Hearing of the Subcommittee on Courts, Intellectual Property and the Internet - "Abusive Patent Litigation: The Issues Impacting American Competitiveness and Job Creation at the International Trade Commission and Beyond"

Hearing

By:  Bob Goodlatte
Date: April 16, 2013
Location: Washington, DC

During the last Congress we passed the America Invents Act (AIA). That bill was the most significant reform to the patent system in my lifetime. The AIA modernizes our patent system and sets it on the right path for decades to come.

The AIA included a number of provisions that went directly to addressing the issues surrounding patent quality. The PTO has new programs in place to ensure higher quality patents that can stand up to review, setting the bar higher so that quality control starts on the front end rather than relying on the federal courts system to fix problems.

The U.S. patent system is designed to be fair, meeting our international obligations and not discriminating against any field of technology. The strength of the U.S. system relies on the granting of strong patents, ones that are truly novel and non-obvious inventions, those that are true innovations and not the product of legal gamesmanship.

While the AIA paved the way for higher quality patents on the front end, there were a few issues that were left on the cutting room floor during the last Congress that could help go more directly to the immediate issues surrounding patent assertion entities (PAEs) or patent trolls.

Abusive patent litigation is a drag on our economy. Everyone from independent inventors, to start-ups, to mid and large sized businesses face this constant threat.

Many of these lawsuits are filed against small and medium-sized businesses, targeting a settlement just under what it would cost for litigation, knowing that these businesses will want to avoid costly litigation and probably pay up. And it is this type of tactic that has now made the International Trade Commission (ITC) an attractive venue for patent cases.

The ITC has at its disposal the ability to issue exclusion orders that block the importation of "infringing" products into the United States. Since the ITC is a federal agency and not an Article III court, it makes sense that it is limited to this single remedy.

In recent years, however, PAEs have used the Commission as a forum to assert weak or poorly-issued patents against American businesses.

It is evident that there are cases that have come before the ITC that probably should be litigated exclusively in our U.S. District Courts. Nowhere is the disharmony between patent law and Article III court precedent more on display than the application of exclusion orders in technology cases at the ITC.

For example, Congress established an important counter-balance to the blunt sanction of the exclusion order in the public-interest test provided under Section 337. The statute requires the ITC to consider public health and welfare, and the impact of an exclusion order on competition in the marketplace before issuing an exclusion order; yet the ITC rarely exercises its responsibility to apply the public-interest test. This failure to follow the law has particularly damaging results in today's technology markets in which products are often reliant on hundreds or thousands of patents. The ITC has the ability to take certain immediate steps within its statutory authority to correct these problems.

Three key adjustments that the ITC should consider undertaking include: A return to a pre-2010 domestic-industry standard that does not allow legal expenses, airplane flights, and the like to satisfy the domestic-industry requirement.

Second, application of the public-interest test and economic-interest test at the beginning of a Section 337 review for purposes of determining claims consideration as well as the issuance of exclusion orders.

And third, based on the public-interest and economic-interest test analysis, articulation of standards that clarify which patent disputes should be adjudicated by the ITC and those which are more properly addressed by U.S. district courts.

The patent system was never intended to be a playground for trial lawyers and frivolous claims. We need to work on reforms to discourage frivolous patent litigation and keep U.S. patent laws up to date. Abraham Lincoln once said that "the patent system added the fuel of interest to the fire of genius." Well I for one would not want to see the spark of innovation and job creation go out because of a few folks who are adding water to the proverbial gas tank.

Abusive patent troll litigation strikes at the very heart of American innovation and jobs. That is why Congress, the Federal Courts and the PTO should continue to take the necessary steps to ensure that the patent system continues to be one that lives up to the vision of our Founders, truly promoting the progress of science and the useful arts.

I look forward to hearing from all of our witnesses on the issue of abusive patent litigation and potential solutions to this growing problem, in order to ensure that we continue to promote American ingenuity, innovation and jobs.