Prepared testimony of Peter F. Theis before the Subcommittee on Courts, the Internet, and Intellectual Property of the Committee on the Judiciary.

Thursday, June 20, 2002

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Good Afternoon. I want to thank Congressman Manzullo for the opportunity to address my concerns regarding the reexamination issue being deliberated by this Committee.

Patentees are the guests of honor at the patent party. Independent inventors, especially, have created immense wealth for this country, millions of job opportunities, and spawned entire industries. The independent inventors invent for financial and personal independence, putting at risk their own money, their family’s financial security, and their time. Yet we are being vilified and demonized, ignored and expunged from the fabric of American society. We are being taxed for our inventions, denied a period of exclusivity, and denied justice by the courts. I don’t get it.

I know the ropes and understand the system. In 1992, the telephone industry and their principal suppliers, employing at least 13 name law firms, ganged up and sued to either invalidate, or preferably seize my patent portfolio. Derivative litigation continues ten years later. I have faced the same huge cartel that has defeated the United States Government. I am seasoned as few are.

I want to share with you from my experiences what happens when the patent system fails to protect the high technology small business. I have been responsible for the creation of immense wealth for others. The next time you want to throw your telephone through the window because of that damned push this say that machine, be aware there is a technology so sophisticated that you can’t differentiate it from a live operator. Today, this natural speech technology, which I invented, and only my company has, is a trade secret. This technology is offered only as a service because to sell equipment or software would expose our technology to theft. To survive, we have to keep a low market profile and not put major players at risk. If a truck hits me on the way out, the technology goes with me. Trade secrets are the sole alternative to ineffective patents. The public and this government are not aware of this technology and others brighter than me can not build on the disclosure this technology because of the failure of the patent system.

The people of this nation will likely never have the benefit of my patents for aircraft turbines without blades or technology to keep cars from going into sudden spins on wet or icy roads. There is now a disincentive to innovation and risking development. Other advances of mine will follow me to the grave.

With this insight, reflect on other independent inventors and small businesses that, like me, have given up; those few risk takers that combine the rare and precious attributes of a creative capability and follow through. Think about how much they could have contributed to our nation’s wealth and well being that has now been lost. Edison and Bell are getting old as icons of American ingenuity. There is not even one contemporary patent hero to whom we can point.

. Thomas

This reexamination act, HR 1886, properly dubbed The Infringer Protection Act, brings down the cost of defense for infringers. Reexamination, unlike litigation, eliminates all risk of loss from an adverse decision. Because an industry can legally gang up against a patentee, they will succeed in defeating a patentee, at a low cost, by sequentially raising one reexamination challenge after another. Since licensing fees and settlement fees generally correspond to the risks and costs of litigation to the infringer, it must follow that the patent property owner will get substantially less in licensing fees, if anything at all.

But the worst part of the proposed Infringers Benevolent Act is that the Federal Circuit can review rational and studied reexamination rulings of PTO. In the United States, we have two sets of laws, one that follows legal precedent and a second, a much larger body of law that does not. They are called “unpublished decisions”. In true Orwellian Doublespeak, this term means these rulings cannot be cited as precedent. It has nothing to do with whether they are published. This practice of having two standards of law is preordained to result in inequity, inconsistency and injustice. It is a license to the judiciary for abuse, corruption, fraud, mediocrity and incompetence – and the Federal Circuit uses that license liberally. Incredibly, the very same judges that make these decisions can plant this “unpublished” imprimatur on these decisions to avoid review en banc, by a superior court or by the legal profession. An appeal has become little more than a beauty contest. A ruling by the Federal Circuit is rule by fiat.

Before the Infringement Promotion Act should even be considered by this Committee, all decisions of the Federal Circuit must be made precedential. Under our two sets of law concept, the term “Justice” joins the lexicon of Orwellian Doublespeak. It hurts me to think of the innocent people in prison today because their appeal rights were based on the secret, arbitrary so called “law”. Having two sets of laws in this country is a ticking time bomb, that, left uncorrected, must lead, eventually, to the loss of liberty for all of us.

For a small business today, a patent affords no monopoly, siphons away scarce executive time and energy from the limited number of people involved in running the business, and precious capital, with little hope of recovery. HR 1886 is the final nail to seal the patent coffin. HR1886 is a win-win for infringers, and a lose-lose for inventors. It is a no-brainer lose-lose for the investment community and for the American public. Thank you.