Providing Consideration of H.R. 3309, Innovation Act; and Providing for Consideration of H.R. 1105, Small Business Capital Access and Job Preservation Act

Floor Speech

Mr. POLIS. Mr. Speaker, I yield myself such time as I may consume.

There are many things that my good friend from Florida said that I agree with. I will be discussing some of the merits of these bills, but it is worthwhile to bring forward before discussing what these bills are, what these bills are not.

It has been 159 days and 14 hours since the Senate passed a comprehensive immigration reform bill. This body's failure to act on immigration reform has already cost our economy nearly $6 billion. Each additional day, each day that we delay action costs $37 million in revenue; hundreds of thousands of jobs lost; failure to secure the border; failure to restore the rule of law to our country; countless families torn apart.

While the Judiciary Committee has found the time to move asbestos bills and patent reform bills to the floor with ease, immigration reform remains stagnant. The Judiciary Committee has reported out four immigration reform bills: the Legal Workforce Act, the Agricultural Guestworker Act, the SAFE Act, and the SKILLS Visa Act. They reported these four bills out prior to the asbestos bill which was rushed immediately to the floor and prior to the patent bill which was rushed to the floor after a hearing in the Rules Committee yesterday.

My question to the gentleman from Florida--and I will be happy to yield for a moment--is why we are giving such treatment to asbestos and patent reform when immigration reform would create so many more jobs and reduce our deficit by so much more?

I would like to know if the gentleman from Florida has an answer to that question.

I yield to the gentleman from Florida.

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Mr. POLIS. Reclaiming my time, 68 Members of the Senate, including many Republicans, including former Presidential Republican nominee John McCain, supported the Senate immigration reform bill.

I certainly understand the desire to get it right, but bills don't get right by themselves. These are four bills that have passed in the Judiciary Committee. We in Rules like to make them right by allowing good, thoughtful amendments from colleagues on both sides of the aisle. I hope that next week or when we are back, we will be able to move forward the immigration bills with the same alacrity that we have moved forward asbestos and patent reform.

I hope the same thing happens that as these bills move through Judiciary that we do see them in the Rules Committee and that they ultimately come to this floor for debate.

Mr. Speaker, I do support the underlying bills that are contained under this rule. I support H.R. 1105, the bipartisan Small Business Capital Access and Job Preservation Act. It exempts private equity funds which are very lightly leveraged in helping to grow companies and jobs from costly and unnecessary SEC registration and reporting requirements like venture capital firms that are already exempted and substantially have very similar business models to private equity firms. These registration requirements are an impediment to business and an impediment to job growth and have nothing to do with creating systemic risk in our economy.

Importantly, this bill would only exempt private equity firms with low debt-to-equity ratios leveraged at a ratio of less than 2 to 1. Once you get to talking about much higher debt-to-equity ratios, there is potentially systemic risk if you are talking about funds in the multi-billions of dollars that are highly leveraged. It is still hard to see how that could happen. It had nothing to do with the financial meltdown of '08-'09. But in this case, we are being extremely safe in saying if they are leveraged 2 to 1, they are no systemic risk to the economy.

My State and my district know firsthand the benefits that private equity provides to employees, to companies, to investors, including pensions, and our economy. There are nearly 500 private equity-backed companies headquartered in Colorado, many more that operate with employees, more than 124,000 workers in Colorado facilities. In 2012, there were 67 private equity investments in Colorado totaling over $26 billion that were brought to our State because of this investment mechanism, placing Colorado third in the States receiving the most private equity investment.

The underlying rule also makes in order H.R. 3309, the Innovation Act, which I also support. In 2011,

``patent assertion entities,'' some of whom are bad actors which are sometimes referred to as ``patent trolls,'' who often produce little or nothing and derive their revenue from litigation and licensing, cost significant overhang to other businesses and to consumers for whom many of these costs are passed along in the products or services that we all enjoy. The majority of the targets of patent trolls were start-ups--hospitals, restaurants, retailers, hotels, and other important job-creation engines in our economy.

