[Congressional Record (Bound Edition), Volume 153 (2007), Part 7]
[Extensions of Remarks]
[Pages 9292-9294]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     THE PATENT REFORM ACT OF 2007

                                 ______
                                 

                         HON. HOWARD L. BERMAN

                             of california

                    in the house of representatives

                       Wednesday, April 18, 2007

  Mr. BERMAN. Madam Speaker, today, I introduce ``The Patent Reform Act 
of 2007'', a product of both bicameral and bipartisan effort to reform 
the patent system to meet the challenges of the 21st century. I would 
especially like to thank Senator Leahy for his dedication to addressing 
many of the inadequacies in our current patent system. Furthermore, I 
appreciate my past and present partners in this area--especially 
Congressman Rick Boucher, with whom I've worked closely to increase 
patent quality for the past several years, and Congressman Lamar Smith, 
who championed this issue last Congress.
  Introduction of this legislation follows a number of recent judicial 
opinions and many hearings conducted over the past several years by the 
Subcommittee on Intellectual Property which ascertained that the 
current patent system is flawed. Over the last 5 years, there have been 
numerous attempts to define the challenges facing the patent system 
today. Among the most notable contributions to this discourse are the 
Patent and Trademark Office's Twenty-First Century Strategic Plan, the 
Federal Trade Commission's report entitled ``To Promote Innovation: The 
Proper Balance of Competition and Patent Law and Policy,'' The National 
Research Council's compilation of articles ``A Patent System for the 
21st Century'' and the book titled ``Innovation and Its Discontents,'' 
authored by two respected economists. These studies offer a number of

