[Congressional Record Volume 150, Number 130 (Monday, October 11, 2004)]
[Extensions of Remarks]
[Pages E1935-E1936]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               THE PATENT QUALITY ASSISTANCE ACT OF 2004

                                 ______
                                 

                         HON. HOWARD L. BERMAN

                             of california

                    in the house of representatives

                        Friday, October 8, 2004

  Mr. BERMAN. Mr. Speaker, today I join Representative Boucher in 
introducing the Patent Quality Assistance Act of 2004, PQA Act. 
Introduction of this legislation comes almost exactly one year after 
release of a Federal Trade Commission report entitled ``To Promote 
Innovation: The Proper Balance of Competition and Patent Law and 
Policy,'' and several months after release of ``A Patent System for the 
21st'' Century'' by the National Research Council. These reports both 
made 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 PQA 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.
  I am a strong believer that the prospect of patent protection 
promotes innovation. However, I also believe that the patent system is 
strongest, and incentives for innovation greatest, when patents protect 
only truly deserving inventions. 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 thoughts in an ongoing discussion 
about legislative solutions to patent quality concerns. We have 
considered the multitude of comments received on patent bills in years 
past, and acknowledge the problems to be difficult and, as yet, without 
consensus solutions. It is clear, however, that introduction of 
specific legislation focuses and advances the discussion. It is also 
clear that the problems with the patent system have become exacerbated, 
rather than dissipating. With or without consensus, Congress must act 
soon to address these problems.
  Thus, we introduce this bill at the end of this Congress with the 
intent of framing the debate going into the 109th Congress, and with 
every intention of passing legislation in the next two years.
  The bill contains a number of initiatives to improve patent quality 
and ensure patents are positive forces in the marketplace.
  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.
  Sections 3 and 4 permit patent examiners, within a limited time 
frame, to consider certain materials 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, and therefore constitute a front-end 
solution for strengthening patent quality.

  Section 5 addresses the inequitable incentives that exist between 
patent holders who indiscriminately issue licensing letters, and the 
parties who receive these 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 provides no disincentive 
to indiscriminate and unfounded issuance of such licensing letters.
  Conversely, parties receiving such licensing letters have a strong 
incentive to pay up even if they believe they are not engaged in 
infringement. Once in receipt of such a letter, the recipient faces no 
good options. If he ignores the letter, the recipient may be liable for 
treble damages as a willful infringer. The recipient can avoid being 
found a willful infringer if he obtains an opinion from a patent 
attorney that the recipient is not committing infringement, but such 
letters frequently cost up to $50,000. A recipient cannot, however, 
file for a declaratory judgement of non-infringement unless the 
licensing letter creates a ``Case or Controversy,'' and of course these 
letters are typically drafted to avoid meeting this threshold.
  Section 5 addresses this inequitable situation. It ensures that 
recipients of licensing letters will not be exposed to liability for 
willful infringement unless the letter gives rise to a ``Case or 
Controversy'', and thus, allows the recipient to seek a declaratory 
judgement.
  Section 6 is designed to address the deleterious effect on innovation 
created by patent ``trolls.'' We have learned of innumerable situations 
in which patent holders, who made no effort to commercialize their 
inventions, waited in the shadows until another party had 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. Issuance of a permanent injunction would, in

[[Page E1936]]

turn, force the alleged infringer to lose the substantial investment 
made in the infringing business or product.
  While we may question their motives, we do not question the right of 
a patent troll to sue for patent infringement, obtain damages, and seek 
a permanent injunction. However, the issuance of a permanent injunction 
should not be automatic upon a finding of infringement. Rather, when 
deciding whether to issue a permanent injunction, courts should weigh 
all the equities, including the ``unclean hands'' of the patent trolls, 
the failure to commercialize the patented invention, the social utility 
of the infringing activity, and the loss of invested resources by the 
infringer. 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 6 accomplishes 
this goal.
  Section 7 provides a much 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 limitations on the inter partes re-examination process so 
restrict its utility that it has been employed only a handful of times. 
Section 7 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.

  Finally, Section 8 is similar to a provision in a bill we introduced 
during the 106th Congress. Section 8 addresses our concern that patents 
have been issued for the mere computer implementation of previously 
known inventions. The idea of implementing a method for doing business 
online should not, in and of itself, be sufficient to secure patent 
protection for that method of doing business. Section 8 creates a 
presumption of obviousness if the only ``novelty'' is in the fact that 
the method utilizes computer technology.
  My colleague from Virginia, Mr. Boucher, and his staff deserve the 
greatest measure of recognition for their hard work in developing this 
legislation. In addition, the chairman of the Subcommittee on Courts, 
the Internet and Intellectual Property, Mr. Smith, deserves credit for 
bringing these issues to the forefront with the numerous hearings on 
patent quality. Also deserving of thanks are the many constitutional 
scholars, policy advocates, private parties, and government agencies 
that contributed their time, thoughts, and drafting talents to this 
effort. I am pleased that, finally, 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 3 years ago.
  Though we developed this bill in a highly collaborative and 
deliberative manner, I do not maintain that it is a ``perfect'' 
solution. Thus, I will remain open to suggestions for amending the 
language to improve its efficacy or rectify any unintended 
consequences.
  As I have previously said: ``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.'' Patent quality is key to continued innovation. 
Thus, we must act during the 109th Congress to assure the highest level 
of patent quality.

                          ____________________