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+ - HOLMES GROUP, THE FEDERAL CIRCUIT, AND THE STATE OF PATENT APPEALS
+
+[House Hearing, 109 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+ HOLMES GROUP, THE FEDERAL CIRCUIT, AND THE STATE OF PATENT APPEALS
+
+=======================================================================
+
+ 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
+
+ __________
+
+ MARCH 17, 2005
+
+ __________
+
+ Serial No. 109-7
+
+ __________
+
+ Printed for the use of the Committee on the Judiciary
+
+
+ Available via the World Wide Web: http://www.house.gov/judiciary
+
+
+ ______
+
+ U.S. GOVERNMENT PRINTING OFFICE
+20-019 WASHINGTON : 2005
+_____________________________________________________________________________
+For Sale by the Superintendent of Documents, U.S. Government Printing Office
+Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
+Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
+
+ COMMITTEE ON THE JUDICIARY
+
+ F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
+HENRY J. HYDE, Illinois JOHN CONYERS, Jr., Michigan
+HOWARD COBLE, North Carolina HOWARD L. BERMAN, California
+LAMAR SMITH, Texas RICK BOUCHER, Virginia
+ELTON GALLEGLY, California JERROLD NADLER, New York
+BOB GOODLATTE, Virginia ROBERT C. SCOTT, Virginia
+STEVE CHABOT, Ohio MELVIN L. WATT, North Carolina
+DANIEL E. LUNGREN, California ZOE LOFGREN, California
+WILLIAM L. JENKINS, Tennessee SHEILA JACKSON LEE, Texas
+CHRIS CANNON, Utah MAXINE WATERS, California
+SPENCER BACHUS, Alabama MARTIN T. MEEHAN, Massachusetts
+BOB INGLIS, South Carolina WILLIAM D. DELAHUNT, Massachusetts
+JOHN N. HOSTETTLER, Indiana ROBERT WEXLER, Florida
+MARK GREEN, Wisconsin ANTHONY D. WEINER, New York
+RIC KELLER, Florida ADAM B. SCHIFF, California
+DARRELL ISSA, California LINDA T. SANCHEZ, California
+JEFF FLAKE, Arizona ADAM SMITH, Washington
+MIKE PENCE, Indiana CHRIS VAN HOLLEN, Maryland
+J. RANDY FORBES, Virginia
+STEVE KING, Iowa
+TOM FEENEY, Florida
+TRENT FRANKS, Arizona
+LOUIE GOHMERT, Texas
+
+ Philip G. Kiko, Chief of Staff-General Counsel
+ Perry H. Apelbaum, Minority Chief Counsel
+ ------
+
+ Subcommittee on Courts, the Internet, and Intellectual Property
+
+ LAMAR SMITH, Texas, Chairman
+
+HENRY J. HYDE, Illinois HOWARD L. BERMAN, California
+ELTON GALLEGLY, California JOHN CONYERS, Jr., Michigan
+BOB GOODLATTE, Virginia RICK BOUCHER, Virginia
+WILLIAM L. JENKINS, Tennessee ZOE LOFGREN, California
+SPENCER BACHUS, Alabama MAXINE WATERS, California
+BOB INGLIS, South Carolina MARTIN T. MEEHAN, Massachusetts
+RIC KELLER, Florida ROBERT WEXLER, Florida
+DARRELL ISSA, California ANTHONY D. WEINER, New York
+CHRIS CANNON, Utah ADAM B. SCHIFF, California
+MIKE PENCE, Indiana LINDA T. SANCHEZ, California
+J. RANDY FORBES, Virginia
+
+ Blaine Merritt, Chief Counsel
+
+ David Whitney, Counsel
+
+ Joe Keeley, Counsel
+
+ Alec French, Minority Counsel
+
+
+ C O N T E N T S
+
+ ----------
+
+ MARCH 17, 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
+
+ WITNESSES
+
+Edward R. Reines, Esq., Weil, Gotshal & Manges, LLP
+ Oral Testimony................................................. 3
+ Prepared Statement............................................. 6
+Mr. Arthur D. Hellman, Professor of Law, University of Pittsburgh
+ School of Law
+ Oral Testimony................................................. 33
+ Prepared Statement............................................. 35
+Mr. Sanjay Prasad, Chief Patent Counsel, Oracle Corporation
+ Oral Testimony................................................. 61
+ Prepared Statement............................................. 62
+Meredith Martin Addy, Esq., Brinks, Hofer, Gilson & Lione
+ Oral Testimony................................................. 65
+ Prepared Statement............................................. 68
+
+ 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.......................................... 89
+Prepared Statement of the Honorable John Conyers, Jr., a
+ Representative in Congress from the State of Michigan.......... 90
+Prepared Statement of Joshua D. Sarnoff, on behalf of the
+ Electronic Frontier Foundation................................. 90
+Letter from James B. Kobak, Jr., to the Subcommittee on Courts,
+ the Internet, and Intellectual Property........................ 95
+Letter to the Honorable Lamar Smith, and the Honorable Howard L.
+ Berman from Michael K. Kirk, Executive Director, American
+ Intellectual Property Law Assocation (AIPLA)................... 99
+Status Report on Developments Relating to the Jurisdiction of the
+ United Sates Court of Appeals for the Federal Circuit submitted
+ by the Holmes Group Task Force, Intellectual Property
+ Committee, Section of Antitrust Law, American Bar Association,
+ and a Report on the United States Court of Appeals for the
+ Federal Court, Section of Antitrust Law, American Bar
+ Association.................................................... 102
+Letter from Meredith Martin Addy, Esq., Brinks Hofer Gilson &
+ Lione to Blaine Merritt, Esq., Chief Counsel, Subcommittee on
+ Courts, the Internet, and Intellectual Property, Committee on
+ the Judiciary, regarding corrections to written statement of
+ March 17, 2005................................................. 234
+
+
+ HOLMES GROUP, THE FEDERAL CIRCUIT, AND THE STATE OF PATENT APPEALS
+
+ ----------
+
+
+ THURSDAY, MARCH 17, 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 4:12 p.m., in
+Room 2141, Rayburn House Office Building, the Honorable Lamar
+Smith (Chair of the Subcommittee) presiding.
+ Mr. Smith. The Subcommittee on Courts, the Internet, and
+Intellectual Property will come to order.
+ Let me make some preliminary observations, and the obvious
+one is to thank you all for waiting. We had a series of votes
+that we were not expecting now, and that is what held us up.
+ In addition to that, those were the last votes, as they say
+in the cloakroom, of the day, of the week, and I think of the
+month. And so a lot of Members are rushing to the airport to
+catch flights or are heading back home. So the fact that there
+may or may not be very many Members present has nothing to do
+with the record that we establish or the importance that we
+consider the subject matter to be. So I want to reassure you
+about that.
+ We are, in fact, going to move forward and introduce
+legislation as a result of your testimony today. Hopefully by
+the time we finish we will have moved a little bit closer
+together--maybe I should say three of you have moved a little
+bit closer to the one, or one may have moved a little bit
+closer to the other three. And as you might anticipate, my line
+of questioning in just a few minutes will be to ask you all
+what you think of the others' suggestions and to try to see if
+we cannot reach if not a consensus, then some kind of a working
+agreement on the direction that we should go, because it is an
+important subject.
+ I will recognize myself for an opening statement, and then
+we will introduce our witnesses.
+ The purpose of today's hearing is to review the Supreme
+Court decision of Holmes Group versus Vornado Air Circulation
+Systems to determine whether the U.S. Court of Appeals for the
+Federal Circuit should have greater authority to hear all
+patent appeals from lower courts. In addition, the Subcommittee
+will explore the extent to which the Federal Circuit is
+accomplishing its main intended purpose of unifying patent law.
+ Congress created the Federal Circuit in 1982 by merging the
+Court of Claims and the Court of Customs and Patent Appeals.
+The history of the enacting legislation reveals that Congress
+believed the merger would reduce overlapping functions between
+the two courts and create greater administrative efficiency
+within the Federal system.
+ More importantly, patent practitioners, academics, and the
+Hruska Commission, which Congress created to study the Federal
+appellate structure, determined that the regional circuits were
+doing a poor job of developing coherent patent law.
+Specifically, litigants complained that the application of
+patent law to the facts of a case often produced different
+outcomes in different courtrooms in substantially similar
+cases. In other words, forum shopping was rampant, as some
+circuits were regarded as pro-patent and other circuits as
+anti-patent.
+ Arguably, channeling patent cases into a single appellate
+forum would create a stable, uniform law and would eliminate
+forum shopping. Greater certainty and predictability would
+foster technological growth and industrial innovation and would
+facilitate business planning.
+ Given this backdrop, some practitioners believe Holmes
+Group contravened the will of Congress when it created the
+Federal Circuit. The Holmes decision, which applies the well-
+pleaded complaint rule to patent appeals, induces litigants to
+engage in forum shopping among the regional circuits and State
+courts. Legal experts predict an erosion in the coherence of
+patent laws that has been steadily building since the circuit's
+creation in 1982.
+ In addition to debating the merits of Holmes Group, the
+Subcommittee will also explore the matter of how well the
+Federal Circuit is discharging its obligation to unify patent
+law. Opinions will always vary, but the Federal Circuit is
+probably viewed by most practitioners and others as having
+largely complied with its mandate to bring stability,
+uniformity, and predictability to patent law.
+ In contrast, critics of the court voice the same concerns
+today that were first articulated on the eve of its creation,
+namely, that the Federal Circuit is a specialty court which
+might take patents out of the mainstream of legal thought,
+expose the court to a one-sided view of the issues, and
+discourage qualified people from serving as judges. There is
+value, say these critics, in the tension produced by the
+percolation of ideas within the judiciary.
+ Moreover, since the Federal Circuit is more statistically
+apt to affirm patentee rights, critics of the patent system in
+general believe that the court may represent a roadblock to
+ongoing efforts by Congress and the Patent and Trademark Office
+to improve patent integrity or quality.
+ Now, we obviously have a good panel today, and we will look
+forward to hearing from you all on these issues.
+ Before you begin, I am going to ask you if you will stand
+and raise your right hands so I can swear you in.
+ [Witnesses sworn.]
+ Mr. Smith. Let me introduce the witnesses. Our first
+witness is Edward Reines, a partner in the technology
+litigation practice of Weil, Gotshal & Manges in Redwood
+Shores, California. Mr. Reines is Secretary of the Federal
+Circuit Bar Association and serves on its Board of Governors.
+He also teaches a patent litigation course at the University of
+California-Berkeley's Boalt Hall School of Law. Mr. Reines
+received his J.D. from Columbia Law School with honors and a
+B.S. from the University of Albany with honors as well.
+ Our next witness is Arthur Hellman, professor at the
+University of Pittsburgh School of Law. Professor Hellman has
+testified a number of times before our Subcommittee on courts
+and constitutional issues. He received his B.A. magna cum laude
+from Harvard College in 1963 and his J.D. in 1966 from Yale Law
+School.
+ Our next witness is Sanjay Prasad, the chief patent counsel
+for Oracle Corporation. He serves on the Board of Directors of
+the Intellectual Property Owners Association and is a past
+Chair of the IP Council's Roundtable of the Information
+Technology Association of America. Mr. Prasad earned his J.D.
+from Syracuse University College of Law, where he was an editor
+of the Law Review. He also earned a master's in computer
+engineering and a bachelor's in electrical engineering, both
+from Boston University.
+ Our final witness is Meredith Martin Addy, a partner in the
+Chicago law firm of Brinks Hofer Gilson & Lione, where she
+focuses on intellectual property litigation. Ms. Addy is a
+member of the U.S. Federal Circuit Advisory Council that meets
+with the Federal Circuit judges at least twice a year to
+discuss practice and procedure. Ms. Addy received B.S. and B.A.
+degrees from Rice University, her J.D. from Georgia, and a
+master's in law from the John Marshall Law School.
+ We welcome you all. Ms. Addy, I have to ask you: Do you
+have a time constraint or are you able to stay with us for the
+next 40 minutes?
+ Ms. Addy. I have no time constraints.
+ Mr. Smith. Okay. I understood you had to catch a plane, so
+good, I am glad you are with us. And I have to ask you: Are you
+from Texas, having gone to Rice University? I was curious.
+ Ms. Addy. I am originally from Georgia.
+ Mr. Smith. Originally from?
+ Ms. Addy. Georgia.
+ Mr. Smith. We welcome you all. Mr. Reines, if you will
+begin.
+
+ TESTIMONY OF EDWARD R. REINES, ESQ.,
+ WEIL, GOTSHAL & MANGES, LLP
+
+ Mr. Reines. Thank you very much, Chairman Smith. It is a
+pleasure to be able to participate in this hearing. I want to
+thank the Subcommittee and its staff for investing the time in
+the Holmes Group issue. This is, in my view, a great example of
+a problem that is best dealt with when it is manageable rather
+than waiting for it to be unmanageable before we turn to it.
+ As the Chairman accurately described, the 97th Congress in
+1982 passed the Federal Courts Improvement Act, and I think the
+consensus is that was a major legislative success. It
+eliminated forum shopping and it cleaned up the choice of law
+and issues that we had with different regional circuits going
+in their own directions.
+ The reintroduction of regional circuits creates a number of
+problems with forum shopping that will take place, I think,
+increasingly over time. This is the kind of issue where I think
+you are going to have a snowball effect. So what you have is,
+you know, as you start out, people don't know what the benefits
+are of forum shopping for different regional circuit courts
+because it's an unknown at this point. But once a decision
+falls one way or the other, one extreme or another, as is bound
+to happen, the concern level will grow as people try to use
+that decision and move their cases to those circuits, and then
+you get a snowball effect, as people find one circuit pro-
+patent or anti-patent.
+ The reason is because once the regional circuit says that
+it's going to apply its own law--and we've seen that; it's
+unlikely they're going to defer to a sister court--some of the
+old precedents will come back. People that are members of the
+Seventh Circuit are going to rely on old Seventh Circuit
+precedents that may be pro- or anti-patent. And so it's a
+reversion to pre-1982, and I think we can see that happening at
+the regional circuit level.
+ The State court problem, we are also seeing problems, and
+somewhat surprisingly, the problem there is moving more
+quickly. In the State of Indiana, in the Green case now, patent
+and copyright cases have to be within the jurisdiction of the
+State court if they're pled with a counterclaim. So right now
+in the State of Indiana, if there's a counterclaim that's
+copyright or patent, it will be adjudicated by the State court.
+ For centuries, patent and copyright cases have not been
+within the jurisdiction of the State courts. Just a few weeks
+ago, in New York, there was a recent decision from the Supreme
+Court. In New York, the trial court actually publishes some of
+their decisions, which you don't see frequently with State
+trial courts, and a few weeks ago there was a decision that
+happened to pop out of there that said we're going to take
+jurisdiction over copyright in the State court and New York
+Supreme Court, which if you've been there, you know that they
+don't really have a lot of background or familiarity with that
+subject matter--the point being that there's thousands of State
+courts around the country where--that aren't publishing
+opinions, that are presumably making similar decisions to the
+decision made by the New York State court. So the scope of the
+problem's under the radar at the trial court level. As those
+percolate up through the appeals, we'll see more and more
+problems. It's just going to take time, but it's going to have
+a snowball effect.
+ So I think there's no dispute among the witnesses and,
+frankly, I haven't heard significant dispute among the
+scholarship, either, that there is a problem, both State courts
+being in patent and copyright--exercising patent and copyright
+jurisdiction, and regional circuits starting to adjudicate
+patent cases. So I think that's clear.
+ Now, there's two questions. One is: Why address it now? The
+answer is to nip it in the bud. It's the type of problem that
+snowballs. Once you have vested interests that see an area of
+law that they can exploit--and I have no idea what that vested
+interest is going to be now, but there will be vested interests
+that will be developing as decisions continue to come out. And
+undoing that will be far more difficult than just stopping the
+problem before it becomes major.
+ On the solutions, the Federal Circuit Bar Association 2
+years ago came up with a solution, and there's really seven
+benefits to the solution that we propose. One is it's simple.
+And two is it's effective. We remove no text from any statute.
+We added a total of five words. Those words come directly from
+related statutes, so the words ``claim for relief'' is from
+Federal Rule of Civil Procedure 8 and is defined in that rule.
