or issued in error it will seldom be enforced or hold up. Patent owners think 

long and hard before asserting a patent because of the cost. Keep in mind it costs 

the patent holder about the same in court as it costs the accused infringer. That’s 

why few patent cases ever make it to court (roughly 97% of patent suits filed are 

settled out of court). No one wants a nuclear war. Therefore, all this hand wringing 

over bad patents is merely pretense to anesthetize and paralyze the patent system. 

It is but a red herring. 

The real issue with these proponents is that big companies don’t like it when 

small companies, universities, or independent inventors assert patents against 

them. The only patents big companies tolerate are their own. Even then their interest is merely as a tool to defend, not to truly innovate. Also and oddly enough, they 

by far own the largest number of patents. But of course from their view, only theirs 

are valid. I find this hypocritical. It is also disconcerting given the likely outcome 

of their assault on our patent system and to our nation’s future innovation and 

economy that is directly dependent upon the innovation the patent system encourages. 

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BILL IS ADDRESSED TO HURT SPECIFIC ENTITIES TO THE BENEFIT OF OTHERS

As I stated earlier, the patent system is becoming a sport of kings. This bill will 

only worsen the situation. It prices small concerns out of the market and in so doing 

only further ensconces big companies in their markets, further cementing their 

stranglehold. The pending bill will only further widen the gap between the haves 

and the have-nots and the public will pay the price in the end with higher prices 

and inferior goods due to reduced competition. 

Certain witnesses and companies have complained about so-called ‘‘patent trolls.’’

This label is most always used by large companies to describe small entities that 

have the audacity to assert patents against them. They have lost in court and so 

now they dissemble aiming to corrupt the patent system, even if it permanently 

damages the country. IPO itself has used this nonsensical term. It is interesting to 

think that though IPO claims to represent ‘‘small business and individual inventor 

members,’’ they speak like a big company. The IPO is not a sheep. It is a wolf. ‘‘Patent troll’’ is then a farce used by these large and unscrupulous parties in an attempt 

to defame inventors and small companies, and mislead Congress about what is really going on within our nation’s intellectual property system. It is another red herring, attempting to obscure Congress from the truth. 

Proponents of this legislation use the argument that there is something implicitly 

wrong with a party who owns patents in only selling or licensing them and not actually building or using the patented technologies themselves. However, for over a 

century independent inventors have done just that. Edison himself was prolific in 

selling his ideas to other parties. Bell left the business end to others. Many inventors feel uncomfortable from past experience in commercializing their own inventions and prefer to leave that to those with more business acumen. Others simply 

prefer to invent and are happy to leave the business end to others. Clearly then, 

there is nothing wrong with an inventor leaving the business side of the invention 

to others such as through licensing of the technologies patented or an outright sale. 

Whoever coined the phrase ‘‘patent troll’’ was either ignorant of the invention field 

or a sly dissembler. 

LARGE COMPANIES DON’T INVENT

Still, it is the breakthroughs that lay the foundation for new fields. Before one 

can refine they must first establish. I am of the opinion that large companies will 

never seek to create markets for new technologies. They would rather wait until 

someone else does it then swoop in to use their large capital reserves to scoop up 

a large share of the developing market. Without a strong patent system independent 

inventors and small companies are at their mercy. Without a strong patent system 

there will be no independent inventors or small companies who risk all to create 

new markets for innovative technologies. That is why these large multi-national entities—with few exceptions—are begging Congress to make changes to U.S. patent 

law. 

BAD PROVISIONS IN THE MANAGER’S AMENDMENT

My firm belief is that many of the provisions included in the Amendment in the 

Nature of a Substitute will irreparably harm small entities dependent on strong intellectual property laws here in the U.S. Without independent inventors and small 

companies to take the dare there will be a dearth of leadership into new promising 

technological fields—only a never-ending stream of minute cosmetic changes to a 

worn and musty product line. Without independent inventors and small businesses, 

our nation’s economy will suffer. Many of these proposed changes will tip the scales 

of justice in favor of those with the deepest pockets and will thereby prove the 

undoing of small entities and independent inventors. 

In part, I have strong concerns about the following provisions: First-to-File, Prior 

User Rights, 18-month publication for domestic applications, and Third Party Re-examination. Each of these provisions benefit large, deep pocketed organizations and 

corrupt companies to the detriment of inventors and small business owners, many 

who will face unaffordable expenses and terrible consequences as a result of this 

proposed legislation. 

With Prior User Rights, small entities could face the near impossible task of competing against a well-funded corporation. This possibility will only add to the difficulty for those who seek funding from third parties such as venture capitalists. 

The risk will be that they may invest in a startup who at some later date in spite 

of having invented the product or technology may have to compete with a far larger 

competitor. This prior user provision then places in doubt the exclusivity right of 

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a patent which was a fundamental principle as espoused in the U.S. Constitution. 

Funding sources will understandably be tentative. 

The publication at 18 months from filing an application is another provision of 

this legislation that would place small entities and inventors at a disadvantage. 

