Patent Reform: Judicial Developments in Areas of Legislative Interest

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Patent Reform: Judicial Developments in

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Prepared for Members and Committees of Congress

Patent Reform: Judicial Developments in Areas of Legislative Interest

Summary

Legislative interest in the patent system has been evidenced by the introduction of reform

legislation in the 111th and predecessor Congresses. These bills would have amended existing

patent law in numerous respects. Although none of these bills were enacted, discussion of patent

reform may continue in the 112th Congress.

Although the patent system has been the subject of congressional interest over the past few years,

the courts have also been active in making changes to important patent law principles. Many

changes introduced by the judiciary have concerned topics that are also the subject of

congressional consideration. In particular:

•

The Supreme Court issued an important decision in 2007 concerning the availability of

injunctive relief against adjudicated patent infringers in eBay v. MercExchange.

•

In 2008, the Court of Appeals for the Federal Circuit (“Federal Circuit”) reached its

ruling in In re TS Tech concerning the standards for deciding which venue is appropriate

for conducting a patent trial.

•

In 2009, the Federal Circuit handed down its opinion in Lucent Technologies. v. Gateway

with respect to the assessment of damages in patent infringement cases.

•

The Federal Circuit issued a decision in 2007 concerning the availability of enhanced

damages for willful patent infringers in In re Seagate Technology.

•

The 2007 Supreme Court opinion in Microsoft v. AT&T addressed the scope of

extraterritorial protection afforded to U.S. patents.

•

The 2010 Supreme Court opinion in Bilski v. Kappos concerned the issue of patentable

subject matter.

Some observers believe that several of these opinions have addressed the very concerns that had

motivated legislative reform proposals, thereby obviating or reducing the need for congressional

action. However, other commentators believe that these decisions have not fully addressed

perceived problems with principles of patent law.

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Patent Reform: Judicial Developments in Areas of Legislative Interest

Contents

Introduction...................................................................................................................................... 1

Patent Fundamentals ........................................................................................................................ 2

Patent Reform Legislation ............................................................................................................... 3

Judicial Reforms to Patent Doctrine ................................................................................................ 4

Injunctions ................................................................................................................................. 4

Venue ......................................................................................................................................... 6

Assessment of Damages ............................................................................................................ 9

Willful Infringement ................................................................................................................ 12

Extraterritorial Patent Protection ............................................................................................. 13

Tax Planning Methods ............................................................................................................. 14

Observations .................................................................................................................................. 15

Conclusion ..................................................................................................................................... 17

Contacts

Author Contact Information........................................................................................................... 18

Acknowledgments ......................................................................................................................... 18

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Patent Reform: Judicial Developments in Areas of Legislative Interest

Introduction

Legislative interest in the patent system was evidenced by the introduction of reform legislation

in earlier sessions of Congress.1 In the 111th Congress, bills would have amended existing patent

law in numerous respects, including changes to the right of a patent owner to obtain

compensatory damages,2 the standard for judicial award of enhanced damages for willful

infringement,3 the ability of patent owners to select the court in which they will bring suit,4 and

the willingness of courts to accept appeals of orders interpreting a patent.5 Patent reform

legislation introduced in earlier Congresses would have made additional changes, including

modifications to the doctrine of inequitable conduct. Discussion of these issues may potentially

continue in the 112th Congress.6

Although the patent system has been the subject of congressional scrutiny over the past few years,

the courts have also been active in making changes to important patent law principles. Many

changes introduced by the judiciary have concerned topics that are also the subject of

congressional consideration. For example, the Supreme Court issued an important decision

concerning injunctive relief in eBay Inc. v. MercExchange, L.L.C.7 at the same time legislation

before Congress would have addressed that issue.8 Some experts believe that as a result of the

eBay decision, legislative reform of the principles of injunctive relief in patent law became

unnecessary.9 Indeed, the patent reform bills placed before Congress subsequent to eBay have not

addressed this issue.

Review of pertinent judicial developments relating to selected patent law topics is timely for

several reasons. First, an awareness of recent judicial opinions may assist understanding of the

context of current legislative reform proposals. Second, some observers believe that several of

these opinions have addressed the very concerns that had motivated legislative reform proposals,

thereby obviating or reducing the need for congressional action.10 Third, a review of legislative

and judicial developments provides an instructive historical narrative and allows for a comparison

of relative institutional capabilities of these two branches of government.

This report reviews the relationship between Congress and the courts in patent reform. It begins

by offering a summary of the patent system. The report then discusses a number of topics that

In the 111th Congress, H.R. 1260, S. 515, and S. 610 were each titled “The Patent Reform Act of 2009.”

H.R. 1260 at § 5; S. 515 at § 4; S. 610 at § 4.

H.R. 1260 at § 10; S. 515 at § 8; S. 610 at § 8 (pertaining to venue).

H.R. 1260 at § 5; S. 515 at § 4 (pertaining to interlocutory appeals). S. 610 does not include a comparable provision.

For example, in the 110th Congress, section 12 of H.R. 1908 included provisions directed towards the doctrine of

inequitable conduct. H.R. 1908 passed the House on September 9, 2007, but was not enacted.

547 U.S. 388 (2006).

See CRS Report RL33429, Availability of Injunctive Relief in Patent Cases: eBay, Inc. v. MercExchange, L.L.C., by

(name redacted) (May 19, 2006).

See William C. Rooklidge & Alyson G. Barker, “Reform of a Fast-Moving Target: The Development of Patent Law

Since the 2004 National Academies Report,” 91 Journal of the Patent and Trademark Office Society (2009), 153 (“The

legislative effort to reform injunctions is finished, at least for the foreseeable future.”).

See F. Scott Kieff & Kevin Rivette, “Congress—Let U.S. patent law ‘marinate’ before taking action,” Great Falls

Tribune (March 31, 2009).

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have been the subject of both judicial and legislative consideration. The current state of the law is

then contrasted with legislative reform proposals before previous Congresses. The report closes

with observations concerning the subtle interaction between legislative, administrative, and

judicial actors within the patent system and their impact upon the U.S. innovation environment.

Patent Fundamentals

The U.S. Constitution confers upon Congress the power “To promote the Progress of ... useful

Arts, by securing for limited Times to ... Inventors the exclusive Right to their ... Discoveries....”11

In accordance with the Patent Act of 1952,12 an inventor may seek the grant of a patent by

preparing and submitting an application to the U.S. Patent & Trademark Office (USPTO).