+There's no ambiguity about it beyond what pre-exists and is
+inevitable. So that's one.
+ The other word that we use is ``involving,'' and in the
+appellate statute for Federal Circuit jurisdiction now, it's
+used--this exact same word, ``involving''--involving a claim.
+So we use words right from the related statutes. We added only
+five words. We removed nothing.
+ There's no question from anyone that I've heard that it
+solves the problem. You might hear a nitpick about procedural
+this or that, but no one says that the solution of the Federal
+Circuit Bar Association won't solve the problem. And if you
+want to do something when you're attempting a solution, you
+want to make sure it works.
+ And the other important thing about the proposal is it
+keeps the structure the way it is now of having the district
+court jurisdiction the same as the appellate jurisdiction of
+the Federal Circuit for patent cases. So that it's derivative.
+The way it's drafted now, 1295 says the Federal Circuit has
+jurisdiction over patent cases where there's been original
+jurisdiction under 1338. So that way you keep that tied
+together. And also, the exclusivity is solved because that's in
+the second sentence and flows directly from there. So it keeps
+everything tied together.
+ Our proposal has the benefit of having studied over years.
+There has been at least 10, 12 Law Review articles focused on
+the subject, suggesting legislative solutions, looking at ours.
+And no one has come up with anything that is a significant
+issue. Scholars have been looking at it for some time.
+Professor Hellman recently came out with some comments about
+it, which is the first I have heard of anything that really
+argues that there are some issues with it.
+ The fourth thing I wanted to say is the main argument made
+is that this changes the formulation of the well-pleaded
+complaint rule. That's what you hear, and so one thing I've
+thought about, well, is that really as significant as it
+sounds? To me, it's not as sacred as some have wanted to make
+it.
+ For one thing, if you look at the Federal question
+jurisdiction, there are at least ten Federal question statutes
+right now on the books that don't employ that language. So you
+have admiralty, civil rights, inter-pleader, and maybe most
+significantly, Federal claims. The other main jurisdiction, as
+the Chairman stated earlier, within the Federal Circuit--
+there's two sort of large chunks. One is patents and one is
+Federal claims. And the Federal Circuit jurisdiction is
+derivative of both of those jurisdictions below.
+ The Federal claims statute doesn't use the well-pleaded
+complaint rule. It doesn't use the ``arising under.'' So the
+fact that so many different Federal question statutes don't use
+that suggests it really isn't sacred to use that particular
+formulation, as some assume, without any real analysis.
+ The second point about it is that you would think if it was
+such an important principle whose--where a change would
+threaten established bodies of laws and established rules, that
+someone would be able to point to one and would say--we'd use
+this study, someone would say, well, if you disconnect this
+from the standard formulation in a few of the Federal question
+statutes, you'll just have this problem or that problem. The
+only thing I have ever heard is Professor Hellman's criticisms,
+which are two. One of them is that we would be giving under
+this statute as amended jurisdiction over the civil action,
+meaning the whole case, and not on a per-claim basis under the
+patent jurisdiction statute; and that as a result of that, you
+would be giving jurisdiction to every claim included in such a
+case even if it's not on its own a Federal claim.
+ But that argument really doesn't make any sense and doesn't
+carry any water at all because the statute as it stands now
+says the exact same thing. The statute as it stands now says
+there will be jurisdiction over a civil action arising under a
+patent suit. So it purports to have the same general civil
+action----
+ Mr. Smith. Mr. Reines, would you conclude your testimony?
+ Mr. Reines. I will. Thank you very much.
+ I guess the final point I wanted to make on that is the
+second issue that's raised is that by adding the words ``claim
+for relief'' that you are disturbing existing law as to what's
+a claim for relief. That's an established phrase in the Federal
+Rules of Civil Procedure. I just don't see that as being a
+problem.
+ So we thank you very much for hosting here, and I hope to
+answer any questions you have.
+ [The prepared statement of Mr. Reines follows:]
+
+ Prepared Statement of Edward R. Reines
+
+ Mr. Chairman, Ranking Member Berman, and Members of the
+Subcommittee:
+ In Holmes Group v. Vornado Air Circulation Sys., Inc., 122 S.Ct.
+1889 (2002) (``Holmes Group''), the Supreme Court voided the
+established principle that all patent infringement claims are to be
+appealed to the Federal Circuit. Instead, the Supreme Court limited the
+appellate jurisdiction of the Federal Circuit to those cases in which
+the claim for patent infringement was first asserted in the complaint,
+and not in a responsive pleading. The Court explicitly based the
+ruling, not on the Congressional intent behind the relevant statutes or
+on any policy rationale, but on a literalistic parsing of the text of
+the particular statutes involved.
+ Regional circuits have now begun hearing patent infringement
+disputes on a sporadic basis, with a 20-year gap in their precedent.
+See, e.g., Telecomm Technical Services Inc. v. Rolm Co., 388 F.3d 820
+(11th Cir. 2004). Even more unsettling, Holmes Group has been construed
+to grant state courts jurisdiction over copyright and patent claims,
+even though such claims have been treated as within the exclusive
+jurisdiction of the federal courts for decades, if not centuries. See
+Green v. Hendrickson Publishers, Inc., 770 N.E. 2d 784 (Ind. 2002);
+Ross & Cohen LLP v. Eliattia (N.Y. Sup. Ct. 2005) (reprinted at 1/24/
+2005 N.Y.L.J. 18).
+ The Federal Circuit was unquestionably created, among other
+reasons, to resolve all patent appeals so as to create uniformity in
+the application and development of patent law. The post-Holmes Group
+cases make clear that the statutes governing the jurisdiction of the
+Federal Circuit, as interpreted, do not fulfill Congress' intent.
+Congress simply did not intend that the Federal Circuit would share the
+development of patent law with the state courts and regional federal
+circuit courts of appeal. Rather, Congress intended for the Federal
+Circuit to function as the unified court of appeals for patent claims
+for the many valid reasons documented in its committee reports. Thus, a
+problem exists because important statutes passed by Congress have been
+construed in a way that conflicts with the clear Congressional intent
+behind those very same statutes.
+ The Federal Circuit Bar Association, in June 2002, created a
+committee (``FCBA Committee'') to consider the wisdom of a legislative
+response to Holmes Group. The FCBA Committee, comprised of Don Dunner,
+Professor Mark Lemley, Molly Mosley-Goren, Joseph Re, Steve Carlson,
+and myself, included leading lights in academia and experienced members
+of the bar.\1\ After extensive deliberation and analysis, and the
+consideration of multiple alternatives, the FCBA Committee concluded
+that the proposal set forth below is the most appropriate legislative
+response to Holmes Group. See Report of the Ad Hoc Committee to Study
+Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 12 Fed.
+Cir. B.J. 713, 714 (2003).\2\ This proposal already enjoys the support
+of the Federal Circuit Bar Association (``FCBA''), the Intellectual
+Property Owners Association (``IPO''), and the United States Counsel
+for International Business (``USCIB''), among others.
+---------------------------------------------------------------------------
+ \1\ The following is a brief description of the members of the
+committee. Don Dunner is a partner at Finnegan, Henderson, Farabow,
+Garrett & Dunner L.L.P. and served as Chairman of the Advisory
+Committee to the Federal Circuit for the first ten years of the Court's
+existence and participated in the drafting of the Court's rules (1982-
+92). Mark Lemley is the William H. Neukom Professor of Law at Stanford
+Law School where he teaches intellectual property, computer and
+Internet law, patent law, and antitrust. Molly Mosley-Goren is of
+counsel at Fish & Richardson P.C., and author of Jurisdictional
+Gerrymandering? Responding to Holmes Group v. Vornado Air Circulation
+Systems, 36 J. Marshall L. Rev. 1 (2002). Joseph Re, Treasurer of the
+Federal Circuit Bar Association, is a partner at Knobbe, Martens, Olson
+& Bear, L.L.P. He clerked for the Honorable Howard T. Markey, Chief
+Judge of the U.S. Court of Appeals for the Federal Circuit. Steve
+Carlson is a practicing patent litigation attorney in Weil, Gotshal &
+Manges L.L.P.'s Silicon Valley Office. He clerked for the Honorable
+Paul R. Michel, Chief Judge of the U.S. Court of Appeals for the
+Federal Circuit. I chaired the committee.
+ \2\ A copy of this report is submitted with this testimony.
+---------------------------------------------------------------------------
+ The FCBA proposes a straightforward legislative solution. We
+recommend an amendment to 28 U.S.C. Section 1338(a) that simply adds
+the phrase ``involving any claim for relief,'' as follows:
+
+ The district courts shall have original jurisdiction of any
+ civil action involving any claim for relief arising under any
+ Act of Congress relating to patents, plant variety protection,
+ copyrights and trademarks. Such jurisdiction shall be exclusive
+ of the courts of the states in patent, plant variety protection
+ and copyright cases.
+
+28 U.S.C. Sec. 1338(a) (bold text proposed). Because the Federal
+Circuit's jurisdiction over patent infringement appeals is derivative
+of the district court's patent jurisdiction defined in the first
+sentence of Section 1338(a), this solution will ensure exclusive
+jurisdiction for the Federal Circuit over all patent appeals. In
+addition, because Section 1338(a) also addresses federal exclusivity
+over patent and copyright claims, this proposal will at the same time
+ensure exclusive federal jurisdiction over all patent and copyright
+claims.
+
+ I. THE PROBLEM
+
+A. The Pre-Federal Circuit Patent Law Morass
+ Before patent appeals were centralized in the Federal Circuit in
+1982, the patent law of the regional circuits was chaotic. The
+complexity of patent cases, both in technical and legal dimensions,
+exacerbated the tendency of circuits to develop conflicting bodies of
+law. The lack of uniformity was disadvantageous for several reasons.
+The disjointed state of the law created costly uncertainty for
+innovators, whether they sought to enforce ownership rights or faced
+threats of patent infringement suits. Further, the lack of uniformity
+created an incentive for forum shopping, which was exploited with zeal
+by litigants.
+ Scholars examining the state of patent law before the creation of
+the Federal Circuit routinely describe it disapprovingly. As one noted,
+``some circuits imposed higher standards on patentees attempting to
+assert the validity of their patents. Other circuits were known for
+being pro-patentee. Varying standards among the circuits and other
+factors caused uncertainty and great concern to American businesses
+that did not know if their patent protection would be sustained in
+court.'' See Christian A. Fox, On Your Mark, Get Set, Go! A New Race to
+the Courthouse Sponsored by Holmes Group, Inc. v. Vornado Air
+Circulation Systems, Inc., 2003 BYU L. Rev. 331, 333 (2003) (citations
+omitted). Of course, there is the famous story of then-Second Circuit
+Court of Appeals Judge Thurgood Marshall's visit with senators in
+advance of his confirmation hearing. When asked by one senator what he
+thought of patents, he reportedly replied: ``I haven't given patents
+much thought, senator, because I'm from the Second Circuit and as you
+know we don't uphold patents in the Second Circuit.''
+ These problems were not merely anecdotal. See, e.g., Manufacturing
+Research Corp. v. Graybar Electric Co., 679 F.2d 1355, 1361 n.11 (11th
+Cir. 1982) (describing the ``morass of conflict'' in the Eleventh
+Circuit, and the former Fifth Circuit, concerning the proper standard
+of proof needed to invalidate a patent). The uncertainty fostered by
+the disparate treatment of patent law in the regional circuits sparked
+legislative interest.
+
+B. Congress Carefully Studied The Problems In The Patent Area Before
+ Creating The Federal Circuit
+ In view of reports about problems in the patent area, Congress
+studied the issue extensively. After hearings and analysis, the House
+Report concluded that, in the patent area, ``current law lacks
+uniformity or is inconsistently applied.'' See H.R. Rep. No. 312, 97th
+Cong. 1st Sess. (1981) (``House Report'') at 20. Further, the House
+Report concluded that patent litigation has been ``characterized by
+undue forum-shopping and unsettling inconsistency in adjudications.''
+Id. Based on prior government reports, the House Report recognized that
+``patent law is an area in which the application of the law to the
+facts of a case often produces different outcomes in different
+courtrooms in substantially similar cases.'' Id. Indeed, the House
+Report observed that the evidence showed that ``some circuits are
+regarded as `pro-patent' and other `anti-patent,' and much time and
+money is expended in `shopping' for a favorable venue.'' Id. at 20-21.
+The House Report noted that ``[p]erceived disparities between the
+circuits have led to `mad and undignified races' between alleged
+infringers and patent holders to be the first to institute proceedings
+in the forum they consider most favorable.'' Id. at 21.
+ The House Report also concluded that the pre-1982 state of patent
+litigation was detrimental to the economy. For example, it noted that
+the lack of uniformity made it ``particularly difficult for small
+business to make useful and knowledgeable investment decisions where
+patents are involved.'' Id. at 22. The House Report explained that
+addressing the problems in the patent area ``will be a significant
+improvement from the standpoint of the industries and businesses that
+rely on the patent system.'' Id. at 23. S. Rep. No. 275, 97th Cong.,
+1st Sess. (1981) (``Senate Report'') at 5 (``[The Industrial Research
+Institute] polled its membership and found them overwhelmingly in favor
+of centralizing patent appeals in a single court.'').
+ The House Report summed up its analysis by observing that ``Patents
+have served as a stimulus to the innovative process'' and that
+improvements in the then-problematic state of patent law ``can have
+important positive ramifications for the nation's economy.'' Id. at 23.
+
+C. The Creation Of The Federal Circuit And The Present Statutory Scheme
+ After the Congressional inquiry into the problems in the patent
+area I just summarized, Congress passed the Federal Courts Improvement
+Act in 1982, intending to consolidate all patent appeals in a new
+court, the Federal Circuit Court of Appeals. Under that Act, the
+Federal Circuit's jurisdiction over patent cases is governed primarily
+by two statutory provisions. The Federal Circuit's jurisdiction is
+fixed with reference to the jurisdiction of federal district courts by
+28 U.S.C. Section 1295(a)(1), which provides in pertinent part:
+
+ The United States Court of Appeals for the Federal Circuit
+ shall have exclusive jurisdiction--
+
+ (1) of an appeal from a final decision of a district court of
+ the United States, the United States District Court for the
+ District of the Canal Zone, the District Court of Guam, the
+ District Court of the Virgin Islands, or the District Court for
+ the Northern Mariana Islands, if the jurisdiction of that court
+ was based, in whole or in part, on section 1338 of this title,
+ except that a case involving a claim arising under any Act of
+ Congress relating to copyrights, exclusive rights in mask
+ works, or trademarks and other claims under section 1338(a)
+ shall be governed by sections 1291, 1292, and 1294 of this
+ title;
+
+28 U.S.C. Sec. 1295(a)(1) (emphasis supplied).
+ The district court jurisdictional statute to which the Federal
+Circuit's appellate jurisdiction is fixed is 28 U.S.C. Section 1338(a).
+This statute provides for the district courts' original jurisdiction
+over patent infringement cases:
+
+ The district courts shall have original jurisdiction of any
+ civil action arising under any Act of Congress relating to
+ patents, plant variety protection, copyrights and trademarks.
+ Such jurisdiction shall be exclusive of the courts of the
+ states in patent, plant variety protection and copyright cases.
+
+28 U.S.C. Sec. 1338(a). Thus, in order for the Federal Circuit to have
+jurisdiction over an appeal, the district court's original jurisdiction
+must have arisen, at least in part, under an Act of Congress relating
+to patents.
+ As I noted earlier, Congress created the Federal Circuit with the
+goal of, among other things, promoting uniformity in patent law.
+Kennedy v. Wright, 851 F.2d 963, 966 (7th Cir. 1988) (``The Federal
+Circuit's exclusive jurisdiction under Sec. 1295(a)(1) was created,
+after all, so that there could be a uniform jurisprudence of patent
+law.''). The following are some of the statements in the legislative
+history that illustrate Congressional intent in this regard:
+
+ ``A single court of appeals for patent cases will
+ promote certainty where it is lacking to a significant degree
+ and will reduce, if not eliminate, the forum-shopping that now
+ occurs.'' House Report at 22.
+
+ ``For these reasons the establishment of a single
+ court to hear patent appeals was a major recommendation of the
+ Domestic Policy Review initiated by President Jimmy Carter. . .
+ .'' House Report at 22.