What is now accomplished in complete secrecy will at 18 months be throw open for 

the world to see. Currently, anyone who doesn’t file overseas has the option of NOT 

having their intellectual property known before protections are guaranteed. This 

will eliminate that option. Once published, the inventor will have to maintain his 

lead in an invention that may yet need refinement against an army of far better 

funded adversaries. Often times, such as in the case of the television, perfecting an 

invention to make it ready for the marketplace can take years. Such was the case 

with Bell and his telephone, Philo Farnsworth and the television, Morse on the telegraph, and the Wright Brothers on the airplane. It took Chester Carlson years to 

develop xerography to a practical state. Often, this is the case. This provision will 

place small entities therefore at a critical disadvantage. It would force them into a 

situation where they will have to compete with a far better funded firm before they 

are ready. As above, this further erosion of the patent system will discourage inventors and investors and thereby innovation. Such then is the problem with both First 

to File and 18 month publication. 

How is an inventor protected after the 18-month publication should it be determined later that the ‘‘invention’’ was not patentable? Trade secrecy is the current 

option and that effectively will be taken away via publication. The danger of course 

is that inventors will begin more widely using trade secret protection where possible. But to encourage disclosure was another reason the patent system was established in the first place. The inventor discloses the invention and in return receives 

exclusive use of their invention for a limited time. It seems to me this provision will 

undermine an important reason the patent system was created. 

I have similar concerns about the First To File provision. Clearly, the advantage 

would be to well funded organizations who can much more readily prepare a patent 

application—specially having been tipped off by an inventor. That would present an 

impossible uphill climb for the inventor and encourage invention theft. I recall the 

confusion physicist Gordon Gould who invented the laser had when he delayed filing 

for about a year. In the interim another did. Fortunately, our First to Invent provision gave the patent to the true inventor. Similarly, Alexander Graham Bell came 

very close to being beaten to the Patent Office by Elisha Gray. Had he been 1 day 

later and had the proposed First to File provision been in effect, the Americana 

catch phrase would have become ‘‘Ma Gray.’’

Another related concern is that the change to First to File will only further 

swamp the patent office. Large companies who are already inundating the PTO with 

applications will only increase the amount of applications they are now filing in an 

attempt to beat small entities to the punch rather than first perfecting an invention. 

The result will be a further overwhelmed examining body struggling to keep up with 

a weighty load. Clearly, large firms are far better able to use this shotgun approach 

with applications. This may be an important reason for the current backlog on 

unexamined applications causing these dangerous pendencies. This use of greater 

resources and funding will further place small entities at a disadvantage. The result 

is similar to the advantage large entities have over smaller adversaries now in the 

courts. Large companies will be able to use their size alone to gain a competitive 

advantage, just as they now do in the market place. Historically the patent system 

has had a leveling affect making smaller entities more competitive which in turn 

forced larger entities to stay current in technologies rather than just rely on their 

superior size to maintain market dominance. I am extremely concerned that nearly 

all of the proposed changes will have a considerable detrimental affect on competition. 

CORPORATIONS VS. SMALL ENTITIES

Patent law affects different business sectors differently. So it is imperative to understand that simply because large companies in one sector of the economy consider 

there to be problems with the law, their proposed changes (such as in the Manager’s 

Amendment) are apt to create undue harm and burdens to others in their field and, 

quite likely, some or all parties in other fields. That is why there is such a strong 

presence on Capitol Hill of lobbyists who represent the Business Software Alliance, 

Pharma and BIO—three ‘‘players’’ who were invited to personally appear before the 

committee to testify. 

Consider what history has shown: independent inventors and small companies are 

most often responsible for technological breakthroughs. Witness Edison’s light bulb, 

Bell’s telephone, the Wright brother’s airplane, Gould’s laser, Fulton’s steamboat, 

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etc. The list goes on. Large firms rarely, if ever, have excelled at breakthrough innovations. Corporations have the wrong culture for it. Theirs is a culture of refinement 

of existing technologies, not on trail blazing new fields. There is too much risk for 

them in getting too far afield from their existing product line. As a case in point, 

when Alexander Graham Bell offered the telephone to Western Union, William 

Orton the then President of the giant telegraph firm rejected his offer and replied 

‘‘what would I do with such a toy?’’

CONCLUSIONS

Patent law in the U.S. is critical to our economy. Patents are the lifeblood to all 

but the largest players in industry. Large corporations can readily compete and even 

dominate without patents. I suspect if you could hear what they say behind closed 

doors you would find their preference would be no patent system at all. That would 

provide far less risk to their market dominance. Without genuine intellectual property, there is little chance for all the rest. It is our intellectual property laws that 

have enabled competition in our country and placed us where we are currently in 

the world—Number One. We need to think carefully and study thoroughly before 

we make changes to them. 

Before considering any further changes to the current U.S. patent code, let reforms at the USPTO take place first. Do not put the proverbial cart of changes to 

our underlying patent protections before the horse of adequate funding to the 

USPTO. Also, please remember that changes take time, so don’t act in haste because large multi-national corporations are making these requests. I for one do not 

believe that they are acting with the best interest of our country at heart, but rather their short-term bottom lines. 

