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partes reexamination, more expansive use of 18-month publication, a doctrine of a first-to-file construct, elimination of the best-mode requirement, reformation of the inequitable conduct defense, and an overhaul of the willful damages prevention have generated much support. Hopefully, reasoned discussions and good-faith negotiations will generation support for other issues as well. I also want to emphasize that subject matter not contained in the print could still be included in the bill.

Last week's panel featured representatives of larger mainstream industry groups. Today we welcome witnesses from Government, small business, the Academy, and the financial world. It is healthy and necessary to consider as many different perspectives as possible. Such diversity will only lead to a better work product.

I look forward to hearing from the witnesses shortly, and now recognize the gentleman from California, Mr. Berman.

Mr. BERMAN. Well, thanks, Mr. Chairman.

Last hearing, we heard differing opinions about which sections of patent law should be reformed, how those reforms should be accomplished. Some of the witnesses stressed changes in litigation rules for patent cases; others focused on the need to harmonize U.S. patent laws with the foreign patent law. But all the witnesses seemed to agree that bolstering the level of patent quality is integral to a workable patent system.

The whole foundation of the patent system is the idea that the Patent and Trademark Office grants high-quality patents. However, in recent years, and particularly since the State Street decision, a large number of questionable patents have been issued, leading to increased litigation and uncertainty in markets that are heavily dependent on patent rights. There are many possible reasons for the questionable quality-lack of funding resulting from fee diversion; lack of appropriate resources or training materials; an increase in the backlog of patent applications, which I gatherwe will probably hear from Mr. Dudas—has become stunning; or even exposure to a new patentable subject matter, such as business method patents.

While the PTO has made great strides in addressing this problem, more needs to be done to restore confidence in the patent system. The Committee Print has provided a useful set of guidelines that identify some of the key areas in need of reform. Some of the provisions are almost identical to the ones Mr. Boucher and I proposed last year. However, an issue we addressed with our thirdparty prior art submission provision, and which deserves greater attention in the Committee Print or any future legislation, is how to address quality on the front end of the examination process.

I anticipate a spirited discussion today on the merits of some of the proposals in the Committee Print. And I guess I submit a challenge to those critical of certain provisions. If you have a problem with the proposal, help us craft a better solution, because we are planning to introduce a patent bill, as the Chairman mentioned, in the near future. I hope that the many interested groups—and here I guess I want to echo the Chairman can work together to help us formulate some answers to the problems facing the patent system today.

I look forward to working with you, Mr. Chairman, in drafting his legislation, and yield back.

Mr. SMITH. Thank you, Mr. Berman. And without objection, the "pening statements of other Members will be made a part of the record.

Before I introduce the witnesses, I would like to invite you to stand and be sworn in, if you will.

[Witnesses sworn.)
Mr. SMITH. Thank you. Please be seated.

Our first witness is John Dudas, Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office. In a previous life, Director Dudas worked for this Subcommittee, so we welcome him back. He earned a bachelor's degree

in finance, summa cum laude, from the University of Illinois and - a law degree with honors from the University of Chicago.

Our next witness is Richard Levin, a special friend and president of my alma mater, Yale University. He co-chaired the National Research Council that published a major study of the patent system last year. President Levin studied history at Stanford University and politics at Merton College, Oxford University. He also holds a doctorate in economics from Yale University.

The next witness is Nathan Myhrvold, founder and CEO of Intellectual Ventures, an invention company in Belleview, Washington. He owns 14 patents and has several others pending. Dr. Myhrvold received an undergraduate degree in mathematics and a master's in geophysics and space physics from UCLA. He later earned another master's in mathematical economics and a doctorate in theoretical mathematics and physics from Princeton University.

Our final witness is Darin Bartholomew, senior patent attorney for John Deere & Company. Mr. Bartholomew has practiced intellectual property law for more than 10 years. He earned an electrical engineering degree from Northwestern University, a J.D. from John Marshall Law School, and a Master of Laws from Georgetown University.

Welcome to you all. We have your complete written statements, and without objection they will be made a part of the record. We do ask that you keep your oral testimony, though, to 5 minute

And Director Dudas, we will begin with you.
TESTIMONY OF THE HONORABLE JON W. DUDAS, UNDER SEC-

RETARY OF COMMERCE FOR INTELLECTUAL PROPERTY,
AND DIRECTOR OF THE U.S. PATENT AND TRADEMARK OF.
FICE

Mr. DUDAS. Thank you very much, Chairman Smith, Ranking Member Berman, and Members of the Subcommittee. I appreciate your inviting me to testify today and I commend you for holding these hearings on your multi-title Committee Print, which proposes comprehensive changes to our patent system.