USPTO officials known as examiners then determine whether the invention disclosed in the

application merits the award of a patent.13

USPTO procedures require examiners to determine whether the invention fulfills certain

substantive standards set by the patent statute. To be patentable, an invention that constitutes a

“process, machine, manufacture, or composition of matter” may be patented.14 It must also be

novel, or different, from subject matter disclosed by an earlier patent, publication, or other stateof-the-art knowledge.15 In addition, an invention is not patentable if “the subject matter as a

whole would have been obvious at the time the invention was made to a person having ordinary

skill in the art to which said subject matter pertains.”16 This requirement of “nonobviousness”

prevents the issuance of patents claiming subject matter that a skilled artisan would have been

able to implement in view of the knowledge of the state of the art.17 The invention must also be

useful, a requirement that is satisfied if the invention is operable and provides a tangible benefit.18

In addition to these substantive requirements, the USPTO examiner will consider whether the

submitted application fully discloses and distinctly claims the invention.19 In particular, the

application must enable persons skilled in the art to make and use the invention without undue

experimentation.20 In addition, the application must disclose the “best mode,” or preferred way,

that the applicant knows to practice the invention.21

If the USPTO allows the patent to issue, its owner obtains the right to exclude others from

making, using, selling, offering to sell or importing into the United States the patented

invention.22 Those who engage in those acts without the permission of the patentee during the

Article I, Section 8, Clause 8.

Pub. L. No. 82-593, 66 Stat. 792 (codified at Title 35 of the United States Code).

35 U.S.C. § 131 (2006).

35 U.S.C. § 101 (2006).

35 U.S.C. § 102 (2006).

35 U.S.C. § 103(a) (2006).

See KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007).

See In re Fischer, 421 F.3d 1365, 1371 (Fed. Cir. 2005).

35 U.S.C. § 112 (2006).

See Invitrogen Corp. v. Clontech Labs., Inc., 429 F.3d 1052, 1070-71 (Fed. Cir. 2005).

See High Concrete Structures, Inc. v. New Enterprise Stone and Lime Co., 377 F.3d 1379, 1382 (Fed. Cir. 2004).

35 U.S.C. § 271(a) (2006).

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term of the patent can be held liable for infringement. Adjudicated infringers may be enjoined

from further infringing acts.23 The patent statute also provides for an award of damages “adequate

to compensate for the infringement, but in no event less than a reasonable royalty for the use

made of the invention by the infringer.”24

The maximum term of patent protection is ordinarily set at 20 years from the date the application

is filed.25 At the end of that period, others may employ that invention without regard to the

expired patent.

Patent rights do not enforce themselves. Patent owners who wish to compel others to respect their

rights must commence enforcement proceedings, which most commonly consist of litigation in

the federal courts. Although issued patents enjoy a presumption of validity, accused infringers

may assert that a patent is invalid or unenforceable on a number of grounds. The Court of Appeals

for the Federal Circuit (Federal Circuit) possesses nationwide jurisdiction over most patent

appeals from the district courts.26 The Supreme Court enjoys discretionary authority to review

cases decided by the Federal Circuit.27

Patent Reform Legislation

Since 2005, a number of bills titled “The Patent Reform Act” have been introduced before

Congress. To varying degrees, each of the bills would work substantial changes to the current

patent system. The bills have differed in the specific reforms that they have proposed. The many

proposed reforms have included a shift to a first-inventor-to-file priority system, allowance of

assignee filing, changes to the law of patent damages, introduction of post-grant opposition

proceedings, and modifications to the principle of venue as it applies to patent cases.28None of

this legislation has yet been enacted.29

Even as Congress has contemplated patent reform legislation, the courts also have been active in

issuing patent decisions. Many of these rulings relate to the same legal topics that proposed

legislation would address, and several made significant changes to existing law. As attorneys Bill

Rooklidge and Alyson Barker observe, “through a variety of important decisions, the courts have

embarked on their own patent reform.”30 This paper next reviews a common phenomenon in

patent reform: Judicial changes to legal doctrines that are the subject of pending congressional

legislation.

35 U.S.C. § 283 (2006). See eBay Inc. v. MercExchange L.L.C., 547 U.S. 388 (2006).

35 U.S.C. § 284 (2006).

35 U.S.C. § 154(a)(2) (2006). Although the patent term is based upon the filing date, the patentee obtains no

enforceable legal rights until the USPTO allows the application to issue as a granted patent. A number of Patent Act

provisions may modify the basic 20-year term, including examination delays at the USPTO and delays in obtaining

marketing approval for the patented invention from other federal agencies.

28 U.S.C. § 1295(a)(1) (2006).

28 U.S.C. § 1254(1) (2006).

See CRS Report R40481, Patent Reform in the 111th Congress: Innovation Issues, by (name redacted) and (name re

dacted).

One of the bills in the 110th Congress, H.R. 1908, passed the House of Representatives on September 7, 2007, but did

not advance in the Senate.

Rooklidge & Barker, supra, at 155.

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Judicial Reforms to Patent Doctrine

Numerous patent substantive and procedural doctrines have fallen under legislative scrutiny in

recent years. A recent, recurring trend is that the courts have contemporaneously reviewed a

number of the same principles. Among them are the availability of injunctions in patent cases,

selection of the appropriate venue for trying a patent case, the assessment of damages against

adjudicated infringers, the standards governing determinations of willful infringement,

extraterritorial patent enforcement, and the availability of patents for tax planning methods. This

report reviews each of these episodes in turn.

Injunctions

Section 283 of the Patent Act allows courts to “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.”31 In practice, for much of its history the Federal Circuit routinely granted injunctions

to patent owners that prevailed in infringement litigation. Only in rare instances, when the

patented invention pertained to an important public need, would an injunction be denied.32 An

injunction prevents the adjudicated infringer from practicing the patented invention until the

patent expires.33

Some observers criticized injunction practice as encouraging speculation by entities that do not

engage in research, development, or manufacturing, but rather acquire and enforce patents against

companies with commercialized products.34 These speculators were sometimes termed “patent

trolls,” an arguably pejorative term that referred to creatures from folklore that would emerge

from under a bridge in order to waylay travelers.35 Some manufacturers were concerned that the

Federal Circuit’s injunction practice provided non-manufacturing entities with too much leverage

during patent licensing negotiations.

In view of industry concerns, the 109th Congress contemplated amending section 283 of the

Patent Act. Under a proposal included within H.R. 2795, the Patent Reform Act of 2005, courts

would have been required to “consider the fairness of the remedy in light of all the facts and the

relevant interests of the parties associated with the invention.” This legislation was not enacted.

