California Legislature—2015–16 Regular Session

Assembly Joint ResolutionNo. 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.

P1    1WHEREAS, The principle of intellectual property is enshrined
2in the United States Constitution, specifically under clause 8 of
3Section 8 of Article I of the United States Constitution, which
4empowers Congress to “promote the Progress of Science and useful
5Arts, by securing for limited Times to Authors and Inventors the
6exclusive Right to their respective Writings and Discoveries”; and

7WHEREAS, A robust patent system is critical to promote
8economic growth and innovation and ensure just compensation
9for the labor and proliferation of beneficial ideas and innovations;
10and

11WHEREAS, California accounts for 25 percent of the nation’s
12patents; and

13WHEREAS, The state recognizes and respects the importance
14of patent protections and patent enforcement rights to driving
P2    1continued research, investment, technological innovation, and job
2creation across multiple sectors of our economy; and

3WHEREAS, Small businesses depend on patents to secure
4investments, and firms with fewer than 25 employees hold nearly
5one-quarter of United States-held patents in innovative emerging
6technologies; and

7WHEREAS, Enforcement of legitimate patent rights is essential
8to promoting an innovation environment that fuels economic
9growth; and

10WHEREAS, There is increasing concern about abusive litigation
11by predatory Patent Assertion Entities (PAEs), which are built on
12a rent-seeking business model that exploits the patent legal system
13for financial gain without producing or manufacturing anything
14 of value for society; and

15WHEREAS, Many PAEs attain ambiguous patents with the sole
16intent of filing patent infringement lawsuits. PAEs assert these
17patents against businesses of all sizes and in all industries, often
18years after the product has become standard and widely used; and

19WHEREAS, PAEs rarely earn successful judgments in court,
20underscoring the questionable merits of these particular patent
21cases. However, given the high cost and risks associated with
22patent litigation, most defendants choose to settle in order to avoid
23further financial loss. Indeed, many PAEs will offer royalty
24settlements below market value in order to encourage settlement
25and avoid trial; and

26WHEREAS, Predatory PAEs have a detrimental impact on the
27economy. PAE activities cost businesses $29 billion directly,
28mostly borne by small and medium businesses; and

29WHEREAS, The costs of frivolous patent lawsuits constrain
30innovation by increasing the risk to investors and businesses of
31introducing new products into the marketplace; and

32WHEREAS, The growth of patent litigation is directly tied to
33aggressive PAEs in recent years. In 2010, PAEs were responsible
34for 29 percent of patent litigation, and by 2012 PAEs represented
3562 percent of all patent suits; and

36WHEREAS, The California economy is especially vulnerable
37to opportunistic litigation given a high proportion of lawsuits
38directed at information technology patents; and

39WHEREAS, Federal legislation is necessary to prevent and
40deter abusive patent litigation; now, therefore, be it

P3    1Resolved by the Assembly and the Senate of the State of
2California, jointly,
That the Legislature urges the President and
3the Congress of the United States to craft a balanced and workable
4approach to reduce incentives for and minimize abusive and
5frivolous patent litigation while ensuring that legitimate patent
6enforcement rights are protected and maintained; and be it further

7Resolved, That the Chief Clerk of the Assembly transmit copies
8of this resolution to the President and Vice President of the United
9States, the Speaker and Minority Leader of the House of
10Representatives, the Majority Leader and Minority Leader of the
11Senate, and each member of the California delegation to the United
12States Congress.



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