Amended in Assembly May 7, 2015

California Legislature—2015–16 Regular Session

Assembly Joint ResolutionNo. 9


Introduced by Assembly Member Chang

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(Coauthors: Assembly Members Baker, Gallagher, and Steinorth)

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(Coauthor: Senator Huff)

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February 25, 2015


Assembly Joint Resolution No. 9—Relative to patents.

LEGISLATIVE COUNSEL’S DIGEST

AJR 9, as amended, 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 minimizebegin delete abusive and frivolousend deletebegin insert unnecessaryend insert 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

P2    1WHEREAS, California accounts for 25 percent of the nation’s
2patents; and

3WHEREAS, The state recognizes and respects the importance
4of patent protections and patent enforcement rights to driving
5continued research, investment, technological innovation, and job
6creation across multiple sectors of our economy; and

7WHEREAS, Small businesses depend on patents to secure
8investments, and firms with fewer than 25 employees hold nearly
9one-quarter of United States-held patents in innovative emerging
10technologies; and

11WHEREAS, Enforcement of legitimate patent rights is essential
12to promoting an innovation environment that fuels economic
13growth; and

14WHEREAS, There is increasing concern aboutbegin delete abusiveend delete litigation
15by predatory Patent Assertion Entities (PAEs), which are built on
16a rent-seeking business model that exploits the patent legal system
17for financial gain without producing or manufacturing anything
18of value for society; and

19WHEREAS, Many PAEs attain ambiguous patents with the sole
20intent of filing patent infringement lawsuits. PAEs assert these
21patents against businesses of all sizes and in all industries, often
22years after the product has become standard and widely used; and

23WHEREAS, PAEs rarely earn successful judgments in court,
24underscoring the questionable merits of these particular patent
25cases. However, given the high cost and risks associated with
26patent litigation, most defendants choose to settle in order to avoid
27further financial loss. Indeed, many PAEs will offer royalty
28settlements below market value in order to encourage settlement
29and avoid trial; and

30WHEREAS, Predatory PAEs have a detrimental impact on the
31begin delete economy.end deletebegin insert economy and innovation.end insert PAE activities cost businesses
32$29 billion directly, mostly borne bybegin delete small and mediumend deletebegin insert small-
33and medium-sizedend insert
businesses; and

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34WHEREAS, The costs of frivolous patent lawsuits constrain
35innovation by increasing the risk to investors and businesses of
36introducing new products into the marketplace; and

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37WHEREAS, The growth of patent litigation is directly tied to
38aggressive PAEs in recent years. In 2010, PAEs were responsible
39for 29 percent of patent litigation, and by 2012 PAEs represented
4062 percent of all patent suits; and

P3    1WHEREAS, The California economy is especially vulnerable
2tobegin delete opportunistic litigation given a high proportion ofend delete lawsuits
3directed at information technology patents; and

4WHEREAS, Federal legislation is necessary to prevent and
5deter abusive patent litigation; now, therefore, be it

6Resolved by the Assembly and the Senate of the State of
7California, jointly,
That the Legislature urges the President and
8the Congress of the United States to craft a balanced and workable
9approach to reduce incentives for and minimizebegin delete abusive and
10frivolousend delete
begin insert unnecessaryend insert patent litigation while ensuring that
11legitimate patent enforcement rights are protected and maintained;
12and be it further

13Resolved, That the Chief Clerk of the Assembly transmit copies
14of this resolution to the President and Vice President of the United
15States, the Speaker and Minority Leader of the House of
16Representatives, the Majority Leader and Minority Leader of the
17Senate, and each member of the California delegation to the United
18States Congress.



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