+
+ ``[T]he Industrial Research Institute, a private,
+ non-profit corporation with a membership of approximately 250
+ industrial companies that account for a major portion of the
+ industrial research and development in the United States,
+ polled its membership and found them overwhelmingly in favor of
+ centralizing patent appeals in a single court.'' House Report
+ at 22.
+
+ ``[T]he central purpose is to reduce the widespread
+ lack of uniformity and uncertainty of legal doctrine that exist
+ in the administration of patent law.'' House Report at 23.
+
+ ``Similarly, the uniformity in the law that will
+ result from the centralization of patent appeals in a single
+ court will be a significant improvement from the standpoint of
+ the industries and businesses that rely on the patent system.''
+ House Report at 23.
+
+ ``[The Industrial Research Institute] polled its
+ membership and found them overwhelmingly in favor of
+ centralizing patent appeals in a single court.'' Senate Report
+ at 5.
+
+ Because Congress was also deeply concerned with forum shopping in
+the patent area, Congress did not intend to limit Federal Circuit
+jurisdiction to patent claims raised in the complaint. Congress
+expressly contemplated that counterclaims for patent infringement could
+influence appellate jurisdiction. The legislative history reflected an
+intent to have all patent appeals go to the Federal Circuit, including
+appeals from cases with patent counterclaims, unless the patent law
+counterclaim was frivolous, trivial, or manipulatively included:
+
+ Federal District judges are encouraged to use their authority
+ under Federal Rules of Civil Procedure, see Rules 13(i), 16,
+ 20(b), 42(b), 54(b), to ensure the integrity of the federal
+ court of appeals by separating final decisions on claims
+ involving substantial antitrust issues from trivial patent
+ claims, counterclaims, cross-claims, or third party claims
+ raised to manipulate appellate jurisdiction.
+ . . .
+
+ If, for example, a patent claim is manipulatively joined to an
+ antitrust action but severed or dismissed before final decision
+ of the antitrust claim, jurisdiction over the appeal should not
+ be changed by this Act but should rest with the regional court
+ of appeals.
+
+Senate Report at 19-20. Recognizing that ``[i]mmaterial, inferential,
+and frivolous allegations of patent questions will not create
+jurisdiction in the lower court,'' Congress reasoned that ``therefore
+there will be no jurisdiction over these questions in the appellate
+court.'' Senate Report at 19. Thus, Congress was fully aware that a
+patent law counterclaim could direct a case to the Federal Circuit on
+appeal. Congress nonetheless did not call for a bar on Federal Circuit
+jurisdiction over patent law counterclaims. Rather, Congress relied on
+the fact that courts would be capable of sifting out sham or unrelated
+patent counterclaims designed to create jurisdiction improperly in the
+Federal Circuit.
+ Consistent with the legislative history, from the creation of the
+Federal Circuit in 1982 until Holmes Group issued in 2002, courts have
+uniformly interpreted the above jurisdictional statutes to grant the
+Federal Circuit exclusive jurisdiction over all patent appeals,
+regardless of the particular pleading containing the patent claim. This
+principle was first established in a series of Federal Circuit cases,
+including Schwarzkopf Development Corp. v. Ti-Coating, Inc., 800 F.2d
+240, 244 (Fed. Cir. 1986) (stating that bona fide counterclaims for
+patent infringement trigger Federal Circuit jurisdiction); In re
+Innotron Diagnostics, 800 F.2d 1077, 1080 (Fed. Cir. 1986) (asserting
+jurisdiction over patent infringement claim that was consolidated into
+pre-existing antitrust case); and Aerojet-General Corp. v. Machine Tool
+Works, Oerlikon-Buehrle Ltd., 895 F.2d 736 (Fed. Cir. 1990) (asserting
+jurisdiction over patent infringement counterclaim). This
+interpretation of the Federal Circuit's jurisdiction was shared by its
+sister circuits. See, e.g., Xeta, Inc. v. Atex, Inc., 825 F.2d 604 (1st
+Cir. 1987) (applying Schwartzkopf and Innotron to hold that ``the
+patent counts of a counterclaim fall within the district court's
+jurisdiction under 28 U.S.C. Sec. 1338.'').
+
+D. Holmes Group Decision
+ In Holmes Group, the Supreme Court removed the jurisdiction over
+appeals in cases involving patent counterclaims that the Federal
+Circuit had been exercising for two decades. According to the Supreme
+Court, whether a civil action ``arises under'' the patent law as
+provided by Section 1338(a) involves only an analysis of the complaint,
+not responsive pleadings. The Court reached this conclusion because of
+its belief that the particular language of Section 1338(a) necessarily
+implicates the well-pleaded complaint rule. Holmes Group, 122 S.Ct. at
+1893. The well-pleaded complaint rule allows a court to only consider
+the complaint allegations in determining what law a civil action
+``arises under.'' Id.
+
+E. Holmes Group Disrupted Two Fundamental Principles Of Intellectual
+ Property Litigation
+ Holmes Group has unsettled two fundamental principles governing the
+jurisdiction of federal courts over intellectual property cases. When a
+patent infringement claim is present in a case, but not in the
+complaint, the appeal must now go to one of the eleven regional
+circuits, not the Federal Circuit. On an irregular basis, the regional
+courts of appeals have now recommenced issuing opinions in patent
+infringement cases. See, e.g., Telecomm Technical Services Inc. v. Rolm
+Co., 388 F.3d 820 (11th Cir. 2004). More such appeals are on the way,
+as the Federal Circuit has transferred other cases out of its
+jurisdiction pursuant to Holmes Group. See, e.g., Medigene AG v. Loyola
+Univ., 2002 WL 1478674 (Fed. Cir. June 27, 2002) (transferring appeal
+to Seventh Circuit).
+ The second fundamental problem created by Holmes Group is the
+disruption of the long-standing principle that patent and copyright
+infringement claims are within the exclusive jurisdiction of the
+federal courts. See Puerto Rico Telephone Co. v. Telecommunications
+Regulatory Board, 189 F.3d 1, 13 (1st Cir. 1999) (recognizing that
+Section 1338 ``confer[s] on the federal courts exclusive jurisdiction
+over any action arising under a federal statute `relating to' patents
+and copyrights''); North Dakota v. Fredericks, 940 F.2d 333, 336 (8th
+Cir. 1991) (``Federal district courts have original and exclusive
+jurisdiction of patent-infringement cases.''); Schwarzkopf Development
+Corp. v. Ti-Coating, Inc., 800 F.2d 240, 244 (Fed. Cir. 1986)
+(``Adjudication of a patent counterclaim is the exclusive province of
+the federal courts.''); Bassett v. Mashantucket Pequot Tribe, 204 F.3d
+343, 352 (2d Cir. 2000) (``[T]he Copyright Act gives federal courts
+exclusive jurisdiction to enforce its provisions.''). Holmes Group has
+been interpreted to limit federal exclusivity to cases where the patent
+or copyright claim is asserted in a well-pleaded complaint. See Green
+v. Hendrickson Publishers, Inc., 770 N.E. 2d 784 (Ind. 2002); Ross &
+Cohen LLP v. Eliattia (N.Y. Sup. Ct. 2005) (reprinted at 1/24/2005
+N.Y.L.J. 18).
+ In Green, the Supreme Court of Indiana explained that ``until very
+recently the logic and language of a consistent body of federal
+decisions appeared to preclude a state court from entertaining a
+counterclaim under copyright [or patent] law.'' After thorough
+analysis, Green found this logic ``trumped'' by Holmes Group, and
+concluded that state courts may now adjudicate patent and copyright
+claims asserted in counterclaims and other responsive pleadings.
+Similarly, in Ross, the state court determined that, because a
+copyright infringement claim was first asserted in a counterclaim,
+``under the well-pleaded complaint rule, this Court [a state court] has
+jurisdiction to determine the counterclaim on the merits.'' Under Green
+and Ross, state courts will have jurisdiction over patent and copyright
+infringement counterclaims even though federal courts have had
+exclusive jurisdiction over such claims since the 1800s.
+ The reallocation of jurisdiction stemming from Holmes Group means
+the Federal Circuit no longer has unified jurisdiction over patent
+appeals because regional circuit courts of appeal and state courts will
+now also decide such cases. Although some degree of comity may be given
+to Federal Circuit law, the regional circuits may believe they are
+bound by their own 20+ year old precedent. Indeed, the Telecomm court
+characterized Federal Circuit's precedent as merely ``persuasive
+authority.'' Telecomm, 388 F.3d at 826. Thus, under Holmes Group, each
+circuit would have to decide whether to bind itself to Federal Circuit
+law, apply the old patent law it created before patent jurisdiction was
+removed from it in 1982, or simply create new precedents from scratch.
+In Telcomm, the eleventh circuit attempted to avoid this conundrum by
+citing no patent law precedent of any kind in deciding the complex
+patent law issue it faced. Telecomm, 388 F.3d at 826.
+ The inevitable lack of uniformity between Federal Circuit law and
+the regional circuit and state court precedents will create an
+incentive for a return to the forum shopping that the Federal Circuit
+was designed to eliminate. Over time, as the various regional circuits
+and state court systems renew adjudicating patent disputes, more
+doctrinal differences will be inevitable. As a consequence, wasteful
+forum shopping will surely resume. In short, while manageable now, this
+problem is bound to snowball.
+ Justice Stevens' concurrence in Holmes Group suggests that one
+justice believes that allowing conflicting patent appeals to percolate
+through the regional circuits (and through the state courts under Green
+and Ross) could be beneficial. See 122 S.Ct. at 1898 (Stevens, J.,
+concurring). However, we believe that Congress had valid reasons for
+rejecting that approach and concluding that any such benefit is far
+outweighed by the resulting cost of doctrinal unpredictability and
+forum shopping. Because a substantial, but sporadic number of cases
+will be appealed to the regional circuits or state courts of appeals,
+patent law outside of the Federal Circuit will develop in fits and
+starts. It is doubtful that any coherent body of non-Federal Circuit
+patent law will develop in the foreseeable future.
+ Other commentators have drawn similar conclusions about the cost of
+Holmes Group. For example, commentators have emphasized the danger of
+the resurrection of ``dead letter'' anti-patent precedents from
+particular circuits. See, e.g., Elizabeth I. Rogers, The Phoenix
+Precedents: The Unexpected Rebirth of Regional Circuit Jurisdiction
+over Patent Appeals and the Need for a Considered Congressional
+Response, 16 Harv. J.L. & Tech. 411, 462 (2003) (``In those cases in
+which a patentee is unlucky enough to find herself stuck in a situation
+in which Vornado will vest appellate review in a regional circuit whose
+long-dormant precedents were unfriendly to patents, certain patent
+rights that were previously fairly stable and predictably valued may
+now be rendered worthless.''). Doctrinal variances between circuits may
+restart the forum shopping that Congress sought originally to minimize.
+See, e.g., Christian A. Fox, On Your Mark, Get Set, Go! A New Race to
+the Courthouse Sponsored by Holmes Group, Inc. v. Vornado Air
+Circulation Systems, Inc., 2003 BYU L. Rev. 331, 352 (2003) (``[T]he
+Court's decision may reintroduce inconsistencies and forum shopping in
+patent law cases and spark races to the courthouse between patentees
+and alleged patent infringers. In summary, [Holmes Group] could
+undercut the foundation of uniform patent law that the Federal Circuit
+has helped establish over the past twenty-one years, a foundation that
+provides vital support for the economy and businesses of the United
+States.''). Many agree that Congress will have to act to repair the
+dangerous condition posed by Holmes Group. See, e.g., Scott W.
+Hackwelder, An Argument for Congressional Amendment of Federal Circuit
+Jurisdiction in Response to Holmes Group, Inc. v. Vornado Air
+Circulation Systems, Inc., 54 Syracuse L. Rev. 475, 498 (Warning that
+``adverse effects stemming from the Holmes Group decision may have to
+be realized before Congress again takes corrective action to address
+the issue of patent law uniformity.''). One commentator explained the
+need for curative legislation in direct terms:
+
+ The original intent of Congress in forming the Federal Circuit
+ was to establish some continuity and consistency when settling
+ patent law disputes. This decision is contrary to Congress'
+ clear mandate to have the Federal Circuit settle patent law
+ disputes. Now it's just a question of how long it will take for
+ a bill to be introduced which will reestablish the Federal
+ Circuit's jurisdiction over patent law disputes.
+
+Joseph Etra, Holmes v. Vornado: A Radical Change In Appellate
+Jurisdiction, 5 Colum. Sci. & Tech. L. Rev. 4.
+ Congress should not wait until a critical mass of adverse effects
+materializes and the problem gets out of hand. Once inconsistent
+decisions begin to populate the law of the regional circuits, parties
+may develop vested interests in maintaining the opportunity to shop in
+particular forums. At that point, the reform which now has broad
+support will become much more difficult to achieve.
+
+ II. THE PROPOSED SOLUTION
+
+ The Supreme Court expressly resolved Holmes Group on a technical
+parsing of the relevant statutes, and did not even purport to conform
+its holding to Congress' intent in creating the Federal Circuit. See
+Holmes Group, 122 S.Ct. at 1895 (``Our task here is not to determine
+what would further Congress' goal of ensuring patent-law uniformity,
+but to determine what the words of the statute must fairly be
+understood to mean.''). The Supreme Court, and Justice Scalia in
+particular, have repeatedly emphasized that where defects in statutory
+language fail to give effect to Congressional intent, it is the role of
+Congress, not the courts, to re-draft the relevant statute. See, e.g.,
+Hartford Underwrites Ins. Co. v. Union Planters Bank, 530 U.S. 1, 13-14
+(2000) (Scalia, J.) (``It suffices that the natural reading of the text
+produces the result we announce. Achieving a better policy outcome--if
+what petitioner urges is that--is a task for Congress, not the
+courts.'').
+ After extensive deliberation, the FCBA has concluded that the most
+appropriate legislative response to Holmes Group is to amend Section
+1338(a) to read as follows:
+
+ The district courts shall have original jurisdiction of any
+ civil action involving any claim for relief arising under any
+ Act of Congress relating to patents, plant variety protection,
+ copyrights and trademarks. Such jurisdiction shall be exclusive
+ of the courts of the states in patent, plant variety protection
+ and copyright cases.
+
+28 U.S.C. Sec. 1338(a) (bold text proposed). The FCBA believes that
+this surgical insertion of five words into the jurisdictional statute
+is the most logical and elegant solution to Holmes Group. However, the
+overriding concern of the FCBA is to see the Holmes Group problem
+fixed. The FCBA is not preoccupied with pride of authorship in a
+particular solution or in mere semantic differences between this
+proposal and others. In the course of its study, the FCBA considered
+many potential legislative solutions. See, e.g., Report of the Ad Hoc
+Committee to Study Holmes Group, Inc. v. Vornado Air Circulation
+Systems, Inc., 12 Fed. Cir. B.J. 713, 719-23 (2003). The FCBA selected
+the solution I advocate now because it offers the following advantages:
+
+ It minimizes additions and deletions to the current
+ statutory language and borrows existing phraseology from
+ related statutes and rules.
+
+ It exploits the fact that Federal Rules of Civil
+ Procedure 8 defines ``claim for relief,'' broadly to include
+ ``an original claim, counterclaim, cross-claim, or third party
+ claim'' and thus employs an established term with known
+ meaning. Fed. R. Civ. P. 8.
+
+ It exploits the fact that 28 U.S.C. Sec. 1295(a)(1),
+ which sets forth Federal Circuit appellate jurisdiction, uses
+ the term ``involving a claim'' and thus employs an established
+ term with known meaning.
+
+ It ensures that federal courts shall have exclusive
+ jurisdiction over all claims for relief arising under the
+ patent laws.
+
+ It ensures that the Federal Circuit will have
+ jurisdiction over all appeals from civil actions in which
+ either party asserted a claim for relief arising under the
+ patent laws.
+
+In short, inserting the phrase ``involving any claim for relief'' into
+28 U.S.C. Sec. 1338(a) elegantly restores both federal court
+exclusivity over patent and copyright cases and federal circuit
+jurisdiction over patent claims in one stroke. It preserves the
+existing language of the various statutes while adding only a single
+well-understood phrase, which draws meaning from Federal Rule of Civil
+Procedure 8 and 28 U.S.C. Section 1295(1).
