California Legislature—2015–16 Regular Session

Assembly Joint Resolution No. 9

Introduced by Assembly Member Chang

February 25, 2015

Assembly Joint Resolution No. 9—Relative to patents.

LEGISLATIVE COUNSEL’S DIGEST

AJR 9, as introduced, Chang. Patent reform.

This measure would urge the President and the Congress of the United States to craft a balanced and workable approach to reduce incentives for and minimize abusive and frivolous patent litigation while ensuring that legitimate patent enforcement rights are protected and maintained.

Fiscal committee: no.

WHEREAS, The principle of intellectual property is enshrined
in the United States Constitution, specifically under clause 8 of
Section 8 of Article I of the United States Constitution, which
empowers Congress to “promote the Progress of Science and useful
Arts, by securing for limited Times to Authors and Inventors the
exclusive Right to their respective Writings and Discoveries”; and

WHEREAS, A robust patent system is critical to promote
economic growth and innovation and ensure just compensation
for the labor and proliferation of beneficial ideas and innovations;
and

WHEREAS, California accounts for 25 percent of the nation’s
patents; and

WHEREAS, The state recognizes and respects the importance
of patent protections and patent enforcement rights to driving
continued research, investment, technological innovation, and job
creation across multiple sectors of our economy; and

WHEREAS, Small businesses depend on patents to secure
investments, and firms with fewer than 25 employees hold nearly
one-quarter of United States-held patents in innovative emerging
technologies; and

WHEREAS, Enforcement of legitimate patent rights is essential
to promoting an innovation environment that fuels economic
growth; and

WHEREAS, There is increasing concern about abusive litigation
by predatory Patent Assertion Entities (PAEs), which are built on
a rent-seeking business model that exploits the patent legal system
for financial gain without producing or manufacturing anything
of value for society; and

WHEREAS, Many PAEs attain ambiguous patents with the sole
intent of filing patent infringement lawsuits. PAEs assert these
patents against businesses of all sizes and in all industries, often
years after the product has become standard and widely used; and

WHEREAS, PAEs rarely earn successful judgments in court,
underscoring the questionable merits of these particular patent
cases. However, given the high cost and risks associated with
patent litigation, most defendants choose to settle in order to avoid
further financial loss. Indeed, many PAEs will offer royalty
settlements below market value in order to encourage settlement
and avoid trial; and

WHEREAS, Predatory PAEs have a detrimental impact on the
economy. PAE activities cost businesses $29 billion directly,
mostly borne by small and medium businesses; and

WHEREAS, The costs of frivolous patent lawsuits constrain
innovation by increasing the risk to investors and businesses of
introducing new products into the marketplace; and

WHEREAS, The growth of patent litigation is directly tied to
aggressive PAEs in recent years. In 2010, PAEs were responsible
for 29 percent of patent litigation, and by 2012 PAEs represented
62 percent of all patent suits; and

WHEREAS, The California economy is especially vulnerable
to opportunistic litigation given a high proportion of lawsuits
directed at information technology patents; and

WHEREAS, Federal legislation is necessary to prevent and
deter abusive patent litigation; now, therefore, be it

Resolved by the Assembly and the Senate of the State of
California, jointly, That the Legislature urges the President and
the Congress of the United States to craft a balanced and workable
approach to reduce incentives for and minimize abusive and
frivolous patent litigation while ensuring that legitimate patent
enforcement rights are protected and maintained; and be it further

Resolved, That the Chief Clerk of the Assembly transmit copies
of this resolution to the President and Vice President of the United
States, the Speaker and Minority Leader of the House of
Representatives, the Majority Leader and Minority Leader of the
Senate, and each member of the California delegation to the United
States Congress.