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Intellectual Property Owners Association (IPO)

APPENDIX D

Citations to Sources on Injunctions in Patent Cases* Statutes Act of Feb. 15, 1819, Ch. 19, 3 Stat.481, (“The circuit courts of the United States, shall have original cognizance, as well in equity as at law ... and ... shall have authority to grant injunctions, according to the course and principles of courts of equity, to prevent the violation of the right of any authors and inventors ...on such terms and conditions as the said courts may deem fit and reasonable ....") (Statute giving federal courts equity jurisdiction in patent and copyright cases for the first time.)

Patent Act of 1836, Ch. 37, 5 Stat. 117, Sec.17 (July 4, 1836) ("... which courts shall have the power, upon bill in equity filed by any party aggrieved, in any such case, to grant injunctions, according to the course and principles of courts of equity, to prevent the violation of the rights of any inventor ...on such terms and conditions as said courts may deem reasonable ....")

Patent Act of 1870, Ch. 230, 16 Stat. 198, Sec. 55 (July 8, 1870), (“. the court shall have power, upon bill in equity filed by any party aggrieved, to grant injunctions according to the course and principles of courts of equity, to prevent the violation of any right secured by patent, on such terms as the court may deem reasonable ....")

Patent Act of 1952, Ch. 950,66 Stat. 812 (July 19, 1952) (35 U.S.C. 283) (“The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.")

Patent Act of 1952, Ch. 950, 66 Stat. 810 (July 19, 1952) (35 U.S.C. 261) (“Subject to the provisions of this title, patents shall have the attributes of personal property ....)

Court Opinions Continental Paper Bag Co. v. Eastern Paper Bag Co., 201 U.S. 405 (1908) (Nonuse of invention standing alone not reason for withholding permanent injunction. Patent statute interpreted in light of policy of U.S. Constitution to give inventor a property right.)

Smith International, Inc. v. Hughes Tool Co., 718 F.2d 1573 (Fed. Cir. 1983) (Preliminary injunction.)

Mercexchange, L.L.C. v. eBay, Inc. 401 F.3d 1323 (Fed. Cir. 2005) (“Injunctions are not to be reserved for patentees who intend to practice their patents, as opposed to those who choose to license. The statutory right to exclude is equally available to both groups ... courts will issue permanent injunctions against patent infringement absent exceptional circumstances.")

* Includes citations to some sources not referred to in Mr. Hawley's statement.

HEARING ON
PATENT LAW REFORM: INJUNCTIONS AND DAMAGES

Testimony of

Jeffrey P. Kushan
Partner, Sidley Austin Brown and Wood, LLP

Before the
Subcommittee on Intellectual Property

of the
Senate Judiciary Committee

June 14, 2005

Mr. Chairman and distinguished Members of the Subcommittee,

My name is Jeff Kushan. I am a partner in the Washington office of the law firm of Sidley Austin Brown and Wood, LLP. I am also a registered patent attorney, and specialize in the areas of biotechnology, pharmaceuticals and software-related inventions.

I have been asked to testify today based on my experiences working with companies in the life sciences sector. I am pleased to offer views that reflect my experiences with such companies, but note that I am testifying today in my personal capacity, and the views I offer are

my own.

Introduction

Patent law reform has become an active issue in the past few years. One reason for this is that patents have grown in importance to several industrial sectors which traditionally have not been significant users of the system, including the software, e-commerce and financial services industries. A second is that the workload of the Patent and Trademark Office (PTO) has continued to grow at a significant pace against the backdrop of an uncertain funding picture. This has raised concerns over the capacity of the PTO to issue valid patents in a timely fashion. And, recently, comprehensive studies of the patent system and its operation have been conducted by the National Academies of Science and the Federal Trade Commission. These studies

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recommend a number of significant reforms to the patent system, and have spawned extensive discussion and debate within the patent community.

Comprehensive patent law reform, however, is not a new topic to this Committee. Between 1995 and 1999, this Committee played a central role in shaping reforms to the patent system that ultimately were enacted as the American Inventors Protection Act of 1999. Those reforms followed changes enacted in 1995 as part of the effort to implement the Uruguay Round Agreement creating the World Trade Organization. Each of these reforms has had a significant impact on the patent system, making it more transparent and effective.

