BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AJR 9|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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THIRD READING
Bill No: AJR 9
Author: Chang (R)
Amended: 5/18/15 in Assembly
Vote: 21
SENATE JUDICIARY COMMITTEE: 6-0, 6/16/15
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning
NO VOTE RECORDED: Wieckowski
ASSEMBLY FLOOR: 76-0, 5/18/15 - See last page for vote
SUBJECT: Patent reform
SOURCE: Author
DIGEST: This resolution urges the President and the Congress of
the United States to craft a balanced and workable approach to
reduce incentives for and minimize unnecessary patent litigation
while ensuring that legitimate patent enforcement rights are
protected and maintained.
ANALYSIS:
Existing federal law:
1)Reserves to Congress, in the United States Constitution, the
power "to promote the progress of science and useful arts, by
securing for limited times to authors and inventors the
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exclusive right to their respective writings and discoveries."
(U.S. Const., art. I, Sec. 8.)
2)Provides, in the Patent Act, for the issuance of patents to
any person who invents or discovers any new and useful
process, machine, manufacture, or composition of matter, or
any new and useful improvement thereof. (35 U.S.C. Sec. 101.)
Existing law:
1)Renders, in the Unfair Competition Law, an individual liable
for any unlawful, unfair or fraudulent business act or
practice and any unfair, deceptive, untrue or misleading
advertising. (Bus. Prof. Code Sec. 17200.)
2)Provides that one who willfully deceives another with intent
to induce him to alter his position to his injury or risk, is
liable for any damage which he thereby suffers. (Civ. Code
Sec. 1709.)
This resolution:
1)Makes the following findings and declarations:
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;"
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;
California accounts for 25 percent of the nation's
patents;
the state recognizes and respects the importance of
patent protections and patent enforcement rights to driving
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continued research, investment, technological innovation,
and job creation across multiple sectors of our economy;
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
enforcement of legitimate patent rights is essential to
promoting an innovation environment that fuels economic
growth.
1)Makes the following additional findings and declarations:
there is increasing concern about 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;
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;
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;
predatory PAEs have a detrimental impact on the economy
and innovation. PAE activities cost businesses $29 billion
directly, mostly borne by small- and medium-sized
businesses;
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;
the California economy is especially vulnerable to
lawsuits directed at information technology patents; and
federal legislation is necessary to prevent and deter
abusive patent litigation.
1)Urges the President and the Congress of the United States to
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craft a balanced and workable approach to reduce incentives
for and minimize unnecessary patent litigation while ensuring
that legitimate patent enforcement rights are protected and
maintained.
Background
In recent years, much attention has been focused on the business
model practiced by certain firms that make money not by
producing goods, but by licensing patent use or asserting patent
claims against other companies that produce goods using patented
technologies and methods. The activities of these so-called
"patent trolls," "non-practicing entities," or "patent assertion
entities" are thought by some to be harming innovation and
causing the market as a whole to reduce venture investing and
research and development spending. Whether or not these
entities actually harm the market is a hotly debated topic, as
is the nature of what - if anything - should be done about it.
Indeed, even the definition of who constitutes a non-practicing
entity is contentious, with some commentators pointing out that
the concept may include universities that license use of their
patents.
This resolution makes specified findings about the detrimental
impact predatory patent assertion entities are having on the
economy and innovation, and would urge the federal government to
enact federal legislation to prevent and deter abusive patent
litigation while ensuring that legitimate patent enforcement
rights are protected and maintained.
Comments
The author writes:
In recent years there have been efforts to abuse the US patent
system for financial gain in a way that is an affront to the
spirit and intent of the protections set up under patent laws.
The US has seen a marked increase in Patent Assertion
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Entities (PAEs) which have no other purpose than to file
predatory patent lawsuits, with a particular focus on
technology and software. PAEs do not manufacture or create
anything. Their only purpose is to acquire patents and assert
them against entrepreneurs.
Victims of PAEs are mostly small to medium sized businesses
that cannot afford the costs of defending a lawsuit. While
technological patents are most often abused, PAEs threaten
lawsuits on any number of businesses including restaurants,
small offices or podcasts for using standard technology like
WiFi or copier machines.
Abusive patent lawsuits have grown in recent years at jarring
rates. In 2009 PAEs accounted for 27 [percent] of patent
lawsuits but by 2012 they made up 62 [percent] of all patent
lawsuits. Together these lawsuits cost businesses $29 billion
per year. The result of these opportunistic schemes to
extract money from employers is less innovation and slower job
growth.
Current federal law does not provide protections for victims
of patent lawsuit abuse and struggles to distinguish between
legitimate efforts to protect patents and [PAEs]. Reform is
needed on a federal level to address this rapidly growing
problem that threatens economic growth and innovation . . .
AJR 9 urges the President and the Congress of the United
States to craft a balanced and workable approach to reduce
incentives for and minimize unnecessary patent litigation
while ensuring that legitimate patent enforcement rights are
protected and maintained.
Related/Prior Legislation
SB 681 (Hill, 2015) makes it unlawful to send a written
communication stating that the recipient may have infringed on a
United States patent if, in bad faith, the sender makes
specified statements, seeks compensation for specified conduct,
or fails to include specified information in the communication.
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This bill also provides specific remedies for sending such
unlawful communications, and specifies that those remedies may
only be obtained by the Attorney General or an attorney acting
on behalf of the state. This bill is pending in the Senate
Rules Committee.
FISCAL EFFECT: Appropriation: Fiscal
Com.:NoLocal:
SUPPORT: (Verified6/9/15)
California Citizens Against Lawsuit Abuse
California Healthcare Institute
California Hotel & Lodging Association
California Restaurant Association
Electronic Frontier Foundation
Greater Santa Barbara Lodging & Restaurant Association
Internet Association
TechNet
OPPOSITION: (Verified6/9/15)
None received
ASSEMBLY FLOOR: 76-0, 5/18/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Lackey, Levine, Linder, Lopez,
Low, Maienschein, Mayes, McCarty, Medina, Mullin, Nazarian,
Obernolte, O'Donnell, Olsen, Perea, Quirk, Rendon,
Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Atkins
NO VOTE RECORDED: Kim, Mathis, Melendez, Patterson
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Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
6/18/15 16:26:48
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