There is much more at stake here than saving a handful of large multi-national 

companies litigation costs. My hope is that Congress will take the time and put in 

the needed effort to understand the consequences before proceeding with this legislation. 

PREPARED STATEMENT OF RONALD J. RILEY, PRESIDENT,

PROFESSIONAL INVENTORS ALLIANCE USA 

Mr. Chairman, Ranking Member Berman, and other distinguished Members of 

the Intellectual Property Subcommittee. 

My name is Ronald J. Riley, and I am an inventor. I founded the Professional Inventors Alliance USA to bring a voice to Washington, D.C. since, generally speaking, 

anytime Congress approaches reforms to the U.S. Patent and Trademark Office and 

to the underlying patent laws of the United States, inventors are for the most part 

left out of the debate. In general, Congress hears from patent counsels who represent large corporations, such as the multinational organizations that support H.R. 

2795, or any of its variations that have come to pass since its introduction in June. 

A most interesting thing to point out is that there is a so-called red-line version of 

the bill now referred to as the ‘‘consensus’’ draft. It turns out that 33 companies got 

together and decided that this is what they want from Congress. 

Thirty-three companies may make a consensus in the eyes of a few, but to those 

of use who use and depend on the current and strong patent system, we question 

the wisdom of accepting such a draft without full and comprehensive hearings that 

everyone can understand. This issue, while arcane, is one of the most important 

issues that will ever come before the U.S. Congress. It goes right to the heart of 

why our country is a world leader on so many fronts. 

Promoting the General Welfare of the Constitution does not, in my opinion, mean 

writing laws that seemingly benefit one sector of the nation to the detriment of the 

general public. Quite frankly, the public interest will not be served by the passage 

of H.R. 2795, or any of the variations that I have read to date. Moreover, the Constitution discusses specifically the exclusive rights conferred to authors and inventors to their respective writings and innovations. The legislation challenges the constitutional framework of exclusive rights for intellectual property owners in many 

ways. 

Additionally, proponents of this legislation suggest that these proposed changes 

will lead to more quality patents, less litigation, harmonization, and, somehow, more 

innovation. Those of us in the Professional Inventors Alliance could not disagree 

more with that assessment and we believe that the very large entities promoting 

this legislation are not being entirely accurate with their descriptions of the legislation to Members of this subcommittee, nor are they presenting the big picture of 

how this legislation could negatively impact our economy. 

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I also would like to address something that I find very interesting. Proponents 

of patent reform tend to use questionable and sometime insulting terms in order to 

paint opponents of patent reform in a certain way. In the 1990s, the so-called submarine patent was the base issue that was showcased to obtain changes to the patent system. This year, it seems to be the term ‘‘patent trolls.’’ This term refers 

insultingly to those companies and/or individuals who trade in patents which they 

have obtained one way or another—legally—from inventors. In the United States, 

which was founded on the concepts of free enterprise and ownership of property, trying to stop such legal activities is questionable at best. If an inventor can do better 

by placing his invention in the hands of a professional patent marketer, this should 

not be thwarted. This is no different, in reality, than using a real estate agent for 

selling a house or commercial space. 

Q. Todd Dickenson, the former director of the U.S. Patent and Trademark Office 

and now a counsel to General Electric, testified on July 26 of this year before the 

Senate Judiciary Subcommittee on Intellectual Property that General Electric was 

a patent troll. In fact, he stated that almost every large company with patents is 

in some fashion a patent troll. So I hope this discussion of the so-called patent troll 

can be deleted from the debate. 

Intellectual property rights are as important as real property rights. As you all 

well know, the United States Supreme Court recently held in the Kelo decision that 

local governments may force property owners to sell out and make way for private 

economic development when officials decide it would benefit the public, even if the 

property is not blighted and the new project’s success is not guaranteed. It is apparent that Congress understands how controversial the Kelo decision is. Real property 

and the laws regarding takings are easier to comprehend as Congress has stepped 

right up to address the Kelo decision in several ways. 

With all due respect to the Members of this Subcommittee, the Professional Inventors Alliance views all versions of H.R. 2795—including the Manager’s Amendment and the so-called Redline version—the way real estate property owners view 

the Kelo decision. Many provisions of the legislation that the supporters claim will 

improve the system will, in fact, take intellectual property right out of the hands 

of the actual inventor without just compensation, or any at all for that matter. 

Private property is a foundation principal that has set our country apart from the 

rest. Fundamentally, many provisions found in the many versions of H.R. 2795 are 

to intellectual private property rights as the Kelo decision is the real private property rights. Therefore, it is with great hope and encouragement that the distinguished Members of this subcommittee and the rest of Congress, should the legislation progress forward, take a very, very close look at why the Professional Inventors 

Alliance believes strongly that provisions found in the many versions of this legislation will have disastrous effects on independent inventors, small- and medium-sized 

businesses throughout the country, and the economy as a whole. 

