Earlier today at a confirmation hearing held by the Senate Judiciary Committee Senator Charles Grassley (R-IA) stated that the nominees for USPTO Director (Michelle Lee) and Intellectual Property Enforcement Coordinator (Daniel Marti) would not be confirmed during this Congress. Grassley also explained that with new members of the Committee it would only be fair to give those new members an opportunity to ask questions of the nominees. Senator Patrick Leahy (D-VT) inquired whether Grassley would allow the nominations to move early in January, to which Grassley responded that he thought that was a reasonable request.
As Senator Grassley moved into his questions he asked both Daniel Marti and Michelle Lee whether patent trolls are a problem and whether they would work with the Senate, if confirmed, on new legislation to address any problems. Lee said that she does think there is a continuing problem with abusive patent litigation, further saying “there can and should be further legislation” to address patent trolls. Shortly after this answer was given, Senator Mazie Hirono (D-HI) during her question and answer period pointed out that “one person’s patent troll is another person trying to protect his or her patent.”
The issue of patent reform and patent trolls would go on to dominate the confirmation hearing. At one point during his questioning of Lee, Senator Dick Durbin (D-IL) explained that patent reform has been a real eye opener for him. While working on the America Invents Act (AIA) he explained that he in good faith tried to take the considerations of his constituents into consideration, offering amendments to address their concerns. Then after he voted for the bill he was inundated with calls and e-mails about why he voted for that “bad bill.” Durbin explained that he has since become determined to be far more proactive because this is such an important issue. He has been holding meetings and talking to constituents and everyone is telling him that it is premature to engage in additional patent reform and the Congress should slow down.
Senator Durbin specifically mentioned a letter relating to patent reform, which is reproduced below, that was sent from the Innovation Alliance, BIO, PhRMA, MDMA and 6 university associations was sent to Senate Judiciary leadership immediately before the start of this hearing. In anticipation of action on patent reform in the upcoming year, the groups emphatically state in the letter that they “will continue to strongly oppose legislation that would weaken the overall patent system and thereby diminish innovation and job creation in the United States.”
It certainly sounds like Senator Durbin is going to tread lightly on patent reform, if not apply the brakes with full force. Time will tell for certain, but with Senator Durbin’s standing and seniority he can certainly foil any patent reform attempts if he so chooses. His remarks today had to come across as extremely disconcerting for those who were hoping for additional patent reform in 2015, and extremely hopeful for those who believe that caution is advised and that the law has already changed too much, and too drastically, over the last several years.
Senator Durbin then simply asked Lee, “What is a patent troll? What is your definition?” Lee responded: “it is not productive to define a patent troll,” but rather that it is important to “focus on abusive behavior.” Durbin also asked whether Lee agreed with what his constituents were telling him, that reform is not necessary and Congress should slow down. To this Lee responded: “I couldn’t agree more that the patent landscape is changing dramatically. All of this needs to be taken into account as we carefully and cautiously determine what changes need to be made. We need balanced, meaningful reform.” Thus, Lee agreed with Senator Durbin to the extent that the patent landscape has changed dramatically in recent years, but didn’t really agree with the thrust of what Durbin seemed to be saying about further patent reform just not being necessary. Lee continues to believe that at least some targeted reform remains necessary, although she acknowledged caution and careful calculation is required.
The final round of questioning came from Senator Sheldon Whitehouse (D-RI), who was most concerned with what search engines, such as Google, are doing to weed out websites that openly offer infringing content. He explained that he had just done a search recently and one of the top websites returned in a Google search was to a well known infringer website. He explained that this was concerning because there are many people who have jobs that are dependent on the fact that content creation can be properly monetized. He asked Lee, who was formerly Deputy General Counsel of Google, whether Google had the ability to weed out infringing websites from its search results. Lee explained that she did not know the answer. Senator Whitehouse wasn’t happy with the response, saying that if someone so highly ranked within the Google legal department didn’t know whether the company had the ability to weed out infringing websites suggested that Google and the private sector were not taking the issue seriously and that self regulation to solve the infringer problem may not be enough.
UPDATED: This article was updated on December 17, 2014, to fully quote Lee’s answer to Senator Durbin regarding the patent landscape and need for further patent reform. An earlier version of this article provided only a portion of the quote, which was out of context. See Correction: Michelle Lee on Patent Reform.
Letter referenced by Senator Durbin during the hearing:
December 10, 2014
Dear Chairman Goodlatte, Chairman Leahy, Rep. Conyers, and Senator Grassley:
The undersigned represent a broad coalition whose members represent the majority of the nation’s patent holders and inventors. We are a diverse array of American innovators, ranging from universities and non-profit foundations, to start-ups and small businesses, to manufacturing, technology, and life sciences companies. Together we represent thousands of organizations that employ millions of workers in the United States. All of our members believe that the future of the U.S. economy, including domestic job growth and our competitive advantage in the global economy, depends on a strong patent system that incentivizes innovators to invent and protects their inventions from unfair copying by others.
