Rep. Nadler Statement on “The Impact of Bad Patents on American Businesses”

Jul 13, 2017 Issues: Civil Liberties, Jobs, Labor and the Economy

WASHINGTON D.C.—Today, Congressman Jerrold Nadler (NY-10), the Ranking Member of the House Judiciary Subcommittee on Courts, Intellectual Property and the Internet, supported efforts to establish stronger safeguards against poor patents at the hearing on “The Impact of Bad Patents on American Businesses.”

“The U.S. Patent and Trademark Office does an admirable job under difficult circumstances in processing the more than 600,000 patent applications—and growing—that it receives each year. But, no system is perfect, and poor patents sometimes slip through the cracks,” Congressman Nadler explained.  “Going forward, we must attempt to reduce the number of bad patents that are granted. I support the PTO’s Patent Quality Initiative, which has made great strides in this direction, and I will continue to advocate for the PTO to receive sufficient resources to do its job effectively.”

The following is the full text of Congressman Nadler’s Statement:

“Mr. Chairman, the United States leads the world in innovation and creativity, which are key drivers of economic growth.  But creators cannot safeguard their inventions from infringement, exploit them for profit, or avoid unnecessary litigation, without a strong patent system to protect them.

“The U.S. Patent and Trademark Office does an admirable job under difficult circumstances in processing the more than 600,000 patent applications—and growing—that it receives each year.  But, no system is perfect, and poor patents sometimes slip through the cracks.

“Whether because of pressure to quickly reduce the backlog of applications without having sufficient resources to properly evaluate each claim, or because of unclear guidance from the courts on what is eligible to be patented, or even because of simple human error, sometimes the PTO issues a patent that is later deemed to be invalid.  This injects uncertainty in the market and imposes potentially huge costs on businesses and small inventors, by requiring legal action to resolve claims of ownership.

“When bad patents are granted, it also encourages abusive litigation by bad actors, known as patent trolls, who purchase these weak patents and use litigation, or the threat of litigation, as a weapon to extort settlements from innocent defendants.  Because litigation can be expensive and time consuming, many defendants determine that it is better to settle even a meritless claim than to endure the significant burdens involved in costly litigation.  With a settlement in hand, the patent troll is free to pursue its next victim, and the cycle continues.

“Going forward, we must attempt to reduce the number of bad patents that are granted.  I support the PTO’s Patent Quality Initiative, which has made great strides in this direction, and I will continue to advocate for the PTO to receive sufficient resources to do its job effectively.  But, it is also critical that we weed out existing bad patents that continue to plague the system.

“The America Invents Act created several mechanisms, such as Inter Partes Review (IPR) and the Transitional Program for Covered Business Methods, to challenge and invalidate patents more efficiently and more cost-effectively than pursuing litigation.  These are being used widely and they have successfully eliminated many patents that should never have been granted in the first place.

“However, some stakeholders are concerned that too many good patents are being invalidated at the same time that bad patents are weeded out.  They also argue that the standards and procedures used in these programs, which differ from those used in district courts, are unfair and sometimes lead to perverse outcomes in which the same patent is upheld by a federal district court, but is ruled invalid by the PTO.

“We should be mindful that many companies make business decisions and attract investors in reliance on having been granted a patent.  As we work to strip bad patents from the system, we must strike the proper balance to ensure that we do not inject uncertainty and unfairness into the marketplace by throwing away good patents along with the bad.

“This hearing offers a good opportunity to examine the impact that poor quality patents have on American businesses and small inventors, and to determine how best to weed out bad patents while protecting legitimate patents from unfair attacks.  I look forward to hearing from our witnesses, and I yield back the balance of my time.”

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