+ Since the FCBA Committee recommended this solution in 2002, it has
+received widespread support. The FCBA has evaluated the comments of
+which it has learned. They have generally been quite minor. The main
+comments are that: (1) there might be undesired, incidental procedural
+hitches resulting from the particular language proposed, (2) defendants
+may include non-bona fide patent counterclaims in a case so the Federal
+Circuit receives an appeal, and (3) a more far-reaching approach might
+solve more problems. The first critique has been articulated by another
+witness, Professor Hellman, and I start there first.
+
+A. Professor Hellman's Critique Of The FCBA Proposal
+ Professor Hellman agrees that Holmes Group has created a
+significant problem and that a solution is warranted. He has put
+forward an alternative proposal based on two issues he has with the
+FCBA solution.
+ First, Professor Hellman expresses concern that amending 28 U.S.C.
+Section 1338(a) in the manner suggested by the FCBA could reopen the
+interpretation of precedents on an otherwise unrelated topic.
+Specifically, Professor Hellman raises an issue as to whether the FCBA
+proposal will cause a reconsideration of when a claim that is not a
+traditional patent or copyright infringement claim implicates patent or
+copyright issues sufficiently that it should be treated as a patent or
+copyright claim for purposes of jurisdiction. In Christianson v. Colt
+Industries, 486 U.S. 800, 808-09 (1988), the Supreme Court ruled that,
+for jurisdictional purposes, a non-patent claim that depends ``on
+resolution of a substantial question of federal patent law'' is
+effectively a patent ``claim'' for jurisdictional purposes
+Christianson, 486 U.S. at 808-09. In copyright law, copyright
+jurisdiction turns on whether ``a complaint alleges a claim or seeks a
+remedy provided by the Copyright Act.'' Bassett v. Mashantucket Pequot
+Tribe, 204 F.3d 343, 355 (2d Cir. 2000).
+ The FCBA solution is not designed to address this issue at all.
+Further, there is no reason to believe the proposed addition would
+affect this issue. Both the statute in its current form and the
+proposed change require the presence of a claim for relief. The
+judicial interpretation on what constitutes such a claim thus should
+not be affected by the proposed change.
+ Professor Hellman's concern in this regard would apply with equal
+or greater force to what I understand to be his own proposal. Both his
+re-write of the Federal Circuit's appellate jurisdiction provision (28
+U.S.C. Sec. 1295(a)(1)), and his rewrite of the federal exclusivity
+provision (28 U.S.C. Sec. 1338(a)), track the FCBA proposal and add the
+phrase ``claim for relief.'' This observation is not intended as a
+criticism of Professor Hellman's proposal. Neither proposal raises a
+significant issue in this regard.
+ Second, Professor Hellman theorizes that that the FCBA's proposed
+addition of language to 28 U.S.C. Section 1338(a) may somehow render
+obsolete supplemental jurisdiction for certain claims by giving the
+district court original jurisdiction over the entire ``civil action''
+rather than just the specific federal claims within the case. This
+critique has no force because 28 U.S.C. Section 1338(a) as it presently
+stands already gives district courts original jurisdiction over the
+entire civil action. The jurisdiction statute currently states: ``The
+district courts shall have original jurisdiction of any civil action
+arising under. . . .'' 28 U.S.C. Sec. 1338(a) (emphasis supplied). The
+FCBA proposal preserves that language: ``The district courts shall have
+original jurisdiction of any civil action involving any claim for
+relief arising under. . . .'' Thus, once a civil action triggers
+jurisdiction under 28 U.S.C. Sec. 1338(a) by including a patent or
+copyright claim, the scope of original jurisdiction remains consistent
+with pre-Holmes Group law.
+ In sum, while it is, of course, possible that unintended
+consequences might be generated by any amendment to Section 1338, the
+FCBA proposal, which is over two years old, has been thoroughly
+evaluated. As demonstrated by the relatively minor concerns expressed
+by Professor Hellman, the proposal has withstood that scrutiny
+remarkably well.
+
+B. The Manipulative Use Of Patent Counterclaims
+ There has been some concern expressed that, if patent counterclaims
+create appellate jurisdiction in the Federal Circuit--as they did prior
+to Holmes Group, parties may manipulatively include such counterclaims
+in a case so that the Federal Circuit would hear an appeal it might not
+otherwise have jurisdiction over. At the outset, there is no evidence
+that this has been a problem over the last twenty years, despite the
+fact that the Federal Circuit could have exercised jurisdiction over
+such cases before Holmes Group. In any event, this concern ignores the
+wealth of case management tools at the disposal of district court
+judges to combat any such abuses.
+ As explained above, when Congress created the Federal Circuit, it
+expected that patent counterclaims would trigger Federal Circuit
+appellate jurisdiction. To address potential abuse, Congress
+specifically encouraged district courts to use all the procedural
+devices at their disposal to prevent the manipulation of appellate
+jurisdiction through the improper addition of counterclaims or
+otherwise.\3\ For example, if a counterclaim is frivolous or a sham,
+the district court can readily dismiss it and strike it from the case.
+If a patent counterclaim is unrelated to the claims in the complaint,
+the district court can readily sever or otherwise separate that
+counterclaim from the case so that improper manipulation does not take
+place.\4\
+---------------------------------------------------------------------------
+ \3\ Senate Report at 19-20 (``Federal District judges are
+encouraged to use their authority under Federal Rules of Civil
+Procedure, see Rules 13(i), 16, 20(b), 42(b), 54(b), to ensure the
+integrity of the federal court of appeals by separating final decisions
+on claims involving substantial antitrust issues from trivial patent
+claims, counterclaims, cross-claims, or third party claims raised to
+manipulate appellate jurisdiction. . . . If, for example, a patent
+claim is manipulatively joined to an antitrust action but severed or
+dismissed before final decision of the antitrust claim, jurisdiction
+over the appeal should not be changed by this Act but should rest with
+the regional court of appeals.'') (emphasis supplied).
+ \4\ Some have implied that it might be desirable to keep the status
+quo so that the antitrust issues that necessarily have patent issues
+embedded in them will be occasionally resolved by the federal regional
+circuit courts of appeal or state courts. This makes no sense for a
+host of reasons. First, the Federal Circuit grants fair treatment to
+antitrust issues. Second, if the Federal Circuit were not doing so,
+obviously the Supreme Court would quickly step in and remedy the
+situation. The Supreme Court has not shown itself to be shy when it
+comes to the Federal Circuit or any other court. Third, having cases
+only irregularly appealed to the eleven regional circuits is a poor way
+to develop a coherent body of precedent to compete with Federal Circuit
+law. Fourth, if a regional circuit did create materially different
+rules than the Federal Circuit, because jurisdiction would turn on
+which pleading contained the patent claim, unseemly races to the Court
+would necessarily follow. The Federal Circuit was created precisely to
+avoid ``expensive, time-consuming and unseemly forum-shopping.'' House
+Report at 20. Fifth, patent law more broadly would suffer because there
+would be no solution to the Holmes Group problems identified earlier in
+my testimony.
+---------------------------------------------------------------------------
+C. There Is No Need For Changes To Other Aspects Of The Federal
+ Circuit's Patent Appeal Jurisdiction
+ The FCBA has considered the effect of Holmes Group on a variety of
+procedural contexts, such as amended complaints, patent claims that are
+resolved pre-appeal, and consolidated actions. For the reasons below,
+the FCBA believes that a legislative response to Holmes Group should
+not specifically address these other procedural contexts.
+
+1. Amended Complaints
+ The FCBA has considered whether the legislative proposal needs to
+contain express language to ensure that patent claims brought first in
+amended pleadings trigger Federal Circuit jurisdiction. The FCBA
+concludes that the proposed language is sufficient to give the Federal
+Circuit jurisdiction over appeals in cases where patent claims were
+interjected in amended pleadings. As proposed, 28 U.S.C. Section
+1338(a) would be amended to refer to ``any claim for relief'' arising
+under patent law, which should adequately address amended pleadings.
+Moreover, existing law appears to hold that the Federal Circuit
+properly has jurisdiction over appeals where patent claims were first
+stated in amended pleadings.
+ Indeed, existing caselaw routinely confirms that, in jurisdictional
+disputes, the amended pleadings govern. See, e.g., Johnson v. Hussmann
+Corp., 805 F.2d 795 (8th Cir. 1986) (overruled on other grounds)
+(``Appellant's amended complaint had been artfully pleaded to avoid
+federal jurisdiction.''); Coastal Corp. v. Texas Eastern Corp., 869
+F.2d 817 (5th Cir. 1989) (``Coastal's amended complaint filed on
+January 31 conferred jurisdiction on the district court at least from
+thence forward. . . .''); Boelens v. Redman Homes, Inc., 759 F.2d 504
+(5th Cir. 1985) (finding federal jurisdiction lacking, because
+``plaintiffs did not allege in the amended complaint or the pretrial
+order that the defendants' warranty, on its face, violated any of the
+substantive provisions of [federal law].'').
+ Indeed, Justice Stevens recognized in his concurrence in Holmes
+Group that the Federal Circuit would, indeed, have jurisdiction over
+appeals containing an amended claim for patent infringement. See Holmes
+Group, 122 S.Ct. at 1896 (Stevens, J., concurring) (``Thus, if a case
+began as an antitrust case, but an amendment to the complaint added a
+patent claim that was pending or was decided when the appeal is taken,
+the jurisdiction of the district court would have been based `in part'
+on 28 U.S.C. Sec. 1338(a), and therefore Sec. 1295(a)(1) would grant
+the Federal Circuit jurisdiction over the appeal.'').
+ Thus, the FCBA has concluded that under existing law, the Federal
+Circuit may properly exercise appellate jurisdiction over cases in
+which a patent claim was first asserted in an amended pleading.
+Accordingly, the proposed amendment does not need to specifically refer
+to amended pleadings.
+
+2. Patent Claims Resolved Pre-Appeal
+ The FCBA has also determined that the legislative proposal need not
+specifically address situations in which the patent claims asserted at
+the district court level are no longer at issue on appeal. Because no
+patent claims are left in such cases, the uniformity of patent law is
+not implicated by where such appeals are adjudicated. Furthermore, the
+general rule under existing law is to fix appellate jurisdiction at the
+outset of a case so that the parties and the trial court know the
+governing law for purposes of resolving motions, writing jury
+instructions, and generally applying the law in the district court.
+Whether a patent claim is resolved pre-appeal generally has no impact
+on appellate jurisdiction, assuming it was bona fide. See Kennedy v.
+Wright, 851 F.2d 963 (7th Cir. 1988) (Easterbrook, J.) (rejecting
+notion that Federal Circuit jurisdiction should reflect the issues
+actually litigated in a case, and transferring appeal from contract-
+based ``patent ownership'' phase of bifurcated patent suit to the
+Federal Circuit); Abbott Labs. v. Brennan, 952 F.2d 1346 (Fed. Cir.
+1991) (``The path of this appeal was established with the filing of the
+civil action to obtain a patent in accordance with 35 U.S.C. Sec. 146
+and although the Sec. 146 issue was not appealed, this appeal of the
+other issues was correctly taken to the Federal Circuit.'').
+ A limited exception to this rule is for voluntary dismissals of
+patent claims. Where a plaintiff voluntarily dismisses its patent
+claims, the courts have found jurisdiction to lie in the regional
+circuits. In Gronholz v. Sears, Roebuck and Co., 836 F.2d 515 (Fed.
+Cir. 1987), after plaintiff filed a two-count complaint for patent
+infringement and for unfair competition, and subsequently voluntarily
+dismissed its patent count, the Federal Circuit treated plaintiff's
+voluntary dismissal of its patent count as an amendment of the original
+complaint, and ruled that ``[a]pplying the well-pleaded complaint rule
+to the complaint then remaining, we determine that the present suit
+does not `arise under' the patent laws for jurisdictional purposes.''
+The Ninth Circuit agreed with this approach in Denbicare U.S.A., Inc.
+v. Toys R Us, Inc., 84 F.3d 1143 (9th Cir. 1996) (exercising
+jurisdiction over appeal of remaining claims after patent-related claim
+was voluntarily dismissed).
+ The FCBA has concluded that the legislative proposal need not
+specifically address cases where patent claims are resolved pre-appeal.
+Congress' goal to promote uniformity in patent law does not appear to
+be frustrated in this situation because in these cases the patent
+claims are not at issue on appeal. Because the Federal Circuit will
+generally have jurisdiction over appeals from cases having patent
+counts in the plaintiff's pleadings, there is nothing to ``fix''
+legislatively concerning these cases.
+
+3. Consolidated Cases
+ The FCBA has considered whether the proposed legislation should
+contain express provisions concerning consolidated cases. Consolidated
+suits present a wide variety of procedural contexts, depending on
+whether the suits are consolidated for trial or only pre-trial
+proceedings, the issues raised in the non-patent suits, the number and
+identity of the parties, the timing of the suits, and the terms of the
+district court's consolidation order. Because of the wide range of
+procedural postures presented by consolidated suits, the FCBA believes
+that appellate jurisdiction over these disputes is best left to case-
+by-case development. As noted above, district courts have powerful
+tools to structure cases in the interests of justice.
+ In cases consolidated for a merits determination, the Federal
+Circuit and the regional circuits have often ruled that non-patent and
+patent suits should all be appealed to the Federal Circuit. For
+example, in Interpart Corp. v. Italia, 777 F.2d 678 (Fed. Cir. 1985),
+Interpart's 1980 non-patent suit against Vitaloni was consolidated with
+Vitaloni's 1982 patent suit against Interpart. After Vitaloni lost in
+both cases, Vitaloni appealed the non-patent claims to the Ninth
+Circuit and the ``exceptional case'' ruling from its patent claims to
+the Federal Circuit. Both courts of appeals agreed that the Federal
+Circuit should have jurisdiction over both suits. Id. at 680-81. The
+Federal Circuit followed this approach in In re Innotron Diagnostics,
+800 F.2d 1077 (Fed. Cir. 1986).
+ In Nilssen v. Motorola, Inc., 255 F.3d 410 (7th Cir. 2001), Judge
+Easterbrook suggested that the proper approach to consolidated
+proceedings is for the district court to order them consolidated for
+appeal where appropriate. In Nilssen, after the district court severed
+the patent and non-patent cases, and the Federal Circuit declined
+jurisdiction over the appeal from the non-patent cases, the Seventh
+Circuit ordered the two fragments re-consolidated, and ordered that the
+``cases must be rejoined for all purposes, including any appeal from
+the final judgment.''
+ In Tank Insulation Int'l, Inc. v. Insultherm, Inc., 104 F.3d 83
+(5th Cir. 1997), the Fifth Circuit found jurisdiction over an appeal
+from the antitrust-related component of a previously consolidated suit
+involving patent and antitrust components. Had the components remained
+consolidated at the time of appeal, the Fifth Circuit stated it would
+not have had jurisdiction: ``So long as the actions were consolidated,
+section 1295 unquestionably vested the Federal Circuit with exclusive
+jurisdiction of the entire action; however, when the consolidation
+order was vacated, the antitrust action returned to its original,
+independent status.'' Id. at 85.
+ As for cases consolidated only for pre-trial purposes, in FMC Corp.
+v. Glouster Eng'g Co., 830 F.2d 770 (7th Cir. 1987) (Posner, J.), the
+Seventh Circuit ruled that discovery-related disputes arising from the
+antitrust-related component of a consolidated action should be appealed
+to the regional circuit, not the Federal Circuit, because consolidation
+for pre-trial purposes should not direct the ultimate appeal in the
+antitrust suit to the Federal Circuit.
+ The FCBA concludes that because of the wide variety of procedural
+contexts presented in consolidated cases, questions of appellate
+jurisdiction over these disputes are best addressed on a case-by-case
+basis. For cases consolidated for a merits determination, many courts
+have found that the best approach is to direct the entire action to the
+Federal Circuit for appeal. For consolidated cases only involving
+patent counterclaims, a legislative response directed to the
+counterclaim issue should be sufficient, without generally addressing
+consolidated suits.
+
+ III. CONCLUSION
+
+ Holmes Group has been implemented to give state courts and regional
+federal circuit courts of appeal jurisdiction over patent claims. This
+conflicts sharply with the Congressional intent behind the creation of
+the Federal Circuit, not to mention a host of policy considerations.
