There are steps that Congress can and should take to provide financial firms and other businesses with additional safeguards against these frivolous claims, without impairing the important protections afforded to intellectual property under the patent law. We recommend five initial measures, which are discussed below:

We will now provide you with some additional detail regarding each of these

measures.

Create an Opposition Proceeding

The USPTO proposed a post-grant review of patent claims in their 21st Century Strategic Plan that was released in 2002. We strongly support establishment of an opposition proceeding and appreciate your inclusion of the concept in the Committee Print. We recommend that the opposition procedure allow the public to petition the USPTO to cancel one or more claims in a patent within 12 months of issuance (a timeframe supported by the Administration) under section 323. The counterpart U.K. opposition law provides for an opposition proceeding within two years after the date of grant, but the European Patent Convention opposition period is only 9 months. We respectfully suggest the

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creation of a reasonably moderate time frame of 12 months by changing the

language of section 323 from "9 months" to "12 months" in the Committee Print.

5 Section 72(2)(b) of the U.K. Patents Act of 2004.

6 EPC Art. 99.

Further, we recommend allowing anyone who is threatened with a patent infringement action to file a request for an opposition proceeding within four months after receiving notice of the patent infringement action. Without the four month window for initiation of an opposition proceeding upon a threat of patent infringement, the opposition proceeding would be seldom used. Organizations would not likely expend the resources necessary to monitor the patents of their competitors or the resources necessary to invalidate a patent in an opposition proceeding without any tangible economic return. However, an infringement action provides a sufficient economic incentive to use an opposition proceeding to avoid paying infringement damages for a questionable patent or a patent of suspect validity. Moreover, the 4 month window for launching an opposition would foster a more detailed scrutiny of patents than ordinarily occurs during the typical 25 hours or less of examination at the PTO.'

Under the proposed opposition procedure, the patentability of issued claims would be filed with the Director and subsequently reviewed by Administrative Patent Judges of the Board of Appeals of the USPTO. In section 321(a) after "opposition" (first occurrence) for clarification, we suggest inserting "with the Director in United States Patent and Trademark Office." In section 325, we suggest deleting "The determination by the Director to dismiss may not be appealed" so that the Patent Office and Director are subject to the checks and balances of the judiciary.

Maintaining the secrecy of the identity of the opposer is important to discourage retaliatory action between competitors, which might discourage using the opposition proceeding in the first place for fear of triggering an extensive opposition war over broad patent portfolios of competitors. The U.K. law also

7 FEDERAL TRADE COMMISSION, TO PROMOTE INNOVATION: THE PROPER BALANCE OF COMPETITION AND PATENT LAW AND POLICY, A REPORT BY THE FEDERAL TRADE COMMISSION, October 2003, at 5.

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supports secrecy of the opposing party in opposition proceedings. Accordingly, in section 322, we suggest deleting "or to any person upon showing of good cause" because this intended exception represents an abyss that would swallow the entire rule on maintaining secrecy of the opposing party.

Section 324 of the Committee Print provides that the opposition proceeding may be based on an extensive scope of validity matters, similar to the standards used in Europe and the U.K. We agree with the broad scope of the opposition proceeding in the Committee Print because it provides a readily available, reasonably prompt and cost effective way to determine patentability as a follow up to initial examination by the PTO without imposing unreasonable burdens on patentees. The opposition procedure would enable companies to manage the risk of claims against them based on bad or suspect patents, without incurring the high cost of litigation or facing the need to settle to avoid that cost.

Under Section 338 of the Committee Print, the opposer can drop out or settle with the patent owner, where the Director or Board has actual knowledge that one or more claims are invalid, but fails to issue an opinion. Accordingly, the existing language should afford the Director or Board the opportunity to issue an opinion in the public interest in such a case, regardless of whether the opposer drops out or settles with the patent owner. Accordingly, in section 338(a), after "filed" (first occurrence), we suggest you insert "or unless the Director decides in its discretion to issue a written decision under 331 that invalidates one or more claims of the applicable patent." Similarly, any opposer that remains in the opposition proceeding, or any opposer in a separate proceeding under section 325(c), should be given an opportunity to add any ground of invalidity raised by an opposer whose request to terminate has been granted by adding appropriate language to the Committee Print.

Estoppel issues have plagued inter partes reexamination proceedings and discouraged their use. After any appeal rights1o are exhausted, a third party reexamination requestor is generally precluded from later challenging the validity of claims that survive inter partes reexamination on any ground that was raised or could have been raised during the inter partes reexamination." Therefore, we recommend narrowly tailoring the language of the estoppel provision of section 336 to encourage use of the opposition proceedings. For instance, we suggest amending section 336(a)(1) as follows: after "law" delete the language to the period and replace with "where an identical issue was actually raised and decided in the opposition proceeding, and necessary to the determination of that issue of invalidity." Further, we recommend modifying section 336(a)(2) by adding

"raised and" after "actually" and "of an issue of invalidity" after "final determination."

Modify the Standard for Injunctive Relief

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Currently, if the patent owner clearly shows that a patent is valid and infringed, the patent owner is entitled to a rebuttable presumption of irreparable harm, which favors the granting of injunctive relief. In many countries, including Canada and most European countries, injunctive relief is not available for paper patents that have not been worked. That is, if the owner of a patent does not use the patent within a specified period of time, the owner may lose the ability to obtain injunctive relief. For example, in the U.K. a party may apply for a compulsory license if the patentee fails to work the patent at any time after the expiration of three years from the date of the grant of the patent and if relevant

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35 U.S.C. 134(c)(2004) relates to appeals to the Board of Appeals, whereas 35 U.S.C. 315(c)(2004) covers appeals to the Federal Circuit.

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35 U.S.C. 315(c)(2004).

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Jack Guttman, Inc. v. Kopycake Enters, Inc., 302 F. 3d 1352, 1356 (Fed. Cir. 2002).

grounds are satisfied." The relevant grounds deal with whether or not the demand for a patented product is met on reasonable terms, among other things.

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Rather than adopting a complex compulsory license provision, we support the general language of the Committee Print, where a court grants an injunction on a patent only if the patentee is likely to suffer immediate and irreparable harm that cannot be remedied by the payment of money damages alone. If an inventor can demonstrate a likelihood of irreparable harm and the patentee or its licensee have worked the invention in the U.S. within a reasonable time (e.g., 1 to 3 years) after the grant of the application, injunctive relief ought to be available. Accordingly, we suggest replacing the language of proposed Section 283(b), "including the extent to which the patentee makes use of the invention" to "including the extent to which the patentee works the invention within a reasonable time after the grant of the patent.” In this case, “worked” would mean “making, using, selling, or having made the subject matter of the claimed invention on a material commercial basis by the patent owner or its licensee."

Improve the Prior User Rights Defense

The prior user rights defense under 35 U.S.C. 273 is an important protection for financial institutions especially due to the recent growth in patent litigation. However, in its current form, the prior user rights defense is merely limited to "business methods." Business methods have proved difficult to define in practice and are not defined anywhere in the Patent Act. Accordingly, a patent owner of a business method patent may characterize its business method as a system or apparatus to circumvent the application of the prior user defense. For the this reason, the prior user defense should be modified to apply equally to any methods, products or services covered by a patent, as proposed in the Committee

13 Section 48(1), U.K. Patents Act of 2004.

14 Section 48(1)(a), U.K. Patents Act of 2004; See, e.g., Swansea Imports Limited v. Carver Technology Limited, BL 0/170/04.