On Tuesday, May 22nd, the House Judiciary Committee convened a hearing regarding oversight of the U.S. Patent and Trademark Office. Appearing before the committee to testify on the agency’s actions was USPTO Director Andrei Iancu. Among the major topics discussed by members of the committee were the agency’s authority to set fees collected from users, the potential diversion of those fees to other agencies within the Commerce Department, as well as recent changes proposed by Director Iancu to bring aspects of patent validity trials conducted by the Office into alignment with standards practiced in Article III district courts.
The written testimony submitted by Director Iancu to the Judiciary Committee spoke to a number of issues discussed during the day’s hearing, including patent pendency, patent eligibility, international IP policy as well as issues connected to patent validity trials conducted by the Patent Trial and Appeal Board (PTAB). In his opening statement, Judiciary Committee Chair Rep. Bob Goodlatte (R-VA) voiced great support for the PTAB and other aspects of the America Invents Act (AIA) which created post-grant validity proceedings and the PTAB agency. “The Committee’s efforts to deter patent trolling have been a resounding success,” Goodlatte said. As was pointed out later in the hearing, they’ve also had the effect of dramatically reducing the United States’ position in international rankings of national patent systems in recent years.
Although he did not appear at the hearing, Democratic Ranking Member Rep. Jerrold Nadler (D-NY) issued the following as part of a statement on the USPTO oversight hearing:
“The AIA represented the most significant overhaul of the patent system in a generation. An important element of that legislation was the creation of a variety of procedures to challenge a patent’s validity after issuance by the PTO. These administrative procedures—particularly the inter partes review, or IPR, process—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 while weeding out the bad patents, the IPR process is also invalidating many good patents, as well. As a result, they say, the patent system has been severely weakened, and inventors—particularly small inventors—are suffering. Critics of IPR argue that if patent-holders are at too great a risk of having their patents later found to be invalid, they will be unable to attract investors and to make business decisions with any certainty.”
Nadler’s statement also spoke to the recent introduction of a proposed USPTO agency rule which would harmonize claim construction standards used in inter partes review (IPR) proceedings at the PTAB to align with claim construction standards utilized in U.S. district court. This particular action of Director Iancu seemed to be controversial in the view of several committee members, particularly the Committee’s Representatives hailing from California.
found it disturbing that the Director Iancu would circumvent the prerogative of Congress with recently announced proposed PTAB claim construction changes, though she admitted the decision wasn’t unlawful. She expounded for several minutes on issues of res judicata, which could tie the hands of the PTAB in light of district court or U.S. International Trade Commission (ITC) decisions regarding patent validity. “[This] would completely blow up what we were trying to do as a Congress,” Lofgren said. “It looks to me that the people who disagreed with [the AIA] and lost in the Congress, they went to the Supreme Court, they lost in the Supreme Court, and now they’re going to you, and you are reversing what the Congress decided to do and what the Court said was permissible to do.” Lofgren ran out of time during her questioning and was later yielded more time by Rep. Karen Bass (D-CA) where she continued to criticize Director Iancu’s proposed rule despite Iancu’s points that patentability standards shouldn’t differ simply based on the context of the venue where a validity challenge is brought. “That’s a law school answer,” Lofgren said. “And in the real world we have patent trolls out there holding people up.” (Note to the wise: “Patent troll” is a derogatory term for a political boogeyman that barely exists in the real world.)
Also voicing concerns over the change in claim construction standards was Rep. Darrell Issa (R-CA), efficient infringer ally, and himself a patent troll, and chair of the House IP Subcommittee. While Director Iancu noted significant similarities between PTAB proceedings and district court proceedings, including the record on the patent’s examination which is available for review, Issa noted that both inter partes and ex parte reexamination proceedings review patent validity de novo and that those reexamination proceedings differed significantly from district court proceedings. Issa also noted that the PTAB had the “bad habit” of not allowing claim amendments. “Because at the end of this, they may have the shambles of a patent, but they still have patentable material, can we have equally expedited process through ex parte reexamination?” Issa asked. He also asked Iancu to consider whether a quick reexam process could follow the conclusion of a PTAB trial “to empower the patent owner to legitimize whatever patentable material is left.”
Other members of the committee, by contrast, were able to better exercise their wisdom by pointing out issues of the deleterious effects of PTAB validity trials on American businesses and patent owners. Rep. Steve Chabot (R-OH) asked Director Iancu if there was evidence suggesting that large companies were using IPR proceedings as a tool to invalidate the intellectual property of smaller companies to prevent them from becoming competitive; Director Iancu did not have statistics on that specifically but said he was open to investigating any kind of abuse at the agency. Rep. Steve King (R-IA) questioned whether the passage of the AIA contributed in any way to the recent declines of the U.S. patent system in international rankings. While Iancu said that some aspects of the AIA have helped the U.S. patent system, he specifically cited the implementation of the IPR process as one issue that has harmed the U.S. patent system.
Multiple times throughout the hearing, Director Iancu made it clear that the USPTO’s fee setting authority, currently scheduled to end this September, is crucial to the agency for making sure it has the resources it needs to conduct its operations effectively. Both Reps. Chabot and Hank Johnson, Jr. (D-GA) noted their co-introduction of a House version of the BIG Data for IP Act which has been introduced into the U.S. Senate by Sen. Chris Coons (D-DE); this bill would extend the USPTO’s fee setting authority for 10 years. Elsewhere, Reps. Goodlatte and Raúl Labrador (R-ID) asked Iancu for assurances that the USPTO’s fee setting authority did not contribute to the potential diversion of user fees paid to the agency elsewhere within the Commerce Department under the Shared Services Initiative.
During his opening statement and at points throughout the questioning period, Director Iancu discussed his willingness to work with the House Judiciary Committee on issues regarding patentable subject matter under 35 U.S.C. § 101. While the language of that statute hasn’t changed much since the first Patent Act was passed in 1790, Iancu seemed to want to encourage the House Judiciary Committee to look at legislative changes to that statute in order to address patentability issues created by recent U.S. Supreme Court decisions in Alice and Mayo; Iancu noted that those decisions have increased the uncertainty regarding patentable subject matter, which is a major current issue with the U.S. patent system.
For more on this hearing see Gene Quinn’s coverage at here.