We appreciate the hard work you and your staffs have undertaken to craft a bill to target abusive practices in patent litigation, and we accept your challenge to our member groups to work with you to craft a responsible bill to address those abuses. As we have demonstrated in the past, we are willing to work with you and other stakeholders to develop targeted and measured reforms that address harmful patent enforcement practices. However, we will continue to strongly oppose legislation that would weaken the overall patent system and thereby diminish innovation and job creation in the United States.
In addition, there have been several major judicial and administrative developments in patent law since the last time your committees fully considered these issues and drafted proposed legislation. As a result of these developments, we are even more concerned that some of the measures under consideration over the past year go far beyond what is necessary or desirable to combat abusive litigation. Indeed, new patent lawsuit filings already have dropped dramatically – 40 percent, year over year, from September 2013 to 2014. Recent developments include the following:
- The Supreme Court decided five patent cases this past year, including Alice Corporation v. CLS Bank, Nautilus v. Biosig Instruments, Limelight Networks v. Akamai Technologies, Octane Fitness v. ICON Health & Fitness, and Highmark Inc. v. AllcareHealth Management Systems, that are already making it easier to defeat patents, including the kind of patents that often are asserted in abusive litigation, anddisincentivizing the bringing of meritless claims. They certainly require thorough Congressional consideration as changes to the patent system are debated.
- The Leahy-Smith America Invents Act (AIA), which includes a number of provisions to increase patent quality and reduce abusive practices, was fully implemented less than two years ago, and its effects are only now beginning to take hold. For example, the AIA created new procedures – “inter partes review” (IPR) and “covered business method patent review” (CBM) – to allow anyone to challenge patents in a fast, relatively inexpensive proceeding before the Patent Trial and Appeal Board (PTAB). These administrative proceedings are already impacting the litigation landscape: judges in patent cases are now granting 80% of all motions to stay patent litigation if the patent is also involved in a parallel IPR or CBM proceeding. This is not to suggest that improvements are not needed with respect to implementation by the U.S. Patent & Trademark Office (USPTO), particularly with respect to concerns raised that these proceedings may be structured in a way that fails to afford basic due process to patent owners. In just two years since the USPTO implemented the new procedures in late 2012, petitioners have challenged claims of more than 2,300 patents. In concluded proceedings, fully 75% of the involved claims have been found unpatentable and only about 20% of patents have survived the proceeding with no changes.
- This past October, the Judicial Conference of the United States adopted changes to the Federal Rules of Civil Procedure that will ensure that patent cases meet the heightened pleading standards required of all other federal cases. The changes also will ensure that discovery in patent litigation will be “proportional to the needs of the case,” reducing the ability of patent plaintiffs to use unnecessary discovery requests to drive up costs for defendants in an effort to force unwarranted settlements. These rule changes make any statutory provision heightening pleading standards or limiting the scope of discovery in patent cases unnecessary and repetitive, since courts now have been directed to limit excessive and abusive discovery requests and ensure adequately described pleadings in patent cases. The rule changes are currently pending before the Supreme Court and are expected to be sent to Congress in early 2015.
- The Federal Trade Commission and state attorneys general also are aggressively using their authority to combat abusive patent demand letters and protect small businesses and consumers from unscrupulous practices. Instead of collecting settlement fees, senders of mass demand letters now find themselves mired in legal proceedings and their patents subject to challenges. Settlements between MPHJ Technology Investments LLC and the New York Attorney General and the FTC in January and November show the effectiveness of consumer protection and unfair competition laws at protecting small businesses from abusive and deceptive representations in demand letters.
Taken together, these judicial and administrative developments, and the plunge in the patent litigation rate, have fundamentally changed the landscape under which patent legislation should be considered. As Congress considers potential changes to the patent system that threaten the constitutionally-guaranteed property rights of innovators, it must assess the full effects of the AIA, changes to the Federal Rules of Civil Procedure, the case law developments, and these administrative developments.
We look forward to working with you and your colleagues to make improvements to patent law that protect small businesses, consumers, and the general public from abusive patent practices, while zealously guarding the United States’ competitive edge as the dominant global leader in innovation.
Thank you for your consideration of our views.
American Council on Education
Association of American Medical Colleges
Association of American Universities
Association of Public and Land-grant Universities
Association of University Technology Managers
Biotechnology Industry Organization (BIO)
Innovation Alliance (IA)
Medical Device Manufacturers Association (MDMA)
Pharmaceutical Research and Manufacturers of America (PhRMA)
USBIC Educational Forum