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Judiciary Testimony Hearing
June 14, 2005

The net result of this doctrine is substantial uncertainty that harms small companies that

are in the marketplace every bit as much as big companies. In fact, in some situations, small

promising companies could actually be put out of business by a patent owner because they do not

have the funds to fight an expensive lawsuit. In either situation, consumers end up losing as

well, because they ultimately pay the costs of lawsuits and decreased competition. The

injunction problem is of concern to Time Warner because predictability is very important to us

as we invest in items that we know consumers want, such as new content delivery systems to

bring our content to consumers, innovative cable technologies, and exciting new possibilities for

AOL users.

As we said earlier, we believe that injunctions are an important and essential part of the

patent system. And we believe strongly that only parties who will be actually irreparably harmed

should be able to receive an injunction following a finding of patent infringement, and that patent

holders will be able to establish irreparable harm easily in many situations.

Level the Playing Field for Patent Litigants on Validity Issues. Currently, issued

patents receive a strong presumption of validity. To invalidate a patent, a defendant must prove

by “clear and convincing” evidence that the patent should have never been issued. In practice,

this means that a defendant must prove that it is absolutely clear that the patent should have

never been issued. All too frequently, this standard unfortunately cannot be squared with the

current state of our patent system. Although the PTO has made great strides with the extremely

limited resources it has been given, most recent reports recognize the inadequate quality of

examination in the PTO and the resulting recent poor quality of issued patents. Thus, it is often

the case that patents do not deserve a strong presumption of validity.

Judiciary Testimony Hearing
June 14, 2005

Given the inefficiency inherent in increasing numbers of expensive validity contests over

increasingly weak patents (especially in the software and business method areas), it is important

to level the playing field now. We thus propose that, to invalidate a patent, a party relying on

prior art not considered by the PTO must prove by “a preponderance of the evidence” that the

patent is invalid

in other words a 51% probability that the patent should have never been

issued. This is fair, especially considering that when a patent is in litigation, thousands of hours

and millions of dollars may be spent on examining whether it should have been issued. This

intense scrutiny should be given at least the same amount of weight as the effort of the PTO to

issue a valid patent, especially in light of the fact that on average an examiner is typically given

less than 30 hours to decide whether to issue a patent.

Require the “Loser Pays Rule” for Patent Infringement Suits. Patent litigation is

extremely expensive, involving high expert witness fees, attorneys fees and extensive discovery.

However, the cost of such litigation often falls disproportionately on defendants. Even when

they win, defendants will usually pay over a million dollars in fees to prove that a single patent is

invalid. Currently, even with (rarely imposed) Rule 11 sanctions, there is a gap in disincentives

to deter a patent owner that wishes to launch a nuisance patent infringement lawsuit. Even when

the patent owner is not justified in his actions, defendants are stuck with the tremendous cost of

defending the lawsuit. As patent litigation is almost entirely contested between commercial entities (increasingly commercial entities that exist solely for the purpose of threatening or pursuing patent litigation), we believe there is no justification for continuing a system biased in

favor of plaintiffs. Some type of fee shifting mechanism would go a long way to ensuring that

litigation is a last recourse, rather than a first option, as occurs all too frequently today.

We believe that adoption of our recommendation would provide a stimulus to decrease the incidence of patent litigation, and increase negotiated (and hopefully therefore more

efficient) resolution of patent disputes.

Judiciary Testimony Hearing
June 14, 2005

Other Proposed Reforms. Other reforms to the patent litigation system, including repealing Section 271(1) of the Patent Law, providing additional alternatives to expensive litigation, and venue reform, may also be worthy of consideration. Overall, however, we believe that the goal should be to return patent litigation to the mainstream of business litigation and restore traditional balance to patent-specific rules, while respecting the important role that the patent system plays in our economy and the rights of patent owners. We also believe that patent litigation reform can have a near term impact in alleviating patent quality problems while the

processes in the PTO are being upgraded for the long haul.

Conclusion. Thank you for the opportunity to testify. We believe the proposals I've described are important reforms that would make the U.S. patent system much fairer and more reasonable for all parties. In providing this testimony, we hope to stimulate a discussion regarding the best way to reform problems in patent law, including patent litigation. We know

that much remains to be done to turn these recommendations into proper legislative proposals,

and would be delighted to work with this Subcommittee to help in any way we can.

Statement of

Carl E. Gulbrandsen

Before the
Senate Committee on the Judiciary
Subcommittee on Intellectual Property

on

Patent Law Reform: Injunctions and Damages

June 14, 2005

Carl E. Gulbrandsen

Managing Director Wisconsin Alumni Research Foundation (WARF)

614 Walnut St. 13th floor

Madison, WI 53726

PH: 608-263-2824 FAX: 608-263-1064

carl@warf.org

SUMMARY OF STATEMENT OF CARL E. GULBRANDSEN

My name is Carl E. Gulbrandsen. I am the Managing Director of the Wisconsin Alumni Research Foundation, known as WARF, on whose behalf I appear. WARF is the patent management organization for the University of Wisconsin-Madison (“UW-Madison"). Founded in 1925 and one of the first organizations to engage in university technology transfer, WARF has had a significant impact on advances in scientific research and the welfare, health and safety of people in Wisconsin, this country and worldwide and is a recipient of the 2003 National Medal of Technology.

In 1980, under the leadership of this Committee, Congress enacted the Patent and Trademark Law Amendments Act (commonly known as the Bayh-Dole Act), incorporating into law the cardinal principle that the public benefits from a policy that permits universities and small businesses to elect ownership of technology invented with federal funding and to become participants in the commercialization process. Today the list of inventions by individuals employed by U.S. universities is impressive. As patent owners, universities depend on a high quality patent system that promotes certainty and confidence, and permits the enforcement of exclusive rights. If that system is strong and robust, technology transfer occurs and the public benefits. If the system is weakened, the public benefits are reduced.

The current debate about patent reform is subdivided into two categories: patent quality improvements and litigation reform. In regard to quality issues, the first line of defense against poor quality patents and slow decision-making is to provide the USPTO the fiscal resources that it needs to hire and train skilled examiners and implement effective electronic processing capabilities. Further steps remain. Diversion should be permanently barred. The USPTO should continue to implement its “Strategic Plan,” which it can do in significant part through regulatory and administrative means. Several elements of the Strategic Plan require legislation: for example, expanding the early publication of patents at 18 months and assignee filing. WARF also supports the creation of a limited post-grant opposition procedure, with reasonable time limitations and no second window, full disclosure of the real party in interest, a broader range of the estoppel effect of the opposition, and support for the USPTO to implement without compromising its ability to examine and issue high-quality patents. WARF additionally opposes dramatic changes to continuation practice.

In regard to litigation reform, including modification of the current law relating to injunctions and damages, the Subcommittee should pay careful heed not to retard the success of university technology transfer and the creation of vibrant new university spin-out companies. WARF therefore opposes injunctive relief reform and the expansion of prior user rights. Finally for the benefit of universities and independent inventors, and to preserve our country's technological lead, WARF would prefer that the first-inventor-to-invent system be maintained. Nonetheless, WARF recognizes that some benefits may be gained by harmonizing the U.S. patent system with the European and Japanese patent systems. However, certain statutory safeguards should be included.

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