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Mr. HAWLEY. The injunction provision in the bill we have more difficulty with because it's not simply a minor-in our view, it's not simply a minor tweaking of the current process. It's a real change. It places the burden on the patentee to establish the need for an injunction, whereas under most circumstances now the injunction is almost a matter of right and the defendant needs to say why it cannot. So that's a major change.

It also begins to import preliminary injunction concepts thatand where the preliminary injunction law is going to be borrowed I'm sure of it and the barrier is very high.

It also encourages the court to determine whether or not the patentee is working the invention themselves, which we feel is akin to a working requirement and will not be seen with favor by small companies and small-and individual inventors.

Mr. BOUCHER. I think I know what you think about the injunction. Mr. Lutton?

Mr. LUTTON. Very quickly. We do support the post-grant. We view it as a second chance to get it right on the patents that matter. We think that second window which I referred to earlier is a critical piece in order to allow us to focus on the patents that really matter.

We're strong supporters of the injunctive provision that's in there, but also believe that there are other ways to get at that same issue, but we like that issue.

I have two other suggestions for you in terms of things that are not in the bill that might be worth thinking about.

One is the submission of prior art by a third party from the outside during the pendency of a patent application with comment so that the interested public can provide the PTO with the benefit of its thoughts on additional prior art.

The second idea is some consideration of whether the burden of proof for invalidating a patent, which is clear and convincing evidence, ought to be lowered in those instances where the patent examiner has not had the opportunity to examine the prior art that is at issue in the challenge later. So clear and convincing may be a appropriate if the patent examiner looked at this art. The patent examiner didn't have that art. It's totally a new challenge. Maybe it's preponderance of evidence.

Mr. BOUCHER. That's a very interesting proposal.

So you're saying keep the clear and convincing evidence standard general but apply a preponderance of the evidence standard where the examiner has not had an opportunity to have benefit of evidence of prior art that whoever wants to challenge the award of the patent happens to have?

Mr. LUTTON. That's right. And I think the rationale would be that the presumption of validity and the clear and convincing evidence standard are premised on an examination of the Patent and Trademark Office. If there was no examination relative to that prior art, why the presumption?

Mr. BOUCHER. Does the availability of a strong and accessible post-grant opposition proceeding where witnesses can be brought in, argument can be held-you get an adjudication before the patent actually leaves the Patent Office-ameliorate to some extent the burden that this clear and convincing evidence standard general imposes with regard to court proceedings?

Mr. LUTTON. To some extent, but not totally. You have to look at post-grant opposition as a second coarser look at the or more granular-let me say it that way—more granular filter through which a patent must pass. But it is not it does not have all of the flexibility and other opportunities over litigation. There are cases that are going to be litigated even after post-grant opposition. But I think it provides another—you can really look at the first examination, which is on average 17 hours, as the first filter. Post-grant for those cases where it's brought a second filter. And then for the cases that are not dealt with that way litigation.

Mr. BOUCHER. Okay. Yes, Mr. Kushan.

Mr. KUSHAN. I just want to briefly emphasize one point about, and it's a cross-cutting point, whether you're talking about postgrant opposition or other issues, focused on PTO activities, one thing that we are concerned about is making sure that we plan for the infrastructure to be sound and fully funded and designed in a way which will be better than the proceedings we have now. In the biotech sector, there are a lot of interference proceedings. If we have that set of rules and practices used to run opposition proceedings, it won't be a very good system and we think you need to consider some structural changes at the PTO to make sure that you have a very well designed group of people running the opposition proceedings. This might be done just by setting up a separate division at the Patent Office to run those proceedings.

The funding issue is also critical, and I think given the constraints we have with assured funding, you need to envision a scenario where we have to prioritize the work of the PTO to make sure that opposition proceedings don't turn into multi-year proceedings because of funding problems. So with that, I'll stop and encourage you to think about how these things will run at the Patent Office as well.

Mr. BOUCHER. LaFuze?

Mr. SMITH. Thank you, Mr. Boucher. Your time has expired. Without objection, Mr. LaFuze, will you respond very briefly?