As discussion of legislative proposals with respect to injunctions continued, the judiciary reached

a number of rulings on this topic. One of them resulted from the well-known patent litigation

concerning the BlackBerry handheld device and communication service. In that litigation, a

federal district court ruled that the BlackBerry infringed patents held by New Technology

Products, Inc. (NTP).36 When the Federal Circuit affirmed this judgment,37 many BlackBerry

35 U.S.C. § 283 (2006).

MercExchange, L.L.C. v. eBay, Inc., 401 F.3d 1323, 1328 (Fed. Cir. 2005).

See Roger E. Schechter & (name redacted), Principles of Patent Law (2d ed. 2005), 330.

See Elizabeth D. Ferrill, “Patent Investment Trusts: Let’s Build a Pit to Catch the Patent Trolls,” 6 North Carolina

Journal of Law and Technology (2005), 367.

See Lorraine Woellert, “A Patent War Is Breaking Out on the Hill,” BusinessWeek 45 (July 4, 2005).

NTP, Inc. v. Research in Motion, Ltd., 261 F. Supp. 2d 423 (E.D. Va. 2002).

NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005).

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subscribers faced the unsettling prospect of an immediate interruption of service due to a courtordered injunction. A subsequent settlement between the litigants ensured that an injunction

would never come into effect.38 The BlackBerry patent litigation led to increasing discussion over

the availability of injunctions in patent cases, perhaps in part because NTP did not commercialize

the patented invention itself.

Shortly after the BlackBerry litigation concluded, the Supreme Court issued an important

decision concerning injunctive relief in eBay Inc. v. MercExchange, L.L.C.39 The patent at issue in

the eBay case concerned “a system for selling goods through an ‘electronic network of

consignment stores.’”40 The district court explained that the patent proprietor, MercExchange,

“does not practice its inventions and exists merely to license its patented technology to others.”41

Although a jury concluded that eBay infringed the MercExchange patent, the district court

refused to issue an injunction. The district court in part reasoned that MercExchange had licensed

its patents to others, did not practice its invention, and had made comments to the media that it

desired to obtain royalties from eBay rather than obtain an injunction.

On appeal, the Federal Circuit rejected the district court’s reasoning and ruled that MercExchange

was entitled to an injunction. The appellate court explained that “[b]ecause the right to exclude

recognized in a patent is but the essence of the concept of property, the general rule is that a

permanent injunction will issue once infringement and validity have been adjudged.”42 The

Federal Circuit did recognize that in rare cases a court should decline to issue an injunction, such

as “when a patentee’s failure to practice the patented invention frustrates an important public need

for the invention.”43 In this case, however, the Federal Circuit concluded that the district court had

not offered “any persuasive reason to believe this case is sufficiently exceptional to justify the

denial of a permanent injunction.”44

The Supreme Court subsequently granted certiorari and issued an opinion vacating the Federal

Circuit’s judgment. According to Justice Thomas, the author of the unanimous opinion of the

Court, neither lower court had followed the correct rules in deciding whether to issue an

injunction or not. The Supreme Court explained that the district court had incorrectly reasoned

that injunctive relief was unavailable where patent proprietors chose to license their patents rather

than commercialize the patented invention themselves. Justice Thomas further explained that

although the Patent Act requires that injunctions issue “in accordance with the principles of

equity,” the Federal Circuit had ignored long-established equitable standards in following a

“general rule” that injunctions issue.45

The Supreme Court directed lower courts to consider four traditional factors for deciding whether

an injunction should issue or not in patent infringement cases. Those factors are:

See CRS Report RL33429, Availability of Injunctive Relief in Patent Cases: eBay, Inc. v. MercExchange, L.L.C., by

(name redacted).

547 U.S. 388 (2006).

MercExchange, L.L.C. v. eBay, Inc., 401 F.3d 1323, 1327 (Fed. Cir. 2005).

MercExchange, L.L.C. v. eBay, Inc., 275 F. Supp. 695, 712 (E.D. Va. 2003).

401 F.3d at 1339.

Id.

547 U.S. at 392-94.

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(1) whether the patent owner would face irreparable injury if the injunction did not issue; (2)

whether the patent owner possesses an adequate legal remedy, such as monetary damages;

(3) whether granting the injunction would be in the public interest; and (4) whether the

balance of hardships tips in the patent owner’s favor.46

Expressing no opinion about how these factors applied to the dispute between the litigants, the

Supreme Court then remanded the case to the district court.47 In the wake of eBay, some courts

have declined to issue injunctions against adjudicated infringers of valid and enforceable

patents.48

Opinions upon the impact of the eBay ruling upon legislative reform of patent injunctions have

varied. Some observers believed that “the Supreme Court failed to meaningfully restructure the

injunctive grant process in its eBay rejection of the automatic injunction rule” and opined that

“the need for legislation ... is renewed rather than removed.”49 Others viewed the Supreme

Court’s ruling more favorably. For example, attorneys Bill Rooklidge and Alyson Barker describe

eBay as a “solution to the perceived injunction problem” that satisfied the concerns of different

constituents in the patent filed in an “elegant” manner. 50 The latter view appears to have

prevailed, however, as no subsequent versions of the Patent Reform Act have incorporated

proposed reforms to injunction practice. Rooklidge and Barker have therefore concluded that the

“legislative effort to reform injunctions is finished, at least for the foreseeable future.”51

Venue

Patent reform legislation also has proposed changes to the rules governing the doctrine of venue

in patent litigation. Venue principles decide which court, out of those that possess personal and

subject matter jurisdiction, may most conveniently hear a particular lawsuit.52 Patent cases are

governed by a specialized venue statute codified at 28 U.S.C. § 1400(b). That statute provides

that in patent litigation, venue is proper either: (1) in the judicial district where the defendant

resides, or (2) where the defendant has committed acts of infringement and has a regular and

established place of business.

An important question under this provision is where a corporation is deemed to “reside.” Prior to

1988, a corporation was viewed as residing in its state of its incorporation.53 In 1988, Congress

Id. at 391.

Chief Justice Roberts issued a concurring opinion observing that courts have granted injunctive relief to the patent

proprietor in “the vast majority of patent cases” and opining that this historical practice should be maintained. Id. at

394. Justice Kennedy also issued a concurring opinion. According to Justice Kennedy, the emergence of non-practicing

patent holders and the “suspect validity” of business method patents were appropriate considerations for courts to “bear

in mind” when deciding whether to issue an injunction or not. Id. at 395.

See Jaideep Venkatesan, “Compulsory Licensing of Nonpracticing Patentees After EBay v. MercExchange,” 14

Virginia Journal of Law and Technology (2009), 26.