The benefits of our patent system have always been obvious to Americans. You're all familiar with article I, section 8, clause 8 of the U.S. Constitution granting Congress the power to promote the progress of science and the useful arts by securing for the limited times to authors and inventors the exclusive right to their respective writings and discoveries. That clause was adopted into the

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Constitution without a dissenting vote and without even a recorded debate. History has repeatedly affirmed the wisdom of our Nation's founders in establishing these principles.

The tremendous ingenuity of American inventors, coupled with an intellectual property system that encourages and rewards innovation, has propelled the growth of our Nation from a small agrarian society to the world's preeminent technological and economic superpower. And all of our patented technology finds its way into the public domain within 20 years, freely available to any and all

. The success of our system has also been the basis for economic development in nations around the world.

Unfortunately, a growing chorus of critics now questions whether the fundamental patent system will enhance or hinder development in other nations. However, many of the nations questioning the efficacy of that system have become hotbeds for the manufacture and export of counterfeit goods, with more than 90 percent of goods, in some cases in some industries, being counterfeited or pirated. Therefore we must actively educate the world that respect for intellectual property benefits everyone.

Having and promoting the fundamentally right system, however, is not enough. Even the best system in the world can and should improve, and, as you know, at the USPTO our 21st Century Strategic Plan began as directives from the President and Congress that we improve. Recently we've announced three internal reforms to improve our Agency's quality and efficiency. We're increasing transparency, we're internally improving our ex parte reexamination, and we're saving applicants tens of millions of dollars by revamping our process of applicants submitting appeal briefs. We're implementing a multitude of improvements and we plan to do more.

We're also hearing legislative proposals in three general categories, as you mentioned-operational, litigation reform, and the convergence of international laws and best practices. In my view, each of these must center on how the patent system encourages innovation and, more importantly, serves the public at large. We must look at these issues from every angle. We must look at them from the perspective of the independent inventor who may be the next Thomas Edison to the perspective of a large company that believes its innovations are being frivolously tied up in unnecessary legal knots.

As you reflect upon all of the proposals you hear, I urge that you not focus exclusively on litigation nor exclusively on the administrative process. Patent quality begins with the application and it begins with the applicant. And I can tell you that the number one challenge I hear from examiners today is one of application quality. So I'm comforted by Ranking Member Berman, your statement about the beginning of the process both at the USPTO, but we'll take it one step even further back, which is the quality of the application and the quality of the process as it comes into the Office, as well as what happens within the Office. I think all of these issues need to be considered, but one component shouldn't be considered to the expense of others.

We're committed at the USPTO to make sure that our practices and policies promote innovation and the dissemination of new tech

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nologies. While we implement operational reform, we realize that measures within your domain will make valuable contributions to the system. The USPTO and the Administration are enthusiastic to continue working with you closely and be a part of this hearing as you develop reform legislation to ensure that the U.S. patent system remains the world's leader.

Thank you.
[The prepared statement of Mr. Dudas follows:]

PREPARED STATEMENT OF THE HONORABLE JON W. DUDAS

STATEMENT OF

TIE HONORABLE JOY W. DUDAS

UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY

AND
DIRECTOR OF TIIE UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE

SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

Committee on the Judiciary

U.S. House of Representatives

“Committee Print Regarding Patent Quality Improvement"

APRIL 28TH, 2005

Introduction

Chairman Smith, Ranking Member Berman, and Members of the Subcommittee:

Thank you very much for inviting me to testify today. I commend you for holding this hearing and last week's hearings on improving the patent system. This is a particularly appropriate time to reflect upon the incredible success of invention and of our patent system in the United States. It was 215 years ago this month that our young nation adopted its first patent statute. On April 5, 1790, your predecessors in Congress passed the final version of the statute, and President George Washington signed it into law on April 10.

Strength of our Patent System

The benefits of our patent system have always been obvious to Americans. You are familiar with Article 1, Section 8, Clause 8, of the U.S. Constitution, granting Congress the power to promote the progress of science and the useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." James Madison wrote in one of the Federalist Papers, “The utility of this power will scarcely be questioned.” He was right. That clause was adopted into the Constitution without a dissenting vote -- without even any recorded debate.

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