Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Mr. GRASSLEY. Mr. President, the U.S. is the world's leader in innovation. Yet today, our patent system--which has allowed generations of inventors, innovators, and entrepreneurs to thrive--is under attack from bad actors, also known as ``patent trolls''.

Abusive patent litigation is stifling the innovation and entrepreneurship that our patent system has been designed to protect. Over the last decade, there has been an explosion in the growth of this type of harmful litigation as those who exploit abusive patent litigation tactics for financial gain have taken aim at businesses operating in every sector of our economy.

From Main Street to Wall Street to Silicon Valley, from start-ups to neighborhood restaurants to major retailers--businesses and consumers across the country are being harmed. Because of this abuse, innovative companies spend less time and resources on research and innovation, and often must have their talented workforce devote many man-hours to defending against baseless claims. This comes at the expense of discovering that next medical breakthrough or rolling out new technologies that will create jobs.

Patent trolls prey on businesses by filing frivolous lawsuits and employing an array of heavy-handed and deceptive tactics to scare plaintiffs into settlements. These bad actors send vague and overly broad demand letters, exploit loose pleading standards that provide little substance of the alleged infringement claims, hide their identity behind shell companies, and use the threat of high cost patent litigation discovery as a weapon. This is a drag on our economy, costing an estimated $80 billion annually in direct and indirect costs. This means fewer jobs created, less innovation, and higher costs for consumers.

To restore integrity to our patent system, today, along with Judiciary Committee Ranking Member LEAHY, and Senators CORNYN, SCHUMER, LEE, HATCH and KLOBUCHAR, I am introducing the Protecting American Talent and Entrepreneurship Act, PATENT Act.

This builds upon the reforms made by the America Invents Act and will promote the intellectual property rights that our Founding Fathers recognized are key to American innovation. The provisions of the PATENT Act will promote more transparency in patent ownership, establish a clear, uniform standard for pleading in patent cases, and deter abusive litigation. I would like to note some of the key provisions in the bill.

The PATENT Act will require plaintiffs in a patent suit to identify each patent and each claim that is allegedly infringed, which products are infringing, and include a description of the alleged infringement. The current requirements for pleading in a patent litigation have been subject to scrutiny by the courts and amount to little more than notice pleading. By providing these congressionally enacted bright line rules across judicial jurisdictions, defendants will be able to better respond to claims and courts will be able to resolve litigation more efficiently.

This legislation will place reasonable limitations on discovery by requiring courts to stay discovery pending the resolution of specific preliminary motions, including motions to dismiss and transfer venue. It also calls on the Judicial Conference to develop rules and procedures to promote efficient and effective discovery, including examining to what extent each party is entitled to ``core documentary evidence''.

While current law allows for fee shifting in patent cases, the reality is that bad actors are almost never subject to fee shifting, leading to an explosion in abusive litigation. The PATENT Act provides that reasonable attorney fees will be awarded if the prevailing party in litigation makes a showing, and the court finds, that the non-prevailing party's conduct was not ``objectively reasonable,'' unless special circumstances make an award unjust. This measure will help to deter the filing of frivolous claims. The bill also provides a process for the recovery of fees from an abusive litigant.

Further, the bill will help stop the widespread sending of fraudulent or materially misleading demand letters by building on existing Federal Trade Commission authority to go after those who violate Section 5 of the FTC Act in connection with patent assertion by engaging in widespread demand letter abuse. This provision has been carefully constructed so that it will not impinge upon legitimate licensing activity or expand FTC authority. We worked on the language contained in this provision with Chairman Thune and his staff, as the Commerce Committee also has jurisdiction over the FTC, and it was important to us to get their input.

The bill also will help to protect small businesses, who are being targeted for doing nothing more than using products which they bought off-the-shelf, by allowing a suit against an end-user to be stayed while the manufacturer litigates the alleged infringement.

This bipartisan legislation is the result of a careful and deliberative process in which we worked with many stakeholders representing almost every area of the economy, the judiciary, and the administration. Since the process started in the last Congress, we've listened and tried to be responsive to all the concerns raised from the different industries and constituencies. As a result, we have made great strides in addressing issues that have been raised along the way and getting stakeholders comfortable with the bill. So I believe the PATENT Act strikes a good balance. Our intent is to protect the rights of patent holders while addressing the problem of abusive litigation. The PATENT Act does that.

As we move forward, we also intend to try to address other concerns that have been raised more recently by patent holders about the Patent and Trademark Office's IPR process. We want to make sure that the PTO processes are not being abused, and instead are being utilized as envisioned by the America Invents Act.

I would like to especially thank Ranking Member LEAHY for being an outstanding partner on the Judiciary Committee on all things intellectual property, Senators CORNYN and SCHUMER for their sustained leadership on the patent troll issue, Senator LEE for his hard work on the demand letter provision, Senator HATCH for his valuable work on the recovery provision, and Senator KLOBUCHAR for her constructive involvement in moving the bill forward. Because of these efforts, we have a stronger bill and are closer to restoring the integrity of the patent system. I am hopeful that we can move in a deliberative and productive way through Committee so we can get to the floor in a timely manner.

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