+ We believe the most appropriate response to Holmes Group (as well
+as Green and Ross) is to amend 28 U.S.C. Sec. 1338 to ensure that the
+district courts have original jurisdiction over all claims for relief
+arising under the patent laws. Because the Federal Circuit's
+jurisdiction is derivative of the district court's jurisdiction under
+Section 1338(a), this amendment will vest the Federal Circuit with
+appellate jurisdiction over all cases containing patent infringement
+claims. Furthermore, this amendment will ensure that there is exclusive
+federal jurisdiction over all patent infringement claims.
+
+ ATTACHMENT
+
+
+
+
+ Mr. Smith. Thank you, Mr. Reines.
+ Professor Hellman?
+
+TESTIMONY OF ARTHUR D. HELLMAN, PROFESSOR OF LAW, UNIVERSITY OF
+ PITTSBURGH SCHOOL OF LAW
+
+ Mr. Hellman. Thank you, Mr. Chairman. I appreciate this
+opportunity to discuss this seemingly narrow but, in fact,
+quite important subject.
+ As you already heard, in the Holmes Group decision the
+Supreme Court repudiated the understanding of the law that
+prevailed in the lower courts on two important points: The
+Court held that the appellate jurisdiction of the Federal
+Circuit does not encompass claims--cases in which claims under
+the patent laws are raised in a responsive pleading rather than
+in the plaintiff's complaint. The consequence of that decision,
+as again you've heard, appears to be and to some courts already
+is that the State courts are not precluded by 1338 from hearing
+counterclaims under the patent and also under the copyright
+laws.
+ I agree with the other witnesses that these outcomes are
+undesirable from a policy standpoint and that Congress should
+take action to reverse that. The question is: How might that be
+done?
+ Well, because the Court's holding was predicated on the
+interpretation of the first sentence of section 1338(a), it
+might seem that the logical corrective is to amend that
+sentence. And that, as you've just heard, is the approach
+suggested by the Federal Circuit Bar Association committee, and
+my initial reaction was that was fine. But it does seem to me
+now, having looked at it further, that the seemingly logical
+approach is not the optimal one. The first sentence of 1338 is
+the basic grant of original jurisdiction to the district
+courts. That's language that has remained unchanged for more
+than half a century, and it does seem to me, contrary to Mr.
+Reines, that any alteration in that language runs the risk of
+unsettling the law in ways that no one can fully anticipate.
+ I think it's significant in this respect--I've discussed
+some of the possibilities in my statement. I think it's
+significant in this respect that the American Law Institute was
+considering a similar change on a kind of wholesale level--in
+its proposal for revising the Federal Judicial Code from an
+action-based grant of jurisdiction to a claim-based grant of
+jurisdiction. And they decided it was just too treacherous--
+that's their word--that there was too great a risk of
+unintended consequences.
+ So if I were alone on this and seeing that change as having
+these potential problems, I probably would not be making the
+point so strongly. But it does seem to me that the experience
+of the ALI is quite significant in that respect, and related.
+ So, to my mind, it seems to me that Congress should not
+pursue that path if its purposes can be accomplished through
+legislation that is less likely to have ramifications outside
+the immediate context, and I think that you can do that.
+ With respect to State court jurisdiction, I think the best
+approach is the most direct. What we want to do is to assure
+that State courts are precluded from hearing claims under the
+patent and copyright laws. It seems to me the simplest way to
+do that is to say that, and the place to say that is in the
+second sentence of 1338(a) that is the exclusive jurisdiction
+provision. And I have suggested a draft. There may be better
+ways of doing it, but it seems to me if you're concerned about
+preserving exclusivity, the place to do it is in the sentence
+that defines exclusivity.
+ Now, there is one difficulty with that. If you do that
+alone, a patent or copyright counterclaim brought in State
+court would have to be dismissed, and the defendant would have
+to file a new suit in Federal court. So you end up with the
+parties litigating two suits, even though the claims are
+closely related or perhaps even interdependent. That's just not
+very efficient. To avoid that, Congress could enact a statute
+that would authorize removal on the basis of a patent or
+copyright counterclaim. I have proposed such a statute in my
+testimony. I'd be happy to discuss it.
+ That brings me to the holding of Holmes Group itself and
+the appellate jurisdiction of the Federal Circuit when patent
+claims are raised in a responsive pleading. Again, it seems to
+me that the best approach is to say directly what you're trying
+to accomplish. And following that precept, I offer a suggestion
+for revising one sentence of section 1295(a), which is the
+grant of appellate jurisdiction to the Federal Circuit. I might
+add that that has the additional benefit of eliminating what is
+now the circumlocution of 1295(a), which vests a very broad
+jurisdiction in its first clause, only to take some of it away
+in the second part of that same sentence.
+ Now, in my statement I've also discussed some of the
+broader issues raised by the Federal Circuit's jurisdiction
+over patent appeals. I'll say right away none of those are
+urgent. None would justify delaying a Holmes fix--I do agree
+with Mr. Reines on that--if the Subcommittee agrees that a fix
+is in order. But this is an oversight hearing, and as your
+initial remarks indicated, Mr. Chairman, we're looking beyond
+the immediate problems.
+ And it seems to me the most substantial concern that's been
+raised is that we may be losing the benefits of what's been
+called ``percolation'' on the non-patent issues that typically
+arise in patent cases. And one way of dealing with that would
+be some kind of transfer provision. But that is an idea, I will
+admit, that has not itself had sufficient percolation. So I'm
+not suggesting any immediate action on that.
+ In contrast, the unfortunate policy consequences of Holmes
+Group I think are quite clear, and the only question is how to
+go about setting them right.
+ Thank you for the opportunity to express my views on that
+subject, and I'll welcome your questions.
+ [The prepared statement of Mr. Hellman follows:]
+
+ Prepared Statement of Arthur D. Hellman
+
+
+
+
+ Mr. Smith. Thank you, Professor Hellman.
+ Mr. Prasad?
+
+ TESTIMONY OF SANJAY PRASAD, CHIEF PATENT COUNSEL, ORACLE
+ CORPORATION
+
+ Mr. Prasad. Thank you, Mr. Chairman. Thank you for
+investigating this issue and for the opportunity to testify
+today. Let me include my full testimony as part of the record
+and provide to you a summary of the testimony today.
+ Mr. Chairman, Oracle is the world's largest enterprise
+software company, with a portfolio of over 500 patents, and it
+is a world leader in innovative software solutions for business
+and Government. It is my responsibility to advise Oracle on
+patent and other related intellectual property matters.
+ As an information age company, Oracle has no factories and
+production lines. All of our revenues derive from the licensing
+of our software and related services. Simply put, our IP is the
+core of our business.
+ Mr. Chairman, as you know, patent disputes do not occur in
+a vacuum. Very often such suits are accompanied by trademark,
+trade secret, or contract claims. In these cases, we can be
+either a plaintiff or a defendant, so we cannot be said to be
+either pro-patent or anti-patent. Our goal is to ensure that
+the courts provide a predictable and efficient way to resolve
+patent disputes.
+ Patent cases are some of the most complex and expensive
+cases that Oracle litigates, with attorney's fees typically
+running into the millions of dollars for a single case.
+Frequently, the outcome of these cases turn on highly technical
+disputes involving intricate matters of computer science,
+database structures, and other technologies that are difficult
+for a lay audience, including a judge or a jury, to understand.
+ A high-technology business such as Oracle's can face
+substantial risks when the court presiding over one of our
+patent cases lacks the time and resources to understand the
+technology at issue.
+ The court system that Congress set up in 1982 under the
+Federal Circuit goes a long way to improving patent litigation.
+The Federal Circuit is widely created--credited with
+establishing a unified body of law, which until now has
+governed all patent disputes nationwide. The creation of the
+Federal Circuit has largely eliminated wasteful forum shopping,
+and it has given a higher degree of predictability of patent
+cases. The judges on the Federal Circuit are accustomed to
+resolving technology disputes and have scientifically trained
+clerks and staff.
+ As a result, all parties can feel confident that the
+Federal Circuit has the knowledge, willingness, and sense of
+mission to properly understand the technology and law presented
+in its cases.
+ Sending all patent appeals to a single court having a basic
+comfort level with technology is essential for a rational
+patent system. This is precisely what Congress intended when it
+created the Federal Circuit in 1982, stating, ``The
+establishment of a single court to hear patent appeals was
+repeatedly singled out as one of the most far-reaching reforms
+that could be made to strengthen the United States patent
+system in such a way as to foster technological growth and
+industrial innovation.''
+ Yet the recent jurisdictional changes posed by Holmes
+represent a serious and formidable challenge to the 1982 Act
+and threaten to profoundly undermine the purpose of that Act in
+three ways. Let me address each of those separately.
+ First, Holmes undercuts Congress' goal of a single body of
+patent law. With the reversion of patent jurisdiction to the
+regional appellate courts, we are moving backward to a system
+with 13 silos of governing law. In fact, we already have the
+first patent ruling out of a regional appellate court--the
+Eleventh Circuit'S ruling in Telecomm Technical Services versus
+Rolm--which suggests that the Eleventh Circuit will be
+following its own law and not that of the Federal Circuit.
+ Mr. Chairman, although in many fields of law it may be
+helpful to have issues percolate through the various regional
+court circuits, it is implausible that such benefits would
+occur in patent cases under Holmes because patent cases will
+reach the regional circuits only on a sporadic basis. Simply
+put, the 20-year gap in the patent law of these circuits would
+inevitably delay the creation of a rational body of patent law.
+ Second, Holmes is likely to prompt a renewed emphasis on
+forum shopping. In a single patent case, litigants can consume
+a year, and easily hundreds of thousands of dollars, by
+jockeying to have their case heard in a circuit perceived to
+have more favorable law. We are troubled by the prospect of a
+return to the costly days of forum shopping, with exorbitant
+amounts of time and money spent not on superior innovation, but
+satellite litigation.
+ Third, Holmes has been interpreted to extent jurisdiction
+over some patent and copyright cases to State courts. It has
+long been understood that patent infringement cases are within
+the exclusive jurisdiction of the Federal courts. The Federal
+trial courts are accustomed to patent cases; State courts are
+not.
+ Moreover, it is an open question whether these State courts
+will be bound to follow Federal Circuit law, as Mr. Reines
+mentioned earlier, or the law of their regional circuit, as it
+was left off over 20 years ago. This, too, has the potential to
+undermine what Congress worked so hard to foster.
+ Mr. Chairman, to conclude, the decision by Congress in 1982
+to centralize patent disputes was driven by important public
+policy goals. Holmes undermines those goals by, one, fracturing
+the uniform body of patent law; two, encouraging forum
+shopping; and, three, extending jurisdiction of certain patent
+and copyright cases to State courts. In our view, it only makes
+sense to re-establish what Congress created in 1982, by
+correcting the jurisdiction of the Federal Circuit to cover all
+patent infringement cases nationwide.
+ Thank you again, Mr. Chairman, for the opportunity to
+participate in today's hearing, and I would be happy to respond
+to any of the Committee's questions.
+ [The prepared statement of Mr. Prasad follows:]
+
+ Prepared Statement of Sanjay Prasad
+
+ INTRODUCTION
+
+ Mr. Chairman, Ranking Member Berman, members of the Subcommittee,
+my name is Sanjay Prasad. I am the Chief Patent Counsel at Oracle
+Corporation. Thank you for the opportunity to testify today. Both the
+Chair and the Ranking Member of this subcommittee have a strong record
+of leadership on vital issues related to intellectual property, and
+today's hearing on the patent appeals process is both necessary and
+timely.
+ Oracle is the world's largest enterprise software company, and a
+world leader in innovative information management solutions for
+business and government. It is my responsibility to advise Oracle on
+patent and other intellectual property matters pertaining to
+technology. This includes managing Oracle's patent portfolio, entering
+into patent licensing agreements with other parties, evaluating patent
+claims asserted against Oracle, and managing outside litigation
+counsel. Oracle has over 500 U.S. patents. Oracle regularly engages in
+technology licensing involving Oracle and third-party copyrighted and
+patented software, and Oracle is regularly involved in patent
+litigation, either as a plaintiff or a defendant.
+
+ TESTIMONY
+
+ Oracle epitomizes the kind of company that America's patent and
+copyright laws are designed to promote. For example, in 1979 shortly
+after its founding, Oracle introduced the first commercially available
+relational database. In 1996, Oracle was the first software company to
+move all of its business application software to the Internet and
+Oracle's database software continues to be widely recognized as the
+most capable and secure database software available. Oracle software is
+used daily by governments, businesses and educational and other
+institutions around the world to securely and efficiently manage their
+critical data and business processes.
+ As an information age company Oracle has no factories and
+production lines. All of Oracle's revenue is derived from the licensing
+of its software and related services. Intellectual property, the
+product of human innovation, is the lifeblood of Oracle's business.
+Copyright law protects expressive content and thereby protects against
+piracy and unlicensed use of Oracle's software. Patent law protects the
+novel and non-obvious techniques embodied in the software. Uniformity
+and balance in both copyright and patent law is necessary to promote
+investment in innovative software products and services. This provides
+a dual benefit. First, it provides greater certainty that the
+substantial investments required to develop innovative software can be
+protected. Second, it provides greater certainty in determining whether
+a product planned for development or distribution infringes any third-
+party intellectual property.
+ Disputes over intellectual property and particularly patents are
+increasingly common. In 2004 there were over 2800 patent cases filed in
+the U.S. See . Disputes over
+patents do not occur in a vacuum. Very often, patent suits are
+accompanied by trademark, trade dress, trade secret, or contract
+claims. In patent cases, Oracle is both a plaintiff and a defendant, so
+Oracle cannot be said to be either ``pro-patent'' or ``anti-patent.''
+Oracle's motivation is to ensure that the courts provide a rational and
+efficient way to fairly resolve patent disputes. As either a plaintiff
+or a defendant, Oracle needs certainty and predictability in
+intellectual property law.
+ Patent cases are some of the most complex and expensive cases that
+Oracle and other high technology companies litigate. Rivals commonly
+seek to obtain injunctions to shut down integral parts of a company's
+products, or may try to misappropriate key technologies. Attorney fees
+typically run into the millions of dollars for a single patent
+litigation. Frequently, the outcome of these cases turns on highly
+technical disputes, involving intricate matters of computer science,
+database structures, networking systems, and other technologies that
+are difficult for a lay audience, including a judge or jury, to
+understand. A high technology business such as Oracle's can face
+substantial risks when the court presiding over one of our patent cases
+lacks the time and resources to understand the technology at issue.
+ The court system that Congress set up in 1982 under the Federal
+Circuit goes a long way to rationalizing patent litigation. The Federal
+Circuit, while imperfect, is widely credited with establishing a
+unified body of patent law. This same body of law, until now, has
+governed all patent disputes nation-wide. The creation of the Federal
+Circuit has largely eliminated wasteful forum shopping, and it has
+given a higher degree of predictability to patent cases. Because the
+judges on the Federal Circuit are accustomed to resolving technology
+disputes, and because they have scientifically trained clerks and
+staff, businesses can feel reasonably confident that the Federal
+Circuit has the faculty and the willingness, and the sense of mission,
+to properly understand the technology presented in its cases. Sending
+all patent appeals to a single court having a basic comfort level with
+technology is essential for a rational patent system. This is precisely
+what Congress intended when it created the Federal Circuit in 1982.
+Indeed, the House Report accompanying the 1982 Act notes that ``[t]he
+establishment of a single court to hear patent appeals was repeatedly
+singled out by the witnesses who appeared before the Committee as one
+of the most far-reaching reforms that could be made to strengthen the
+United States patent system in such a way as to foster technological
+growth and industrial innovation.'' See H.R. Rep. No. 312, 97th Cong.
+1st Sess. (1981) (``House Report'') at 20. Over twenty years later,
+Oracle agrees with those witnesses, and the considered judgment of
+Congress.