First to File 

Every version of this legislation of which I am aware includes a provision known 

as First to File. Supporters of this system say that this change from the current 

and stronger ‘‘first to invent’’ system will stop the time-consuming ‘‘interference’’

legal arrangement necessary in determining who actually is the first to invent 

where such a question arises; therefore, there will be less litigation. This is false 

in that the numbers of patents that go through interference are minute. According 

to the U.S. Census Bureau and U.S. Patent and Trademark Office, in 2003 there 

were only ninety (90) inter partes interferences declared out of 367,000 patent application filings; there were 2721 ex parte interferences. This comes to .0076 of a percentage point. The bottom line is that there are not a lot of these cases brought 

through the system. 

The reality of a first-to-file system is that patents will be of less quality; prior art 

will not be researched thoroughly, if at all. In the race to file a patent, companies 

likely will file as many patents as quickly as possible thus jamming up the patent 

examination process with unnecessary proceedings. Such a system will encourage 

incomplete and poorly drafted concepts. These facts will make the system more—

not less—litigious than the first to invent system. In fact, it could open the patent 

attorneys up to malpractice suits IF they didn’t beat someone to the patent office 

to file the application. 

A significant side effect of first to file is that the large number of published patent 

applications which do not proceed to become issued patents become pseudo prior art 

which then is used to interfere with subsequent inventors getting the patents they 

are due. In other words, the ‘‘new’’ prior art is actually very poor and will lead to 

less quality in future patents. This runs contrary to what those who are promoting 

this legislation say with respect to this legislation. 

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As we all know, harmonization is one of the ‘‘reasons’’ Congress is working to 

alter our patent system. Well, Japan has the first-to-file system and firms tend to 

file applications as soon as possible to prevent their rivals from using the invention 

before them. The point of this statement is that it shows that companies will game 

the system. Proponents of changing the U.S. system to one that is not as strong 

point to several scenarios as examples for why changes in the system are needed. 

Congress should be aware that there are calls for changes to the Japanese system, 

itself, because their system facilitates wholesale theft of their inventions. 

Finally, under a first to file system, far too many questions exist to determine how 

it will impact our tried and true system. For many patents—especially extraordinarily innovative ones—it takes years before a patent issues. There is a long pending timeframe now that is getting longer. The question then becomes: When does 

a first-to-file patent become a ‘‘real’’ patent? Also, when do subsequent filings that 

also may be ‘‘real’’ patents—get their chance at being issued and not stopped by 

failed first-to-file filings? In other words, is the first to file filing really the invention? This is a clear case of unintended consequences that will clog up the examination system and further clog up the courts with litigation that currently is non-existent under the first-to-invent system. 

18-Month Publication of all domestically filed applications 

It is with great interest that I hear all of these corporations discuss harmonization with other countries’ patent systems. We always hear specifically about Japan’s patent system, and apparently the promoters of this legislation think highly 

of that system. 

Just this past July, an article from a Japanese media outlet written by Yomiuri 

Shimbun was published. I have included the article at the end of this written testimony and ask that it be made part of the official record. 

The central theme to the article was that Japan’s intellectual property competitiveness is in decline. Interesting points were made about what Japan is giving 

away in terms of economic resources. The director of Japan’s External Trade Organization’s Intellectual Property Rights Beijing Office last year visited the head office 

of the Haier Group, China’s largest consumer electronics maker. A Haier Group official ‘‘proudly’’ told the Japanese IP official that they use dozens of computers to 

search for patent applications submitted to the patent office in Japan, the United 

States and European countries to obtain useful information to develop ‘‘their’’ products. The Chinese company’s official noted that it was for that reason alone that 

their company spends only small amounts of money on research. 

Rightfully stunned by the information, the Japanese IP director of External Trade 

discussed his experience with the head of a private patent office in Tokyo, who then 

turned around and asked his colleagues to figure out how often patent applications 

were being reviewed on the Japanese patent office’s website from people in China 

and South Korea. Each day, from these countries respectively, Japan’s patent office 

website was hit 17,000 and 55,000 times. 

This is astounding information that I hope the subcommittee understands. This 

Congress is on record as being very concerned about piracy by unscrupulous overseas firms. Foreign competitors, many whom we know already are stealing such information, can move forward untouched while harming the true creators and 

innovators of new discoveries and ideas. Japan’s system is leaking and Congress is 

embarking on changing our laws to be in line with their poor ones. Legislation attempting to harmonize with Japan and the E.U. must be reconsidered closely and 

thoroughly. Perhaps Japan and the E.U. need to adopt some of our intellectual property protections. 

The article discusses that the IP competitiveness is a foundation of Japan’s national strength. PIA argues that our current patent system, which has served this 

country well for over 215 years, is the foundation for our country’s economic and 

innovative strength. There is a reason why the U.S. is a leader in the world although we are one of the youngest countries on the globe. The U.S. respects personal property, both intellectual and real property. In other countries, this is just 

not the case. That is why the Professional Inventors Alliance finds it alarming that 

Congress is actually looking to weaken our system of intellectual property rights 

protections that currently exists and are the strongest in the world. 

The pre-patent world publication after 18 months devalues the application process 

and actually makes it an adversarial opportunity for unscrupulous entities seeking 

to steal ideas from those legitimately going through the system. Therefore, the 

newly knowledgeable firms—both international and domestic—with an ability to review such published applications can begin to advance a not yet patented innovation. With the U.S. Patent Office’s internet site, people around the world can see 

the details and begin to pirate and market ideas that are currently held in secret. 