The reforms made in the America Invents Act, enacted 2 years ago, went a little ways in this regard, but did not do much to halt or put a stop to or reduce patent troll litigation or improve the quality of patents. In the case of software patents, growing patent backlogs, lack of training and resources available to PTO examiners, and ambiguity regarding patentability standards have led to approval of low-quality software patents that have not even stood up when brought to litigation.

Thankfully, the momentum is growing to address patent reform. I want to be clear--and I discussed this with Chairman Goodlatte in the Rules Committee yesterday--this bill is not patent reform. I believe the gentleman, Mr. Goodlatte, agrees this is not patent reform. It may be a few steps in the right direction. It may be a good start. It doesn't fundamentally create an intellectual property protection system for the digital era in the 21st century.

It continues to put, constructively, Band-Aids on a 1913 system, which I do believe it is high time to rethink. I look forward to an upcoming symposium in my district at the University of Colorado this Friday that we will be having on sort of ``blue sky'' intellectual property protection mechanisms for the 21st century in the digital economy to encourage growth and to protect inventors. This bill does not do that. However, it is a step forward in many regards.

While I strongly support many of these patent system improvements, it won't fix our patent system. Patent trolls have targeted every form of business. It should come as no surprise that the Innovation Act enjoys support from Members from both sides of the aisle, from companies, from academics. I submitted a letter from 67 professors at law universities who practice in IP from a broad ideological perspective into the record in our Rules Committee yesterday expressing their support for this bill.

This bill maintains protections for inventors' rights to enforce their patent claims. Specifically, this bill allocates the burden of patent litigation more fairly. It includes a provision that restores financial accountability to the patent system by making it easier for courts to impose sanctions on anyone who brings a frivolous patent suit.

The bill also requires the disclosure of critical details when a patent-holder files a suit, such as what patent and claims are being infringed, so the person or entity receiving the letter can know what is being discussed so that defendants don't need to guess the nature of the allegations against them.

The underlying legislation further requires patent-holders to disclose additional information to the PTO, the court, and the accused infringer, including the patent ownership, who owns the patent, and parties with financial interest in the patent. These provisions will help stop patent trolls who engage in illegitimate litigation campaigns and extortion against start-ups and small businesses.

While I strongly support these patent reforms that are a modest step towards improving our patent system, the litigation reforms alone don't have enough to benefit start-ups and small companies that are targeted by patent trolls who send pre-litigation demand letters. I am very appreciative of the chairman's effort to allow, and the Rules Committee's effort to allow, for the discussion of my amendment, along with Mr. Chaffetz, Mr. Connolly, and Mr. Marino, who have been working in this regard to see stronger language on the issue of pre-litigation demand letters. And I am grateful that we have made in order an amendment to increase accountability in the demand letter process.

We will be discussing that amendment in a more thorough basis shortly; but, in brief, the problem is that before a patent troll even files a suit, it typically sends a demand letter, or many demand letters, demanding some form of payment. Under current law, the sender does not even have to disclose even the most basic information. As such, entities often hide behind numerous shell corporations or send vague or overbroad letters that don't even identify the owner of the patent or the basis of their legal claim, essentially leading particularly small companies to have to hire lawyers or attorneys at great expense. When you have a company that is a $300,000-a-year company, a $500,000-a-year company, and you receive one or more of these notices, you can imagine how that takes away from your growth, your margins, your ability to hire more people, if you have to retain professional counsel to even understand what is being alleged that your company did.

Importantly, the underlying bill requires patent-holders seeking to bring willful infringement claims to provide their targets with a minimum level of disclosure information. The amendment enhances that and builds upon the language and would mandate that demand letters include information identifying the parent entity of the claimant. This language will help ensure that patent trolls can no longer hide under shell companies to conceal their true entity and their legitimacy from the demand letter recipient.

I look forward to discussing these bills further, and I reserve the balance of my time.

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Mr. POLIS. And I certainly wish that we had acted on immigration reform. We did pass under Democratic control a DREAM Act, if the gentleman will recall, in the waning days of the 111th Congress, and did take at least one constructive step with an immigration bill that we brought to the full floor of this House and passed.

I would like to yield 3 minutes to the gentleman from Colorado (Mr. Perlmutter), a member of the Financial Services Committee and a former member of the Rules Committee.