+ Yet, the recent jurisdictional changes posed by Holmes Group
+represent a serious and formidable challenge to the 1982 Act, and this
+challenge is being launched on three fronts. First, we are in the midst
+of an attack on a single body of patent law. With the reversion of
+patent jurisdiction to the regional circuit courts of appeals, we are
+moving backward to a system with thirteen silos of governing law,
+instead of a single body of patent law, as Congress had envisioned in
+1982. We already have the first patent ruling out of a regional circuit
+court of appeals--the Eleventh Circuit's ruling in Telecomm Technical
+Services Inc. v. Rolm Co., 388 F.3d 820 (11th Cir. 2004), which
+suggests that the Eleventh Circuit will be following its own law, not
+the law of the Federal Circuit. Each case that gets directed to the
+regional circuit courts has the potential to add to this backward
+spiral away from a uniform body of law. It will become harder for
+Oracle to predict the outcome of patent cases when the law is split
+among thirteen circuits.
+ The attack on a single body of law is likely to prompt a second
+front: a renewed emphasis on forum shopping. In a single patent case,
+litigants can consume a year, and easily hundreds of thousands of
+dollars, by jockeying to have their case heard in a circuit that they
+perceive has favorable law. Again, Congress in 1982 succeeded in
+eliminating much of this wasteful forum shopping by establishing a
+single court of appeals for patent cases and thereby fostering the
+creation of a unified body of governing law. Oracle is troubled by the
+prospect of yet another backward spiral--a return to the costly days of
+forum shopping, with exorbitant amounts of time and money spent not on
+superior innovation, but satellite litigation.
+ The third front created by the challenge of Holmes Group was
+launched when Holmes Group was interpreted to grant state courts
+jurisdiction over some patent and copyright cases. It has long been
+understood that patent infringement cases are within the exclusive
+jurisdiction of the federal courts. The federal trial courts are
+accustomed to patent cases, and generally have adequate time and
+resources to dedicate to patent disputes. But federal courts, even with
+all their experience, are still challenged by patent cases. State
+courts, on the other hand, have not handled patent infringement cases
+in modern times, if at all. The procedures that are specific to patent
+cases (especially claim construction, or ``Markman,'' hearings) are
+simply not done in state courts. This is an entire body of law,
+intertwined with demanding technological facts, that state courts are
+not accustomed to handling. Litigating patent cases in state courts
+would be an unknown. Indeed, it is an open question of whether these
+state courts would be bound to follow Federal Circuit law, or the law
+of their regional circuit, as it was left off over 20 years ago. This
+too, is a backward spiral, but it has the greatest potential to
+undermine what Congress worked so hard to foster 23 years ago.
+ Three fronts--three real-world concerns for Oracle. Through no
+fault of its own, Oracle could bring a non-patent claim in federal
+court, perhaps under a contract through diversity jurisdiction, or
+perhaps in a trade dress or trademark matter, and be faced with a
+counterclaim for patent infringement. Under Holmes Group, that claim
+would no longer be appealed to the Federal Circuit, but would instead
+be directed to a regional circuit court of appeals. Similarly, it is
+entirely possible that Oracle could bring a case in state court on a
+matter appropriate for resolution there, such as to seek payment on a
+contract, and become entangled with a counterclaim for patent
+infringement. Under Holmes Group, such a case may never be tried or
+appealed through the federal court system.
+ The decision by Congress in 1982 to centralize patent disputes was
+driven by laudable and credible public policy goals. However, I ask
+this subcommittee, and all of my fellow witnesses here: What is the
+public policy benefit to be gained from the re-allocation of patent
+jurisdiction among the regional circuits and state courts? I for one
+believe there is nothing to gain, but much to lose. Although in many
+fields of law, it may be helpful to have issues ``percolate'' through
+the various regional circuits, it is implausible that such benefits
+would occur in patent cases under Holmes Group. The distinction is that
+the majority of patent cases will continue to be appealed to the
+Federal Circuit. It will only be the occasional patent case that is
+appealed to the regional circuits, or that will be tried through the
+state court system. Patent law in the regional circuits will develop,
+at best, in fits and starts. It is hard to conceive how a cohesive body
+of patent law could develop in the regional circuits, given that patent
+cases will reach the regional circuits only on a sporadic basis, in the
+occasional cases when patent claims are first asserted in a responsive
+pleading. Because there is more than a 20-year gap in the patent law of
+the regional circuits, it could take decades for the various regional
+circuits to ``catch up'' to intervening Supreme Court rulings (most
+notably Markman v. Westview Instruments, 517 U.S. 370 (1996)), and
+create a rational body of law around these new developments. Although
+the regional circuits could defer to Federal Circuit precedent, it is
+unlikely that they will do so--indeed, the Eleventh Circuit has already
+suggested that it will not follow this approach.
+ Oracle strongly endorses the approach of the Federal Circuit Bar
+Association to restore the Federal Circuit's jurisdiction to its state
+prior to Holmes Group. There is too much at stake to have cases
+sporadically appealed through courts with little or no experience in
+patent law. Rather, it makes complete sense to re-establish what
+Congress created in 1982, by correcting the jurisdiction of the Federal
+Circuit to cover all patent infringement cases nationwide, regardless
+if the patent claim was asserted in a complaint or in a responsive
+pleading. The amendments proposed by the FCBA will properly restore the
+Federal Circuit's jurisdiction, and will help promote Congress' goal of
+creating a unified body of patent law to promote technological progress
+in America.
+ Thank you again, Mr. Chairman, for the opportunity to participate
+in today's hearing, and I look forward to working with you and this
+subcommittee to ensure that our nation's patent laws and procedures
+protect and promote innovation.
+
+ Mr. Smith. Thank you, Mr. Prasad.
+ Ms. Addy?
+
+ TESTIMONY OF MEREDITH MARTIN ADDY, ESQ.,
+ BRINKS, HOFER, GILSON & LIONE
+
+ Ms. Addy. Mr. Chairman, Members of the Subcommittee, thank
+you for the opportunity to present my views today on the
+Federal Circuit and the state of patent appeals. I will present
+my views from the perspective of a practitioner and of a former
+law clerk.
+ I will highlight my written testimony and focus on three
+types of comments and criticisms that the Federal Circuit has
+faced regarding patent appeals. The first type is that the
+Federal Circuit is too pro-patent. The second type is that
+patentable subject matter has been expanded. And the third type
+is that the Federal Circuit is in some cases panel-dependent.
+ Before talking about the three types, I'd like to talk for
+a minute for context on the state of the law when the Federal
+Circuit started in 1982.
+ During the early days of the Federal Circuit, with its
+mandate to increase uniformity and stability and remove forum
+shopping, the Federal Circuit did not start with a clean slate
+for precedent. The Federal Circuit inherited the precedent of
+its predecessor courts, and for patent appeals, that was the
+Court of Customs and Patent Appeals, the CCPA. That court heard
+cases on appeal from the Patent and Trademark Office, so cases
+where an inventor did not get his patent or interferences, that
+court, however, did not hear cases having to do with patent
+infringement. As you know, those cases went to the regional
+circuit.
+ So because the Federal Circuit inherited the case law of
+its predecessor court, it had to sit en banc to overrule that
+law. In addition, it had to look at the myriad of different
+regional circuit laws on litigation issues and figure out which
+one, if any, to apply.
+ The first part of its existence was spent stabilizing major
+patent doctrines. Today, the Federal Circuit is poise to
+address issues within those doctrines.
+ Turning to some of the recent commentary and criticisms, it
+is my position that the Federal Circuit has satisfied its
+mandate to unify and stabilize patent law. But it has done so
+not without criticism. And, in fact, the patent bar has lively
+debates on the state of various intricate patent doctrines and
+how they're fairing at the Federal Circuit. I will not address
+those specific doctrines here, but I will reserve my analysis
+to more general commentary.
+ The first issue is the patent--is the Federal Circuit too
+pro-patent? If the Federal Circuit is perceived to be too pro-
+patent, it may be in response to the perception that many of
+the regional circuits were anti-patent. However, I believe that
+in recent years, the Federal Circuit has become less pro-
+patent, and I think that it is more in the middle of the road.
+ However, critics say that its pro-patent stance hurts the
+quality of patents. Bear in mind, however, that only about 1.5
+percent of patents are ever litigated, and only--less than that
+are appealed to the Federal Circuit. So if the quality of
+patents is deteriorating, it cannot be solely the Federal
+Circuit that is responsible for a deteriorating quality of
+patents.
+ The FTC has issued a report that is concerned about the
+quality of patents, and it suggests that in order to raise the
+level of the quality of patents, we should lower the standard
+at the Federal Circuit for proving invalidity. However, the
+issues that the Federal Trade Commission raises are problems
+having to do with the PTO, and if those problems exist, I
+believe they should be fixed at the PTO and not at the Federal
+Circuit.
+ In fact, if you were to lower the standard for proving
+invalidity at the Federal Circuit, you would inject an
+uncertainty into patent law. The PTO examiners look at the
+prior art, and when a patent issues, it has a presumption of
+validity because of that examination. Without that presumption
+of validity, neither the public nor the patentee would know the
+scope of his patent. It is my opinion that the standards for
+proving invalidity at the Federal circuit are good.
+ The second issue is the expansion of the scope of
+patentable subject matter. The court has recognized that
+business methods and computer software are patentable subject
+matter, and critics say that that expansion is not warranted.
+But the patent statute has been construed broadly to include
+anything under the sun made by man. Patenting of business
+methods and software patents has been a positive innovation for
+that industry, positive for that industry because it has
+brought into the public domain documents on that technology
+that were formerly kept as trade secrets.
+ And, number three, the third issue I'd like to discuss are
+the perceived panel dependencies at the Federal Circuit.
+Federal Circuit judges respect their unique position as
+basically the sole arbiters of patent law. And they recognize
+the need for uniform application of the law.
+ Precedent at the Federal Circuit progresses at light speed
+compared to other circuits, compared to other issues left to
+percolate in the regional circuits. And each Federal Circuit
+judge addresses the same patent doctrines much more frequently
+than regional circuit judges address issues. Because of that,
+we may be more able to spot these perceived inconsistencies.
+But some commentators have said that's a positive thing and
+it's analogous to the percolation in the regional circuits.
+ My experience has been that these differing views are
+necessary to identify the true nature of the doctrines and the
+necessity for en banc hearings.
+ In conclusion, I believe that the constructive criticism of
+the Federal Circuit is a good thing. It helps us gauge whether
+the Federal Circuit is doing its job, and I believe that the
+Federal Circuit has succeeded in fulfilling its mandate to
+unify and stabilize patent law. The Federal Circuit has
+developed a vibrant body of patent jurisprudence. There is none
+in State court. In the regional circuits, it's 23 years old.
+And because of its unique experience, the Federal Circuit is
+poised to accept plenary authority to hear patent appeals.
+ Thank you, Mr. Chairman.
+ [The prepared statement of Ms. Addy follows:]
+
+ Prepared Statement of Meredith Martin Addy
+
+
+
+
+ Mr. Smith. Thank you, Ms. Addy.
+ The problem with listening to four lawyers is that you all
+sound persuasive, and I do want to address some of the larger
+issues. But, Ms. Addy, since you brought up the Federal
+Circuit, let me ask you this question. You may or may not know
+that the last year for which we have figures, 2003, the Federal
+Circuit was affirmed by the Supreme Court less than 30 percent
+of the time. You implied that the Federal Circuit Court was
+doing just fine. Do you see any significance or does the low
+affirmation percentage raise any questions in your mind about
+the Federal Circuit? Or does it raise questions about the
+Supreme Court?
+ Ms. Addy. I believe the average for regional circuits as a
+whole is also lower than 30 percent. So I'm not sure that the
+numbers at the Federal Circuit are much different.
+ Mr. Smith. Maybe in context. That's interesting.
+ Ms. Addy. But at the same time, I think it's a very good
+thing that the Federal Circuit is reviewed by the Supreme
+Court. The Supreme Court is watching what the Federal Circuit
+does. It's taking cases that it thinks maybe the Federal
+Circuit hasn't expressed the doctrine exactly as it should. And
+that is a good thing.
+ Mr. Smith. Okay. One other question, and this gets more to
+the general subject. Everyone else was pretty clear. Mr. Prasad
+was clear about supporting the Federal Bar-suggested solution,
+as was Mr. Reines, and Professor Hellman had his own solution,
+which I'm going to ask you about momentarily. You were less
+clear in what you supported. Do you incline toward the Federal
+Bar solution in the way they would amend 1338?
+ Ms. Addy. Yes, Mr. Chairman, I do lean toward the Federal
+Circuit Bar Association's proposed amendment.
+ Mr. Smith. Okay. Good. Now, that gets into obviously the
+threshold issue today, which is how to amend 1338. Everybody
+agrees that it ought to be amended. Professor Hellman would
+amend a different sentence than the Federal Bar.
+ Mr. Reines and Mr. Prasad and Ms. Addy, what do you think
+about Professor Hellman's solution? It sounds like, as I say,
+all the solutions are reasonable. We're trying--we're going to
+have to--I think we need to make some change. What do you think
+about his idea and his point that if you change the sentence of
+1338 that the Federal Bar suggests, that will create confusion,
+we have 50 years of history there and so forth and so on? Let
+me actually start with Mr. Reines and work my way down the
+panel.
+ Mr. Reines. Thank you very much----
+ Mr. Smith. And then, Professor Hellman, we'll let you
+respond.
+ Mr. Reines. Thank you very much, Chairman Smith. My
+analysis is that when you change--if what you're really worried
+about is unintended consequences that you can't foresee--and I
+think we have got a consensus that's really what you're talking
+about--then what you should try to do is change as little as
+you can. And the total rewrite to the second sentence of 1338
+that's been proposed by Professor Hellman and the total rewrite
+of 1295(a), which is a total rewrite, I think leads to the
+potential for more.
+ Now, again, our Federal Circuit Bar Association's chief
+interest is in solution, so we would work to help anything that
+we think can address this that doesn't create negative
+consequences elsewhere. But the total rewrite solution creates
+more potential disturbances.
+ Mr. Smith. So you actually think Professor Hellman's
+solution would unsettle the law more than the Federal Bar
+solution?
+ Mr. Reines. If what you're worried about--and then there's
+one other thing, that--and I mentioned this a little bit in my
+opening comments, which is if you decouple the district court
+jurisdiction versus the appellate court jurisdiction, and you
+now make the exclusive jurisdiction--decouple that from the
+district court, right? So the way it is now, this is the
+district court's original jurisdiction, and that's exclusive.
+All right? That's the way that 1338--and 1295, the appellate
+jurisdiction says--the appellate jurisdiction is from the--is
+for cases that are under the district court jurisdiction.
+They're all tied together. You don't get gaps. You don't have
+disconnects, okay?
+ With Professor Hellman's articulated concerns in his
+testimony about, well, if the well-pleaded complaint rule is
+construed differently and now disrupted, you still have that
+because when he says, for example, on the exclusivity, Federal
+exclusivity, he says no State court shall have jurisdiction
+over any claim for relief arising under any Act of Congress.
+There's no telling that someone might say, well, that's not a
+claim for relief or this isn't a claim for relief or whatever
+argument you're making relative to our change would apply to
+the exclusivity provision. But it wouldn't apply to the
+district court original jurisdiction. So you could have a gap
+there.
+ And the same with respect to the appellate jurisdiction.
+The way the appellate jurisdiction is is in any civil action in
+which a party has asserted a claim for relief. That's Professor
+Hellman's solution, which maps to what we're proposing
+basically. But if that's different--if he's right that that's
+different from the original jurisdiction of the district court,
+you're going to have a gap. So you might have a case that does
+fall within the original jurisdiction of the district court
+under patents, but doesn't go to the appeal court because of
+his concern that maybe by changing that formulation of language
+you change the scope. So if you keep to all three based on the
+same thing, you don't have those gaps.
+ Mr. Smith. Okay. Mr. Prasad?
+ Mr. Prasad. Thank you, Mr. Chairman. The principal concern
+really is as Mr. Reines expressed, and Mr. Hellman also, that a
+solution be reached. And so the--I think we have a preference
+for the approach taken by the Federal Circuit Bar Association,
+and I agree that and understand that the only dispute really is
+in some of the unforeseen consequences that may flow from that.
+ As a matter of logic, it would seem to me that the fewer
+changes, the better, and that the fewer unforeseen consequences
+that may flow from that.
+ Mr. Smith. Okay. Thank you. And, Professor Hellman, what do
+you think of the critiques?
+ Mr. Hellman. Well, thank----
+ Mr. Smith. And, by the way, in your answer tell me if you
+could live with the Federal Bar solution as well.
