APPENDIX

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE HOWARD L. BERMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Thank you for scheduling a hearing on the Patent Act of 2005. Several groups have worked diligently to arrive at a consensus on reforms necessary to improve existing patent laws. There seems to be agreement that any legislation should focus on three broad subjects: 1) the decrease in patent quality, 2) the increase in litigation abuses, and 3) the need to harmonize U.S. patent laws with the patent laws of foreign countries. The Chairman and I and our staffs, have carefully considered the copious comments on the committee print and have carefully crafted H.R. 2795 to respond to the concerns.

I initially became interested in patent reform, primarily because of the multitude of questionable quality patents that were being issued. High-quality patents are essential to a healthy patent system. Poor quality patents tend to spawn litigation, which in turn creates uncertainty in markets that depend on patent rights. As a result, investors hesitate to invest and innovators hesitate to invent. That is why I am pleased that there is strong support for a key quality provision in the billallowing third parties to submit prior art to examiners within a limited time frame. With Section 10, we have taken an important first step in addressing the problem of poor patent quality by enabling examiners to have more information from additional sources. During the question and answer portion of this hearing, I intend to explore the merits of additional quality measures such as the "second window" in the post-grant opposition procedure.

This bill is by no means a perfect solution, but I believe many of my additional concerns will be addressed as the bill goes through committee. For example, the PTO has voiced some concerns about its ability to administer the provision on the duty of candor. If the agency tasked with managing the procedure believes it will have trouble doing so, it is worth taking a second look at the consequences of the language. Furthermore, I think the harmonization provisions need to be fleshed out a bit more to address the concerns of small-inventors and universities, which I hope at least one of the witnesses will speak today. As we move forward in this process, I hope that we will continue to seek a consensus on the best way to reform our patent system.

I look forward to hearing from parties interested in patent reform over the next few weeks in order to rectify any unintended consequences presented by the text of the bill. Overall, I believe that our bill has addressed a number of pressing issues and will certainly create a healthier more effective patent system.

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

I am an original cosponsor of this legislation because I believe we need to make major changes to the patent system. At the same time, however, I do have concerns with several of the provisions in the bill.

At the outset, it is important for our economy to harmonize our patent system with those of other countries. To this end, we should establish a system that awards the patent to the first-inventor-to-file. We also should make it easier for third parties to challenge patents after they have issued as long as the process has some finality to it.

Other sections, however, will require continuing discussions. I have not heard anyone deny that there are too many 'bad' patents out there, patents that are overbroad or that the Patent and Trademark Office should have been denied as (63)

being obvious. Owners of such patents file infringement suits and receive either damages or injunctions for patents that never should have been issued. This drives up costs not only for businesses but also for consumers. To address this, we are faced with two options.

Because of problems in a few industries, there are proposals that we make it more difficult to enforce patents. I fear, however, that this could disproportionately affect smaller patent owners, who would have a more difficult time in establishing harm from infringement if damages but not an injunction were awarded.

In terms of scope, this approach may be too broad. It would affect owners of not just overbroad patents but also those that are entirely legitimate. It also would affect not just the industry in question but every industry that is vital to our economy, from biotechnology to software to high-tech. Finally, it could discourage investment and research into new drugs and technologies, as investors would not know whether any resulting patents would ultimately be enforceable.

The second option, which I believe deserves greater consideration, is to prohibit such patents from issuing in the first place. Such an approach would help avoid infringement and related litigation costs altogether. It also would ensure against the issuance of injunctions for patents that should not have been granted without affecting the rights of legitimate patent owners.

One proposal to accomplish this is to allow patent examiners to review more than just officially published documents. Patent examiners must be able to consult information that tells whether an application describes something that is not really new, even if that information was not a patent or a journal article. I would hope we can all agree that the PTO should be able to consider a wider variety of such prior art than it is currently permitted.

We also need to revisit the standard that is used to determine whether an application describes something that would be obvious to people in the field. Even if an invention was not clearly explained somewhere, the concept of it may be too obvious to merit patent protection, and we should make that clear to the PTO and to the Federal Circuit. These two ideas, among others, could drastically cut the number of bad patents being issued and drive down costs for all of us without harming valid patent owners, large and small.

PREPARED STATEMENT OF THE HONORABLE ZOE LOFGREN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Today we are here to discuss the merits of the "Patent Act of 2005." But first I want to thank Chairman Smith and his staff for all their hard work on this bill and their willingness to work across the aisle on it. I also want to thank Ranking Member Berman and his staff, as well as the academic and industry groups who have tried to find creative solutions to some of the more vexing parts of this legislation. I know we have a lot of work left to do. I think our country needs patent reform and for that reason I am a cosponsor of this bill. But this is just the beginning of the process. The bill we are considering today includes many needed reforms that I think everyone can support. Obviously, there are aspects that will need further work and change.

Patents are a critical source of this country's economic vitality. The strength of our patent system has spurred innovation and led to the creation of entire industries. But to ensure the continued success of our patent system, it is clear that changes need to be made. This legislation is a needed first step to move this process forward.

As we continue to seek the right balance, I hope that we also consider other ways to improve patent quality. Over the last several weeks, I have received numerous suggestions including, among other things, suggested improvements to the non-obviousness standard found in section 103(a). While it is too early for me to endorse any of these suggestions, I hope that we can give them serious consideration. Again, thank you Mr. Chairman, I look forward to working with you and the other Members of the Subcommittee on this legislation in the weeks to come.

Standard Seging Organizations - These proposals are aimed at proteering companies that participate in standard setting organizations from patentees who fail to disclose them patents during the standard setting process.

1) Introduce a "safe harbor” exception that protects the interoperability of

standards-based products. The safe harbor could state that any act necessary to achieve interoperability between two independent products cannot trigger liability for willful intringement. This would help bring parent law in line with some of the protections afforded interoperability in the copyright and DMCA contexts.

2) Prohibit treble damages unless notice of potential infringement has been received before a standard has been officially adopted.

3. Define a reasonable royalty in standards-related lawsuits as the ex can royaly price

Parent Trolls - These proposals are aimed at patent troils.

1) Attorneys fees - Currently, attorneys' fees in patent cases are only awarded to a patent defendant if the case is “exceptional," meaning it was objectively unreasonable to bring the case or frivolous in some way. This is a difficult standard to meet.

a. Adopt copy ught law's standard for attorneys' fees, fc., fees are awarded my the prevailing party. Legislative history could explicitly state that evidence of troll-like hehavior should be considered in deciding whether attorneys' fees are appropriate.

Mandate attorneys' fees for defendants who respond to den and letters with prior art that subsequently unvalidates the patent in court.

2) Bankruptcy-There have been instances of patent trolls purchasing patents in bankruptcy proceedings for the sole purpose of bringing litigation. To combat this, give the FTC junsdiction to eballenge such purchases. If the FTC finds that the purchase is likely to have an anti-competitive effeer (for example, to hold-up Implementation of an industry standard), it could block the sale.

Ar tias juncture, these are not proposals or my part. However, I would welcome your comments and analysis