Madam Chair, I thank Mr. Conyers and Chairman Goodlatte. I am glad we are here today addressing these issues of abusive lawsuits in the patent system. As has been mentioned by others, we do have a problem, it is widely agreed to, among…
Madam Chair, I thank Mr. Conyers and Chairman Goodlatte. I am glad we are here today addressing these issues of abusive lawsuits in the patent system.
As has been mentioned by others, we do have a problem, it is widely agreed to, among patent assertion entities, sometimes called patent trolls. These lawsuits, these abusive lawsuits that are brought, can easily cost $2 million to $10 million apiece, and that is why, when a meritless lawsuit is threatened, it is easy to extort a smaller payment to make it go away, and that is what we are trying to deal with here.
This is a big issue for small businesses. Professor Colleen Chien of Santa Clara University, now with the White House, did a study and found that more than half of these suits were against companies with less than $10 million in annual revenue.
And that is why this bill, it is not a perfect bill, but why this bill has such broad support. It is genuinely a bipartisan bill. I am a cosponsor of this bill, along with the Congresswoman Anna Eshoo, Mike Honda, Peter DeFazio, Jared Huffman, and many others. At a time when the country is saying, ``Can't you just work together?'' we have. Reasonable people can differ, which is why we have this debate here today. We have 40 members in the House Judiciary Committee. Only five members voted against reporting this bill out. That is remarkable.
The White House has just issued a very strong statement of administrative policy. They support this bill. So at a time when too often we are seen as the battling Bickersons, we have support across the aisle with the White House to do this.
What does the bill do? It deals with pleading requirements. Oftentimes, these patent assertion entities will allege infringing, but they don't, with any particularity, say what is being infringed.
It does a change in attorneys' fees that matches the existing rule in copyright. I oppose fee shifting in civil litigation generally, but the Congress has, on many occasions, narrowly cast fee shifting to deal with specific problems. This would join that. I would note that the shifts would not occur unless the party's position is unreasonably justified. The court is not to allow this shift if the party has a reasonable case in fact or law or, as my colleague, Mr. Jeffries, had added, a severe economic harm.
I would note that this is supported from start-ups to big companies.
Startup Investors Nationwide Support Broad Patent Reform
Dear Congress: Each year, we invest hundreds of millions of
dollars in software and information technology businesses and
emerging mobile technologies. Together with other investors,
we commit more than $1 billion annually in angel and venture
capital that ensures continuing growth of young, high-tech
companies employing 1.4 million people. Collectively, we have
invested in companies such as Netflix, Twitter, Facebook,
Dropbox, Palantir, Kickstarter, and countless other
technologies that power
American businesses everywhere. We are the fuel in America's
startup economy engine.
We write to urge comprehensive legislation to address the
troubling growth and success of the patent troll business
model. Young, innovative companies are increasingly
threatened and targeted by patent troll lawsuits. In fact,
the majority of companies targeted by patent trolls have less
than $10 million in revenue. And while big companies paid the
lion's share of the $29 billion of direct costs resulting
from patent troll activities in 2011, the costs borne by
small companies are a proportionately larger share of their
revenues.
As a result, Congress and the Administration are
considering multiple reform proposals. None alone will fix
the problem, but together they will make a substantial dent
in what one famous troll recently called ``a new industry.''
Successful legislation should make it harder to be a patent
troll, and easier for targeted businesses to protect and
defend themselves. Legislation should:
Make it easier to efficiently review patents at the Patent
Office, as an alternative to litigation. Increase
transparency by requiring patent trolls to specify, in
complaints and demand letters, which patent and what claims
are infringed, and specifically how the offending product or
technology infringes.
Limit the scope of expensive litigation discovery.
Require patent trolls to pay legal fees and other costs
incurred by prevailing defendants.
Protect end users of technology [e.g., wi-fi, printers and
scanners, and APIs) from being liable for infringements by
technology providers.
Our Founders did not intend to incentivize patent trolling
in the Constitution--nor did Congress intend the Patent Act
to promote this industry. Comprehensive legislation to reduce
abusive patent litigation will make the patent troll business
model less attractive, and will protect software, mobile and
information technology entrepreneurs. In turn, our digital
economy will continue to grow and so will our national
economy.
The undersigned:
Gil Bickel, St. Louis Arch Angels, St. Louis, MO; David
Bradbury, Vermont Center for Emerging Technologies,
Burlington, VT; Glen Bressner, Originate Ventures, Bethlehem,
PA; Brad Burnham, Union Square Ventures, New York, NY; Jeff
Bussgang, Flybridge Capital, Boston, MA; Steve Case,
Revolution Capital Washington, DC; Jeff Clavier, SoftTechVC,
Palo Alto, CA; Ron Conway, SV Angel, San Francisco, CA; Mark
Cuban, Investor in over 70 startups, Dallas TX; Peter
Esperago, Cultivation Capital, St. Louis, MO.
