Today, Congressman Jerrold Nadler (D-NY), Ranking Member of the House Judiciary Committee, released the following statement regarding the U.S. Patent and Trademark Office oversight hearing:
“The patent landscape has changed considerably in less than a decade. Starting with passage in 2011 of the America Invents Act, known as the AIA, and followed by a number of significant Supreme Court decisions, patent stakeholders have had to adjust to a very different ecosystem in a relatively short amount of time, and one that continues to evolve. Today’s oversight hearing on the U.S. Patent and Trademark Office presents a good opportunity to examine the state of the patent system, and how Congress and the PTO can partner together to ensure that it works for all stakeholders.
“The AIA represented the most significant overhaul of the patent system in a generation. An important element of that legislation was the creation of a variety of procedures to challenge a patent’s validity after issuance by the PTO. These administrative procedures—particularly the inter partes review, or IPR, process—are being used widely, and they have successfully eliminated many patents that should never have been granted in the first place.
“IPRs provide a cheaper and more efficient forum for patent challenges than district court litigation. They also help curb abusive litigation by so-called patent trolls, who purchase weak patents and who use litigation, or the threat of litigation, as a weapon to extort settlements from innocent defendants. By providing a less expensive means of defending against a spurious claim, and by removing many weak patents from circulation, IPR has taken some of the tools out of the patent trolls’ arsenal.
“However, some stakeholders are concerned that while weeding out the bad patents, the IPR process is also invalidating many good patents, as well. As a result, they say, the patent system has been severely weakened, and inventors—particularly small inventors—are suffering. Critics of IPR argue that if patent-holders are at too great a risk of having their patents later found to be invalid, they will be unable to attract investors and to make business decisions with any certainty.
“IPR critics also argue that its standards and procedures, which differ from those used in district court—even though they sometimes run concurrently—are unfair and sometimes lead to perverse outcomes in which the same patent is upheld by a district court, but is ruled invalid by the PTO. As we work to strip bad patents from the system, we must strike a balance to ensure that we do not inject uncertainty and unfairness into the marketplace by throwing away good patents along with the bad. I hope that Director Iancu will help us determine what reforms to the IPR system, if any, may be needed to achieve this balance.
“I would note that the PTO recently announced an important proposed rule that would harmonize the claim construction standard in IPR and in district court. I will be interested in hearing the Director’s thoughts on what other measures the PTO can take administratively, and what reforms might require congressional action.
“The courts have also played a significant role in shaping the patent system. In just the last few years, the Supreme Court heightened the pleading standards governing patent cases by eliminating Form 18; it loosened the standard for fee shifting in patent cases, which has had a measurable impact on deterring abusive litigation; it tightened the definition in the patent venue statute, which has resulted in a dramatic decline in forum shopping; and, just last month, the Court rejected a challenge to the constitutionality of the entire IPR system. Each of these rulings appears to have brought greater clarity to the patent system, but we will look to Director Iancu for guidance on whether congressional action is needed in response to any of these decisions.
“On the other end of the spectrum is a series of Supreme Court decisions from earlier this decade that narrowed the standard for what is eligible to be patented under Section 101 of the Patent Act. Some stakeholders believe that rather than clarifying the standard, the Court has further muddied the waters. Others believe that the Court’s interpretation was too narrow and that otherwise novel inventions that deserve patent protection are improperly being deemed unpatentable. Some stakeholders, however, believe that the Court struck the right balance, and they oppose any changes to this provision. I will be interested to hear from Director Iancu whether he believes that Section 101 is something that either Congress or the PTO should address.
“This Committee has also taken a particular interest in determining whether the covered business method program should be extended and whether any reforms are necessary to prevent abuse of sovereign immunity in patent cases. These are just a few of the many issues that Director Iancu must confront as he takes on responsibility for administering the nation’s patent system.
“The United States leads the world in innovation and creativity, which are key drivers of economic growth. But creators cannot safeguard their inventions from infringement, exploit them for profit, or avoid unnecessary litigation, without a strong patent system to protect them.
“It is against this backdrop that we welcome to our Committee for the first time Andrei Iancu, the recently confirmed Director of the U.S. Patent and Trademark Office. The challenges he faces are numerous, but so are the opportunities he has to reshape the patent system so that it continues to spur the innovation that helps our economy to flourish.”