Chairman Johnson's Opening Statement in Hearing on “The Patent Trial and Appeal Board After 10 Years: Impact on Innovation and Small Businesses”

The Leahy-Smith America Invents Act of 2011—or AIA— made the most fundamental changes to the patent laws that our country had not seen since the Patent Act of 1952. One of those fundamental changes was the creation of the Patent Trial and Appeal Board—an adjudicatory body within the United States Patent and Trademark Office.

The PTAB—as the Patent Trial and Appeal Board is known—conducts trials to review the validity of patents that the Patent Office previously issued. Congress designed the PTAB with the intent of providing a faster and less expensive alternative to patent litigation before the district courts for determining the validity of a patent. One of the most popular types of trial the PTAB conducts is called "inter partes review"—or IPR. I believe that we will hear this term frequently today.

This September, the PTAB will be 10 years old. And it has been busy. To date, the PTAB has received more than 13,000 petitions for trials and has issued nearly 4,000 decisions on the validity of patents. So, this is a natural time to evaluate the impact of the PTAB's work. Today, we will do so with an eye toward the backbone of America's economy—the small business.

The importance of small business to job creation, economic productivity, and innovation in the United States cannot be understated. Small businesses create most of our county's new new jobs, drive our economy, and are responsible for a substantial portion of our gross domestic product.

Small businesses also drive innovation in our county. For example, the Small Business Administration reports that small businesses are more likely to develop emerging technologies than large business firms. And the U.S. Senate Committee on Small Business & Entrepreneurship reports that "small businesses produce more than 14 times more patents than large businesses and universities and employ nearly 40 percent of America's scientists and engineers."

Small businesses need to be able to protect their innovations with patents. Indeed, we know that small businesses that apply for patents and other types of intellectual property protections are more likely to grow quickly and succeed, than businesses that do not. Economists studying the impact of the award of a patent to small businesses concluded that the award of the first patent to a startup, on average, leads to 16 additional employees after five years, and $10.6 million in additional sales over five years.

But businesses of all sizes have also come to Congress raising concerns about lawsuits based upon patents they believe should not have issued, causing them to spend money on lawsuits instead of R&D.

That brings us to the issue before us today: has the PTAB—with its goal of quickly and efficiently determining the validity of a patent—hurt or helped small businesses?

To be sure, the PTAB has both its defenders and its critics. And I believe we will hear from both today. Some stakeholders are concerned that PTAB proceedings are unfair to small inventors and businesses. For example, some stakeholders argue that only large corporations benefit from the PTAB's high patent-invalidation rate. Other stakeholders strongly support the need for PTAB proceedings to protect small businesses from unreasonable patent licensing demands. These companies point to the existence of PTAB as giving them a less expensive forum to challenge the patent, which can also drive down the costs of settling cases.

Our job in Congress, however, is to figure out how to balance the many competing interests to ensure that the patent system incentivizes and promotes innovation to the greatest extent possible. That is the conversation I hope to have here today.

I am pleased that we have a panel of distinguished practitioners, patent-law experts, and representatives from small businesses who can speak directly to their experiences with the PTAB. Thank you for being here today, and I look forward to your testimony.

###