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subjectivity; while providing an undeniable benefit to the system by requiring the inventor to fully disciose the invention; including the best mode contemplated for practicing the invention. The FTC and NAS may be correct that some aspects of patent litigation have become too focused on subjective elements, but these elements cannot, in our view, be eliminated form a truly balanced patent system.
Question: Do any reforms obviate, or at least lessen, the need for any others? Would an effective post grant review system remove the need for changes to the standards for issuing injunctions? Would improved patent quality through reforms at PTO be more productive in reducing abusive litigation than some of the litigation reforms we discussed at the hearing?
Answer: In our view well designed reforms must address both patent quality and litigation abuse aspects of the patent system. In other words, elements of patent reform should be mutually reinforcing, or tend to create a virtuous cycle of less incentive to abuse in patent enforcement leading to better patent quality leading to less abusive litigation. Key problems with focusing on only patent quality include the tremendous cost of existing questionable patents and the lag time until patent quality is improved throughout the system. As an important property right with a twenty year lifespan, both the creation and the enforcement of patents need to be gotten right if the system is to promote innovation and real progress.
Question: If Congress were to enact changes to the standards for granting injunctive relief, what factors should shape any reform, and what should Congress seek to avoid?
Answer: Congress should look to historical practices of courts of equity and seek a system which is fair and balanced for all parties, while allowing courts to appropriately consider all the societywide interests often impacted in patent litigation. These interests include the patentee's property rights, fair competition, innovation through alternatives to patented methods, reliability and efficiency in increasingly complex value chains and services, among others. In our view, Congress should also avoid fashioning a patent-specific rule absent exceptionally good reasons.
Thank you for your letter of hme 21, 2005, which not only expressed your gratitude for my testimony -- on behalf of the Wisconsin Alumni Research Foundation -- all your subcommittee's June 14* bearing on “Patent Reform: Injunctions and Damages but also posed written questions for me to answer for the bearing record Please find attached my answers to the questions.
Thank you also for the opportunity to testify before your sabcommittee on the very important subject of patent law reform. As you know, the ability of American universities to receive high-quality patents, to transfer technology to the marketplace, and to exploit (and protect) rights in an uncertain cavironment is of utmost significance to American competitiveness, jobs, patient cures and the public.
Carl E Fullrantan
Honorable Patrick Leaby
Chalrman Orrin G. Hatch
July 20, 2005
In outlining your opposition to the post-grant review procedwe set out in H.R. 2795, you stated, "Ortex in the face of escalating costs, a legitimate patent holder will abandon exclusive rights rather than fight a protracted battle to secure protection for intellectual property. " Many who support changes to the standard for injunctive relief might use these exact words, yet the Wisconsin Alumni Research Foundation ("WARF") opposed ow addressing injunctive relief. Are these positions inconsistent? No. In my opinion, and on behalf of WARF, these positions are not inconsistont, primarily because injunctive relief and post-grant review address two different issues. The proposed change to injunctive relief addresses the ability of a patent holder to "exclude" an alleged Infringer from practicing his invention until the alleged infringer has exhausted all avenues of appeal, even though the patent has been tested by both the U.S. Patent and Trademark Office (“PTO") and a federal district court. The post-grant review process, on the other hand, adds another layer of testing to the patent process which may, if not properly designed, result in a protracted and prohibitively expensive process for obtaining a patent which then may be enforceable.
The principal argument for change in both of these areas relies upon the premise that invalid patents are being issued more frequently under today's patent system, and that such patents are being used more frequently against legitimate business activities. I believe that the best way to alleviate this problem is to provide adequate resources to the PTO, so the PTO may ensure that patents are valid before they are issued.
Under the present system, injunctive relief can only be provided after a finding of patent validity and infringement. In the case of patent validity, this will mean that the patent has been tested at least twice, once by the PTO and a second time by a federal district court. In the latter case, testing is governed by the rules of federal procedure and is conducted in an environment where the challenger has the opportunity to argue against patent validity. Based upon this depth of review, one should be able to presume that both the PTO and the federal district court got it right and, therefore, that the validity determination is likely to withstand challenge, such that injunctive relief is properly afforded.
The changes to injunctive relief proposed in H.R. 2795, however, would establish a system that suggests that both the PTO and the federal district court got it wrong with respect to patent validity, and that it is likely that the patent at issue is invalid. This system would establish a dangerous precedent as it is likely to diminish the trust afforded to the PTO and the federal judiciary with respect to patent matters. Moreover, such a system would likely weaken the value afforded to patents held by universities and small businesses given the case at which an alleged infringer could continue to infringe to the detriment of the patent holder or its licensees.
Some have argued that the prosent injunctive relief system should be changed because it provides an opportunity for misuse. I disagree. In any legal system, there are opportunities for gamesmanship and for bad actors to use legitimate processes illegitimately for harassment. Because injunctive relief can only be granted by a federal judge after reviewing the facts of a specific case and hearing arguments from counsel, WARF believes adequate safeguards are in place to provent the use of injunctive relief for illegitimato purposes.
The best route for improving patent quality is to reduce the number of low quality patents being issued. A post-grant review process, if property designed, may achieve such an offect. An improperly designed process, however, would likely increase the cost of pursuing patent protection for universities and small businesses and, in somo casos, could force universities and small businesses to give up intellectual property rights rather than fight protracted battles to secure patent protection.
