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Mr. SMITH. Thank you, Dr. Myhrvold.
Mr. Bartholomew. TESTIMONY OF DARIN BARTHOLOMEW, SENIOR ATTORNEY,
PATENT DEPARTMENT, JOHN DEERE & COMPANY, ON BEHALF OF THE FINANCIAL SERVICES ROUNDTABLE
Mr. BARTHOLOMEW. Thank you, Chairman Smith, Ranking Mem- ) ber Berman, and Members of the Subcommittee. My name is Darin 1 Bartholomew. I am senior counsel for Deere & Company, where I focus on intellectual property and technology matters. I am pleased to testify today on behalf of John Deere Credit, the Financial Serv- ; ices Roundtable, and BITS.
The Financial Services Roundtable and BITS are financial services trade associations that represent some of the largest financial institutions in the country, including banks, broker-dealers, and other financial institutions. John Deere Credit is one of the largest equipment finance companies in the United States and is proud to be a member of the Financial Services Roundtable. We agree with many of the concepts which you include in the Committee Print and we appreciate the opportunity to provide you and other Members of the Committee with comments.
Today, over 800,000 applications are pending in the PTO and examiners are unable to spend enough time to provide a meaningful examination on complex applications. This is particularly true in the area of business method and financial services patents. After the landmark decision in State Street Bank & Trust Company in 1998, the number of pending patent applications that involve financial services and business methods have surged greatly. Because it typically takes more than 3 years to get allowance of these applications, we are faced with an avalanche of increased litigation risks for the financial services industry.
There are steps that Congress can take to provide protection against frivolous claims without impairing the important protections afforded by intellectual property rights. The main areas are creating an opposition proceeding, modifying the standard for injunctive relief, improving the prior-user rights defense, clarifying the damage rules, and promoting collaborative research.
The Committee Print on opposition proceedings does not include a window for initiation of an opposition proceeding upon the threat of patent infringement. However, we believe that this is essential to improve the quality of patents issued in the U.S. Organizations will not likely expend the resources necessary to monitor patents in a 9-month post-grant window. There is no tangible economic return for challenging patents unless there is a threatened infringement or requirement to license the application.
We believe that the 4-month window for launching an opposition after a threat of patent infringement would foster a more detailed scrutiny of patents than ordinarily occurs during a typical examination in which an examiner expends about 25 hours or less. This would create an efficient two-level examination regime within the U.S. for patents that are asserted. Patents that are asserted represent less than 2 percent of issued patents, approximately 2,500 patents a year. That would be a low administrative burden on the PTO to conduct an opposition proceeding for patents prior to their
assertion. In the Committee Print, secrecy of the opposer was one of the topics that is necessary to prevent retaliatory oppositions or opposition wars between competitors. We felt that the preponderance of the evidence standard proposed would provide an incentive to use opposition proceedings instead of filing a lawsuit initially.
Turning to the area of injunctive relief, in the U.K. injunctive relief is permitted anytime after expiration of 3 years from the date of the grant of the patent. This would provide a strong incentive for actually using inventive ideas instead of letting them sit on the shelf, and inventors would be allowed to license to others to achieve and satisfy the working requirements, which would meet the requirements of small entities.
With respect to business method patents, business method patents have proved difficult to define in practice and are not defined anywhere in the Patent Act. That's why we favor the Committee Print that would expand the prior-right user defense to all methods and to apparatus and systems. In addition, we feel that the defense should be extended to cover other matters so that we can achieve a standard in which the preponderance of evidence is used to invalidate business method patents.
In clarifying the damage rules, we agree with the Committee Print, but we have some modifications to refine language. These modifications involve clarifying the level of knowledge that it takes to prevent increased damage awards. We are in agreement with the codification of this decision, in that the absence of an opinion of counsel does not create an inference of willful infringement, in concurrence with the recent Knorr-Bremse decision.