Today's patent reform debates are motivated by the belief of many companies that there is too much uncertainty and unpredictability involved in the patent system. This is true from both the perspective of companies that wish to enforce patents, and from those who must face patents. Another motivation is the perception that the PTO is struggling to keep pace with its workload. The package of reform measures now under consideration reflects some effort to respond to each of these motivating factors.

Before addressing those measures, however, it is important to recognize two of the most significant challenges facing our patent system today.

First, the PTO faces serious challenges in performing its statutory function of issuing valid patents in a timely fashion because of the ongoing problem of patent fee diversion to other government entities. The unpredictable nature of patent fee diversion has made it difficult for the PTO to engage in the long-term restructuring of its operations that is necessary to make the patent examination process more reliable and efficient. Without question, the most important legislative deliverable for Congress in the effort to improve the patent system is predictable and adequate funding for PTO operations. And, as Congress contemplates granting the PTO more responsibilities, predictable and adequate funding will become even more important.

Second, the model used by the PTO to conduct examination of patent applications needs to be seriously reevaluated. Every application that is filed today is placed into the queue for examination. This requires the PTO to budget for and engage in an unnecessary examination of many thousands of patent applications. The United States is unique in the world in this respect

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every other major office conducts examination of applications only upon request and payment of a fee. Exacerbating this problem is the approach the PTO employs in “restricting" patent applications. The PTO requires applicants to file additional patent applications when it believes a first application has claimed more than one patentably distinct invention. The PTO examiners, however, use an exceedingly narrow and strict standard for restriction in the biotechnology sector, which has led to a multiplicity of unnecessary filings. These extra applications make coherent and efficient examination of inventions very difficult, and contribute to an artificial backlog of unexamined applications. Restructuring the patent examination process to address these two problems would result in examiners having more time to examine each invention, and would thus significantly improve patent quality. Congress should consider legislation to address both of these issues in conjunction with the current effort to reform patent standards.

As noted above, the primary motivation for patent law reform is the concern of many companies over the unpredictability of the process of resolving disputes over patents through litigation in the Federal Courts. This concern extends to companies in all technology sectors, including the biotechnology and pharmaceutical sectors. Although the Court of Appeals for the Federal Circuit has done much over the years to clarify the requirements and standards for patentable inventions, there still remains a significant amount of uncertainty in how those requirements and standards will be applied to biotechnology inventions by trial courts and juries. As a result, it remains difficult to predict if a patent will be held valid, if it will be infringed or if it will be held unenforceable. Similarly, it is often impossible to predict what consequences and damages a company will face if it is found to infringe a patent. The uncertainty in today's patent litigation environment, unfortunately, is being exploited by certain patent owners to distort the value of their patent rights and to undermine the legitimate use of patents. Reforms to the patent system- both as to the standards governing patent validity and as to outcomes and consequences in litigation - are necessary and timely.

Over the past few months, in hearings before this Committee and in the House, a relatively focused set of reform measures have been identified. Recently, Chairman Smith of the Subcommittee on Courts, the Internet and Intellectual Property of the House Judiciary Committee recently introduced legislation, the Patent Act of 2005, H.R. 2795 (the “House bill”),

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which incorporates many of these reform measures. The House bill would make a number of significant changes to the patent system.

It would change our system to provide that patents are awarded to the first
inventor who files a patent, rather than necess

essarily the first who invented the invention. In conjunction with this change, reforms are made to the standards that define prior art, along with changes to delete a number of subjective elements found in the current patent statute.

It would create an administrative procedure that the public could use to review the validity of patents. This post-grant opposition system would be administered by the PTO, and would be a more rigorous administrative alternative to litigation than what is presently available at the PTO.

It would create a new procedure that the public could use to cite prior art before a patent issues.

It would change how allegations of inequitable conduct could be raised and addressed in litigation, and vest the PTO with more authority to evaluate and sanction parties that engage in misconduct before the PTO.

It would codify certain standards that govern determinations of damages where the patent concerns one component of a product that has many components.

It would alter the standards that govern determinations of willful infringement, and how and when such allegations could be raised in litigation.

It would give the Director of the PTO the authority to regulate so-called
continuation practice, to prevent abuses that are perceived to exist.

Many of these measures are supported by most sectors of the patent community. Others are supported in principle with differences existing as to how the measure should be implemented. If enacted, these measures would significantly improve the patent system, provided that certain significant questions are addressed and resolved.

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