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Washington, D.C. - Mr. Speaker, Today, I join Representative Boucher in introducing the Patents Depend on Quality Act of 2006 (PDQ Act). Introduction of this legislation follows a series of hearings conducted by the Subcommittee on Intellectual Property which ascertained that the current patent system is flawed. Over the course of the last four years there have been numerous attempts to define the challenges of the patent system today. For example, the Patent and Trademark Office developed their Twenty First Century Strategic Plan, not much later the Federal Trade Commission released a report entitled "To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy." The National Research Council published a compilation of articles "A Patent System for the 21st Century" and two economists authored a critique of patent law in a book titled Innovation and Its Discontents. These accounts make a number of recommendations for increasing patent quality and ensuring that patent protection promotes, rather than inhibits, economic growth and scientific progress. Consistent with the goals and recommendations of those reports, the PDQ Act contains a number of provisions designed to improve patent quality, deter abusive practices by unscrupulous patent holders, and provide meaningful, low-cost alternatives to litigation for challenging the patent validity.
Past attempts at achieving more comprehensive patent reform have met with resistance and recently have resulted in a call for additional hearings. However, the call for legislative action is loud. The New York Times has noted, "[s]omething has gone very wrong with the United States patent system." The Financial Times has stated, "[i]t is time to restore the balance of power in US patent law." Therefore, today, we are introducing a narrowly tailored bill to address some of the more urgent concerns.
I firmly believe that robust patent protection promotes innovation. However, I also believe that the patent system is strongest, and that incentives for innovation are greatest, when patents protect only those patents that are truly inventive. When functioning properly, the patent system should encourage and enable inventors to push the boundaries of knowledge and possibility. If the patent system allows questionable patents to issue and does not provide adequate safeguards against patent abuses, the system may stifle innovation and interfere with competitive market forces.
This bill represents our latest perspectives in an ongoing discussion about legislative solutions to patent quality concerns and patent litigation abuses. We have considered the multitude of comments received on prior patent bills. We acknowledge that the problems are difficult and, as yet, without agreed-upon solutions. It is clear, however, that introduction and movement of legislation, not necessarily additional hearings, will focus and advance the discussion. It is also clear that the problems with the patent system have been exacerbated by a decrease in patent quality and an increase in litigation abuses. With or without consensus, Congress must act soon to address these problems.
Thus, we introduce this bill with the intent of propelling the debate forward in the 109th Congress. The bill contains a number of initiatives designed to improve patent quality and limit litigation abuses, thereby ensuring that patents are positive forces in the marketplace. I will highlight a number of them below.
Section 2 creates a post- grant opposition procedure. In certain limited circumstances, opposition allows parties to challenge a granted patent through a expeditious and less costly alternative to litigation. In addition, Section 2 provides a severely needed fix for the inter- partes re-examination procedure, which provides third parties a limited opportunity to request that the PTO Director re-examine an issued patent. The current limitations on the inter partes re-examination process restricts its utility so drastically that it has been employed only a handful of times. Section 2 increases the utility of this re-examination process by relaxing its estoppel provisions. Further, it expands the scope of the re-examination procedure to include redress for all patent applications regardless of when filed. In addition, Section 2 contains a limitation on use of inter-partes reexamination procedure as a "second bite at the apple" after district court litigation. Other provisions in this bill, such as the second window in the post-grant opposition proceeding, will sufficiently address the quality problem in patents which have already issued.
Sections 3 and 4 permit patent examiners, to consider certain materials within a limited time frame submitted by third parties regarding a pending patent application. Allowing such third party submissions will increase the likelihood that examiners are cognizant of the most relevant "prior art," thereby constituting a front-end solution for strengthening patent quality.
Section 6 addresses the unfair incentives currently existing for patent holders who indiscriminately issue licensing letters. Patent holders frequently assert that another party is using a patented invention and for a fee, offer to grant a license for such use. Current law does little to dissuade patent holders from mailing such licensing letters. Frequently these letters are vague and fail to identify the patent being infringed and the manner of infringement. In fact, the law tacitly promotes this strategy since a recipient, upon notice of the letter, may be liable for treble damages as a willful infringer . Section 6 addresses this situation by ensuring that recipients of licensing letters will not be exposed to liability for willful infringement unless the letter specifically states the acts of infringement and identifies each particular claim and each product that the patent owners believes have been infringed.
Section 8 is designed to address the negative effect on innovation created by patent trolls. We have learned of countless situations in which patent holders, making no effort to commercialize their inventions, lurk in the shadows until another party has invested substantial resources in a business or product that may infringe on the unutilized invention. The patent troll then steps out of the shadows and demands that the alleged infringer pay a significant licensing fee to avoid an infringement suit. The alleged infringer often feels compelled to pay almost any price named by the patent troll because, under current law, a permanent injunction issues automatically upon a finding of infringement. The threat of a permanent injunction would, in turn, cause the alleged infringer to lose the substantial investment made in the allegedly infringing business or product.
While we may question their motives, we do not question the right of patent trolls to sue for patent infringement, obtain damages, and seek a permanent injunction. However, the issuance of a permanent injunction should not be granted automatically upon a finding of infringement. Rather, when deciding whether to issue a permanent injunction, courts should have the discretion to weigh all the equities in order to prevent the violation of a patent right. That requires balancing the inventor's exclusive right designed to provide the incentive and reward for invention and those equities which may be necessary for the public interest, such as whether the patent troll has "unclean hands," the failure to commercialize the patented invention, the social utility of the infringing activity, the loss of invested resources by the infringer and of course, the quality of the patent. After weighing the equities, the court may still decide to issue a permanent injunction, but at least the court will have ensured that the injunction serves the public interest. Section 8 accomplishes this goal.
When considering these provisions together, we believe that this bill provides reform necessary for the patent system to achieve its primary goal of promoting innovation. As the New York Times has pointed out, "[t]here is legislation in the House to address th[e] issue[s], and it needs to be taken up." We hope introduction of this bill will facilitate the necessary movement of patent reform legislation.
I would especially like to thank Congressman Boucher with whom I have been working on patent reform for the past few years even before the issue was en vogue. Also deserving of thanks are the many constitutional scholars, policy advocates, private parties, and government agencies that continue to contribute their time, thoughts, and drafting talents to this effort. I am pleased that, finally, at least a consensus has emerged among the various collaborators in support of the basic "post grant opposition" approach embodied in the legislation. This bill is the latest iteration of a process we started over five years ago.
Though we developed this bill in a highly collaborative and deliberative manner, I do not want to suggest that it is a "perfect" solution. Thus, I remain open to suggestions for amending the language to improve its efficacy or rectify any unintended consequences.
As I have said previously, "The bottom line in this: there should be no question that the U.S. patent system produces high quality patents. Since questions have been raised about whether this is the case, the responsibility of Congress is to take a close look at the functioning of the patent system." High patent quality is essential to continued innovation. Litigation abuses, especially those which thrive on low quality patents, impede the promotion of the progress of science and the useful arts. Thus, we must act quickly during the 109th Congress to maintain the integrity of the patent system.
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