Robin M. Davis, “Failed Attempts to Dwarf the Patent Trolls: Permanent Injunctions in Patent Infringement Cases

Under the Proposed Patent Reform Act of 2005 and EBay v. MercExchange,” 17 Cornell Journal of Law and Public

Policy (2008), 431.

Rooklidge & Barker, supra, at 160.

Id.

See Wachovia Bank v. Schmidt, 546 U.S. 303 (2006).

See Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222 (1957).

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adopted a new definition of “reside” as it applies to venue for corporate defendants.54 Under the

new definition, a corporation is presumed to reside in any judicial district to which it could be

subject to personal jurisdiction at the time the litigation commences. Congress codified this

change in a separate provision found at 28 U.S.C. § 1391. Although Congress arguably did not

contemplate that these reforms would hold consequences for the specialized patent venue statute,

the Federal Circuit nonetheless held that this amendment should also be read into § 1400(b).55

The result of the 1988 amendments has been significant for corporate defendants, which

constitute the majority of defendants in patent litigation. Although § 1400(b) still governs venue

in patent cases, few, if any plaintiffs rely upon the restrictive second prong of that section. Instead

they base venue upon the “residence” requirement of the first prong—which now is entirely

conterminous with personal jurisdiction, and which for larger corporations is likely to include

every federal district in the country. For corporate defendants, then, the venue statute has

essentially become superfluous, for the same standards governing personal jurisdiction also

dictate whether a court may provide an appropriate venue or not.

Some observers allege that the liberal venue statute promotes forum shopping, allowing patent

proprietors to bring suit in courts that they believe favor patent owners over accused infringers.

One such “magnet jurisdiction” is said to be the rural Eastern District of Texas, and in particular

the Marshall, Texas, federal court. According to one account, many observers “wonder how a

East Texas town of 25,000—even if it was named after Supreme Court Justice John Marshall—

came to harbor an oversized share of intellectual property disputes.”56 In addition, reportedly

“many of the local lawyers who once specialized in personal injury cases are turning their

attention to intellectual property law.”57 Others believe that the existence of a single appellate

court for patent cases, the Federal Circuit, minimizes forum shopping concerns, and that certain

district courts attract patent cases due to their expertise and timeliness, rather than an inherent

favoritism for patent holders.58

While the 110th Congress was considering legislative changes, the Federal Circuit also addressed

the venue laws. In its December 29, 2008, decision in In re TS Tech USA Corp.,59 the Federal

Circuit held that the District Court for the Eastern District of Texas abused its discretion in

denying a motion to transfer to another venue. Some observers believe that the TS Tech decision

eliminated the need for legislative intervention,60 while others suggest that one current

congressional proposal would codify its holding.61

In TS Tech, Lear Corporation brought a patent infringement suit in the Eastern District of Texas

against TS Tech, which operated principal places of business in Ohio, Michigan, and Canada. The

Judicial Improvements and Access to Justice Act, P.L. 100-702, tit. X, § 1013(a), 102 Stat. 4642, 4669 (1988).

VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990).

Allen Pusey, “Marshall Law: Patent Lawyers Flood to East Texas Court for Its Expertise and ‘Rocket Docket’,”

Dallas Morning News (March 26, 2006), 1D.

Id.

See Xuan-Thao Nguyen, “Justice Scalia’s ‘Renegade Jurisdiction’: Lessons for Patent Law Reform,” 83 Tulane Law

Review (2008), 111.

551 F.3d 1315 (Fed. Cir. 2008).

Rooklidge & Barker, supra, at 185.

See Intellectual Property Owners Association, “Patent Reform (111th Congress)” (May 4, 2009) (available at

http://www.ipo.org).

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district court denied TS Tech’s request for transfer to Ohio, in part reasoning that the Eastern

District of Texas possessed a local interest in resolving patent infringement disputes involving

products sold there. The district court also held that the district presumptively was convenient for

one of the litigants because Lear had chosen to file suit there.62

In its review of the issue, the Federal Circuit granted TS Tech’s petition to transfer the litigation

to Ohio. Several factors were central to the Federal Circuit’s holding. The appellate court

reasoned that the district court had given too much weight to Lear’s choice of venue.63 It further

explained that the district court had not given sufficient weight to the cost of attendance for

witnesses, as well as the inconvenience associated with physical and documentary evidence

located distant from Texas.64 Finally, the Federal Circuit observed that the alleged infringing

products were sold throughout the United States. As a result, the Eastern District of Texas had no

greater connection to the dispute than any other venue.65 Some observers believe that these

factors are present in many patent cases brought before the Eastern District of Texas, and possibly

other magnet jurisdictions. As a result, TS Tech may mean that motions to transfer venue will be

granted with greater frequency.66 Other observers are less impressed, believing that TS Tech did

not work a “sea change” in transfer motion practice and observing that the patent dockets of the

Eastern District of Texas remain active.67

Subsequent to TS Tech, several different versions of the Patent Reform Act have proposed

changes to the venue provisions governing patent cases. In the 111th Congress, three bills titled

“The Patent Reform Act of 2009” considered this issue. They were H.R. 1260, introduced on

March 3, 2009, by Representative Conyers; S. 515, introduced on March 3, 2009, by Senators

Hatch and Leahy; and S. 610, introduced by Senator Kyl on March 17, 2009. On April 2, 2009,

the Senate Judiciary Committee voted 15-4 to bring S. 515 before the full Senate. None of this

legislation was enacted.

In the 111th Congress, H.R. 1260 and S. 610 generally called for venue to exist (1) where the

defendant has its principal place of business, (2) where the defendant has committed a substantial

portion of its acts of infringement and has an established physical facility, (3) if the plaintiff is an

institution of higher education, individual, or small business, the plaintiff’s residence, or (4) the

place of the plaintiff’s established physical facility devoted to research, development, or

manufacturing. In addition, H.R. 1260 stipulated that “a party shall not manufacture venue by

assignment, incorporation, or otherwise to invoke the venue of a specific district court.”

In contrast, S. 515 did not present new substantive rules for venue for patent cases. Rather, it

succinctly provided that “[f]or the convenience of parties and witnesses, in the interest of justice,

a district court shall transfer any civil action arising under any Act of Congress relating to patents

upon a showing that the transferee venue is clearly more convenient than the venue in which the

Lear Corp. v. TS Tech, No. 2:07-CV-406 (E.D.Tex. Sept. 10, 2008).

551 F.3d at 1320.

Id. at 1320-21.

Id. at 1321.

See Douglas C. Muth et al., “The Local Patent Rules Bandwagon,” 21 Intellectual Property & Technology Law

Journal (Aug. 2009), no. 8 at 19.