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This devalues the both the application and patent to the point where going through 

the system will prove more harmful to an inventor/small business trying to secure 

exclusive rights guaranteed by the Constitution. This cannot seriously be the intent 

of this Subcommittee, but it is the reality. 

Pre-grant publication is ill-conceived. Cutting-edge technologies take many years 

to go through the patent system. Right now, if an inventor files overseas they know 

that the application will be published after 18 months. This proposed legislation 

takes away even this modest protection—the current domestic filing with no publication—from the actual inventor. Moreover, for domestically filed applications, publication at 18 months worldwide of the application details that which historically in 

the U.S. has been held in confidence (secret) will harm the actual inventor. 

Secrecy ALWAYS has been a key ingredient of the U.S. Patent System. In fact, 

the Patent Office always has kept the details secret until a final decision was made 

regarding patentability. Under the current system, if the domestic-only filed application is not granted a patent, all of the information surrounding the application are 

returned to the inventor sealed thereby allowing the actual inventor to rework the 

application OR go the way of trade secrets. This provision, which is in all of the 

proposals, will take away this opportunity for inventors and small businesses to 

take their ideas and move forward and prosper even without patent protection but 

through what is known as trade secrets. 

Third-Party pre-grant review 

Publication and third-party pre-grant review go hand-in-hand. This also is an attempt to harmonize the U.S. Patent System with that of the Japanese. This prepatent/pre-publication review allows rival companies—both foreign and domestic—

to learn the details of the innovation and challenge the examiner during what is 

now done in total secrecy. To reiterate, secrecy is very important so that the true 

inventor is protected and he/she can be assured the exclusive right to it and receives 

royalties. 

Aside from allowing others to learn all of the details of the applications before 

they are protected, adding this procedure for third party review will add delays to 

a patent. It also provides competitors time to research and learn more about the 

innovation in order to make their best objections against claims allowed by the patent examiner. 

This provision will add extra hurdles to the patent process to the detriment of the 

applicant (i.e., actual inventor). This will lengthen the time toward granting a patent, not lessen the time as proponents of the legislation claim. Moreover, this adds 

yet another place for unscrupulous competitors to learn about the innovation, put 

it into use and therefore claim prior use. This provision adds an additional measure 

to lessen the quality of the patent. 

The third-party participation in pre-grant reviews provision devalues the patent 

by allowing entities to learn and challenge what is currently being done in secrecy, 

which is very important so that the true inventor is protected and can be assured 

the exclusive rights to receive royalties. This participation also will delay the patent 

and further burdens to the examiners, which—according to Under Secretary Jon 

Dudas—are already over encumbered with work. 

Third-Party Reexamination 

It is with great hope that every member of this subcommittee understands exactly 

it is that is being proposed in this legislation. The current Inter partes examination 

proceedings differ from the proposed post-grant opposition proceedings in that inter 

partes reexaminations already are available under the current process at any time 

during the life of the patent and are limited to patentability issues based on earlier 

patents or publications describing the invention at issue. This legislation expands 

inter partes reexaminations by removing the limitation that any requester is estopped from asserting at a later time patent invalidity on any ground that the requester ‘‘could have raised’’ during the reexamination proceeding. This allows continual post-grant oppositions by an infinite number of entities that obviously will 

harm those with limited funding (i.e., small businesses and independent inventors). 

Of course, the original limitation was intended to balance the equities involved 

in inter partes reexamination, and comported with fundamental notions of fairness. 

This is no different than what occurs if an infringer is sued in court and, having 

argued invalidity and losing, that same infringer cannot later bring a second lawsuit 

seeking to invalidate the same patent. 

PIA’s position is that this is but another provision that will harm the small business and independent inventor by devaluing the exclusive right to a patent. It also 

will severely add to the costs of obtaining a patent and weaken the current system. 

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Prior User Rights 

Patent law favors the patent holder who applies the Founders’ desire for placing 

patents in the public domain. H.R. 2795, the July Manager’s Amendment, and the 

new September 1st red-line version of the bill bring ‘‘prior user rights’’ into U.S. law 

to harmonize with Japan and European patent law—expanding on the first-to-file 

patent right. Well, I’ve already discussed how the first-to-file proposal will harm 

independent inventors and small businesses. So, let’s go over in detail how this provision will harm the U.S. patent system to the detriment of not only small business 

people and inventors but the interest of the general public. 

Prior user rights neutralize and devalue the exclusive rights to a patent. The concept is to allow anyone using technology that is covered by claims made in a patent 

to pay no royalties to the patent owner if it can be proven that the prior user actually utilized the innovation before the patent was issued. Prior user rights provide 

an open invitation to commit fraud in an attempt to avoid paying for the rights to 

use the patent. Moreover, these proposed rights create a never-ending cause for 

more, rather than less, litigation. 

First, the inventor or small business must discover the use by the prior user party 

then file suit in order to get them to stop using the innovation (current process). 