With respect to the promotion of collaborative research, the current novelty provision in the law includes a public use provision as a novelty-barring event, and the U.K. and Europe both include language that prior art must be publicly available in their statutory provisions. Accordingly, we think that it is appropriate to include a reference to "public" or "publicly available" in the current statute. The presence of the word "public" supports the use of confidentiality agreements to conduct collaborative research between organizations, and the absence of “publicly available" would potentially lead to the creation of a class of secret prior art that is disfavored by the Federal Circuit and Congress.
We look forward to providing additional detail and working with the Subcommittee to refine these concepts.
PREPARED STATEMENT OF DARIN BARTHOLOMEW
Mr. Darin Bartholomew
“Patent Quality Improvement"
House Judiciary Committee Subcommittee on Courts, the Internet, and Intellectual
Chairman Smith, Ranking Member Berman and members of the Subcommittee, my name is Darin Bartholomew. I am senior counsel for Deere & Company where I focus on intellectual property and technology matters. I am pleased to testify today on behalf of John Deere Credit and The Financial Services Roundtable and BITS, which are affiliated financial services trade associations.
John Deere Credit is one of the largest equipment finance companies in the United States, with more than 1.8 million accounts and a managed asset portfolio of nearly $16 billion. It provides retail, wholesale and lease financing for agricultural, construction and forestry, commercial and consumer equipment (including lawn and grounds care) and revolving credit for agricultural inputs and services. John Deere Credit also provides financing in Argentina, Australia, Brazil, Canada, Finland, France, Germany, Italy, Luxembourg, Spain, and the United Kingdom.
The Financial Services Roundtable ( www.fsround.org) represents 100 of the largest diversified financial services companies providing banking, insurance, and investment products and services to American businesses and consumers. Member companies participate through their chief executive officer and other senior executives nominated by the CEO. Roundtable member companies account directly for over one million jobs.
BITS ( www.bitsinfo.org) was created in 1996 to foster the growth and development of electronic financial services and e-commerce for the benefit of financial institutions and their customers. BITS provides intellectual capital and addresses emerging issues where financial services, technology and commerce intersect. BITS's Board of Directors is made up of the Chairmen and CEOs of twenty of the largest U.S. financial services companies, as well as representatives of the American Bankers Association and the Independent Community Bankers of America.
I am pleased to testify as a member of The Roundtable's Patent and Intellectual Property Working Group. John Deere Credit, as well as its parent, Deere and Company, is intensely interested in patent quality issues at the USPTO. We are grateful that you have begun the discussion of these matters with your comprehensive Committee Print. We agree with many of the concepts which you included in the Committee Print and we appreciate the opportunity to provide you and other members of the Committee with comments.
Today, over 800,000 applications are pending in the PTO and Examiners are unable to spend enough time to provide a meaningful examination on complex applications. Regardless of which factors contribute to a lack of patent quality, businesses of all shapes and sizes, including banks, broker-dealers, insurers and finance companies are threatened by a large and growing number of frivolous claims of patent infringement. Currently pending claims of infringement are a serious problem, but they are only the tip of the iceberg because of the lag in allowance of patent applications related to business methods and financial services. After the landmark decision in State St. Bank & Trust Co. v. Signature Fin. Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), the number of pending patent applications that involve financial services have surged generally. Because it typically takes more than three years to procure allowance of applications for business methods (e.g., Class 705)," the risk of increased litigation for the financial services industry is now present. If not addressed by appropriate legislation, the current trend will lead to a greater number of frivolous claims filed against
financial firms in coming years.
'U.S. PATENT AND TRADEMARK OFFICE, PERFORMANCE AND ACCOUNTABILITY REPORT FISCAL YEAR 2004, available ul www.usptv.gov/web/offices.com/annual/2004/060405 table5.html (last visited April 27, 2005).
FEDERAL TRADE COMMISSION, TO PROMOTE INNOVATION: THE PROPER BALANCE OF COMPETITION AND
STEPHEN A. MERRILL, RICHARDC. LEVIN, AND MARK B. MYERS, NATIONAL RESEARCH