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Mr. DUDAS. Thank you. We do allow now at the Patent and rademark Office up to 2 months after publication the submission prior art, but with no relevancy statement. The distinction made - you can submit prior art, that's accepted. If you comment on the cor art, that's sent back or destroyed. There is a statutory prohicition currently in place that says we cannot have a pre-grant opposition procedure, so the question is, in order to avoid harassment

delay of the patent application, how do we get relevant art from che outside along those lines?

We are open to the suggestion of how we can improve that. We certainly believe that there should be a uniformity of any type of submission that there is there. We are currently looking at 2 months after 18 months—I'm sorry, it's published at 18 months, then there's 2 months to submit prior art-moving that time frame to bring in prior art. And then the question of what's the right balance of whether or not there can be any comment on that at all. That becomes more problematic, and we've traditionally opposed pre-grant both in the U.S. and elsewhere, where it looks sike it can be harass the applicant.

But a way of getting more prior art is something that we have now that we'd like to expand, and we also do it in more general ways through partnerships with the private sector.

Mr. BOUCHER. Well, I very much welcome your willingness to have a conversation about ways we might amplify that process to some extent.

Other comments on the submission of prior art? President Levin.

Mr. LEVIN. It seems to me a bit of a confession of failure if you don't allow the submission of prior art until publication and don't require publication until 18 months, and then are thinking about what would happen after that 2-month window. It's like saying there's no hope for ever getting pendency below 2 years. That's not the way the system should be working. That shouldn't be our aspiration. Wouldn't it be a lot better to speed up pendency, to actually beat the publication deadline and actually have the publication of the patent come when the patent issues, after 9 months or 6 months, and then let people intervene with their prior art in an opposition procedure?

So why think in a mindset that assumes there's a 3-year pendency? That's not the best system.

Mr. BOUCHER. But you do favor a clear provision that allows for the submission of prior art, perhaps amplifying the administrative process currently in practice at the Patent Office?

Mr. LEVIN. Well, I think it's more important to speed up pendency and introduce a post-grant review system, where of course

Mr. BOUCHER. Well, we can do both, though. I mean, it is not a mutually exclusive arrangement.

Dr. Myhrvold, do you want to comment? Mr. MYHRVOLD. Well, I very much support both what Commissioner Dudas and Dr. Levin said. I would love to have six- or 9month pendencies. That would be fantastic for inventors. Maybe a little bit too much to hope for in the near term. I think that the current administrative

Mr. SMITH. Without objection, the gentleman is recognized for an additional 2 minutes.

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Mr. BOUCHER. Thank you.

Mr. MYHRVOLD. You know, I think that the existing procedur that the Patent Office has are good. By the way, I support public tion of all applications. I think transparency in the process is veyte to a a matter of balancing, you know, what the relevant time frame> good, and this plays to that. And then, as Director Dudas said, it apprec are. Obviously, if you have a 2-year time to submit prior art, than on a pushes pendency back out again.

Mr. BOUCHER. Okay. I understand your point. Thank you.

Let me tell you what my practical concern is about the automatic runawa and that is that it simply enhances dramatically the leverage of the for pa injunctions that follow today the finding of patent infringement most patent holder in order to negotiate what may be an extraordinarily favorable settlement from his perspective. Let me give you an ex- rere atu ample. Research In Motion, the maker of BlackBerries, which we wan, it all carry now, originally was confronted with a patent claim for $50 (lick car million. Once a finding of infringement was entered, settlements e inserte commenced, and the settlement turned out to be $450 million. And that the incentive that Research In Motion had to pay that king's ran- non som som, that shakedown, as Chairman Smith so well described the mmonly general circumstance, is that automatic injunction would have ter- sentable minated the company's business. They would have had to stop sell- at do yo ing BlackBerries in the United States.

And I just think that leverage is unjustified. I think it is too hunk it is much. Now, the patent holder is going to get his damages no matter what. There is going to be a trial or a settlement on the ques

ald cons tion of damages. But why give the patent holder that extraordinary mess me amount of leverage and a shakedown opportunity?

Comments? President Levin.

Mr. LEVIN. I think that there's a certain logic in that and perhaps—it's not something I've given a lot of thought to previously, but some more balanced phrasing, rather than going from presumptively there'll be an injunction to presumptively there won't be, finding some kind of balancing test as a way of changing the law would be a solution.