See Elizabeth Durham, “Will All Roads Lead to the Eastern District of Texas? Transfer Practice After Volkswagen

and TS Tech,” 21 Intellectual Property & Technology Law Journal (July 2009), no. 7 at 12.

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civil action is pending.” Some observers believed that S. 515 would essentially have codified the

holding in the TS Tech case.68

Assessment of Damages

Commencing with the introduction of the Patent Reform Act of 2005 in the 109th Congress,69

each version of omnibus reform legislation has proposed amendments to the damages provisions

of the Patent Act. These proposals have been, in the eyes of some observers, the most contentious

issue within the debate over the modern patent system.70 This difference in views may arise from

divergent conceptions over the fairness of damages awards levied against infringers.

Some commentators believe that current damages standards have resulted in the systemic

overcompensation of patent owners. Such overcompensation may place unreasonable royalty

burdens upon producers of high technology products, ultimately impeding the process of

technological innovation and dissemination that the patent system is meant to foster.71 Others

believe that current case law appropriately assesses damages for patent infringement. These

observers are concerned that this reform might overly restrict damages in patent cases, thereby

discouraging voluntary licensing and promoting infringement of patent rights. Limited damage

awards for patent infringement might prevent innovators from realizing the value of their

inventive contributions, a principal goal of the patent system.72

This debate, at least in part, is fueled by the fact that marketplace circumstances often make the

determination of an appropriate damages award in patent litigation very difficult. In some cases,

the product or process that is found to infringe may incorporate numerous additional elements

beyond the patented invention. For example, the asserted patent may relate to a single component

of an audio speaker, while the accused product consists of the entire stereo system. In such

circumstances, a court may apply “the entire market value rule,” which “permits recovery of

damages based upon the entire apparatus containing several features, where the patent-related

feature is the basis for consumer demand.”73 On the other hand, if the court determines that the

infringing sales were due to many factors beyond the use of the patented invention, the court may

apply principles of “apportionment” to measure damages based upon the value of the patented

feature alone.74

As discussion of damages reform has proceeded before Congress, the courts have also been

active. One of the more notable cases on patent damages principles arose from the efforts of

Lucent Technologies, Inc., to enforce its so-called “Day patent,” which related to a method of

entering information into fields on a computer screen without using a keyboard.75 In 2002, Lucent

See Intellectual Property Owners, supra.

H.R. 2795, 109th Congress, § 6(a).

See Rooklidge & Barker, supra.

Amy L. Landers, “Let the Games Begin: Incentives to Innovation in the New Economy of Intellectual Property

Law,” 46 Santa Clara Law Review (2006), 364-65.

William C. Rooklidge, “Reform of the Patent Laws: Forging Legislation Addressing Disparate Interests,” 88 Journal

of the Patent and Trademark Office Society (2006).

State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1580 (Fed. Cir. 1989).

Dowagiac Mfg. Co. v. Minn. Moline Plow Co., 235 U.S. 641 (1915).

Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009).

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brought an infringement suit against computer manufacturer Gateway, Inc. Lucent asserted that

Gateway infringed the Day patent because certain software developed by Microsoft

Corporation—Microsoft Money, Microsoft Outlook, and Windows Mobile—were pre-installed in

Gateway computers. More particularly, Lucent asserted that the software infringed because it

enables the user to select a series of numbers corresponding to a day, month, and year using

graphical controls. Microsoft subsequently intervened in order to defend the “date-picker tool”

found in its software.76

At trial, the jury found the Day patent not invalid and infringed. Lucent sought damages of

$561.9 million based on 8% of Microsoft’s infringing sales, while Microsoft asserted “that a

lump-sum payment of $6.5 million would have been the correct amount for licensing the

protected technology.” The jury then awarded Lucent a single lump-sum amount of

$357,693,056.18 for all three Microsoft products. Microsoft subsequently pursued an appeal.77

The litigation in Lucent Technologies, Inc. v. Gateway, Inc. captured the attention of many

observers. In a March 3, 2009, letter addressed to Senator Patrick Leahy, Chairman of the

Judiciary Committee, Senator Arlen Specter requested a delay in Senate action on the Patent

Reform Act of 2009 until the Federal Circuit heard oral argument in the case.78 Observing a

“symbiotic relationship between the judicial and legislative branches with regard to changes to

the patent system,” Senator Specter believed that “oral argument has the potential to facilitate a

compromise or clarify the applicability of damages theories in various contexts.”79

The Federal Circuit heard oral argument in the Lucent appeal on June 2, 2009, and issued its

opinion on September 11, 2009.80 In its decision, the Federal Circuit upheld the lower court’s

determination that the Day patent was not invalid and infringed. In the most anticipated portion of

the opinion, the appellate court also struck down the jury’s damages award as not supported by

substantial evidence.81 A lengthy portion of the Lucent opinion undertook a detailed review of the

numerous elements—the so-called Georgia-Pacific factors—that were before the lower court

when it reached its damages determination. The Federal Circuit ultimately concluded that the

“evidence does not sustain a finding that, at the time of infringement, Microsoft and Lucent

would have agreed to a lump-sum royalty payment subsequently amounting to approximately 8%

of Microsoft’s revenues for the sale of Outlook (and necessarily a larger percentage of Outlook’s

profits).”82

Some observers believe that the Federal Circuit has placed renewed emphasis upon the use of

reliable evidence of damages in patent trials. For example, patent attorney Johnathan Tropp

reportedly viewed Lucent as “an important signal to district courts that they have a responsibility

to ... ensure that damages verdicts are appropriate and based on substantial evidence.”83 In

Id. at 1308.

Id. at 1309.

The letter is available at http://inventivestep.files.wordpress.com/2009/03/specter-letter.pdf.

Id.

580 F.3d at 1301.

Id. at 1335.

Id.

Steven Seidenberg, “Into the Fray: Lucent Ruling Makes It Harder to Prove Patent Damages,” InsideCounsel (Dec. 1,

2009).

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addition, Lucent discussed the controversial issue of apportionment. Under the facts of the case,

the Federal Circuit concluded that the entire market value rule did not apply:

[T]he only reasonable conclusion supported by the evidence is that the infringing use of the

datepicker tool in Outlook is but a very small component of a much larger software program.