+ Mr. Hellman. Well----
+ Mr. Smith. Which you initially supported.
+ Mr. Hellman. Yes, which I initially thought was fine.
+ Let me start with Mr. Reines' point about decoupling. It
+seems to me decoupling is in a way what we want to do because
+we don't--there's not a problem with the original jurisdiction.
+The first sentence of section 1338(a) defines the original
+jurisdiction. Nobody is concerned about that. Nobody is
+concerned that the Holmes Group decision narrows or expands the
+original jurisdiction from what we want it to be. Indeed, in
+the ad hoc committee report, they recognized the possibility
+and, indeed, in my view the probability that counterclaims
+would be now within the original jurisdiction and, therefore,
+the removal jurisdiction, but until now that has not been a
+problem for anyone.
+ A couple of other comments on this question of
+unanticipated consequences, and I certainly agree that when you
+look at it, the difference between changing a few words and
+changing a lot of words seems to militate in favor of the
+solution that changes fewest words. The question, though, is
+where those words are, and the words that the ad hoc committee
+would change are in a single sentence that has all sorts of
+ramifications.
+ I alluded earlier to the American Law Institute
+proceedings, and I'd like to say just one or two more words
+about that because I think it's very instructive. What they
+were considering was revising the statutes that grant original
+jurisdiction to the district courts at the level of the action
+rather than the claim. And that certainly sounds very much like
+the ad hoc committee proposal.
+ But they rejected the idea of doing that, after a lot of
+study, and they concluded--and I want to quote their language
+here--that ``A subtle and complex set of secondary meanings now
+govern these statutes,'' and if you try to rewrite them, you
+``proceed at great risk of creating unintended consequences.''
+ Now, the American Law--the Federal Judicial Code Project, I
+should say, was not just academicians. I mean, you might think,
+well, academics see these problems where they don't exist, and
+that is part of our stock in trade, I have to admit. But this
+wasn't just academics. This was judges and lawyers, includes
+people who are very knowledgeable about title 28, people who
+live and breathe it. And I think it's very telling that after
+looking carefully at the idea, they decided that altering the
+language or approach of the statutes defining original
+jurisdiction was treacherous.
+ So a final point on that. There may be a lesson from what
+happened with the 1982 statute. If you go back--and I think
+there's some of the material in Mr. Reines' statement, which
+indicates that the people who shepherded that legislation
+through Congress in the early 1980's did think that they were
+including patent counterclaims in the Federal Circuit's
+jurisdiction. They refer to them in some of their discussion.
+And yet they chose to use language, which, based on a century
+of precedents, would allow courts to look only at the
+complaint. And it seems to me there may be something of a
+lesson there that if you want to change the jurisdiction, you
+should do so directly and address the problems. The problems
+are exclusivity. The problems are appellate jurisdiction. They
+are not original jurisdiction, and it seems to me that although
+it is seemingly the simplest solution, it is the one that is
+the riskier.
+ Thank you.
+ Mr. Smith. Okay. And could you live with the Federal Bar?
+You think it is too dangerous and too risky and too
+treacherous?
+ Mr. Hellman. Well, I have to say, frankly, if you propose
+that as a statute, if you write it as a bill, and the Federal
+jurisdiction experts as well as the patent folks look at it and
+nobody else sees this problem, I'm certainly not going to say,
+well, you know, I have a special insight into the particular
+problems. But it seems to me that's the way to do it. Let's
+have some wider circulation, not just among people who are
+experts in patent law, but people who have devoted their lives
+to looking at the Federal jurisdiction statutes and how courts
+construe them. If they don't see the problem, then fine, it is
+a simpler solution. But it seems to me that you cannot assume,
+especially after Holmes Group--I mean, after all, Holmes Group
+is a statute that--excuse me, a case, a case that is based on
+careful parsing of language and is really very self-consciously
+and almost proudly indifferent to whether or not it is
+interpreting the law in a way that fosters the congressional
+policy. It seems to me that calls for some very, very careful
+drafting.
+ Mr. Smith. I agree with you, and I also agree with your
+suggestion of wider circulation may not be a bad idea as well.
+ That is all very helpful. Mr. Reines, any final comments on
+direction we should go? You are comfortable? Having listened
+and heard from Professor Hellman, are you still as comfortable
+as you were when you arrived with the Federal Bar solution?
+ Mr. Reines. Yes, I am, Chairman. I am very appreciative of
+the Committee taking a look and addressing this at this point
+in time. I think it's critical.
+ Mr. Smith. Okay. And, Mr. Prasad, are you--has your mind
+been changed at all by hearing Professor Hellman? That puts
+somebody in an awkward position. Maybe it puts you in an
+awkward position, too. I think he made some very good
+suggestions that we'll consider, but what is your view?
+ Mr. Prasad. He does make some good suggestions, and I must
+say I'm much more familiar with the Federal Circuit Bar
+Association suggestion than I am with Mr. Hellman's. And so
+without having considered it must further, let me still stay
+with my preference for the Federal Circuit Bar Association's
+proposal, but I am not opposed to considering Mr. Hellman's
+proposal either.
+ Mr. Smith. Also, you would probably agree that if we go
+forward with the Federal Bar suggesting for how to amend 1338,
+we ought to go forward slowly and methodically and precisely.
+ Mr. Prasad. Well, yes, I agree with the underlying precept
+of that, which is to do no harm and to do it correctly. But I
+would suggest that it be done expeditiously.
+ Mr. Smith. Fair enough.
+ Ms. Addy?
+ Ms. Addy. Thank you, Mr. Chairman. I echo the concerns of
+my colleagues with Professor Hellman's suggestion, except I was
+impressed with it when I read it. My main concern right now is
+that the Federal Circuit Bar Association proposal has been
+around and it's been discussed. It's been thought about quite a
+bit, and I think Professor Hellman's is a new--is a new
+suggestion. So I still support the Federal Circuit Bar
+Association's proposal, but I am happy to hear that if you go
+forward, you're going to take a look at the potential
+ramifications of it.
+ Thank you.
+ Mr. Smith. You are all very agreeable today. This is an
+unusual panel.
+ Well, that concludes my questions. As I say, everything you
+have said has been very helpful. We will move ahead
+expeditiously, but hopefully judiciously as well.
+ And so thank you all again. We stand adjourned.
+ [Whereupon, at 5 p.m., the Subcommittee was adjourned.]
+
+
+ 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,
+ Subcommittee on Courts, the Internet, and Intellectual Property
+ Mr. Chairman, thank you for scheduling our first patent hearing of
+the year. I hope this is the beginning of a series of hearings designed
+to address problems in Patent Law and the Patent system as a whole.
+ Our country's economy thrives because it can rely on strong
+protection for intellectual property. Robust patent protection for
+valid patents promotes innovation. However, I also believe that the
+patent system is strongest, and incentives for innovation greatest,
+when patents protect only truly deserving inventions. When functioning
+properly, the patent system should encourage and enable inventors to
+push the boundaries of knowledge and possibility. If the patent system
+allows questionable patents to be granted and does not provide adequate
+safeguards against patent abuses, the system may actually stifle
+innovation and interfere with competitive market forces. Companies must
+have confidence in the quality of patents and a system that enables
+them to enforce their patents if they are going to continue to invest
+in research and development--to find the next drug to cure cancer, to
+create the newest technology to search the internet, or to develop the
+latest robot to build a car.
+ Without stability, uniformity and dependability in the patent
+system, the market will not be assured of the high quality patents
+essential to spurring innovation. It was with this idea in mind that we
+created the Federal Circuit. Before we consolidated the authority for
+patent decisions into one court, the regional circuit decisions were
+all over the map. In one Circuit, the validity of patents was rarely
+affirmed, while in another, patents were rarely declared invalid.
+Patent litigators became the ultimate forum shoppers because the
+Circuit you filed in almost always assured your outcome.
+ The creation of the Federal Circuit in 1982 has been a boon to
+innovation. Patentees have been able to rely on the Federal Circuit to
+provide a coherent body of patent law precedent. The judges on the
+court, who are experts in the very complex field of patent law, have
+developed a consistent body of rulings that serve as clear guidance to
+those addressing patent validity and infringement issues. However,
+after almost two decades, some argue that the consolidation of patent
+law in one court has had some downside. Critics contend that with a
+single court handling all appeals in patent cases, patent issues have
+been taken out of the mainstream of legal thought. Another criticism is
+that the Federal Circuit's rulings have been more ``pro patent'' then
+previous courts in that they are statistically more likely to affirm a
+patentee's rights. So the court, in some ways, may be a hinderance to
+efforts by Congress and the Patent and Trademark Office to improve
+patent quality and integrity.
+ It is with an eye toward addressing these issues that we are
+delving into the concerns raised by the Holmes decision. The result of
+the Holmes case is that alternative forums, such as the regional
+circuit courts or even state courts, can decide patent appeal issues.
+The re-entry of the Circuits and the entry of state courts into the
+process of deciding patent law issues appears to interfere with the
+policies Congress sought to advance when it created the Federal
+Circuit. In our discussions about this issue, we should keep in mind
+the goal of maintaining the integrity of the patent system.
+ I look forward to hearing from the witnesses to further explain
+alternatives to resolving the issues raised by the Holmes case. And I
+hope to work with the Chairman on a possible legislative fix to this
+problem and other matters within the patent system.
+
+ __________
+Prepared Statement of the Honorable John Conyers, Jr., a Representative
+ in Congress from the State of Michigan
+
+ I understand the need and desire for uniformity in patent cases,
+but I am concerned about proposals that would render the regional
+circuit courts of appeals virtually meaningless.
+ We all know that one of the Federal Circuit's primary
+responsibilities is hearing patent appeals. When we created the court,
+we did it to ensure uniformity in that area of law. In 2002, however,
+the Supreme Court held the Federal Circuit did not have jurisdiction
+where patents were merely a counter-claim, as opposed to one of the
+plaintiff's original claims.
+ So now there are proposals to say that any case with patent issues
+arising at any stage would be appealed directly to the Federal Circuit.
+I have two major concerns with this idea. First, any party wishing to
+go to the Federal Circuit instead of a regional appellate court could
+merely include a frivolous patent argument. The regional circuits would
+be stripped of any responsibility.
+ Second, the proposal could fundamentally alter other areas of law.
+Cases mainly about antitrust law or contracts could end up in the
+Federal Circuit by virtue of one patent-related counter-claim. The
+Federal Circuit would thus become the de facto court of jurisdiction
+for any business-related lawsuit, and that is not the system we
+envisioned.
+ Having said that, I am open to hearing what problems exist within
+the Federal Circuit and what we can do to allow it to function better.
+
+ __________
+ Prepared Statement of Joshua D. Sarnoff, on behalf of the Electronic
+ Frontier Foundation
+
+ On behalf of the Electronic Frontier Foundation (EFF), I thank you
+for the opportunity to submit this testimony on the recent Supreme
+Court decision in Holmes Group, Inc. v. Vornado Air Circulation
+Systems, Inc., 535 U.S. 826 (2002), and whether to consolidate
+appellate jurisdiction over all patent law issues in a single federal
+Court of Appeals. I teach patent law at the Washington College of Law
+(WCL), American University, and through the Glushko-Samuelson
+Intellectual Property Law Clinic at WCL have represented EFF and other
+organizations as amici curaie in Supreme Court and Federal Circuit
+patent cases. My testimony is submitted in a personal capacity and on
+behalf of EFF, and thus does not necessarily reflect the views of
+American University. In Holmes Group, the Supreme Court held that
+Congress intended for appellate jurisdiction in patent cases to conform
+to the ``well pleaded complaint rule,'' and thus did not vest exclusive
+appellate jurisdiction in the U.S. Court of Appeals for the Federal
+Circuit (but rather retained jurisdiction in other Courts of Appeals to
+decide patent law issues raised as counterclaims). There is no
+constitutional hurdle to legislating a different result. Thus, my
+comments address only the purported wisdom of vesting exclusive
+jurisdiction over patent law issues in a single appellate court.
+ EFF is a nonprofit, membership-supported civil liberties
+organization working to protect consumer interests, innovation and free
+expression in the digital world. EFF and its 15,000 dues-paying members
+are concerned to preserve the public benefits that result from
+innovative efforts and social activities that are unencumbered by
+patent litigation and licensing threats. EFF and its members have an
+interest in the development of patent laws and of their interpretation
+by the federal courts in a manner that reflects these concerns. In this
+regard, EFF believes that judicial competition in developing the patent
+law is a better long-term strategy than an improperly constrained
+uniformity.
+ I have three basic points to make today. First, although uniformity
+in patent law is desirable, it is desirable only as the product of a
+process in which the relevant policies are properly analyzed and
+competing concerns are adequately considered. Vesting exclusive
+jurisdiction over all patent law issues in a single appellate court may
+impose uniformity before better interpretations of the law can be
+developed and may result in inadequate consideration of competing
+interests. By limiting legal interpretation to a single Court of
+Appeals, the relevant policy decisions (and alternatives) also are
+deprived of the chance for empirical validation before a unitary
+interpretation is imposed. Congress should therefore reject this
+particular means of achieving uniformity in patent law, and should
+preserve appellate court competition in developing interpretations of
+the patent law.
+ Second, vesting exclusive jurisdiction in a single appellate court
+may result in a systematic bias that favors patent holders, but more
+importantly will preclude the most effective remedy for any such bias
+that does result. There are reasons to be concerned that the Federal
+Circuit reflects such a ``pro-patentee'' bias, and one of its members
+has recently admitted as much (at least in regard to willful
+infringement law). But whether or not the perception of bias is
+accurate, the potential for bias reinforces the wisdom of the Holmes
+Group decision. Patent law issues that are improperly decided by the
+Federal Circuit may be revisited by the regional Circuit Courts of
+Appeals if and when the issues arise through counterclaims. Congress
+thus should discourage rather than codify the Federal Circuit's recent
+efforts to informally aggrandize its jurisdiction so as to become the
+sole appellate patent court.
+ Third, legal interpretation within appellate jurisdictions is path
+dependent. Such path dependence makes it more difficult to develop
+alternative interpretations, as well as to reverse erroneous decisions,
+within that jurisdiction. Litigants are unlikely to raise issues that
+have already been adversely decided within a jurisdiction. The path
+dependence of interpretation reinforces the importance of assuring
+appellate competition to permit development of legal interpretations.
+Interpretation across appellate jurisdictions follows the persuasive
+weight of the legal reasoning of the earlier decisions, and litigants
+remain free to raise issues and judges to develop better
+interpretations of the law. Vesting exclusive jurisdiction in a single
+appellate court will not provide a process that promotes the reasoned
+development of patent law, and will impede or delay efforts to fix the
+law.
+
+ UNIFORMITY AND THE NEED FOR COMPETITIVE DEVELOPMENT OF THE LAW.
+
+ As Ralph Waldo Emerson famously stated many years ago, ``A foolish
+consistency is the hobgoblin of little minds, adored by little
+statesmen and philosophers and divines.'' Although Emerson did not
+describe how to distinguish between a foolish and a wise consistency,
+the basic idea can be readily applied to the issue of federal appellate
+court jurisdiction. We should seek to impose uniform interpretations of
+the law only if they are the product of well reasoned elaboration.
+Following this principle, the Supreme Court typically rejects petitions
+for certiorari unless and until the Circuit Courts of Appeals in a
+number of cases have elaborated the basic legal principles at issue and
+have generated a conflict of sufficient importance that an imposed
+uniformity is deemed to be warranted. Significantly, the Supreme Court
+frequently lets inter-Circuit conflicts linger, either to determine
+before intervening the effects over time of the various rules adopted
+by the Circuit Courts or to allow the so-called problem of lack of
+uniformity to resolve itself through private action that adjusts to the
+differing conditions in the various jurisdictions.
+ Because patent rights are exclusively federal and have effect
+throughout the territory of the United States, such inter-Circuit
+conflicts in patent law are presumptively undesirable. But the question
+for this Committee is not whether to promote greater uniformity of
+patent law, but at what cost. Although I support the goal of achieving
+greater patent law uniformity, I believe that the benefits of achieving
+greater uniformity by eliminating inter-Circuit conflicts would be
+outweighed by the costs of eliminating the development of reasoned
+alternative interpretations of the law. This is not merely because I
+disagree with many of the interpretive choices of the Federal Circuit
+(even though the existing jurisprudence of the Federal Circuit provides
+ample grounds for such a position). Rather, I believe that patent law
+is sufficiently important that reasoned elaboration of patent law
+should draw on the collective wisdom of appellate jurists throughout
+the nation, and that there needs to be an institutional mechanism to
+counter-balance initial appellate decisions that are wrongly decided or
+that reflect bad policy choices. I hold this view even though I
+recognize the highly technical nature of patent litigation and the
+concomitant need for federal appellate courts to develop specialized
+expertise.