Mr. LAFUZE. I will. First of all, the intellectual property law section supports the post-grant opposition system that's in place in the bill. And secondly, with respect to injunctions, we don't have a position, so I will only offer my own personal comments on that. I think the injunction issue needs to be broken down into two parts. What happens after a trial is over and a judgment is entered and a judgment and an injunction is being considered pending appeal. And then I think the other one, which is an entirely different circumstance, is what do you do with an injunction when the court of appeals says the patent is valid, the patent is infringed, and the remedies under title V include the possibility of in injunction. I think we need to break those up. There are things we can do with the bond pending appeal. There are things that we can do with attorneys fees if somebody gets an injunction and it turns out they lose on appeal, and the defendant actually has been injured that can be measured somehow monetarily, and I think if we break those two issues apart, separate them, analyze them differently, it will be easier to handle.

Mr. SMITH. Mr. Boucher, thank you for your earlier comments as well as your questions. I might have guessed with all witnesses being lawyers we were going to have a little bit of a problem with time constraints. But we had a lot to discuss today as well.

Let me just make the observation that I think it's evident to anyone who is here that not only is this an important piece of legislation, but we're going to go forward in a bipartisan way and I appreciate the supportive comments on both sides of the podium up here.

We're also serious about going forward in an expeditious way. We have a tentative mark up scheduled for the end of May. That gives us I think a reasonable amount of time to continue our discussions. And we still do have work to do on injunctions and post-grant opposition and a couple of other continuation applications being another area that we need to explore, too.

But we've made a lot of progress, and I appreciate all the agreement and the time that you all have committed to the task.

This is the first, as you know, of a couple of hearings, and we do expect to get to the end with your good help.

Mr. BERMAN. Would the Chairman yield?

Mr. SMITH. Thank you, again. The Gentleman from California is recognized

Mr. BOUCHER. I just want to make about 20 seconds of comment. Mr. SMITH. Okay. The Gentleman is recognized.

Mr. BOUCHER. To repeat in my opening statement the congratulation on what you're doing on all this and how you're going about it. And secondly, see if the witnesses other than one of you spoke to the prior—third-party prior art issue—if, in writing you could just give us your position on allowing the Patent Examiner to get third-party prior art between publication and grant. I think that's an issue the committee print doesn't address, which having all your positions would be helpful.

Mr. SMITH. Thank you. Thank you, Mr. Berman, and again thank you, all. We stand adjourned.

[Whereupon, at 6:09 p.m, the Subcommittee adjourned.]

COMMITTEE PRINT REGARDING
PATENT QUALITY IMPROVEMENT

Part II

THURSDAY, APRIL 28, 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 12:12 p.m., in Room 2141, Rayburn House Office Building, the Honorable Lamar Smith (Chair of the Committee) presiding.

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

First of all, let me express my appreciation to the great interest we have in this hearing today. We probably have the best attendance we have had all year on any hearing. We, of course, had a hearing on the same subject last week, so maybe the interest has been building as well. We expect to have interest by Members and appreciate the three other Members who are here today. This is not the best time necessarily to be conducting a hearing-at noon—but we hope there will be other Members who will stop by before we have a final vote and leave town today.

I am going to recognize myself for an opening statement, and then yield to the gentleman from California, the minority Ranking Member, for his opening statement as well.

Today the Subcommittee on Courts, the Internet, and Intellectual Property will conduct its second hearing on a Committee Print to improve patent quality. The print is based on the leading recommendations developed by the PTO and a broad cross-section of industry and trade associations that are involved in the formulation of patent policy.

There is no shortage of volunteers nationwide who want to testify before this Subcommittee. I assure these individuals and groups that their concerns will be heard and given due process.

Following this hearing, I will work with the Subcommittee Members, the Patent and Trademark Office, and others to develop a bill based on the print, that I expect to move this spring. So I urge all interested parties to work toward areas of compromise and concordance, knowing that no entity or individual will be entirely satisfied with the finished product. Still

, there are areas of agreement and the trajectory is encouraging. Creation of a post-grant opposition system, tweaks to inter

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