On Friday, the House Subcommittee on Intellectual Property, Competition, and the Internet held a hearing on patent reform, even though no bill has yet been introduced in the House in the 112th Congress. The witnesses at the hearing included David Simon, associate general counsel, intellectual property policy, Intel Corp. and on behalf of the Coalition for Patent Fairness; Carl Horton, chief intellectual property counsel, General Electric Corp. and on behalf of the Coalition for 21st Century Patent Reform; and retired Chief Judge Paul Michel of the Federal Circuit.
Simon began his testimony by reciting how far things have come in patent reform thanks to recent court decisions. No longer do companies like Intel have to fear easily obtained injunctions, invalidating bad patents for obviousness is easier, the standard for willful infringement is now more than mere knowledge of a patent, and inconvenient fora for infringement suits are no longer the rule. He also noted that damage awards are becoming more difficult to prove, especially for non-practicing entities.
Looking at the current state of the patent system, the need to address this set of issues as part of a larger comprehensive, substantive patent reform has passed.
Simon asked the Committee not to focus on things like substantive reform, but to instead focus on the PTO. He testified that the PTO has still granted too many bad patents, the rise in false marking cases is a problem, and too many defendants are sued in the same case, even where the patents and products are not related.
He noted that the current statutory scheme places a difficult burden on the examiner. The examiner has little time to review poorly written applications and to make rejections of bad claims. If the examiner cannot articulate proof that a patent claim should not be granted, it will issue. He also criticized the fact that the PTO cannot institute a long term plan because of budgetary issues and is still being flooded by too many unimportant patent applications.
The agenda of his organization proposed needed changes at the PTO. First, they proposed computerized examination to better handle poorly written patent claims. Second, the PTO needs to keep the current reexamination system in place. Third, given the push to switch from first-to-invent to first-to-file, a stronger prior user rights defense is needed. This will prevent companies from liability from poorly written applications that might flood the PTO under a new system. Next, Congress must end fee diversion and permit the PTO to set fees at the level it needs. Post-grant opposition must be strengthened in the bills and always permitted. Finally, all aspects of PTO operation must be made more transparent.
Horton raised several changes on behalf of his organization. He advocated a change to a first-inventor-to-file system while maintaining the grace period. This would greatly simplify the process. No longer would evidence of conception and reduction to practice be necessary. Section 102 could be simplified so that anticipatory prior art available before the filing date precludes a patent.
Next, he advocated permitting third parties to submit prior art and other information during pendency of a patent application. He also agreed that the 12 month post-grant opposition window and the expansion of inter partes reexamination during the remaining life of the patent were needed. Reexamination should be permitted on any basis related to patentability. He concurred in the safeguards against abuse of these systems in S. 23.
Next, he emphasized the need for additional funding for the PTO. He agreed with Simon that the PTO needs fee setting authority and must be permitted to keep the fees it collects.
The explosion in false marking cases requires Congress to revise the antequated statute to reduce complaints to those filed by injured parties and the United States. State of mind factors in patent litigation should be addressed including best mode, inequitable conduct, and willful infringement. Finally, he noted that his organization will support the Senate’s “gatekeeper” provision on damages, but that he does not believe reform is needed in the damages context.
Judge Michel addressed delay in the patent system as the biggest problem. He advocated more resources to the PTO to permit it to conduct examination more quickly. Fees must be set at levels to permit the PTO to do so. He argued that patents are getting longer and more complex which makes the PTO’s job more difficult. He advocates hiring large numbers of additional examiners and judges for the BPAI, as well as a new IT infrastructure.
Judge Michel believes most of the proposed patent reform legislation is irrelevant until the PTO is adequately funded to do its job. ALL patent applications should have examination concluded in 2 years. Because applications are published in 18 months, many applications are available to competitors for several years before any patent issues. During this time, they can be copied with impunity.
Even though Congress is proposing great speed for post-grant procedures and the prevention of their abuse, without adequate resources, how can it guarantee such results? Who can even enforce them? Reexaminations are supposed to be conducted with special dispatch, yet delays of over 3 years are common.
The Federal courts also require additional resources to handle all of the patent cases. An inadequate number of judgeships have been authorized, and of those that have, there is substantial backlog and gridlock on confirmations.
He agreed with Simon that many of the patent reform intiatives have been handled by the courts. Any new PTO procedures will divert resources from its primary function of examination and issuing patents. Finally, Congress should hear from all constituents prior to enacting reform legislation. Specifically, he believes that CEOs of start-up companies and venture capitalists have not been adquately heard in the patent reform debate. He urged Congress to hear from them as well.