The vast majority of the features, when used, do not infringe. The date-picker tool’s minor

role in the overall program is further confirmed when one considers the relative importance

of certain other features, e.g., email. Consistent with this description of Outlook, Lucent did

not carry its evidentiary burden of proving that anyone purchased Outlook because of the

patented method.84

The Federal Circuit went on to speak in a more general way:

Although our law states certain mandatory conditions for applying the entire market value

rule ... the base used in a running royalty calculation can always be the value of the entire

commercial embodiment, as long as the magnitude of the rate is within an acceptable

range.... [E]ven when the patented invention is a small component of a much larger

commercial product, awarding a reasonable royalty based on either sale price or number of

units sold can be economically justified.85

Some disagreement has reportedly resulted from this language. As legal journalist Steven

Seidenberg explains:

Some say the ruling allows damages to be calculated based on an infringing product’s entire

market value, provided the calculation realistically reflects the patent’s importance in the

infringing product. Others assert that entire market value can be used only when a plaintiff’s

patented feature drives consumer demand for the infringing product, and that any damage

calculations must reflect the relative importance of the infringing product.86

Each of the three patent reform bills in the 111th Congress was introduced prior to the issuance of

the Lucent opinion. At least one observer, patent lawyer Kevin McCabe, reportedly opined that

“the Lucent decision is the Federal Circuit’s way of showing Congress that damage reform is

unnecessary.”87 In any event, in the 111th Congress, H.R. 1260, S. 515, and S. 610 each addressed

monetary remedies in patent cases. In brief, both H.R. 1260 and S. 515 called for a court to select

one of the following methods for determining a “reasonable royalty” as the measure of damages:

(1) the economic value that is properly attributable to the patented invention’s specific

contribution over the prior art, (2) the entire market value rule, or (3) other factors, such as terms

of the nonexclusive marketplace licensing of the invention. Both bills also stipulated that courts

may receive expert testimony as an aid to the determination of the appropriate royalty.

In contrast, S. 610 did not expressly address apportionment and the entire market value rule. It

instead allowed courts to “consider any factors that are relevant to the determination of a

reasonable royalty.” However, S. 610 stipulated that the amount of royalties paid for patents other

than the patent subject to litigation may only be considered in particular circumstances, and

further that the financial condition of the infringer is not relevant to the reasonable royalty

determination. S. 610 also required damages experts who intend to present testimony to provide

580 F.3d at 1337.

Id. at 1339.

Seidenberg, supra.

Id.

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data and other information from which they draw their conclusions, and also mandated that trial

judges determine whether such testimony is based upon legally sufficient evidence before

allowing it to be considered by a jury.

Willful Infringement

The patent statute currently provides that the court “may increase the damages up to three times

the amount found or assessed.”88 An award of enhanced damages, as well as the amount by which

the damages will be increased, falls within the discretion of the trial court. Although the statute

does not specify the circumstances in which enhanced damages are appropriate, the Federal

Circuit has limited such awards to cases of “willful infringement.” The appellate court has

explained that willful infringement occurs when “the infringer acted in wanton disregard of the

patentee’s patent rights” based upon such circumstances as copying, closeness of the case, the

infringer’s concealment of its conduct, and the infringer’s motivations.89 In its 1992 opinion in

Read Corp. v. Portec, Inc.,90 the Federal Circuit explained that:

Willfulness is a determination as to a state of mind. One who has actual notice of another’s

patent rights has an affirmative duty to respect those rights. That affirmative duty normally

entails obtaining advice of legal counsel although the absence of such advice does not

mandate a finding of willfulness.91

As framed in Read v. Portec and numerous other judicial opinions issued prior to 2007, the

willful infringement doctrine has proved controversial. Some observers believe that this doctrine

ensured that patent rights will be respected in the marketplace. Critics of willful infringement

believed that the possibility of trebled damages discourages individuals from reviewing issued

patents. Out of fear that their inquisitiveness will result in multiple damages, innovators might

simply avoid looking at patents until they are sued for infringement. To the extent this

observation was correct, the law of willful infringement discouraged the dissemination of

technical knowledge, thereby thwarting one of the principal goals of the patent system. Fear of

increased liability for willful infringement might have also discouraged firms from challenging

patents of dubious validity.

In view of these critiques, Congress considered legislative amendments to the law of willful

infringement as early as 2005.92 However, in its 2007 decision in In re Seagate Technology,93 the

Federal Circuit made significant changes to the law of willful infringement itself. The appellate

court overturned two decades of its precedent by opting to “abandon the affirmative duty of due

care.”94 The Federal Circuit instead explained that accused infringers possessed no obligation to

obtain an opinion of counsel.95 Rather, “proof of willful infringement permitting enhanced

35 U.S.C. § 284.

See Transclean Corp. v. Bridgewood Services, Inc., 290 F.3d 1364 (Fed. Cir. 2002).

970 F.2d 816 (Fed. Cir. 1992).

Id. at 828.

H.R. 2795, 109th Congress, at § 6(b).

497 F.3d 1360 (Fed. Cir. 2007) (en banc).

Id. at 1371.

Id.

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damages requires at least a showing of objective recklessness.”96 Under this view, the “state of

mind of the accused infringer is not relevant to this objective inquiry.”97

Many observers believe that Seagate significantly limited the circumstances under which courts

will conclude that an infringer acted willfully.98 Due to the Seagate opinion, some commentators

believe that congressional reform of willful infringement principles is not needed at this time.99

Others are more skeptical, believing that the “new objective recklessness standard will result in

little practical change because potential infringers will likely continue to seek opinions of

competent counsel to protect against a charge of willful infringement.”100

In the 111th Congress, H.R. 1260 and S. 515 included identical language that would add several

clarifications and changes to the law of willful infringement. First, a finding of willful

infringement would be appropriate only where (1) the infringer received specific written notice

from the patentee and continued to infringe after a reasonable opportunity to investigate; (2) the

infringer intentionally copied from the patentee with knowledge of the patent; or (3) the infringer

continued to infringe after an adverse court ruling. Second, willful infringement cannot be found

where the infringer possessed an informed, good faith belief that its conduct was not infringing.

Finally, a court may not determine willful infringement before the date on which the court

determines that the patent is not invalid, enforceable, and infringed. No comparable language

appeared in S. 610.

Extraterritorial Patent Protection

U.S. patents are generally effective only in the United States. They normally do not provide

protection against acts that occur in other nations. However, one provision of the Patent Act, 35

U.S.C. § 271(f), provides U.S. patent owners with a limited measure of extraterritorial protection.

Specifically, § 271(f) prohibits “supplying” a “component” of a patented invention abroad

knowing that such components would be combined in a manner that would infringe the patent if

such combination occurred within the United States. Congress enacted § 271(f) in order to

prevent individuals from avoiding infringement liability under U.S. law by manufacturing parts

domestically before shipping them abroad to be assembled into a patented device.101

Some observers had expressed concerns that § 271(f) had been interpreted overly broadly. In

particular, the Federal Circuit had ruled that software designed in the United States, and then

transmitted abroad for copying and sale, fell within § 271(f).102 Some commentators believed that

this holding would “impose liability for software developed in America and sold overseas,” with

Id.

