Hearing of the Courts, Intellectual Property and the Internet Subcommittee of the House Judiciary Committee - Abusive Patent Litigation: The Impact on American Innovation & Jobs, and Potential Solutions

Hearing

Chairman Goodlatte: 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.

An example of a positive retrospective provision from the AIA, is the work being done to implement a transitional program to correct the egregious errors made in the granting of a wide range of business method patents. This program will provide the PTO with a fast, precise vehicle to review low-quality business method patents, which the Supreme Court has acknowledged are often abstract and overly broad. This program will make our patent system stronger and better, and it may even make sense to make it permanent in the future and expand its applicability to other non-technological patents.

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. The tens of billions of dollars spent on settlements and litigation expenses associated with abusive patent suits represent truly wasted capital -- wasted capital that could have been used to create new jobs, fund R&D, and create new innovations and technologies that would "promote the progress of science and useful arts."
Non-practicing entities (NPEs) are those that hold patents but do not practice or produce an actual product based on those patents. The term NPE covers everything from universities to high technology companies that focus on R&D but monetize their research through legitimate licensing. But within that universe there are a specific subset of entities - PAEs -- which often times acquire weak or poorly-granted patents, and proceed to send blanket demand letters or file numerous patent infringement lawsuits against American businesses with the hopes of securing a quick payday.

Many of these PAEs file lawsuits 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.

PAE lawsuits claim ownership over basic ideas, such as sending a photocopy to email, podcasting, aggregating news articles, offering free Wi-Fi in your shop, or using a "shopping cart" on your website -- something is terribly wrong here.

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. Abusive patent troll litigation strikes at the very heart of American innovation and job creation. That is why Congress, the Federal Courts and the PTO should continue to take the necessary steps to ensure that the patent system lives up to its Constitutional underpinnings.

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.

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