Today, Congressman Jerrold Nadler (NY-10), Ranking Member of the Subcommittee on Courts, Intellectual Property and the Internet, delivered the following statement at a hearing on the economic harm of abusive patent litigation:
"Today we will continue our discussion about how to address abusive patent litigation. I continue to believe that we must pass legislation that will address the scourge of patent trolls, which continue to burden businesses across the country. Abusive patent litigation has become a problem not only for large corporations but for small and mid-size companies as well.
"Legitimate patent litigation is necessary, but all too often, litigation or the threat of litigation is used as a tool to extort settlements from defendants. Unfortunately, small and medium-size businesses are especially burdened by these abuses. Many of the witnesses here today will explain that responding to demand letters and abusive litigation practices often decreases the amount of time and resources they can spend on research and development. Most small and mid-size businesses can’t afford in-house patent counsel or to keep a high-priced attorney on retainer. They need to focus their limited resources on creating the next great innovation. That’s what makes them so susceptible to vague but threatening demand letters and frivolous but costly litigation that prey on their fear of litigation and ignorance of the legal system.
"Abuses of the patent system can undermine confidence in the entire system. I am a cosponsor of H.R. 9, the Innovation Act, in good faith, because it is my hope that it will reduce and discourage abusive patent litigation. The key word is abusive – I respect that the vast majority of patent cases involve arguably valid claims. But we want to reduce the effects of harmful actions by bad actors. If there are situations where the patent system is being abused, we should do everything in our power to correct that situation and make it better for all participants in our patent system.
"The nation’s economy depends on effective and enforceable patent rights. The amount of abusive patent litigation has continued to increase over the years and has now trickled down to small and mid-size businesses. However, as we examine ways to address the problem, we should ensure that we limit unintended consequences, and provide protection for the enforcement of patent claims brought in good faith.
"I have heard from many stakeholders and businesses who have given first-hand accounts of the burdens imposed by abusive litigation. I am looking forward to hearing from today’s witnesses about how patent trolls have harmed their businesses and stifled innovation. For example, I would like to hear how small businesses respond to demand letters and bogus lawsuits that are filed against them. What kind of pressure do they feel to settle rather than fight the demands of patent trolls? I would also like to hear how small businesses will benefit from the proposed changes in the Innovation Act.
"I remain a vocal advocate for a strong patent system and do not want a system that can be exploited by abusive tactics. As we will hear today, the patent troll problem is real and it’s having real consequences. Once we acknowledge that the problem is real, we must address it. We must find ways to discourage bad actors from filing case after case and gaining settlement after settlement.
"As I travel around my district many people want to know why we need legislation to deal with patent trolls. This hearing will provide some of the answers. Patent trolls often take many businesses by surprise because usually they have had no communications with the plaintiffs prior to being served with the complaint.
"Surely we can all agree that the system as currently structured needs to be fixed. I look forward to working with colleagues on both sides of the aisle to continue to improve the legislation in any way we can to ensure it is fair to all parties and gets at the root problem of abusive patent litigation. I hope that the statements, stories and explanations we will hear today will further our efforts to deal with abusive patent litigation. I thank the Chairman for holding this hearing, I look forward to hearing from the witnesses, and I yield back the balance of my time."
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