Hearing of the Senate Judiciary Committee - S. 1137, the PATENT ACT -- Finding Effective Solutions to Address Abusive Patent Practices

Hearing

Good morning. We're here to discuss the problem of abusive patent practices and the solutions
offered by S. 1137, the PATENT Act. Abusive patent litigation is having a serious impact on
small companies, innovators, manufacturers, Main Street businesses, high tech firms, and
consumers. The patent troll problem is being felt across every sector of the economy, and from
small town Iowa to Silicon Valley. It's critical that we enact reforms to prevent this from further
stifling the innovation and entrepreneurship that our patent system is designed to protect.

The volume of abusive patent litigation has exploded in recent years. By some accounts it's
costing the U.S. economy upwards of $80 billion annually. Bad actors are exploiting the high
costs of patent litigation and using deceptive tactics to prey on businesses.

Last week, several of us on the Judiciary Committee introduced the bipartisan PATENT Act.
Since the process started in the last Congress, we've engaged stakeholders that have been
targeted by patent abuse. In addition, we've sought to be responsive to concerns raised by other
industries and constituencies. Because of this, we've made significant progress. As I've
maintained from day one, patent holders have a very legitimate right to enforce their patents
against infringement. Our efforts must strike the right balance.

As a result of these efforts, the PATENT Act has received a tremendously positive response.

The bill has the support of groups as diverse as hotels, retailers, tech companies, realtors,
automakers, broadcasters, homebuilders, and restaurants. Further, other stakeholders such as the
associations representing higher education and universities, the Coalition for 21st Century Patent
Reform, and the Biotechnology Industry Organization have recognized our commitment to
finding effective solutions that don't produce unintended consequences or impinge upon the
ability of good-faith actors to enforce their patent rights. I ask unanimous consent to put several
letters and statements in the record in support of the bill.

The PATENT Act deters abusive litigation through a series of targeted reforms. Let me state
briefly some of the key provisions contained in the bill. The PATENT Act establishes clear
uniform pleading standards in patent infringement lawsuits and gives defendants clear notice of
the claims against them. It increases transparency of the parties bringing lawsuits.

It places standards on demand letters and clarifies that the widespread sending of deceptive
demand letters are covered by Section 5 of the FTC Act. The bill also allows manufacturers --
rather than end users -- to litigate cases in order to protect customers who are targeted for patent
infringements cases just because they use a product they purchased off the shelf.

Further, the bill deters frivolous suits and abusive litigation practices by allowing the award of
attorney fees if a court determines the position or conduct of a non-prevailing party was not
objectively reasonable. It creates a mechanism for a court to recover fees where an abusive
litigant is judgment-proof. Finally, in order to deal with asymmetries in discovery burdens and
litigation costs, the bill requires courts to stay discovery pending the resolution of certain
preliminary motions such as motions to dismiss and transfer venue.

Because of the wide-ranging positive reactions to the PATENT Act, I'm comfortable with where
we are on the language contained in the bill. However, I'm also aware of concerns about
processes at the Patent and Trademark Office that have been recently raised by patent holders.

They worry that administrative proceedings created by the America Invents Act -- the inter partes
review (IPR) and post-grant review (PGR) proceedings -- are being abused and are stacked
against patent holders. Other stakeholders however are of the view that these new proceedings
have been very effective at weeding out weak patents.

I've committed to looking at these concerns, determining whether they are valid or not, and
working with my colleagues to see what can be done to improve this process.

We'll be hearing from the witnesses on where they stand on these proceedings, so we'll be able
to evaluate what should and can be done to ensure that they are fair to all parties.

As we move forward on this legislation, it's important that we continue the collaborative process
that has characterized its creation. Again, I thank my colleagues for their dedication and
constructive engagement on this bill.

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