H.R. 3309, the "Innovation Act"
Date: Tuesday, October 29, 2013 - 10:00AM
Location: 2141 Rayburn House Office Building
H.R. 3309, the "Innovation Act"
Statement of Rep. John Conyers, Jr.
There are few economic issues that our committee or this Congress will face that are more important than whether and how to reform our patent laws. Intellectual property – principally patents – are responsible for nearly one third of all jobs in the U.S. economy. Our patent system, while not perfect, is the envy of the world and perhaps the most significant driver of growth in our economy.
As we consider patent legislation, I would like to offer three points for consideration. First, I believe the issues of non-practicing entities or so-called patent "trolls" present some unique problems that are worthy of congressional attention. There is a disconnect when shell corporations – with little or no assets – can threaten thousands of small end users with ill-conceived patent litigation over ordinary business practices. If we don't know who these shell companies are; if the shell companies have no operating businesses or assets; and if they are given free license to engage in endless and costly discovery, we have a problem that requires legislation.
But at the same time, we need to be exceedingly careful in addressing these problems. Our first rule should be to make sure we do no harm to our patent system or take any actions which unintentionally discourage innovation or increase litigation. As the former director of the Patent and Trademark Office, David Kappos reminds us, "we are not just tinkering with any system here; we are reworking the greatest innovation engine the world has ever known, almost instantly after it has been significantly overhauled. If there were ever a case where caution is called for, this is it."
In this regard, I don't see any reason we should be considering amending the fee shifting statute when the Supreme Court has just agreed to take up this very issue. Similarly, I see no rush to expand the use of "business method patents" when the PTO and the courts are just now beginning to review cases brought under the law we just passed.
Second, the changes we make must be carefully balanced and consistent with our principles and constitutional imperatives. For 80 years we have asked our federal judges – the experts on litigation – to develop rules for their own court rooms. That system has worked well and I see no reason to abrogate the principle of separation of powers now. And if we are going to consider crafting new rules on discovery, stays, and joinder, we should insist that the rules work the same for all parties plaintiffs and defendants. Nor should we be crafting a series of special carve outs from the legislation for the pharmaceutical industry. The last thing we need to do is create two systems of patent law – one for pharmaceuticals and one for everybody else.
Third, we cannot lose sight of the single most important problem facing our patent system today – the continuing diversion of patent fees. The most effective step we can take in responding to abusive patent litigation is making sure poor quality patents are not issued to begin with. To do that we need to give our examiners the resources they need to review and analyze the hundreds of thousands of complex and interrelated patent applications they receive every year. That is why yesterday, I along with Representatives Watt, Issa and Collins, introduced bipartisan legislation – the Innovation Protection Act – which does exactly that on a permanent, statutory basis. This will apply regardless of the sequester or any future shutdowns
I stand ready, able and willing to work with members on both sides of aisle in tackling these problems. But I would urge the chairman to move cautiously, carefully and deliberately.
Statement of Ranking Member Melvin L. Watt
H.R. 3309, the "Innovation Act"
Thank you, Chairman Goodlatte. I appreciate the opportunity to thank and welcome all the witnesses and especially to welcome back the former Under Secretary for Commerce and Director of the United States Patent and Trademark Office (USPTO), Dave Kappos. He has been a tremendously valuable resource to me, my staff and other members of the Intellectual Property Subcommittee and this Committee and I want to thank him for his continued generosity of time and expertise.
I supported the America Invents Act (AIA) and actively participated in its development through bipartisan Member meetings, as well as joint meetings with stakeholders, congressional leadership and Administration officials. The reforms enacted in the AIA were designed to equip the PTO to deliver better quality and more efficient services to the innovative Americans who rely upon the Office to evaluate and process their patent claims fairly. The USPTO is ground zero in our efforts to maintain a world-class patent system. But in order to protect our innovators from false reliance on bad patents, costly litigation in the federal courts, services that are not commensurate with the fees and a full range of other negative outcomes, we must find the political courage to fully fund the PTO.
That is why I was happy to join with Mr. Conyers and my Republican colleagues, Mr. Collins and Mr. Issa, in introducing the "Innovation Protection Act." Guaranteeing that our inventors, whether large or small, whether individuals, businesses or universities, get the services they pay for is not a complicated proposition. Congress has exhaustively studied and acknowledged the adverse effects of depriving the PTO of needed resources for years. Its good policy with virtually universal support and the time to deliver is overdue. I hope that all members of this Committee will join as cosponsors of our bill and that this Committee will act on our legislation promptly.
The problem we confront with the so-called "patent trolls," while real, is not, in my opinion, nearly as enormous as it has been portrayed, nor is it as urgent. The GAO dutifully fulfilled its mandate to assess the consequences of patent litigation by Non-Practicing-Entities (NPEs). The take away from that study was that operating companies fight more among themselves and brought the bulk of the patent lawsuits examined over a period of years and that NPEs brought only a fraction of cases but engage in litigation tactics that pose some unique challenges. These unique challenges will undoubtedly require equally unique solutions, not solutions that could erect unfair barriers that impact all litigants.
While the Chairman's bill proposes a number of creative solutions, we need to carefully examine how they will affect not only the bad actors, but how they will affect all participants in the patent system. And while the Chairman released two discussion drafts prior to introducing his bill, to date the process of developing and testing these legislative proposals has been, quite frankly, both insular and disappointing.
While I support some of the concepts in HR 3309, I worry about the interaction and execution of some of its provisions and question the wisdom or workability of others. In the meantime, if we move forward precipitously with this bill, we risk jeopardizing comity with the federal judiciary with overly prescriptive mandates, losing the trust and confidence of the small and independent inventors with unbalanced remedies that leave them out of the equation and, even worse, we run the risk of enacting measures that could not only be ineffective but could exacerbate the current problem or invite new, unintended problems.
One need only look to the joinder provisions incorporated at the eleventh hour into the AIA. These provisions were intended to disrupt the practice of joining unrelated defendants in a single case. In that respect the joinder rules were successful. But the unintended (yet, upon reflection, not entirely unpredictable) consequence has been an explosion of litigation against single defendants.
There are multiple, credible and thoughtful stakeholders who have expressed grave reservations about one provision or another in the Chairman's bill. These concerns should not be dismissed as opposition or obstructionism. Reflection is much needed here. And, I hope that moving forward there will be in-depth, constructive reflection and open engagement. We have spent a considerable amount of time in various hearings, discussing, (even arguing about) the problem. I urge the Chairman to devote at least a comparable amount of time to evaluating these very discrete and unrelated proposed solutions.
I look forward to hearing from the witness and yield back.
Mr. Krish Gupta, Sr. Vice President and Deputy General Counsel, EMC Corportation
Mr. Kevin Kramer and Deputy General Counsel for Intellectual Property, Yahoo!, Inc.
Mr. David J. Kappos, Former Under Secretary of Commerce for Intellectual Property and Former Director of the U.S. Patent and Trademark Office
Mr. Robert A. Armitage, Former General Counsel, Eli Lilly & Co.