**Statement of Representative Howard L. Berman of California on the
Patent Reform Act of 2007**

**April 18, 2007**

Mr. Howard L. 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 21^st^ 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 Representative Boucher with whom I've worked closely to
increase patent quality for the past several Congresses and
Representative 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 course of the last five 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 21^st^ Century" and the book titled *Innovation and Its Discontents*
authored by two respected economists. These studies offer 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, 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
resistance. However, the time to reform the system is way past due. 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 US patent law." Therefore,
today, 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
not resolved, Congress may need to re-evaluate 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."[^1] 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
    re-examination procedure. Unfortunately, the inter-partes
    re-examination 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 re-examine 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 an 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 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. 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]{.underline}**. 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 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: 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
110^th^ Congress to maintain the integrity of the patent system.

[^1]: John R. Thomas, Apportioning Patent Damages: Proposals for Reform