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Mr. POLIS. Mr. Speaker, I am prepared to close, so I yield myself such time as I may consume.

The gentleman from Georgia (Mr. Collins), rightly asserted that the Democrats did not, in fact, when they were in charge of the legislature in both Chambers, fix our broken immigration system. However, we did pass the DREAM Act. And given that this is football season and I think that my friend, the gentleman from Georgia, perhaps shares affinity for football, that while we did not in fact score a touchdown and fix our broken immigration system, at least the Democrats got a field goal when we were in charge. We are still waiting for the Republicans to match our field goal here if we can't score a touchdown with comprehensive immigration reform, and we look forward to improving these bills that have passed out of the committee before the asbestos bill, before the patent reform bill, and need the work of the full membership of this body to improve them.

Legislation is not like a fine wine, that when it sits in a barrel it improves itself. It needs to be actively worked upon to improve it, and I hope that it is a matter of days or hours or minutes until we can dust off these immigration bills that Chairman Goodlatte and the Judiciary Committee have worked on and improve upon them so that this body can actually move forward and score a field goal, a touchdown or more, and finally replace our broken immigration system with one that reflects our values as Americans, restores the rule of law, reduces our deficit by $200 billion, creates 6 million jobs for American citizens, secures our borders, and implements workplace enforcement of our immigration system. I am confident that we can do that working together, just as we are working together on these bills that are before us today.

As I indicated earlier, that while the patent bill does harvest some low-hanging fruit, there remains a lot of work to be done to create a 21st century intellectual property protection system for our country.

One such effort was an amendment that I offered, Polis amendment 5, that was not allowed under this rule. This amendment reflects a bill that I sponsor with Mr. Marino that regards the Demand Letter Transparency Act. Depending on a start-up's resources, even the recipient of one demand letter can even be a death sentence for a small one-, two-, three-person company. The threat of a demand letter alone can jeopardize a company's ability to raise funds, can scare away potential customers, and, God forbid, actually defending a patent lawsuit can cost hundreds of thousands to millions of dollars in legal bills, which to a one-,Ð two-, or three-person company is simply a matter of shutting the doors because they cannot afford to do that.

At the Rules Committee yesterday, I offered my bipartisan amendment based on legislation that I introduced with Representative Marino and Representative Deutch that would provide a comprehensive approach to increasing transparency and accountability in the demand letter process. While our amendment was not made in order, I am grateful we did include at least some slight provisions regarding who owns shell corporations, amendment 4 was allowed. We plan to continue to press forward on the need to address this issue through meaningful legislation.

Our bill would require certain entities to provide additional disclosure information to the PTO and to the demand letter recipient so that these start-ups and mom-and-pop restaurant owners and stores will know who is sending these demand letters and whether the claims they are making are truthful or grounded at all or just a scam.

Our bill would establish a searchable and accessible public registry of demand letters and clarify that the Federal Trade Commission could use its authority to impose civil penalties to go after patent trolls. While the FTC has announced its intent to investigate PAEs, our bill would clarify the FTC's role to use its enforcement powers against PAEs who engage in unfair and deceptive trade practices to find as a violation the provisions of our bill.

Our amendment would prevent patent trolls from hiding behind anonymous shell companies and empower defendants to take collective action and share information and increase reporting so that the regulatory authorities and the PTL are on alert as to which patents are being frivolously asserted by whom.

In conjunction with litigation reforms that are proposed in this underlying bill, our proposal would produce a more robust patent market and a more productive and predictable and competitive economy.

Our proposal is supported by a diverse group of individuals and organizations, including DISH Network, Public Knowledge, the National Restaurant Association, the Electronic Frontier Foundation, the National Retail Federation, the Direct Marketing Association, the Mobile Marketing Association, the Association of American Advertising Agencies, and the Hotel & Lodging Association, among many others.

Mr. Speaker, for once, this body is moving forward on bipartisan legislation that will help spur innovation and economic growth. The first bill that we are considering with regard to private equity will help increase job growth and job creation in our country by removing a regulatory burden that was put in without the proper justification. Private equity funds had nothing to do with the meltdown in 2008 and 2009, nor do they represent any systemic risk to our economy. They simply allow people to aggregate their resources to buy stock equity in companies. We have a cap on the debt equity ratio of two to one, and they do what they do. People earn money and people lose money, and that is how the economy works, but there is absolutely no systemic risk.