Enactment of this legislation provides a prior user right that would give anyone—

deep pocketed corporations, both foreign and domestic, for example—a new defense 

to use the patented innovation at will. This essentially diminishes to zero the value 

of the patent if the inventor is a small business / independent inventor and the 

‘‘prior user’’ is a large corporation with a lot of money. The new prior user rights 

defense coupled with third-party pre-grant review and 18-month publication fly in 

the face of the constitutional provisions rewarding those who disclose and patent 

their innovations. 

The question raised with allowing prior user rights is: What is the motivation for 

an independent inventor or small business to go through the costly patent process 

when that patent can be taken by another claiming prior use? Moreover, IF the idea 

of the legislation is to limit law suits, imagine if the owner of the patent has as 

much funding as the ‘‘prior user’’—this could then result in more—not less—timely 

and costly litigation. Again, this runs contrary to the authors’ intent on limiting litigation. 

Assignee Filing 

This provision has to be viewed from the eye of the beholder. This legislation allows employers, a.k.a. assignees, to have the absolute power to file an application 

without the signature of the actual inventor, or even the knowledge of the inventor! 

This proposal renders powerless the inventor against their employer with respect 

to patent ownership and control. It is always beneficial for there to be a record of 

the actual inventor. 

With a Congress that is so determined to show how strong they are with respect 

to property rights after the Kelo decision, this provision should be of major concern 

to a great many people. 

Best Mode 

Eliminating ‘‘Best Mode’’ essentially would alter the definition of ‘‘prior art;’’ simply put, this is any existing knowledge of a similar innovation via ways accessible 

by the Public. Current law requires inventors to disclose to the public the best use 

of the invention at the time the patent application is filed. Without this requirement, the inventor and not the public would know the full use of the patent. It also 

would allow for an unscrupulous inventor to increase the term of the patent protection by filing ‘improvements,’ about which they were already aware, later. While the 

bill’s authors claim that they want to improve the quality of patents, it seemingly 

would do the opposite. 

The ‘‘best mode’’ requirement makes it necessary to disclose a specific embodiment. Patent applications and patents without specific embodiments are respectively filed and issued in Japan and that is why a Japanese patent is often not a 

good piece of prior art. For a detail in a specific embodiment may be the very thing 

that can be put into a claim to make it allowable over the prior art. 

The purpose for which our Founding Fathers created the U.S. Patent System is 

to promulgate knowledge and technology. The ‘‘deal’’ with the federal government 

is that if an inventor provides enough details of the innovation so that someone 

skilled in the art could duplicate it, the government would provide the inventor an 

exclusive right (property right) for a limited time and keep others from using the 

invention. Therefore, there is no reason to hide the innovation and by virtue of 

knowing the ‘‘best mode,’’ others will learn how to utilize and improve upon it; 

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thereby building knowledge for the public, as a whole. So anything but ‘‘best mode’’

is in effect gaming the system and cheating the intent of the patent system itself. 

Please understand about this term ‘‘specific embodiment;’’ It is necessary when 

making claims (i.e., value points) for the patent. Eliminating the ‘best mode’ requirement may make it difficult for people to fully know and understand how the patent 

is supposed to work. The specific embodiment is the best mode of operation of the 

patented innovation. Not requiring best mode is yet another open invitation to game 

the proposed system by later filing the ‘true’ best mode which had been withheld 

to gain longer effective patent terms. 

Duty of Candor and Limitation of Inequitable Conduct 

While the legislation would codify a duty of candor (specific embodiment) owed by 

the patent applicants, it seeks to limit substantially the defense of inequitable conduct—intentional acts and omissions of a patent applicant or representative of a 

patent applicant during the course of obtaining a patent from the USPTO—by allowing it only to be pled where the court has first invalidated a claim and the accused infringer has a reasonable basis for alleging that (‘‘but for’’ conduct of the inventor) a reasonable patent examiner would not have allowed the invalidated claim 

to issue as part of the patent. 

Under the current system, the party alleging inequitable conduct must prove the 

threshold elements of materiality of the misstatement or omission and intent to deceive the patent office by clear and convincing evidence. The determination of inequitable conduct is committed to the district court’s discretion. Inequitable conduct 

is highly factual, often turning on credibility of witnesses. Courts have long been 

viewed as best able to resolve highly factual questions such as intent to deceive. 

Moreover, the defense is not available, under the current language, until after there 

is a finding of invalidity. In essence, the defense is not available to a defendant until 

it has already won the case. Under the legislative proposals, however, the matter 

would then be referred to the USPTO and leave sole determination in the office with 

no right to appeal. 

The American Intellectual Property Law Association interestingly states that ‘‘the 

current reliance on the courts for ‘enforcement’ of the duty (of candor) is problematic 

because it can lead to the punishment of benign deeds and the failure to punish bad 

deeds. The ultimate ineffectiveness of the inequitable conduct defense today is probably best illustrated by the fact that it is raised and litigated in almost every important patent case, but is rarely successful.’’ [emphasis added]. If it is rarely successful, it appears that the courts indeed are doing their jobs appropriately. 