One proposal that seems to have broad support is the idea of creating an effective post grant review procedure. This would allow a third party to challenge a patent's validity at the Patent and Trademarks
Office after a patent has issued. Do you favor some form of post grant review, and do you have any specific concerns! I would support a limited post-grant review process that is time and cost-sensitive and tailored to avoid misuse. Universities are uniquely positioned in the intellectual property landscape. Through the mechanism of the Bayh-Dole Act, universities are charged with pursuing intellectual property for those inventions arising through fedorally funded research. However, universities typically have budgets which limit their ability to spend significant sums of money on patent prosecution, even when such spending may prove a wise investment.
Adding a system of post-grant opposition to the prosecution process can only increase the costs of pursuing patent protection and, in some cases, may force universities and small businesses to give up intellectual property rights rather than fight protracted battles to secure intellectual property protection. As a concrete example, WARF has spent hundreds of thousands of dollars in the last few years pursuing patents on stem cell technology through the post-grant opposition procedures in Europe. I can speak from personal experience when I say that such costs can force universities to reconsider whether or not they should vigorously pursue their rights.
Given the budgetary concerns of universities and small businesses, the effect of abusive practices by parties able to afford a protracted opposition process would substantially hamper the ability of universities and small businesses to effectively pursue and maintain patent protection. In the absence of appropriate protections, a bad actor could, for instance, seek to oppose a patent during post-grant review, then seek to have the patent subject to a re-examination, and then seek to challenge the patent through the federal court system. In such a situation, the university or small business would have to make the choice of either bearing the costs associated with defending the patent or allowing the patent to expire.
If post-grant opposition is adopted, the procedure should be structured in a fashion so as to minimize the burden on the PTO. It is widely acknowledged that the PTO is already under stress due to the demands placed upon it through the basic patent examination process. By increasing the burden on the PTO through addition of post-grant review, consideration must be made to how such a system could compromise the ability of the PTO to do its job.
Finally, the procedure should be structured so as to provide for a shortened and well-structured opposition process. A second window (that could be opened within six months after the date that a patent owner asserts infringement) should not be allowed. Even without a second window, the addition of post-grant review is likely to extend the prosecution period for an issued patent by at least another year if such patent is subject to an opposition. In effect, this will reduce the period of exclusivity afforded to the issued patent and extend the commercial uncertainty of the patent until such time as the patent finally issues. To minimize this effect, Congress should consider providing a patent term extension for the period of the opposition in the event that post-grant review is adopted. Allowing for such an extension may also serve as one of several necessary conditions to avoid abuse of the process.
Palent continuations allow a patent holder to file an initial application, and then later expand the scope of that patent Some feel that the practice is being abused. WARF opposes limtrations on continuations because university research is earb-stage research and because the wefulness of a given discovery can take time to manifest itself. If a good idea has not actually been turned into an innovation worthy of patent protection at the time an application is filled, why should universities gain rights beyond the scope of what the university first knew It was creating? Continuation practice is very much part of the standard operating procedure for patent prosecution and is relied upon by attomcys - and the PTO - to streamline and simplify the oxamination of patents. Continuation practice is ossential for complex inventions. For an invention to receive the benefit of its filing dato, an inventor (including a university) must both fully describe the invention in the specification of the patent application and meet certain statutory requirements. Continuation practice does not modify this basic requirement. Rather, continuation practice allows an inventor additional time to fully consider which aspects of the disclosed invention should be claimed. A distinction must be made here between knowing what it is that was created and knowing what it is that is being claimed. In practical effect, universities do not gain rights beyond the scope of what was invented. The ability to later claim that which was originally described in a patent application is also important to the PTO. Without continuation practice, patent applications would be filed with significantly more claims to examine as inventors would be forced to submit all possible claims based on the disclosed invention. For the inventor, this would be expensive due to the increased number of claims that would need to be drafted and presented to the PTO before the inventor had a real opportunity to decide which claims - if any - would be commercially important. For the PTO, this would be inefficient as it would increase the examination burden and ultimately require the filing of a significant number of claims and/or applications.
Importantly, with the proposed first-inventor-to-file system, limits on continuation practice could delay inventors from filing their claims under a system in which the filing date would be all the more important for claiming exclusive rights.
What are your views on the Supreme Court's decision in Merck v. Integra Lifesciences?
I have not yet formed an opinion with respect to this decision and its effect upon technologies developed at universities and other research institutions. It will take some time for practitioners and the courts to digest this case and to understand its full impact
In my opinion, the so-called "safe harbor" against infringement provision of the Hatch-Waxman Act (35 U.S.C. 271(e)) was intended to be a very limited exception to the general rule that all patents are broadly enforceable. I believe the Supreme Court has interpreted the language of the statute in a way that may have expanded its scope from what was originally intended by Congress in enacting the Act. I believe that this may be an area of the law which Congress may wish to revisit and clarify through legislation
"Patent trolls* extract value from the patents they own, not by working them or licensing them, but by using them as settlement leverage in lawsuits. Mr. Lemley noted in his written testimony that threats of litigation by patent trolls are prevalent, and he promised forthcoming research that will quantify and describe more about this problem. Can you provide us with any more concrete detalls about how much of a problem patent trolls are when it comes to seeking fand winning) injunctions on patents?
I cannot provide any concrete details about how much of a problem patent trolls aro. I understand what is meant by the term "patent troll”, but I think the uso of the term muddies, rather than clarifies, a perceived problem with the patent law. The U.S. Constitution contemplates, and the patent law imparts, the right of