Brad Feld, Foundry Group, Boulder, CO; Nicole Glaros,
Techstars, Boulder, CO and New York, NY; David Gold, Access
Venture Partners, Westminster, CO; Greg Gottesman, Madrona
Venture Group Seattle, WA; Paul Graham, Y Combinator,
Mountain View, CA; Bill Gurley, Benchmark Capital, Menlo
Park, CA; Reid Hoffman; Greylock Partners, Menlo Park, CA;
Kirk Holland, Access Venture Partners, Westminster, CO; Len
Jordan, Madrona Venture Group, Seattle, WA; Scott Levine,
iSelect Fund, Clayton, MO.
John Lilly, Greylock Partners, Menlo Park, CA; Trevor Loy,
Flywheel Ventures, Albuquerque and Sante Fe, NM; Chris Marks,
High Country Venture, Boulder, CO; Dan Marriott, Stripes
Group, New York, NY; Matt McCall, Pritzker Venture Capital
Group, Chicago, IL and Los Angeles, CA; Jim McKelvey,
Cultivation Capital, St. Louis; Andrew McLaughlin, BetaWorks,
New York, NY; Josh Mendelsohn, Hangar, San Francisco, CA;
Jason Mendelsohn, Foundry Group, Boulder, CO; Michael Neril,
Webb Investment Network, San Francisco, CA.
Charlie O'Donnell, Brooklyn Bridge Ventures, New York, NY;
Alexis Ohanian, Angel Investor, New York, NY; Bijan Sabet,
Spark Capital, Boston, MA; Devin Talbott, Enlightenment
Capital, Washington, DC; Brett Topche, MentorTech Ventures,
Philadelphia, PA; Jorge M. Torres, Silas Capital, New York,
NY; Hunter Walk, Homebrew, San Francisco, CA; David Weekly,
Startup Founder and Angel Investor, Palo Alto, CA; Fred
Wilson, Union Square Ventures, New York, NY.
I thank the gentleman for yielding.
Madam Chair, I am afraid I must oppose my colleague's amendment. I believe that the amendment would basically gut core elements of the Innovation Act protections for small business and leave small businesses exposed.
We have discussed the fee-shifting issue, so I want to focus on two other issues: the discovery cost-shifting and the heightened pleading provisions that I think are very important in the bill.
First, on pleading requirements, patent assertion entities often sue and do not reveal what patent the defendant is allegedly infringing or how, and that is why the Innovation Act requires greater particularity in pleading. The bill's requirement includes information that the plaintiffs should already have on hand, but the bill specifically provides an exception for information that is not reasonably accessible to the plaintiff. The amendment would eliminate that provision.
Relative to discovery, one of the ways that patent entities bully defendants is by driving up the cost of litigation through broad discovery requests. Section 3 of the bill directs the court to limit discovery until claim construction occurs in the routine Markman hearing. That gives defendants a break from costly discovery requests until it is more clear what the claims against them are.
Now the bill also says the court shall--that is mandatory--shall require discovery beyond that related to claim construction if it is necessary to ensure a timely resolution of the action. The bill provides the court with discretion to permit discovery to prevent manifest injustice.
I believe that the bill before us is a very important element of protecting against abusive litigation, and the amendment would do damage to it.
And finally, I would just associate myself with the chairman's comments on fee-shifting.
I thank the gentleman for yielding.
Mr. Chairman, while Mr. Rohrabacher and I do not agree on the underlying bill, I do support his amendment.
The Innovation Act would repeal section 145, the right of a patent applicant to appeal an initial PTO determination in Federal court.
This is a long-standing provision of law, and while it is rarely used, and even less often successful, I do believe that it poses at least theoretically a hedge against misconduct in the Patent Office and, at a minimum, will help ensure that the PTO's initial determinations are as meticulous as inventors deserve.
I spoke in favor of this amendment and voted for it when it was offered in the Judiciary Committee, and I continue to support it. I urge my colleagues to vote in favor.
Mr. Chairman, I appreciate the time.
Earlier in the debate, I jumped ahead of myself and addressed the issue of pleadings and discovery costs during the Watt amendment about fee shifting. So I will focus on fee shifting now.
The provision in the bill is absolutely right on. I oppose the English rule generally, but we have created dozens of times instances where the losing party can pay--let me just read the language:
The courts will shift the costs and fees to a non-
prevailing party unless the party's position is reasonably
justified in fact or law or the fee award would cause
economic harm.
The discretion is still with the judicial officer to avoid harm.
In terms of what should be in the bill, I mentioned at the outset that I don't believe this bill is perfect. If it were up to me, the bill would also exempt PTO user-fees from sequestration; it would clarify the scope of prior art and the grace period; it would allow the PTO to continue using its BRI standard in post-grant and inter partes review. I hope that the Senate will address those issues. Certainly, the amendment by Mr. Watt and Mr. Conyers does not.
It pains me when I have to disagree with my ranking member, who I admire so very much, but I do disagree with this amendment. I think it will absolutely gut the bill. I intend to vote against it, and I hope that others join me.