Mr. BOUCHER. But you agree the current structure is a little bit unbalanced in having that automatic

Mr. LEVIN. I agree with the factual assertion you made, that it does give a lot of leverage to the patent holder.

Mr. BOUCHER. You are a careful witness, President Levin.
Mr. Dudas, do you want to comment?

Mr. DUDAS. I'd be happy to comment. I think it goes back a bit to what Congressman Berman had said earlier on the question of

Mr how are you viewing this. One of the challenges as intellectual Sir property policymakers is convincing others that intellectual prop- the erty is property. And the question is, “Is this property?" If you take

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the countries, the person who has the beachfront property, who holds out when the shopping center wants to come in. Do we say the by shopping center's got a great shopping center plan, we really think that they're going to go ahead and build and they'll pay you money damages? I think it's a question of, if that patent is intellectual property, is this really reducing property rights; and a question of

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Ur. BOUCHER. I hear what you are saying. It is a kind of theo-ocal response to a practical problem, and I find it less than comling. But I appreciate what you said anyway. Mr. Dudas, with the Chairman's indulgence, I want to ask you e question on a subject that has not been raised today. Mr. BerFan and I several years ago were quite concerned about the award business method patents and the fact that we saw that as someting of a runaway train. And there were some notable examples at I think most people, most observers really thought were inap

opriate for patent awards. I mean, what comes to mind is oubleClick's patent on the reverse auction. That wasn't exactly W. Reverse auctions have been known since about 5,000 years 0. I mean, it was not exactly novel. What was novel was that publeClick carried this out on the Internet for the first time.

So we inserted a provision which, frankly, I still find appealing, hat says that if you are carrying out through a computer implenentation something that is well-known in the physical world and : a commonly known practice, it is not novel, it is obvious, it is tot patentable.

What do you think about that? Is that something we should do? It is not something that is in the draft we are now considering, but we think it is still an important principle.

Mr. DUDAS. I think it is something that we are considering and should consider. I think the biggest problem that we have with business methods patents or with new technologies is that it's new and that it's something that the Office will deal with. I'm one that hesitates to compare rejection rates with a signal of quality, but when you have new technology, you often have that come in. Business methods patents allowance rate is now 16 percent. I think in that area in particular, finding the new technology, finding the new art has largely addressed it. I think this is something that we should be considering. Mr. BOUCHER. Well, this comes right to the point, though. Simply

Mr. SMITH. Mr. Boucher, would you like another minute or would you like to submit written questions to Director Dudas?

Mr. BOUCHER. Well, Mr. Chairman, may I ask unanimous consent for one additional minute?

Mr. SMITH. Without objection, the gentleman is recognized for another minute. Mr. BOUCHER. Thank you, Mr. Chairman. Simply improving the quality of the information that comes to the patent examiner doesn't solve a problem when the standard, no matter what the quality of the information, permits the award of the patent. So very simply, do you have a standard now at the Patent Office that says that something carried out for the first time by computer implementation in common parlance, carried out on the Internet-is not patentable if this is a known practice in the physical world?

Mr. DUDAS. I don't believe we have a standard that goes along those lines. I think

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Mr. BOUCHER. And so my question is shouldn't we have one. Just that simple.

Mr. DŪDAS. And I—the answer—it's a simple question, I think the answer is probably more complex. If you carry something out in the private world and you manage to do it through software, software patents are

Mr. SMITH. I see I still have about 30 seconds for Mr. Myhrvold. [Laughter.]

Mr. MYHRVOLD. The devil's in the details here. If you had a car that could drive itself, that's something that we can do in the real physical world, no software can do today. The day they do that, that's a breakthrough.

Mr. SMITH. Thank you, Mr. Boucher.

The gentleman from California, Mr. Schiff, is recognized for his questions.

Mr. SCHIFF. Thank you, Mr. Chairman.

