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H.R. 632 would enhance fairness in compensating owners of patents that were used by the United States government. The bill will provide for reasonable fees for expert witnesses and attorneys' fees in suits against the United States for compensation of patents used by the Government. Under current law, a patent holder cannot recover any of his costs in securing payment when a patent is used by the Government.
I became aware of this situation because of the problems encountered by Standard Manufacturing of Dallas, Texas, which produces high-quality military equipment. When it appeared that the Federal Government stole one of its designs and shared it with a competitor, Standard went to the U.S. Court of Claims to have its interest protected. The Court of Claims agreed with Standard's claim of patent infringement. However, as it stands now, when the appropriate damages are decided in July, the judge cannot take into consideration the expense of Standard's attorney fees.
I urge speedy passage of this legislation to prevent further injustice. Unless this legislation is passed, Standard's recovery will be substantially diminished by the costs it has incurred to obtain it. I urge this committee to act quickly on this bill to avoid that injustice.
Mr. Chairman, I appreciate having the opportunity to testify this morning in support of H.R. 632, a bill I introduced to help small patent holders recover litigation costs when the Federal Government is found to have infringed their patents.
As some of you may know, I introduced this bill last fall and testified before the Subcommittee on Administrative Law and Governmental Relations. At the time of the hearing, there was interest and support from Members; however, due to the timing, there was no action.
Under current law, a patent holder cannot recover any of his costs in securing payment when a patent is used by the Government. The patent holder must initiate a lawsuit under 28 USC 1498 in order to obtain any compensation at all. Although section 1498 provides for "reasonable and entire compensation," what the patent holder actually receives is the amount which a court determines is reasonable compensation for the use of the patent. The patent holder cannot receive any reimbursement for the costs of litigation.
I became aware of this situation because of the problems encountered by Standard Manufacturing of Dallas, Texas. Standard has a 55-year history of producing high-quality military equipment. They designed and patented the "trailer" used for loading bombs onto B-52 bomber in the 1950s. They also submitted a design to the Air Force for a "trailer" that could be used for both the B-52 and B-lB bombers.
When it appeared that the Federal Government stole this design and shared it with a competitor, Standard went to the U.S. Court of Claims to have its interest protected. The Court of Claims agreed with Standard's claim of patent infringement, and will soon determine the appropriate damages.
Mr. Chairman, it's wrong for the Federal Government to take and use patents from small businesses like Standard without just compensation. Standard is now entitled to some compensation, but it has incurred enormous legal fees to recover damages. And, unfortunately, these legal fees, incurred because of what the Federal Government has done to Standard, cannot be recovered. Thus, as the law now stands, Standard cannot receive just compensation for the taking of their property.
Last fall, the Department of Justice recommended against enactment of the legislation for three reasons. I would like to take a few minutes to explain why I believe the Justice Department is mistaken.
In the first place, the Department claimed that this bill would single out suits brought under 28 USC 1498 for more expansive awards than are available in other actions against the government. This is not the case. The heart of this bill is simply to assure that the patent owner actually gets what current law says he is entitled to -- "reasonable and entire compensation" for the use of his patent. Usually, when the government exercises its right to take property by eminent domain, a property owner does not have to bring a suit to recover compensation. However, when a patent is used by the government, the patent holder must initiate a lawsuit under 28 USC 1498 in order to obtain any recovery at all. Section 1498 provides for "reasonable and entire compensation". However, what the patent owner actually receives is what a court determines is reasonable compensation for the uses of his patent, less whatever it has cost to obtain recovery.
Secondly, the Justice Department suggested that there are other remedies available to patent owners to recover their litigation costs, such as the Equal Access to Justice Act, 28 USC 2412. However, as a practical matter that is simply not the case. Under judicial interpretation of existing law, patent owners have been forced to bear all the costs of the lawsuits even when they win. When a patent owner attempted to recover litigation costs under the Equal Access to Justice Act, in the case of De Graffenreid v. United States, 29 Fed Claims 394 (1993), the government opposed his action. The court held that he could not recover any of the expenses he had incurred in finally obtaining compensation for the use of his patent some fifteen years after he first filed a claim alleging infringement of his patent. Although a variety of arguments have been made to the courts under current law, the fact remains that no patent owner has been able to recover litigation costs of his suit against the government.
Finally, the Justice Department suggested that this bill would prolong litigation by removing a plaintiff's incentive to settle the suit once liability has been determined. However, the bill provides only for the award of those litigation costs determined by the court to be reasonable. It is the Government that has no incentive to settle this type of suit. They take, use and enjoy the benefits of the patent's owner's invention, pay him nothing and the patent holder is unable to seek injunctive relief to stop them. During any settlement negotiation, the Government is secure knowing of the vast resources available at its disposal and that the pay check will go on whether or not a particular case is settled fairly and expeditiously. On the other hand, the patent owner must derive the funds to cover past and on-going litigation costs. It is the Government who, in taking advantage of this above situation by a paltry offer, makes settlement negotiations impossible and thus prolongs litigation. A small business is at severe disadvantage in establishing its rights because of the enormous cost of litigation.
This problem should have been corrected long ago, and I urge speedy passage of this legislation to prevent further injustice. The damages trial for Standard will be held this summer, which will determine what the government owes Standard for the use of its patent. Unless this legislation is speedily passed, Standard's recovery will be substantially diminished by the costs it has incurred to obtain it. I urge this committee to act quickly on this bill to avoid that injustice.
Again, thank you for letting me appear here this morning.