See Siraj Husain, “The Willfulness Pendulum Swings Back: How Seagate Helps Level the Playing Field,” 28 Loyola

of Los Angeles Entertainment Law Review (2007-2008), 239.

See Rooklidge & Barker, supra, at 167; IPO, supra.

100

Christopher C. Bolten, “In re Seagate Tech., LL.C., Is the Objective Recklessness Standard a Practical Change?,” 49

Jurimetrics Journal (Fall 2008), 90.

101

See Dariush Keyhani, “Patent Law in the Global Economy: A Modest for Proposal for U.S. Patent Law and

Infringement Without Borders,” 54 Villanova Law Review (2009), 291.

102

Eolas Techs. Inc. v. Microsoft Corp., 399 F.3d 1325 (Fed. Cir. 2005).

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the result that “American software developers would have faced a competitive disadvantage visà-vis their foreign counterparts.”103

Proposals before Congress would have addressed this concern. In the 109th Congress, S. 3818,

titled the Patent Reform Act of 2006, would have repealed 35 U.S.C. § 271(f).104 However, the

courts were the first to address the controversy regarding extraterritorial patent protection. In

2007, the Supreme Court issued its opinion in Microsoft Corp. v. AT&T Corp.105 The issue before

the Court was whether § 271(f) applied to a “master disk” of software that Microsoft sent from

the United States to a foreign manufacturer. The foreign manufacturer then used the disk to create

multiple copies of the software that was then installed on computers that were made and sold

abroad. The Supreme Court held that sending the master disk abroad did not constitute

“supplying” a “component” of the foreign computers within the meaning of § 271(f).106 This

“narrowing reading of § 271(f)” limited the liability of software firms accused of patent

infringement based upon overseas activity.107

Possibly as a result of Microsoft v. AT&T, proposals to eliminate § 271(f) did not reappear in

subsequent versions of the Patent Reform Act. As Senator Patrick Leahy explained on April 18,

2007, shortly before Microsoft v. AT&T was decided:

The Patent Reform Act of 2007 is also significant for what is not included.... [W]e do not

inject Congress into the ongoing litigation over the extra-territorial provision, section 271(f).

S. 3818 would have repealed the provision in its entirety; the Patent Reform Act of 2007

does not, while the interpretation of the provision is currently pending before the Supreme

Court. If the Court does not resolve that issue, we will revisit it in the legislative process.108

Although debate has continued over the soundness of the Microsoft v. AT&T ruling,109 the lack of

legislative interest in amending or eliminating § 271(f) may suggest that concerned actors believe

the Supreme Court addressed perceived problems with that statute.

Tax Planning Methods

Controversy over the newly recognized phenomenon of patents on tax planning methods resulted

in proposals to limit or prohibit them. For example, in the 110th Congress, the Patent Reform Act

of 2007 stipulated that a patent may not be obtained on a tax planning method, which was defined

as “a plan, strategy, technique, or scheme that is designed to reduce, minimize, or defer, or has,

when implemented, the effect of reducing, minimizing, or deferring, a taxpayer’s tax liability, but

103

Rachel Krevans & Daniel P. Muino, “Restoring the Balance: The Supreme Court Joins the Patent Reform

Movement,” 9 Sedona Conference Journal (2008), 15.

104

S. 3818, §5(f).

105

550 U.S. 437 (2007). See CRS Report RS22670, Exporting Software and the Extraterritorial Reach of U.S. Patent

Law: Microsoft Corp. v. AT&T Corp., by (name redacted).

106

Id. at 453.

107

See James Ernstmeyer, “Does Strict Territoriality Toll the End of Software Patents?,” 89 Boston University Law

Review (2009), 1267.

108

U.S. Senator Patrick Leahy, “Leahy, Hatch, Berman And Smith Introduce Bicameral, Bipartisan Patent Reform

Legislation” (April 18, 2007) (available at http://leahy.senate.gov/press/200704/041807a.html).

109

See Ernstmeyer, supra.

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Patent Reform: Judicial Developments in Areas of Legislative Interest

does not include the use of tax preparation software or other tools used solely to perform or

model mathematical calculations or prepare tax or information returns.”110

A number of recent court decisions have explored the topic of patentable subject matter—that is

to say, what sorts of advances are eligible for patenting.111 Most notable is the 2010 decision of

the U.S. Supreme Court in Bilski v. Kappos.112 There the Supreme Court reviewed a lower court

ruling holding that a patent on a particular “method of hedging risk in the field of commodities

trading” was not eligible for patenting because the invention was neither (1) tied to a particular

machine or apparatus nor (2) transformed a particular article into a different state or thing.113 This

“machine-or-transformation” standard was widely viewed as narrowing the range of patentable

subject matter.114

In Bilski v. Kappos, the Supreme Court ruled that the risk hedging method at issue was

unpatentable. However, the Supreme Court also rejected the holding that the “machine-ortransformation” test was a categorical rule that governed which inventions were patentable. The

lower court’s “machine-or-transformation” standard was instead a factor to be considered in

assessing patentability, the Supreme Court reasoned, but not the sole one. By a 5-4 margin, the

Supreme Court also rejected the argument that business methods were categorically unpatentable.

The Supreme Court further declined to announce a new test of patentable subject matter, instead

suggesting that the analysis must proceed on a case-by-case basis founded on existing case law

that rejected patents on laws of nature, natural phenomena and abstract ideas.115

The impact of the Supreme Court’s ruling may influence legislative involvement with respect to

tax planning method patents. Prior to the issuance of the Supreme Court opinion, Linda Beale, a

member of the faculty of the Wayne State University Law School, explained that “[w]hen the

Supreme Court hears the case, it may reverse Bilski and leave Congress no choice but to enact

legislative exclusions to the patent laws.”116 On the other hand, Congress may believe that the

holding in Bilski v. Kappos appropriately resolves concerns pertaining to patent eligibility. The

possibility of legislative intervention regarding tax planning method patents remains to be seen.

Observations

This discussion of injunctions, venue, damages, willful infringement, extraterritorial patent

protection, and tax strategy patents suggests that the courts have modified a number of patent law

110

H.R. 1908, 110th Congress, § .

111

See Judy Naamat, “The State of the Patent Street: Does Statutory ‘Matter’,” 91 Journal of the Patent and Trademark

Office Society (2009), 229.

