Statement of Rep. Howard Berman (D-CA). Re: Introduction of HR 1333, the Business Method Patent Improvement Act of 2001. Date: April 3, 2001. Source: Congressional Record, April 3, 2001.

Mr. Speaker, I rise to discuss three pieces of legislation I have introduced today.

Last fall, Representative RICK BOUCHER and I introduced H.R. 5364, the Business Method Patent Improvement Act of 2000. Upon introduction of that bill, I made it clear that my primary motivation was protection of intellectual property. I believe the protection of intellectual property is critical both to innovation and to the economy, and will be advanced by assuring the highest level of quality for U.S. patents.

With these same goals in mind, today Representative BOUCHER and I introduce three new bills. The Business Method Patent Improvement Act of 2001 is very similar to last year's version, but includes several significant changes in response to legitimate criticisms of last year's bill. The Patent Improvement Act of 2001 responds to suggestions by many parties that certain provisions in last year's bill should apply broadly to all patentable inventions. Finally, the PTO funding Resolution ensures that all PTO fees will be used to fund the PTO and the vital services it provides.

These bills represent a starting point, not an end point, for discussion of legislative solutions to patent quality concerns. The multitude of comments received on last year's bill demonstrate that these problems are difficult and, as yet, present no clear-cut answers. Indeed, reactions to last year's bill exhibited few consistent patterns, with members of the same industries often expressing diametrically opposed viewpoints. What was clear, however, was that introduction of specific legislation proved helpful at focusing the discussion. Thus, we introduce these bills to initiate that discussion anew in the 107th Congress.

The Business Method Patent Improvement Act of 2001 requires the PTO to publish all business method patent applications after 18 months. In conjunction with the publication provision, it creates opportunities for the public to present prior art or public use information before a business method patent issues. It establishes an administrative ``Opposition'' process where parties can challenge a granted business method patent in an expeditious, less costly alternative to litigation. The bill lowers the burden of proof for challenging business method patents, requires an applicant to disclose its prior art search, and finally, creates a rebuttable presumption that a business method invention constituting a non-novel computer implementation of a pre-existing invention is obvious, and thus, not patentable.

The Patent Improvement Act of 2001 would establish an administrative ``Opposition'' process where parties can challenge any granted patent in an expeditious, less costly alternative to litigation. The bill creates a rebuttable presumption that any invention constituting a non-novel

The PTO funding Resolution creates a point of order regarding any legislation that does not allow the PTO to spend all fees collected in the year in which they are collected.

Some may consider the coordinated introduction of these three bills an unusual approach. Indeed, it will be noted that the first two bills overlap--that is, they contain many of the same provisions applied to different, but overlapping types of patents. We have chosen this approach because we consider all the bills to be improvements over current law, but are not sure which bills will generate sufficient support to be enacted this Congress. Further, we consider the PTO funding Resolution to be a necessary element of any plan to improve patent quality, but recognize that such legislation will generate its own debate.

I have decided to forge ahead through these thorny issues because my concerns about the quality and effects of business method patents have not dissipated or diminished during the past year. The pace of business method patenting has picked up dramatically. While in FY 1999, the PTO received approximately 2650 business method patent applications, in FY 2000 it received 7800 such applications. The PTO reports that the first quarter of FY 2001 has seen business method applications running 18-20% higher than in Q1 of FY 2000. I commend the PTO for reducing the proportion of business method patents granted through its Business Method patent Initiative, but there is some concern that this Initiative will extend patent pendancies further.

We will not know what business methods are claimed in these applications for at least eighteen months after filing, and in all probability for at least twenty-six months. Some consider this a problem in itself, as technology businesses attempting to move at Internet speed may invest enormous sums of ever-dwindling venture capital only to find important elements of their business plan covered by a patent. This is an unfortunate by-product of the patent system, but I do not believe we should address it by prohibiting patents on business methods or requiring publication upon filing.

Of greater concern to me is assuring the highest quality of business method patents being issued. Unfortunately, those business methods patents of which we are aware do not give us much confidence about the quality of those yet to be published. Last year, I cited as examples of concern a patent granted for a method of allowing automobile purchasers to select options for cars ordered over the Internet, and a patent that purportedly covered the selling of music and movies in electronic form over the internet. This year I add to that list a patent for a method of operating a fantasy football league over the Internet, a patent covering incentive programs using the Internet, a patent covering the use of targeted banner advertising over the internet, and a patent covering a system for previewing music samples over the internet.

I do not pretend to know whether any of these patents are valid or invalid. However, many respectable parties, including patent lawyers, patent-holding technology companies, and academics, have expressed serious concerns about the quality of such patents.

I would like to see a patent system that subjects these patents to more rigorous review, and thus provide greater assurance that they are valid when issued. If there may be ways to improve the prior art available to patent examiners before they issue a patent, we should explore them. If there are ways to decrease the costs of challenging bad patents, we should enact them into law. And if retention of fees will result in better trained, more experienced examiners with access to better resources, we should let the PTO keep the fees.

As I said last Congress: ``The bottom line in this: there should be no question that the U.S. patent system produces high quality patents. Since questions have been raised about whether this is the case, the responsibility of Congress is to take a close look at the functioning of the patent system in this very new, and rapidly growing area of patenting.''