Determination of Damages 

This provision seeks to limit the damages to the portion of the total value of the 

method or apparatus in question by the value of the overall invention (entire market 

value rule). It seems that the courts are the best place for this to continue to transpire because a broad-based law might have an adverse effect. For example, while 

attempting to hinder willful patent infringers, this provision would reward them. It 

also can be viewed as sort of compulsory licensing. 

If infringers are not worried about getting hit with the full market value of the 

overall invention, then they can simply view the infringement as a ‘‘cost of doing 

business.’’ Large corporations could hammer small businesses and inventors because 

the curtailing effect of damages due to the inventor would be lowered substantially. 

Let’s take a look at an example to determine damages by the ‘‘portion’’ of the 

‘‘total value’’—Think in electronic terms of a wheelbarrow. If the invention in question were the wheel, and the entire wheelbarrow sells for $100, what is the contribution of the wheel? Though the wheel may be considered only 10 percent of the 

cost, its contribution to the whole is infinite. It is the causal component and without 

it, the wheelbarrow is worthless. 

Let’s now consider that there is a wheel on the original product, but the new invention provides the equivalent of a ball or roller or other bearings which make the 

wheel work much better. What then is the value of the new invention? Would it be 

simply the cost of the bearings? 

With invention, one must consider what makes the invention enabled. Without 

the wheel or the bearing, it is not a wheelbarrow. Though other inventions may be 

more subtle, the value of the whole invention may rest upon the inventive content. 

This is because an improvement to the product may be the reason the newly combined devices can be sold at a premium (or even sold at all). That can be referred 

to as a ‘‘competitive edge,’’ and without the new invention, it is just another of the 

same. 

This is the purpose of invention, since all but the seminal inventions are improvements on other previous inventions. The first or seminal invention might be a reducVerDate 0ct 09 2002 11:36 Oct 28, 2005 Jkt 000000 PO 00000 Frm 00216 Fmt 6601 Sfmt 6621 G:\WORK\COURTS\091505\23434.000 HJUD1 PsN: 23434
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tion or means of implementing a discovery that has not before been implemented. 

From that time, inventions based on that invention are improvements that may 

make the previous improvement(s) un-saleable or primitive. In short, the value of 

the invention is often not the ‘‘part’’ or ‘‘portion’’ of the overall value but it is the 

gestalt of the system because without it there would be no reason to use or by the 

‘‘invention’’ over the same or similar product that does not include it. 

Limitation of the Doctrine of Willful Infringement 

This section proposes limitations on treble damages to specific case where the defendant (willful infringer) has received a detailed written notice from the patent 

owner specifying all of the charges. Contrary to limiting lawsuits as the authors 

claim as one of their objectives in this legislation, this one would create more problems and litigation. For instance, patent infringers wouldn’t be motivated to abide 

by the patent protections of the inventor in that they would pay less in damages 

related only to specific cases in combination with the market value changes. This 

would dampen efforts to thwart the stealing of intellectual property. 

Without the ability to sue for and collect damages because of ‘‘willful infringement,’’ there is little if any reason for larger and well-heeled companies to stop infringing. A perfect example of such a company was RCA under the leadership of 

David Sarnoff. He spent years and millions of dollars fighting valid patents of Philo 

Farnsworth of Utah, the actual and seminal inventor of the systems of electronic 

television we use today. As a side note, his statue, not Sarnoff’s, is in the U.S. Capitol to presumably celebrate his innovations in television. 

Here is one of the best examples of the hard road for the individual inventor—

even one who invented one of the greatest breakthrough products in the world. 

Farnsworth, like many inventors, had to crawl along to market, fighting the entrenched large companies (RCA) and new technology. In this case, Farnsworth was 

a 14-year-old Mormon farm boy who realized, while plowing his potato field, that 

one could draw a picture on a phosphorescent tube, one line at a time. This is a 

brilliant insight that took him years to perfect. And when he did the large companies—RCA, front and center—did their best to destroy him. This is but another example how the Professional Inventors Alliance believes the various versions of H.R. 

2795 will tip the scales in favor of the deep pocketed infringers to the detriment 

of the actual inventor. 

Because of the initial bill, references to proponents of the H.R. 2795 bill 

as introduced, and comments made by members of Congress concerning 

the following provisions, we want to go on record to discuss both injunctive relief and limiting the scope of continuations.

Limiting Injunctive Relief 

While eliminating injunctive relief was part of the base bill, it is highly likely that 

proponents of the original version will continue to push for this provision. So I want 

to pay attention to it briefly because we understand that there will be efforts to ‘‘put 

it back in the bill once it passes out of committee,’’ as was stated by a distinguished 

member who sits on this panel, while he was addressing supporters of the legislation. 

In short, this is compulsory licensing under another name, which can also be classified as a regulatory taking. This provision unconstitutionally undercuts the ‘‘exclusive rights of authors and inventors’’ granted under valid patents by allowing the 

courts to determine ‘‘equity’’ in considering ‘‘fairness of the remedy in light of all 

the facts and the relevant interest of the parties associated with the invention.’’

Simply put, infringement is infringement and patent holders, under this section, 

cannot be guaranteed exclusivity of their invention. Moreover, this essentially is 

compulsory licensing under another name. In effect it is a regulatory taking of private property. This would be an enormous blow to universities, the independent inventor and small business owner, especially those who are attempting to obtain venture capital for the commercialization of their invention(s). 

