06.22.21

Leahy Today Holds Hearing Featuring Vermont’s Patent Troll Experience

. . . . As New Chair Of Senate’s Intellectual Property Subcommittee, Leahy Is Focusing On ‘Protecting Real Innovations By Improving Patent Quality’

(TUESDAY, June 22, 2021) – Senator Patrick Leahy (D-Vt.), Chair of the Senate Judiciary Subcommittee on Intellectual Property, on Tuesday will hold the panel’s second hearing of this Congress, titled, “Protecting Real Innovations by Improving Patent Quality.” 

The hearing will feature testimony from Bridget Asay, an attorney who represented the State of Vermont against a patent troll that threatened dozens of small Vermont businesses and nonprofits in 2013 with infringement claims on a patent that never should have been issued.

The hearing will explore the root causes of why poor quality patents are issued, the harms they can cause to the broader public, and the benefits of certainty to inventors in knowing that when a patent is issued, it will be good quality.  The patents that Ms. Asay will discuss were held by MPHJ Technology Investments and covered scanning a document and then emailing it — something that most small businesses and many Vermonters do on a regular basis.

The hearing will also feature testimony on patents procured by disgraced Silicon Valley company Theranos, whose founder, Elizabeth Holmes, is under indictment for engaging in a scheme to defraud investors, doctors and patients based on medical diagnostic technology that did not actually exist.  The company held more 700 patents for this imaginary technology.  These patents, which have since been acquired by another company, have been asserted as recently as March of 2020 in an effort to block COVID-19 diagnostic products.

The hearing starts at 2:30 p.m. Tuesday and will be livestreamed on the Senate Judiciary Committee website

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Leahy’s Opening Statement is available BELOW.

For reference, an article today in Politico about the hearing is also BELOW.

 

Statement Of Senator Patrick Leahy

Chair, Intellectual Property Subcommittee

Hearing On: “Protecting Real Innovations By Improving Patent Quality”
June 22, 2021

 

Patents are a powerful tool for innovation.  In exchange for disclosing how an invention works, the public grants an inventor a limited monopoly to produce and sell an innovative product.  A patent protecting a genuine innovation can attract the funding necessary to build a business, provide legitimacy to a non-traditional inventor, and drive the economy by helping to create American jobs.  Good quality patents provide more certainty to small businesses and inventors, allowing them to confidently defend their inventions from infringers.  Given the power that a patent conveys, ensuring that the U.S. Patent and Trademark Office issues the highest quality patents possible is crucial to ensuring that the system works the way our Founders intended.

Unfortunately, there is another side to the patent quality coin, one that can result in serious consequences for our economy and society at large when the system produces patents that never should have issued in the first place.  As Bridget Asay will testify today, Vermonters faced these consequences firsthand when an out-of-state company asserted poor quality patents against dozens of Vermont small businesses and non-profits.  Being a small and close-knit state, Vermont mobilized in force against this company, which held patents covering the common activity of scanning a document and emailing it.

Vermont’s experience is just one case study of what can happen when poor quality patents infect the system.  We will hear other examples today as well, including the disturbing story of how the disgraced Silicon Valley company Theranos and its founder, Elizabeth Holmes, obtained hundreds of patents for an invention we now know was fraudulent.  The story doesn’t end there – not only do these patents for an imaginary invention still exist, but some were issued even after the public knew of the fraud.  What’s more, they have been asserted against actual innovators working to develop COVID-19 diagnostics. 

Think about that for a moment – as the world was scrambling to respond to a devastating global pandemic, with millions of lives at stake, genuine medical technology designed to help us understand the virus’s spread was nearly blocked by patents for a fake invention.  If it wasn’t for bad publicity, these patents might have successfully thwarted real innovators and cost actual lives.  We should all be outraged by this, both by the behavior of the entity that asserted these junk patents and the fact that some of these patents issued even after the rest of the world knew they were based on a lie.

As we think about patent quality, we should also keep in mind that 52 percent – more than half – of United States patents are issued to foreign entities.  Even more are likely transferred to foreign entities after they are issued.  Unfortunately, we don’t know how many patents are ultimately owned by foreign entities because the PTO does not require that a patent owner tell the public — who might be on the hook for infringement — that the patent was sold.  There is a real risk that foreign companies build portfolios of poor quality patents and then weaponize those patents to stifle actual American innovators.  Improving patent quality is one tool to help mitigate this risk.

Getting patent quality right has real stakes.  I am proud of the work we undertook ten years ago in the Leahy-Smith America Invents Act to address patent quality after patents have been issued.  The post-grant procedures we put in place helped to invalidate some of the patents that were asserted against Vermonters years ago.  I respect the Supreme Court’s decision yesterday in the Arthrex case, which touched on these proceedings, and am confident that the PTO and the Patent Trial and Appeal Board will continue to be able to perform the duties Congress tasked them with under the Leahy-Smith Act.

But the focus of our hearing today is on improving patent quality at the outset, before patents issue.  Preventing poor quality patents from ever issuing is just as important as eliminating bad patents later.  I look forward to hearing ideas from the witnesses today on what steps we can take to improve patent quality at the outset.  I know that Senator Tillis shares my concern about patent quality and I hope to work with him and other members of the Subcommittee to help deliver real improvements to our intellectual property system.

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POLITICO

Tuesday, June 22, 2021

 

TECH OF THE TOWN

LAWMAKERS EXAMINE WAYS TO IMPROVE PATENT QUALITY — The Senate Judiciary Committee’s intellectual property panel will delve this afternoon into patent quality, an issue that’s come into play during the Covid pandemic — notably in March 2020, when a company attempted to use patents acquired from the defunct, scandal-plagued startup Theranos to block a (legitimate) health company from manufacturing Covid tests.

“We should all be outraged by this, both by the behavior of the entity that asserted these junk patents and the fact that some of these patents issued even after the rest of the world knew they were based on a lie,” Chair Patrick Leahy (D-Vt.) will say about the incident, according to prepared remarks shared with MT. He will also warn against the risk of foreign companies using poor-quality patents to stifle American innovation, as the panel explores ways to catch such patents before they’re issued.

Ranking member Thom Tillis (R-N.C.) will push for eliminating a program that diverts fees collected by the U.S. Patent and Trademark Office to often unrelated programs, according to his prepared remarks. He will also advocate for creating a "gold-plated" patent that would involve a more rigorous review process, making it “virtually impossible to challenge” — an idea Barack Obama backed during his 2008 campaign. And he’ll argue for limiting the scope of "overbroad patents being issued, especially in the software and financial services spaces."

— Perfect timing: The hearing comes a day after the Supreme Court ruled that the way many patent judges had been appointed to the USPTO’s Patent Trial and Appeal Board violates the Constitution; the judges have “unreviewable authority” despite neither being nominated by the president nor confirmed by the Senate. The solution: Allow the USPTO director to review rulings. (PTAB was formed as a way to challenge questionable patents under a 2011 law that Leahy spearheaded.)

Leahy is expected to address the decision at today’s hearing. He said in a statement that it underscores the need for the Biden administration to nominate a permanent USPTO director who will work “to weed out poor quality patents,” be transparent about interventions in PTAB rulings and “respect the law.”