Washington, D.C. — House Judiciary Committee Chairman Bob Goodlatte (R-Va.) delivered the following remarks at the Courts, Intellectual Property, and the Internet Subcommittee hearing on “Assessing the Effectiveness of the Transitional Program for Covered Business Method Patents.

Chairman Goodlatte: A strong and healthy patent system is important to the economy and to American technological leadership.  A strong patent system requires high quality patents that are clear, precise, and claim actual innovations.

Congress passed the America Invents Act in 2011 because the health of our patent system was in jeopardy.  The system was clogged with numerous low quality patents that had slipped past the Patent and Trademark Office.  These patents were vague, overly broad, and often claimed to cover things that had been well-known and widely-used for many years.  Such patents harm innovation by blocking off broad areas of endeavor and not giving inventors enough room to innovate.

Further, bad actors discovered they could use these bad patents to hold businesses hostage.  Vague patents could be reinterpreted and repurposed to broadly cover products or processes used or sold by many companies.  Litigating in court to invalidate even a bad patent could cost millions of dollars and take years.  The consequences of losing often meant the company’s existence could be threatened.  Small businesses without the resources or expertise to defend themselves from bad patents were particularly at risk.  For such businesses, a lawsuit wasn’t even necessary – the mere threat of a lawsuit was enough to extort a settlement from them.

For many patent trolls, their weapon of choice was a business method patent.  Ill-advised court decisions in the late 1990s and 2000s opened the floodgates to overly broad business method patents, in particular those relating to the use of financial services.

These patents posed unique challenges to the U.S. patent system, so the America Invents Act included a specialized procedure to address them, the Covered Business Method (“CBM”) Program.  Many stakeholders, including the financial industry and the software industry, worked with Congress as we formulated the program.

In 2014, two years after CBM patent reviews began, I requested the Government Accountability Office to study the CBM program so that the Committee’s oversight could be informed by its unbiased research.  With the sunset date of the program approaching, the GAO’s report is timely because the Committee is faced with the decision of whether to renew the program.

With over 500 cases and over 300 patents having gone through the CBM program, we now have enough information to assess how effective the program has been, and whether it is accomplishing the goals Congress had in mind for the program.  This information will be important as we also examine if the program is still needed.

I thank Chairman Issa for overseeing this hearing, and I thank the witnesses for their participation.  I look forward to exploring these important issues.