[Congressional Record Volume 159, Number 176 (Thursday, December 12, 2013)]
[Extensions of Remarks]
[Pages E1845-E1846]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             INNOVATION ACT

                                 ______
                                 

                               speech of

                         HON. SUZANNE BONAMICI

                               of oregon

                    in the house of representatives

                      Thursday, December 12, 2013

       The House in Committee of the Whole House on the state of 
     the Union had under consideration the bill (H.R. 3309) to 
     amend title 35, United States Code, and the Leahy-Smith 
     America Invents Act to make improvements and technical 
     corrections, and for other purposes:

  Ms. BONAMICI. Mr. Chairman, I rise today to express my support for 
the Innovation Act, H.R. 3309, but also to note my concerns about 
provisions of the bill that could undermine patent holders or make it 
more difficult for them to assert their rights. I hope a conference 
committee or the Senate will address and resolve these issues before 
the bill reaches the President's desk.
  Patent litigation reform is important and necessary. Over the last 
few decades we have seen the rise of entities that are created to make 
profits by extracting payments from small businesses through the 
assertion of vague allegations of patent infringement. These so-called 
``patent trolls,'' also known as ``patent assertion entities'' (PAEs) 
buy patents on products they didn't invent and don't manufacture and 
then threaten and sue innovators who are actually contributing to our 
economy and creating jobs.
  This scheme preys on the unwillingness or inability of small 
businesses to fight expensive lawsuits in court. PAEs know they can 
simply send a demand letter including a threat to sue, and regardless 
of the validity of the claim, a small business more often than not will 
pay the PAE to make the lawsuit or potential lawsuit go away. Often 
there is no examination of the validity of the patent or the claim. In 
fact, in many cases, the business never knows who is threatening or the 
nature of the alleged infringement. By some estimates this practice is 
costing American companies $29 billion each year. Something needs to be 
done.
  This bill takes important steps to protect the rights of 
entrepreneurs and small businesses if litigation is filed or 
threatened. The Innovation Act introduces a heightened pleading 
standard that requires patent holders to identify specifically the 
patent claims they are asserting and the product or process they allege 
infringes upon it. They also must identify those who have financial 
interests in the asserted patent. Importantly, the bill also limits 
expensive discovery before the court determines the scope of a disputed 
patent claim. And where the claim is against an end user of the 
technology, the bill would stay those proceedings in most instances 
where there is an ongoing action against the customer's supplier. I am 
quite concerned, however, that other provisions of this bill have the 
potential to impede legitimate patent holders from enforcing their 
rights and expose nonprofit organizations and research universities to 
unnecessary risk.
  First, the fee-shifting provisions make it significantly less likely 
that an individual inventor or a small business would be able to assert 
a legitimate patent against an infringer. Patent suits are expensive, 
and in our American system parties are responsible for their own costs. 
In recognition of this, attorneys often take cases on a contingency fee 
basis and get paid a portion of the recovery only if they win. If 
plaintiffs and their attorneys now have to factor in the risk that they 
may need to pay not only their own costs and fees but also the costs 
and fees of the other party, they will be much less likely to assert 
legitimate enforcement claims. This provision is purported to stop 
frivolous lawsuits, but it does more than that--it equates a loss with 
a lack of merit. There are many reasons why a party may have a genuine 
dispute regarding law and fact and still lose the case; that does not 
mean that the case was frivolous. This bill creates a presumption of 
fee shifting, limits judicial discretion, and sets litigation reform on 
the wrong path.
  Second, the joinder provisions in the Innovation Act could allow 
nonprofit organizations and research universities to be forcibly joined 
into a case against a downstream user. The purpose of the joinder 
provision is laudable--to ensure that a troll that loses a patent case 
cannot hide behind shell companies or other complicated corporate 
structures to avoid paying a judgment. In such a case it would allow 
the prevailing party to join another entity that has an economic 
interest in the patent. But the provision is overbroad. Nonprofit 
organizations and research universities often spend a great deal of 
time and effort on research and development; as a result, they 
frequently hold patents and license them for commercial use. Under this 
bill, a research university like Oregon State or Portland State could 
be joined in a lawsuit and forced to pay the judgment of a losing party 
if that party can't or won't pay. That isn't fair and it could 
potentially nullify state law. This provision must be narrowed before 
it goes to the President's desk.
  Finally, there are a handful of amendments that would make this bill 
stronger and I regret that the House has not adopted them. The 
automatic stay provisions would be stronger if limited to small 
businesses only, as the Jackson-Lee amendment would do. Likewise, the 
Watt amendment would mitigate some of the concerns with the fee-
shifting provisions by allowing judges to consider whether a prevailing 
party acted in bad faith or unnecessarily delayed the proceedings when 
making a fee award. And the Conyers-Watt substitute amendment 
represents a far better path overall for reducing patent troll 
litigation without advancing reforms hostile to legitimate plaintiffs.
  Mr. Chairman, patent trolls are a problem for small businesses and 
tech startups in my district and across the country. Their business 
model is to sue the job creators and

[[Page E1846]]

innovators who drive our economy forward. I am glad that the House has 
taken concrete steps to address this problem, and I expect improvements 
will be made to this bill as it continues through the legislative 
process.

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