+ Congress has enacted the basic requirements of patent law in Title
+35 of the United States Code, but has left the vast majority of patent
+law jurisprudence to judicial elaboration through statutory
+construction on a common-law development model. Such development
+benefits from the collective wisdom of more minds and perspectives,
+rather than fewer, and from the evaluation of prior experiences when
+applying varying interpretations of the law. Thus, I support the
+development of greater uniformity in patent law only following the
+reasoned articulation of competing patent law policies by the various
+Courts of Appeals. The Supreme Court has been showing a greater
+interest in patent law issues over the last three years, which is an
+encouraging development and will help to further develop its expertise.
+There is no question that the Supreme Court would benefit from the
+reasoned consideration of patent law issues by additional Circuit
+Courts of Appeals before seeking to impose uniformity in patent cases.
+As Justice Stevens noted in concurrence in Holmes Group, ``[a]n
+occasional conflict in decisions may be useful in identifying questions
+that merit this Court's attention.'' 535 U.S. at 839.
+ Further, consolidating review of all patent law issues within a
+single Court of Appeals simply may not result in the desired
+uniformity. Instead of so-called ``circuit-splits,'' the pressure on
+the Federal Circuit to resolve conflicting policy issues has led to
+``panel-splits.'' And unlike in copyright or trademark, the business
+community cannot adopt different approaches depending on the
+geographical jurisdiction in which the relevant activities are
+conducted. For example, in Phillips v. AWH Corp., Nos. 03-1269, 03-
+1286, the Federal Circuit has recently sought to clarify the applicable
+rules for claim construction, which are widely perceived to be
+inconsistently applied and in need of greater specification. I
+submitted an amicus brief on behalf of EFF and other organizations in
+the Phillips case, encouraging the Federal Circuit to adopt claim
+construction rules that impose greater interpretive uniformity on its
+own panels, the district courts, and society at large. But it is widely
+feared that the Federal Circuit will not provide the patent bar with
+sufficient guidance, and that panels of the Federal Circuit will
+continue to apply the interpretive rules in an unpredictable fashion.
+ If, however, the Federal Circuit does provide sufficiently clear
+guidance and panels of its judges scrupulously follow that guidance,
+there remains the concern that the Federal Circuit in the Phillips case
+will impose a foolish consistency that outweighs the benefits of
+achieving uniformity. Although I believe this outcome is much less
+likely than the failure to provide adequate guidance, given the
+substantial social costs of the existing lack of predictability, it may
+be very difficult to reverse such Federal Circuit rules if they prove
+unworkable or undesirable over time. The rules would need to be changed
+en banc, stare decisis will exert pressure to stick with the rules, and
+as discussed below litigants may be reluctant to challenge the clearly
+established precedent. This result is particularly likely given the
+Federal Circuit's perceived institutional competence.
+ Given these concerns, the Committee should evaluate whether too
+great an emphasis already has been placed on achieving a constrained
+uniformity of patent law through the current jurisdictional
+arrangements, which provide the Federal Circuit with exclusive
+appellate jurisdiction over all cases that ``arise under'' patent law
+pursuant to 28 U.S.C. Sections 1295(a)(1) and 1338(a). Even following
+Holmes Group, other jurisdictions may follow the lead of the Federal
+Circuit's more developed jurisprudence. As a practical matter,
+competitors and the public routinely conform their conduct to Federal
+Circuit law, as they cannot reasonably rely on the low likelihood that
+patent law issues will arise only as counterclaims in litigation. This
+deprives patent law of the ability to obtain empirical validation that
+the interpretive choices of the Federal Circuit impose good policies,
+as there is no set of alternative interpretations with which to compare
+the results. Similarly, it deprives patent law of the development of
+those alternatives in the first instance.
+ Further, even without legislative authority to do so, the Federal
+Circuit has been seeking to arrogate to itself the role of establishing
+uniform patent law interpretations in all instances. For example, in
+Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc., 375 F.3d 1341, 1355
+n.3 (Fed. Cir. 2004), the Federal Circuit recently encouraged other
+federal Appellate Courts to defer to the Federal Circuit's choice of
+law principles when determining when a patentee's behavior strips it of
+antitrust immunity, removing any questions of patent law from (and
+leaving only antitrust law to) the regional Circuit Courts of Appeals.
+The Federal Circuit characterized its choice of law rule as ``a
+sensible approach to preserving the uniformity of patent law without
+regard to the appellate forum.'' But this rule is sensible only if the
+desired outcome is to assure that Federal Circuit law (or any single
+Circuit's law) prevails on patent law issues. This concrete example
+provides a good illustration of why such constrained uniformity may not
+be desirable. The Federal Circuit simply may not have the best insight
+into the proper balance between the antitrust law and patent law, and
+there are reasons to think that obtaining the insights of distinguished
+jurists of antitrust law and economic theory in other Circuits (e.g.,
+the ``Chicago-School'' jurists of the 7th Circuit) would be beneficial.
+
+ BIAS AND THE NEED FOR COMPETITIVE DEVELOPMENT AS A REMEDY.
+
+ For many years, the Federal Circuit has been criticized for being
+biased in favor of patentees, particularly in its early years.\1\ When
+it was created, the Federal Circuit was vested with jurisdiction over
+appeals from other administrative and specialty courts so as to reduce
+the likelihood of becoming too narrowly specialized and of developing
+an institutional bias.\2\ Although I share these concerns about bias
+without here putting my concerns to the proof, it is more important to
+relate what one of the Federal Circuit's own judges has said and to
+focus on providing a remedy against the potential for such bias. Again,
+as Justice Stevens noted when concurring in Holmes Group, ``occasional
+decisions by courts with broader jurisdiction will provide an antidote
+to the risk that the specialized court may develop an institutional
+bias.'' 535 U.S. at 839.
+---------------------------------------------------------------------------
+ \1\ See, e.g., Mark D. Janis, Reforming Patent Validity Litigation:
+The Dubious Preponderance, 19 Berkeley Tech. L.J. 923, 928 (2004);
+Allan N. Litmann, Restoring the Balance of Our Patent System, 37 IDEA
+545, 552-70 (1997); Lawrence M. Sung, Intellectual Property Protection
+or Protectionism? Declaratory Judgement Use by Patent Owners Against
+Prospective Infringers, 42 Am. U. L. Rev. 239, 248 n.47 (1992);
+Rochelle C. Dreyfuss, The Federal Circuit: A Case Study in Specialized
+Courts, 64 N.Y.U. L. Rev. 1, 26-30 (1989); Eric Schmitt, Judicial Shift
+in Patent Cases, New York Times, Jan. 21, 1986, at D2.
+ \2\ See, e.g., William H. Burgess, Simplicity at the Cost of
+Clarity: Appellate Review of Claim Construction and the Failed Promise
+of Cybor, 153 U. Pa. L. Rev. 763, 764 (2004).
+---------------------------------------------------------------------------
+ In the recent case of Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH
+v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004) (en banc), the Federal
+Circuit reconsidered en banc its prior rules for willful patent
+infringement law. The Court of Appeals apparently took the case because
+of the clamor from the bar that the law was out of touch with existing
+practices and because the Federal Circuit's earlier rules unduly
+penalized alleged infringers and encouraged disingenuous legal
+opinions. What is significant about this case is the self-perception of
+the Federal Circuit's role that was articulated during oral argument by
+Judge Pauline Newman, who is likely the most respected living patent
+jurist. Judge Newman stated from the bench words to the effect that the
+Federal Circuit had self-consciously adopted its rules on willful
+infringement because the public was not paying enough attention to
+patent rights in the early 1980s, that times have since changed and
+patent rights are now better respected, and thus that the earlier rules
+are no longer needed. It would be difficult to find a clearer statement
+that the Federal Circuit views its role as protecting the interests of
+patentees. Further, it took the Court over twenty years to reach an en
+banc decision to reverse the excesses of its earlier rules, and then
+did so only because it thought that circumstances had changed and thus
+that its earlier rules were now unnecessary to protect patentees.
+ Although Judge Newman's statement was limited to the particular
+context of willful infringement law, it raises serious concerns
+regarding institutional bias on the Federal Circuit. Further
+consolidating appellate jurisdiction over patent law in the Federal
+Circuit would reinforce any institutional bias that exists and would
+preclude any meaningful remedy for such bias. The most significant
+remedy for bias is to assure judicial competition in the development of
+patent law, so that the Federal Circuit does not develop exclusive
+competence and an unwarranted monopoly of legal interpretation. For
+example, the Federal Circuit decided Mallinckrodt, Inc. v. Medipart,
+Inc., 976 F.2d 700 (Fed. Cir. 1992), in which ``a century of law under
+the [patent] exhaustion doctrine was abruptly swept away.'' \3\ So long
+as other appellate jurisdictions are competent under the Holmes Group
+to decide patent law issues by developing their own circuit patent law,
+the potential remains to achieve a more reasoned and balanced approach.
+EFF thus has submitted an amicus brief in the Ninth Circuit Court of
+Appeals in Arizona Cartridge Remanufacturers Assoc., Inc. v. Lexmark,
+No. 03-16987, seeking to restore the patent exhaustion law that the
+Federal Circuit unilaterally removed. But given the current
+jurisdictional arrangements, it has taken over a decade to get to
+another circuit to review this issue.
+---------------------------------------------------------------------------
+ \3\ Richard H. Stern, Post-Sale Patent Restrictions After
+Mallinckrodt: An Idea in Search of a Definition, 5 Alb. L.J. & Sci &
+Tech. 1, 6 (1994).
+---------------------------------------------------------------------------
+ PATH DEPENDENCE REINFORCES THE NEED FOR COMPETITIVE DEVELOPMENT.
+
+ Legal interpretation is path dependent. At the most basic level,
+the principle of stare decisis requires some reason to adopt a
+different interpretation or principal of law in subsequent cases. At
+the level of institutional design, decisions of an initial panel of an
+appellate court are supposed to be binding on subsequent panels of the
+same court, unless and until the entire court revisits and revises the
+issue en banc. In contrast, initial panel decisions of one appellate
+court are not binding on the panels of other appellate jurisdictions,
+which are then free to develop their own interpretations or principles
+guided by the strength (or lack thereof) of the reasoning of the
+earlier decisions from the initial jurisdictions. This means that
+initial decisions within any particular appellate jurisdiction attain
+much greater significance in determining what rules gets adopted and
+how difficult it is to revise those rules. In contrast, decisions among
+multiple appellate jurisdictions develop based on the competitive
+strength of judicial reasoning. The latter form of developing the law
+is much to be preferred.
+ The recent case of Merck KGaA v. Integra LifeSciences I, Ltd., 331
+F.3d 860 (Fed. Cir. 2003), further demonstrates the difficulty of
+correcting bad initial decisions of a single appellate court, even when
+potentially subject to review in the Supreme Court. Although Judge
+Newman issued a blistering dissent that excoriated her colleagues for
+severely constraining the scope of the historic experimental use
+exception to patent infringement and would have held that the exception
+applied to the conduct at issue, see id. at 873-75, the Petitioner in
+that case studiously refused to assert that the exception applied to
+the conduct at issue on appeal. As noted by various law professors as
+amici in the Supreme Court, litigants are extremely reluctant to
+challenge current Federal Circuit precedents (or those of any specific
+appellate court) for fear of being sanctioned or of undermining the
+perceived strength of other challenges they might make. See, e.g.,
+Brief of Intellectual Property Professors as Amici Curiae in Support of
+Neither Party. Merck v. Integra, No. 03-1237 (citing Allen Eng'g Corp.
+v. Bartell Indus., 299 F.3d 1336, 1356 (Fed. Cir. 2002)).
+ I have submitted on behalf of EFF and other organizations an amicus
+curiae brief urging the Supreme Court to reach the experimental use
+issue in the Merck case, notwithstanding Petitioner's refusal to rely
+on it. In this way, the Court might revise the Federal Circuit's
+constricted interpretations of this critically important patent law
+doctrine, which is causing adverse effects. But the Supreme Court may
+not do so in this case, and may never be presented with a case that
+clearly presents the issue. Correction of the law then would be denied
+or delayed unless and until Congress codifies a revision. For this
+reason, the National Academy of Sciences, the American Intellectual
+Property Law Association, and the American Bar Association have all
+proposed that Congress act to reverse the Federal Circuit's erroneous
+interpretations of this patent law doctrine.
+ The path dependence of legal interpretation reinforces the need to
+assure that exclusive jurisdiction over patent law issues is not vested
+in a single appellate court. As demonstrated above in regard to willful
+infringement, exhaustion, and experimental use issues, the effective
+monopoly of Federal Circuit jurisdiction over patent law interpretation
+has delayed and may prevent correction of erroneous interpretations of
+patent law. Congress should seek to encourage such correction by making
+it easier to revise judge-made patent law interpretive rules over time.
+Further consolidating patent law interpretive jurisdiction by vesting
+it exclusively in a single Court of Appeals will not accomplish this
+beneficial objective. To the extent that this corrective function can
+more readily be accomplished by delegating substantive lawmaking
+authority to the U.S. Patent and Trademark Office, which is subject to
+political processes, Congress should consider that alternative
+(although it would simultaneously need to impose substantial measures
+to prevent agency capture and to correct any institutional bias within
+the PTO \4\).
+---------------------------------------------------------------------------
+ \4\ See, e.g., Orin S. Kerr, Rethinking Patent Law in the
+Administrative State, 42 Wm. & Mary L. Rev. 127, 188 (2000); Craig A.
+Nard, Deference, Defiance, and the Useful Arts, 56 Ohio St. L.J. 1415,
+1502-03 (1995).
+---------------------------------------------------------------------------
+ CONCLUSION
+
+ Congress should seek a wise, not a foolish, consistency in the
+development of patent law by the federal Courts of Appeals. There is no
+need to revise the rule of Holmes Group by vesting exclusive
+jurisdiction over patent law issues in the Federal Circuit, and doing
+so is likely to cause affirmative damage by precluding the development
+of reasoned alternative interpretations of patent law. Given the
+potential for institutional bias on the Federal Circuit, moreover,
+Congress needs to preserve some remedy that permits alternative
+interpretations of the law to be developed. Congress also may wish to
+consider whether to terminate its twenty-year experiment with vesting
+``arising under'' jurisdiction for patent law exclusively in a single
+Court of Appeals. Finally, Congress should seek to minimize the path
+dependence of patent law, so that interpretive errors are more easily
+corrected and so that the law can more readily respond to changed
+circumstances.
+ I thank you again for the opportunity to submit this testimony, and
+I would be happy to provide additional testimony on this issue and on
+other patent law reform issues that the Committee may address, such as
+the need for legislation to codify a broader experimental use exception
+if the Supreme Court does not revise the Federal Circuit's improper
+interpretations.
+ Letter from James B. Kobak, Jr., to the Subcommittee on Courts, the
+ Internet, and Intellectual Property
+
+
+
+Letter to the Honorable Lamar Smith, and the Honorable Howard L. Berman
+ from Michael K. Kirk, Executive Director, American Intellectual
+ Property Law Assocation (AIPLA)
+
+
+
+ Status Report on Developments Relating to the Jurisdiction of the
+United Sates Court of Appeals for the Federal Circuit submitted by the
+ Holmes Group Task Force, Intellectual Property Committee, Section of
+ Antitrust Law, American Bar Association, and a Report on the United
+ States Court of Appeals for the Federal Court, Section of Antitrust
+ Law, American Bar Association
+
+
+
+
+Letter from Meredith Martin Addy, Esq., Brinks Hofer Gilson & Lione to
+ Blaine Merritt, Esq., Chief Counsel, Subcommittee on Courts, the
+ Internet, and Intellectual Property, Committee on the Judiciary,
+ regarding corrections to written statement of March 17, 2005
+
+
+
+
+
+