President Levin, I wanted to follow up on one of the questions t that my colleague Howard Berman asked you earlier, and preface 0.6 it by saying that, you know, I am very proud as a Californian that the UC has led in patents for several years now. And Cal Tech, lo- ent, cated in my district, is a proud Number Two. There has been some Mr. concern raised, I think, at the UC about the change, or proposed change, in going to the first-to-file from a first-to-invent and what Mr. impact that would have on universities that maybe don't have such Mr. a well-developed effort to race to the Patent Office, and have a dif- Mr. ferent practice, by and large.

Mr What impact do you think such a change would have on the uni- Mr versities? Is that a concern to you, given your background? How do Nec you think it would change the behavior of universities? Should force there be some kind of a carve-out for universities and their publica- omy tions? What do you think the impact would be?

does Mr. LEVIN. I would firmly oppose a carve-out for universities on these grounds. I think the impact would be of changing to first-to- M file, is that we'd get a little more efficient in our own internal proc- M essing of patents. I mean, it's hardly an excuse that universities op

T erate more slowly than the private sector. We shouldn't rely on his that. And I know there are some colleagues within the university community who are advancing the view that you suggest, but I har think for the most part they are the people who run our technology dia transfer offices. And we had a recent meeting of the presidents of the Association of American Universities, on the Committee on In- obtellectual Property, that was unanimous in supporting the NRC

PC recommendations, including first-to-file. I think it's—you know, if we're inefficient at processing patents, we shouldn't be rewarded by the law. We ought to get better.

Mr. SCHIFF. Well, isn't that inefficiency due somewhat to the dif- h ferent nature of a university from a private firm that is in the busi

Mr. LEVIN. We already have what is a very, I think, appropriate but also generous provision of the law which allows universities to file patents for inventions that were financed by Federal grants. That's worked extremely well. The reason that the University of California has done so well is because of the passage of the BayhDole Act, and it's had, I think, massive salutary effects on our

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economy to get technology out into the public domain. There's no reason I mean, organizations like the University of California or Yale or MIT are well enough organized today that we ought to be able to turn patents around just as fast as private sector. I don't see any reason for a special exception.

Mr. SCHIFF. Anybody on that narrow issue have any different view?

Mr. Chairman, thank you. I yield back the balance of my time.

Mr. SMITH. Thank you, Mr. Schiff. Why don't you yield the balance of your time to Mr. Berman, who has another question?

Mr. SCHIFF. Yes, I would be happy to yield my time.

Mr. BERMAN. I am just wondering if the president of Yale, who has spoken against carve-outs, what they think of the University of California's desire to carve out immunity from liability in copyright and patent cases. One test of your cautiousness that Mr. Boucher observed. (Laughter.)

Mr. LEVIN. I'm not an expert on the doctrine of sovereign immunity, but I think that it's an unfortunate consequence of that doctrine that some universities are claiming exemption from infringement, whereas private universities are liable for infringement.

Mr. BERMAN. And those same universities want to enforce their patent rights

Mr. LEVIN. That's right. Yeah. Mr. BERMAN. —against others. Mr. LEVIN. Yeah. IMr. BERMAN. That makes it particularly strange, doesn't it? Mr. LEVIN. We're prepared to play by the fair rules of the game. We can enforce our patents and copyrights, other people can enforce them against us. I think that's best for the American economy. If there's a way to make that true for all universities that doesn't violate important constitutional principles, I would be in favor of it.

Mr. BERMAN. Now we'll need a hearing on that subject.
Mr. SMITH. Thank you, Mr. Berman.

The other gentleman from California, Mr. Issa, is recognized for his questions.

Mr. Issa. It is interesting that my years of watching Star Trek have come in handy. As you were explaining the problem, I immediate thought of the problem of firing while cloaked. Didn't everyone want to have that ability to fire without being fired back. And obviously, in that fiction it wasn't possible, but in this reality it is possible.

As I ask my questions, I want you to understand that I am not an attorney, I am not a patent attorney; I am a bit of a bonehead engineer. But I always talk like I have experience, because I do have 37 patents and plenty of time paying a lot of lawyers, an awful lot of lawyers, and even a few judges, it seems- [Laughter.]

I knew that would get that reaction.

Mr. SMITH. You may want to rephrase that. Refer to the Ethics Committee.

Mr. Issa. I cannot tell you how much I have spent over the years with judges that were doing their first Markman ruling. And I actually gave the money to the lawyer, but I knew that I was paying

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