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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, and based on past patent bills, the Patent Reform Act 
contains a number of provisions designed to improve patent quality, 
deter abusive practices by patent holders, provide meaningful, low-cost 
alternatives to litigation for challenging the patent validity and 
harmonize U.S. patent law with the patent law of most other countries.
  Past attempts at achieving comprehensive patent reform have met with 
stiff resistance. However, the time to reform the system is way past 
due. The New York Times has noted, ``Something has gone very wrong with 
the United States patent system.'' The Financial Times has stated, ``It 
is time to restore the balance of power in U.S. patent law.'' 
Therefore, we are introducing this bill as a first step to restoring 
the necessary balance in our patent system.
  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 
inventions that are truly innovative. 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 perspectives in an ongoing discussion 
about legislative solutions to patent quality concerns, patent 
litigation abuses, and the need for harmonization. We have considered 
the multitude of comments received concerning prior patent bills and 
over the course of numerous negotiations between the parties. We 
acknowledge that the problems are difficult and, as yet, without 
agreed-upon solutions. It is clear, however, that introduction and 
movement of legislation 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 to 
address these problems. Thus, we introduce this bill with the intent of 
passage in the 110th Congress.
  There are a number of issues which we have chosen not to include in 
the bill, primarily because we hope they will be addressed without the 
need for legislation. For instance, the Supreme Court recently resolved 
questions regarding injunctive relief. In that category, we include 
amendments to Section 271(f) and the obviousness standard as both 
issues are currently before the Supreme Court. If either of those 
issues are left unresolved, Congress may need to reevaluate whether to 
include them in a patent bill.
  The bill does contain a number of initiatives designed to harmonize 
U.S. law with the law of other countries, improve patent quality and 
limit litigation abuses, thereby ensuring that patents remain positive 
forces in the marketplace. I will highlight a number of them below.
  Section 3 converts the U.S. patent system from a first-to-invent 
system to a first-inventor-to file system. The U.S. is alone in 
granting priority to the first inventor as opposed to the first 
inventor to file a patent. There is consensus from many global 
companies and academics that the switch in priority mechanisms provide 
the U.S. with greater international consistency, and eliminate the 
costly and complex interference proceedings that are currently 
necessary to establish the right to obtain a patent. While cognizant of 
the enormity of the change that a ``first inventor to file'' system may 
have on many small inventors and universities, we have maintained a 
grace period to substantially reduce the negative impact to these 
inventors. However, we need to maintain an open dialogue to ensure that 
the patent system will continue to foster innovation from individual 
inventors.
  Section 5 addresses both the topic of apportionment and wilfullness. 
Patents are provided to promote innovation by allowing owners to 
realize the value of their inventions. However, many have argued that 
recent case law has tilted towards overcompensation, which works 
against the primary goal of promoting innovation. ``Excessive damages 
awards effectively allow inventors to obtain proprietary interests in 
products they have not invented, promote patent speculation and 
litigation and place unreasonable royalty burdens upon producers of 
high technology products. Such consequences may ultimately slow the 
process of technological innovation and dissemination the patent system 
is intended to foster.'' While preserving the right of patent owners to 
receive appropriate damages, the bill seeks to provide a formula to 
ensure that the patent owner be rewarded for the actual value of the 
patented invention.
  Furthermore, this Section seeks to curb the unfair incentives that 
currently exist for patent holders who indiscriminately issue licensing 
letters. Patent proprietors 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 particular claims of 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 5 addresses this 
situation by ensuring that recipients of licensing letters will not be 
exposed to liability for willful infringement unless the letter clearly 
states the acts that allegedly constitute infringement and identifies 
each particular patent claim to the product or process that the patent 
owner believes is being infringed.
  Section 6 provides a needed change to the inter-partes reexamination 
procedure. Unfortunately, the inter-partes reexamination procedure is 
rarely used, but the changes we introduce should encourage third 
parties to make better use of the opportunity to request that the PTO 
Director reexamine an issued patent of questionable validity. Primarily 
though, Section 6 creates a post-grant opposition procedure. In an 
effort to address the questionable quality of patents issued by the 
USPTO, the bill establishes a check on the quality of a patent 
immediately after it is granted, or in circumstances where a party can 
establish significant economic harm resulting from assertion of the 
patent. The post-grant procedure is designed to allow parties to 
challenge a granted patent through a expeditious and less costly 
alternative to litigation. Many have expressed concerns about the 
possibility of harassment of patent owners who want to assume quiet 
title over their invention. In an effort to address those concerns, the 
bill prohibits multiple bites at the apple by restricting the 
cancellation petitioner to opt for only one window one time. The bill 
also requires that the Director prescribe regulations for sanctions for 
abuse of process or harassment. During the legislative process we will 
likely provide more statutory guidance for the Director in establishing 
regulations guiding the post-grant opposition. We appreciate that this 
is an extremely complicated and new procedure and therefore we look 
forward to working with various industries to ensure the proceeding is 
balanced, fair and efficient. Part of the goal of this Section is to 
also address the quality problem in patents which have already been 
issued and are at the heart of the patent reform discussion.
  Section 9 permits third parties a limited amount of time to submit to 
the USPTO prior art references relevant to a pending patent 
application. Allowing such third party submissions will increase the 
likelihood that examiners have available to them the most relevant 
``prior art,'' thereby constituting a front-end solution for 
strengthening patent quality.
  The bill also addresses changes to venue to address extensive forum 
shopping, provides for interlocutory appeals to help clarify the claims 
of the inventions early in the litigation process, establishes 
regulatory authority for the USPTO to parallel the authority of other 
agencies, and expands prior user rights to accommodate in part for the 
switch to first-inventor-to-file.
  When considering these provisions together, we believe that this bill 
provides a balanced package of reforms that successfully accounts for 
the interests of numerous stakeholders in the patent system, including 
individual inventors, small enterprises, universities, and the varied 
industry groups, and that are necessary for the patent system to 
achieve its primary goal of advancing innovation.
  This bill is the latest iteration of a process started many years 
ago. Deserving of thanks are the many constitutional scholars, policy 
advocates, private parties, and government agencies that have and 
continue to contribute their time, thoughts, and drafting talents to 
this effort, including, of course, the legislative counsel. I am 
pleased that finally, we have a critical mass of interested parties who 
understand the need for reform.
  Though we developed this bill in a highly deliberative manner, using 
many past bills as the foundation for the provisions, I do not want to 
suggest that it is a ``perfect'' solution. This bill is merely the 
first step in a process. Thus, I remain open to suggestions for 
amending the language to improve its efficacy or rectify any unintended 
consequences. Furthermore, there are a host of issues or varied 
approaches to patent reform which are likely not even covered by the 
bill but may be considered at a later time. I hope to work with the 
many cosponsors and the diverse industry, university

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and inventor groups to reach further consensus as we move this bill 
towards final passage.
  As I have said previously, ``The bottom line in this is 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 ones committed by 
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 110th Congress to maintain the integrity of the patent 
system.

                          ____________________