Some of these dollar amounts sound high, but what we talked about in the Rules Committee yesterday is that you might have a private equity fund that is $300 million. That sounds like a lot of money. That is the amount of money they have to invest over a period of years. With $300 million, they invest that over 5, 6, or 7 years. That is not their operational budget. Their operational budget is 2 percent or less of that every year. So a $300 million private equity fund might have an annual budget of $6 million.

Again, $6 million sounds like a lot of money. It certainly is. But when compliance with the SEC reform is $500,000, as has been estimated, you are talking about a sizeable percentage of your annual operating budget. So that means you have to hire a couple of people less. You might not be able to do that extra investment that you didn't have the ability to do the diligence in. You might not be able to invest in that additional company and help it grow and create jobs because of regulatory compliance that has nothing to do with systemic risk.

Mr. Speaker, as this session of Congress comes to a close, the first session of the 113th Congress, there is much that this body has left undone. While the other Chamber across the way has acted on overwhelmingly bipartisan measures that help fix our immigration system, saving $200 billion, creating over 6 million jobs, securing our borders, restoring the rule of law, and uniting families, this body has not passed a single bill in that area.

While the other body has passed a bill that would prevent companies from discriminating against gay and lesbian employees with strong bipartisan support, this body has not even brought such a bill to committee or the floor.

While I am pleased to see the bipartisan Innovation Act and Small Business Capital Access and Job Preservation Act come to the floor today, although I would like to see them with a more open process that allowed more ideas from both sides of the aisle to be introduced as amendments, I only hope that a majority of this body sees fit to hold votes on other issues such as immigration reform and employment nondiscrimination, which I am confident would pass the floor of the House today.

As I talk to many tech companies and small businesses in my district, many of the purported beneficiaries of this modest patent reform bill, they support it, but they support immigration reform more. They say, Good job. Now get immigration reform done. That is what I am hearing from employers and businesses in my district. I hope that my colleagues on the other side of the aisle are hearing the same.

Our Nation cannot afford to maintain a 20th century intellectual property protection system in a digital and biological era. This bill does not correct that. It does not change that. It is a modest step forward and an important part of reforming parts of the process that Democrats, Republicans, and many stakeholders can agree are broken.

The measure contains bipartisan balanced proposals, just as H.R. 15 does, the comprehensive immigration reform bill in the House, with over 190 bipartisan sponsors. And just as this bill will continue to incentivize entrepreneurship, so too--times 10, times 100--would comprehensive immigration reform, which includes a start-up visa that allows entrepreneurs who have already received commitments of investment to come to this country and create their jobs here. We are turning jobs for Americans away every day we fail to act on immigration reform. We can bring H.R. 15 to the Rules Committee and to the floor of the House next week or we can stay the following week and give this body the opportunity to send a bill to President Obama's desk to finally replace our broken immigration system with one that works.

Mr. Speaker, if we defeat the previous question, I will offer an amendment to the rule to bring up House Resolution 424, Ranking Member Slaughter's resolution, that prohibits an adjournment of the House until we adopt a budget conference report. This body should not adjourn until we have completed a budget conference report that could help prevent a second government shutdown and prevent a fiscal crisis.

Mr. Speaker, I ask unanimous consent to insert the text of the amendment in the Record, along with extraneous material, immediately prior to the vote on the previous question.

The SPEAKER pro tempore. Is there objection to the request of the gentleman from Colorado?

There was no objection.

Mr. POLIS. Mr. Speaker, while I am actively encouraging Members on both sides of the aisle to get behind the Innovation Act and the Small Business Capital Access and Job Preservation Act, I must urge my colleagues to vote ``no'' and defeat the previous question, as well as a ``no'' vote on the restrictive rule.

I hope that we can send the message that we need to bring immigration reform to the floor of this House, rather than let the four bills that have already emerged out of committee stay sitting and aging and not getting any better while we fast-track asbestos and while we fast-track modest patent reforms.

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