112

130 S.Ct. 3218 (2010).

113

549 F.3d 943 (Fed. Cir. 2008) (en banc). See CRS Report R40803, Patent-Eligibility of Process Claims Under

Section 101 of the Patent Act: Bilski v. Kappos, by (name redacted), Patent-Eligibility of Process Claims Under the Patent

Act: Bilski v. Kappos., by (name redacted) (Sept. 9, 2009).

114

See Linda M. Beale, “Is Bilski Likely the Final Word on Tax Strategy Patents? Coherence Matters,” 9 John

Marshall Review of Intellectual Property Law (Summer 2009), 110.

115

See generally Stephen T. Schreiner & Noah M. Lerman, “Intellectual Property Update: Viability of Business

Method Patents and Financial Method Patents After the Supreme Court’s Bilski Opinion,” 127 Banking Law Journal

(2010), 986.

116

Beale, supra.

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doctrines that were previously subject to congressional consideration. Of course, many of these

principles had been developed through judicial opinions. To that extent, congressional interest in

patent reform was itself a reaction to earlier developments in the courts. This interaction between

different branches of government has become a hallmark of the recent patent reform process.

Notably, the Supreme Court and Federal Circuit have not reacted to every proposal in the various

Patent Reform Acts in this manner. For example, Congress has considered legislation that would

permit interlocutory appeals of claim construction rulings.117 The Federal Circuit has not altered

its general practice of disfavoring such appeals, however.118

It also should be appreciated that judicial opinions have worked significant changes to a number

of patent principles that were not expressly the target of proposed legislative reforms. For

example, some observers believe that the 2007 Supreme Court opinion in KSR v. Teleflex119

resulted in significant changes to the law of nonobviousness.120 Of course, judicial changes to one

component of the patent system may have an impact upon other doctrines, including those subject

to congressional scrutiny.

A number of reasons may explain this pattern of judicial involvement in areas of legislative

interest. First, Congress considered the initial Patent Reform Act in 2005.121 During the years that

legislation has been pending, many patent infringement cases have been tried and appealed. The

courts have therefore had many opportunities to address core patent doctrines.

Second, the Federal Circuit hears all appeals from district courts across the United States in both

patent acquisition and infringement cases.122 This concentration of appellate jurisdiction provides

one court with the ability to change patent doctrine relatively quickly. Further, although the

rulings of other federal courts of appeal bind only a limited portion of the country, Federal Circuit

patent precedent has effect throughout the United States.123

Some additional factors suggest judicial interest in legislative scrutiny of the patent system. The

Federal Circuit’s location in Washington, DC,124 may imply an awareness of legislative activity

involving patents. That several Federal Circuit judges formerly served as members of

congressional staff may also suggest interest in patent reform efforts on the Hill.125

Whatever the reasons for the persistent interaction between Congress and the courts in the patent

reform process, these circumstances raise a number of issues pertaining to institutional

117

In the 111th Congress, see H.R. 1260, § 10 and S. 515, § 8. S. 610 does not address interlocutory appeals of claim

construction rulings.

118

See Kelly C. McKinney, “The Patent Reform Act of 2007 and International Patent Law Harmonization,” 31

Houston Journal of International Law (2008), 125.

119

550 U.S. 398 (2007). See CRS Report RS22669, The Obviousness Standard in Patent Law: KSR International Co. v.

Teleflex Inc., by (name redacted).

120

See Rebecca S. Eisenberg, “Pharma’s Nonobvious Problem,” 12 Lewis & Clark Law Review (2008), 375.

121

H.R. 2795, 109th Congress (introduced on June 8, 2005).

122

28 U.S.C. § 1295(a) (2006).

123

See Chris J. Katopis, “The Federal Circuit’s Forgotten Lessons?: Annealing New Forms of Intellectual Property

Through Consolidated Appellate Jurisdiction,” 32 John Marshall Law Review (1999), 581.

124

28 U.S.C. § 48(a) (2006).

125

See U.S. Court of Appeals for the Federal Circuit, Judicial Biographies (available at http://www.cafc.uscourts.gov/

judgbios.html).

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competence. The longstanding debate over whether legislatures or courts comprise the most

appropriate body to work particular legal reforms has been renewed in this setting. Law

professors Dan Burk and Mark Lemley side with the courts, asserting that “Congress has spent

the last four years, from 2005 to 2008, in an ultimately futile effort to reform the patent

system.”126 They further contend that “[d]uring the period in which Congress tried and failed to

reform the patent system, courts were actively involved in fixing many of the very same problems

Congress was ultimately unable to resolve.”127 In their view the “fact that courts proved capable

of solving many of the problems on which Congress ultimately foundered” indicates that the

courts are the most appropriate institution for working needed reforms to the patent laws.128

On the other hand, legislatures are frequently seen as possessing superior resources to investigate

and develop factual evidence. Compared to the courts, Congress possesses greater research

capabilities and superior means for obtaining information from informed third parties. The

legislative decision-making process may better reflect the views of a wide range of stakeholders

and offers the advantage of superior democratic accountability.129

It should also be appreciated that the judiciary does not oversee a number of significant

components of the patent system. For example, the courts cannot directly influence the budget or

internal operations of the USPTO.130 In contrast, Congress possesses authority to determine such

matters as the scope of USPTO rule-making authority, the level of fees the USPTO may charge,

and the agency’s budget.131

Conclusion

Several previous Congresses have considered enacting a Patent Reform Act. To the extent

legislative deliberations are believed to alert the courts to perceived problems with a particular

doctrine, however, Congress may be seen as already having prompted a great deal of change to

the patent system. Our recent experience highlighting the interaction between the different

branches of government during the patent reform process suggests the importance of legislative

awareness of judicial developments. It also reminds us that although courts often possess a range

of options in interpreting statutory language that the legislature has chosen, authority to alter the

Patent Act itself ultimately resides with Congress.

126

Dan L. Burk & Mark A. Lemley, The Patent Crisis and How the Courts Can Solve It (University of Chicago Press

2009), 100.

127

Id. at 102.

128

Id.

129

See generally Robert B. Schapiro, “Judicial Deference and Interpretive Coordinacy in State and Federal

Constitutional Law,” 85 Cornell Law Review (2000), 656.

130

Rooklidge & Barker, supra.

131

See generally Arti K. Rai, “Growing Pains in the Administrative State: The Patent Office’s Troubled Quest for

Managerial Control,” 157 University of Pennsylvania Law Review (2009), 2051.

Congressional Research Service

Patent Reform: Judicial Developments in Areas of Legislative Interest

Author Contact Information

(name redacted)

Visiting Scholar

[redacted]@crs.loc.gov, 7-....

Acknowledgments

This report was funded in part by a grant from the John D. and Catherine T. MacArthur Foundation.

Congressional Research Service

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