[Congressional Record Volume 152, Number 43 (Thursday, April 6, 2006)]
[Extensions of Remarks]
[Pages E524-E525]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       INTRODUCTION OF THE PATENTS DEPEND ON QUALITY ACT OF 2006

                                 ______
                                 

                         HON. HOWARD L. BERMAN

                             of california

                    in the house of representatives

                        Wednesday, April 5, 2006

  Mr. BERMAN. Mr. Speaker, today, I join Representative Boucher in 
introducing the Patents Depend on Quality Act of 2006 (PDQ Act). 
Introduction of this legislation follows a series of hearings conducted 
by the Subcommittee on Intellectual Property which ascertained that the 
current patent system is flawed. Over the course of the last 4 years, 
there have been numerous attempts to define the challenges of the 
patent system today. For example, the Patent and Trademark Office 
developed their Twenty-First Century Strategic Plan, not much later the 
Federal Trade Commission released a report entitled ``To Promote 
Innovation: The Proper Balance of Competition and Patent Law and 
Policy,'' The National Research Council published a compilation of 
articles entitled ``A Patent System for the 21st Century,'' and two 
economists authored a critique of patent law in a book titled 
Innovation and Its Discontents. These accounts make 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 PDQ 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.
  Past attempts at achieving more comprehensive patent reform have met 
with resistance and recently have resulted in a call for additional 
hearings. However, the call for legislative action is loud. The New 
York Times has noted, ``[s]omething has gone very wrong with the United 
States patent system.'' The Financial Times has stated, ``[i]t is time 
to restore the balance of power in U.S. patent law.'' Therefore, today, 
we are introducing a narrowly tailored bill to address some of the more 
urgent concerns.
  I firmly believe that robust patent protection promotes innovation. 
However, I also believe that the patent system is strongest, and that 
incentives for innovation are greatest, when patents protect only those 
patents that are truly inventive. 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 be issued 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 perspectives in an ongoing discussion 
about legislative solutions to patent quality concerns and patent 
litigation abuses. We have considered the multitude of comments 
received on prior patent bills. We acknowledge that the problems are 
difficult and, as yet, without agreed-upon solutions. It is clear, 
however, that introduction and movement of legislation, not necessarily 
additional hearings, will focus and advance the discussion. It is also 
clear that the problems with the patent system have been exacerbated by 
a decrease in patent quality and an increase in litigation abuses. With 
or without consensus, Congress must act soon to address these problems.
  Thus, we introduce this bill with the intent of propelling the debate 
forward in the 109th Congress.
  The bill contains a number of initiatives designed to improve patent 
quality and limit litigation abuses, thereby ensuring that patents are 
positive forces in the marketplace. I will highlight a number of them 
below.

  Section 2 creates a post-grant opposition procedure. In certain 
limited circumstances, opposition allows parties to challenge a granted 
patent through an expeditious and less costly alternative to 
litigation. In addition, Section 2 provides a severely 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 current limitations on the inter-partes re-
examination process restricts its utility so drastically that it has 
been employed only a handful of times. Section 2 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. 
In addition, Section 2 contains a limitation on use of inter-partes re-
examination procedure as a ``second bite at the apple'' after district 
court litigation. Other provisions in this bill, such as the second 
window in the post-grant opposition proceeding, will sufficiently 
address the quality problem in patents which have already issued.
  Sections 3 and 4 permit patent examiners to consider certain 
materials within a limited time frame 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,'' thereby constituting a front-end 
solution for strengthening patent quality.
  Section 6 addresses the unfair incentives currently existing for 
patent holders who indiscriminately issue licensing 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 does little to dissuade patent holders from mailing such licensing 
letters. Frequently these letters are vague and fail to identify the 
patent being infringed and the manner of infringement. In fact, the law 
tacitly promotes this strategy since a recipient, upon notice of the 
letter, may be liable for treble damages as a willful infringer. 
Section 6 addresses this situation by ensuring that recipients of 
licensing letters will not be exposed to liability for willful 
infringement unless the letter specifically states the acts of 
infringement and identifies each particular claim and each product that 
the patent owners believe have been infringed.
  Section 8 is designed to address the negative effect on innovation 
created by patent ``trolls.'' We have learned of countless situations 
in which patent holders, making no effort to commercialize their 
inventions, lurk in the shadows until another party has 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. The threat of a permanent injunction would, in 
turn, cause the alleged infringer to lose the substantial investment 
made in the allegedly infringing business or product.
  While we may question their motives, we do not question the right of 
patent trolls to sue for patent infringement, to obtain damages, and to 
seek a permanent injunction. However, the issuance of a permanent 
injunction should not be granted automatically upon a finding of 
infringement. Rather, when deciding whether to issue a permanent 
injunction, courts should have the discretion to weigh all the equities 
in order to prevent the violation of a patent right. That requires 
balancing the inventor's exclusive right designed to provide the 
incentive and reward for invention and those equities which may be 
necessary for the public interest, such as whether the patent troll has 
``unclean hands,'' the failure to commercialize the patented invention, 
the social utility of the infringing activity, the loss of invested 
resources by the infringer and, of course, the quality of the patent. 
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 8 accomplishes this 
goal.

  When considering these provisions together, we believe that this bill 
provides reform necessary for the patent system to achieve its primary 
goal of promoting innovation. As the New York Times has pointed out, 
``[t]here is legislation in the House to address th[e] issue[s], and it 
needs to be taken up.'' We hope introduction of this bill will 
facilitate the necessary movement of patent reform legislation.
  I would especially like to thank Congressman Boucher with whom I have 
been working on patent reform for the past few years even before the 
issue was en vogue. Also deserving of thanks are the many 
constitutional scholars, policy advocates, private parties, and 
government agencies that continue to contribute their time, thoughts, 
and drafting talents to this effort. I am pleased that, finally, at 
least 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 5 years ago.

[[Page E525]]

  Though we developed this bill in a highly collaborative and 
deliberative manner, I do not want to suggest that it is a ``perfect'' 
solution. Thus, I remain open to suggestions for amending the language 
to improve its efficacy or rectify any unintended consequences.
  As I have said previously, ``The bottom line is 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.'' High patent quality is essential to continued 
innovation. Litigation abuses, especially those which thrive on low 
quality patents, impede the promotion of the progress of science and 
the useful arts. Thus, we must act quickly during the 109th Congress to 
maintain the integrity of the patent system.

                          ____________________