In the case above (Philo Farnsworth vis-a`-vis RCA) it took countless trials that 

in each one RCA lost. But they had power and money to try and return and retry 

ad nauseam until the Courts finally put their collective foot down. Few innovators 

and/or inventors could have survived this. 

Limiting the Scope of Applications 

Proponents of limiting the scope of continuing applications would keep the inventor from broadening the scope of his/her claim after the initial filing of the patent 

application. Adding this provision could have very damaging side effects. The proponents of the legislation claim they want to do away with subjectivity in the examination process. In our opinion, this may have the very opposite effect. 

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During the hearings on patent reform, Under Secretary Jon Dudas claimed that 

the increased mass of continuation applications has burdened the workforce. Also, 

that there are a ‘‘few’’ people who have used the continuation applications procedures to ‘‘track’’ the commercial development of a specific technology only to ‘‘spring 

it upon’’ an industry. So why not provide more money for more examiners to the 

USPTO instead of changing the entire patent system that will benefit only a select 

few? 

Thwarting the creativity of inventors by limiting claims to those in the initial application will severely hurt the patent system and unnecessarily deny applicants the 

right and opportunity to obtain protections for their entire inventions. Quite often 

applications for newly discovered ideas take a long time to go through the system. 

During that period, further ideas arise after the initial application is processed that 

had only the initial claims. By not allowing the inventor to make claims for his or 

her invention would lead to legitimate inventions going unprotected by the proposals before the subcommittee. At the same time it brings into question the constitutionality of the provision because the inventor is not provided such guarantees 

to exclusive rights. 

CONCLUSIONS

The Manager’s Amendment, as well as the other variations of the legislation, if 

passed as currently written, would be an enormous blow to universities, the independent inventor and small business owner, especially those who are attempting to 

obtain venture capital for the commercialization of their invention(s). As I indicated 

I my opening statement, the Supreme Court’s recent decision on Kelo is to private 

real property as many provisions of this proposed legislation is to private intellectual property. 

Taken in total, this would be the most comprehensive change to the patent system 

in history. At the same time, it would weaken the best patent system in the world 

to that of Europe and Japan. It would open our innovations to worldwide piracy 

through the many provisions in the bill—first to file, worldwide publication, third 

party input both pre- and post-grant, limitations on damages for infringement and 

prior user rights. Taken as a whole, patents as we know them today will be hugely 

devalued. 

There is nothing in any treaty to which the U.S. is a part that requires us to rewrite our laws. While there are minimum requirements, the U.S. can maintain its 

strong patent system and still be compliant with all treaties. On the other hand, 

other countries are free to strengthen their patent systems to allow innovation and 

advancement to occur in their countries. Even with current protections set forth in 

our Trade Related Intellectual Property System that supposedly were written to protect U.S. intellectual property holders, dozens of nations that signed onto the agreement have not honored their commitments. Likewise, the U.S. has not enforced 

them since 2000. 

It needs to be pointed out that the USPTO takes in more than adequate financial 

resources through fees (inventor taxes or innovation taxes), which since the early 

1990s have been diverted from use by the Patent Office by Congress and used for 

general obligations elsewhere in the federal budget. Recent temporary medications 

in our laws have changed this process thereby providing the USPTO with vastly 

more resources. Perhaps it would be better to allow the USPTO to hire more examiners to address the ‘‘burdened’’ workforce before altering (and severely weakening) 

the U.S. Patent System. 

It is clear that intellectual property experts from the international community 

also are calling for new patent procedures that will lessen unnecessary patent application filings. Even Japan’s ‘‘experts’’ are concerned with how unscrupulous companies in South Korea and China are utilizing the ‘‘open applications system’’ Congress is currently considering implementing in the U.S. To do so is frightening, not 

only from an independent inventor’s point of view, but also for national security considerations. Members of the Professional Inventors Alliance are clearly concerned 

with the proposals pushed by multinational corporations that, if enacted into law, 

will have a devastating impact on our country’s economy and innovative sprit and 

output! Please do your due diligence and listen not only to those promoting these 

provisions that will line their large and deep pockets. More importantly, please consider what the impact of changing the best system in the world and unilaterally 

dragging it down to mediocrity and how it will affect our country as a whole. 

On behalf of the Professional Inventors Alliance we respectfully request that Congress tread very, very carefully in this policy arena and not move forward with any 

of these controversial proposals that will benefit only a portion of those who benefit 

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from the current patent system. After all, it has served this country well for over 

200 years. 

Thank you for the opportunity to present the views of the Professional Inventors 

Alliance. We have many ideas about how to improve the system and when called 

upon to provide those, we will be happy to do so. Please feel free to contact me if 

anyone has any questions concerning this testimony.

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LETTER TO THE HONORABLE LAMAR SMITH, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TEXAS, AND CHAIRMAN, SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY, FROM CHRISTINE J. SIWIK, RAKOCZY MOLINO

MAZZOCHI SIWIK LLP, ON BEHALF OF BARR LABORATORIES, INC.


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Æ


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