Testimony by R. Bruce Josten on the Intellectual Property Restoration Act of 2003
Statement of R. Bruce Josten, Executive Vice President, U.S. Chamber of Commerce, to the Subcommittee on Courts, the Internet and Intellectual Property of the Committee on the Judiciary on H.R. 2344, the Intellectual Property Restoration Act of 2003
June 17, 2003
Thank you Mr. Chairman, Ranking Member Berman, and members of the Subcommittee,
for this opportunity to provide comments on this very important issue. My name is Bruce Josten and I am Executive Vice President for Government Affairs at the U.S. Chamber of Commerce. The U.S. Chamber represents more than 3 million businesses and organizations of every size, sector, and region.
Our members are deeply concerned about the ability of states and state entities, such as
state universities, to use their constitutional protection from lawsuits to freely infringe upon the
copyright, patent, and trademark rights of others, while at the same time taking full advantage of copyright, patent, and trademark protection for their own intellectual property. This bill would not permit the states to have it both ways: if they want copyright, patent, and trademark protection, they must expressly waive their sovereign immunity.
For over ten years, Congress has been attempting to remedy a series of unfortunate
Supreme Court decisions that began in 1962. Under these decisions, the principle of sovereign immunity, in the context of intellectual property, has come to mean that the owners of patents, trademarks, and copyrights cannot sue states even when the state infringes those intellectual property rights. This is an abuse of the states' constitutional protection from suit.
It had been widely thought that when a state engages in an activity that can properly be
regulated by Congress, it impliedly consented to suit in Federal court.(1) This principle has been
eroded over the years and today states can use their constitutional sovereign immunity protection, even for non-governmental activities, such as unfairly competing with patent owners and infringing their patents.
The U.S. Chamber and its members are deeply concerned about this situation. The system
of patent, trademark, and copyright protection in the United States encourages investment in
invention and innovation. Such protection assures innovative companies and individuals that they will stand to reap the financial rewards if their new product or service finds favor in the marketplace. However, when a substantial group of parties, such as states and state agencies, can disregard these protections, the intellectual property protections are eroded.
The prospect of state infringement of intellectual property rights will have an adverse
effect on the level of investment in research and development of new products and services.
Companies will be reluctant to invest the necessary funds in the development of new products when they know that a state or state agency can appropriate that product or service for their own use, without licensing the technology or paying royalties. As states increasingly face budget shortfalls, the likelihood of their forays into patented or copyrighted commercial ventures increases.
States have not shied away from taking advantage of their unfair status in the marketplace.
According to testimony by Marybeth Peters, Register of Copyrights, in a July 2000 hearing before this Subcommittee, then called the Subcommittee on Courts and Intellectual Property, four-year state colleges and universities have registered over 32,000 monographs since 1978 and this does not include scholarly journals, magazines, newsletters, and computer programs.
Similarly, the U.S. General Accounting Office reported in 2001 that state institutions of
higher learning hold nearly 12,000 patents and 2,700 trademarks in addition to the 32,000 copyrights.
State universities often obtain their patents with federal funding. They protect and license these patents the same as would any other patent holder. The U.S. Chamber and its members believe that the states cannot continue to have it both ways. If they participate in the commercial marketplace, they must abide by the rules that apply to everyone.
We recognize that some states, as a matter of policy, seek licenses and attempt to avoid infringement. However, so long as the threat of infringement remains real and not theoretical, the chilling effect will continue.
The Pending Legislation
H.R. 2344 does not attempt to abrogate state sovereign immunity. Rather, it requires
states to expressly waive their immunity if they want to be able to sue to protect their own patents, trademarks and copyrights. Furthermore, the legislation creates liability on the part of the states and state agencies if they violate intellectual property owners' due process rights or unlawful takings rights under the Constitution. Relief under this section of the legislation would include actual damages, profits, statutory damages, and fees, but would not include treble damages.
This approach is rational and reasonable. It narrowly tailors the solution to the problem
while avoiding the constitutional shortcomings that have undermined past efforts at legislation.
Rather than broadly abrogating the states' sovereign immunity protection, it gives the states an
incentive to expressly waive their sovereign immunity. The case of Alden v. Maine, 119 S. Ct. 2240 (1999), established that states may waive their immunity and that Congress may provide incentives for such waivers. This legislation offers an incentive – the right to sue to protect intellectual property owned by the states – in exchange for the waiver of immunity when the state or state agencies are charged with infringement. It is a fair and equitable solution.
The final provision of this legislation provides remedies against officers or employees of a
state or state agency for unlawful infringement, including monetary damages, declaratory and
injunctive relief, costs, attorneys' fees, and destruction of infringing articles. Codification of this
remedy, first defined by the Supreme Court in Ex parte Young (2), is a necessary legislative step, as the recent resurrection of state sovereign immunity may be used to erode these protections.
The U.S. Chamber of Commerce enthusiastically supports this legislation and urges the
Subcommittee to favorably report H.R. 2344.
(1) Parden v. Terminal Railway of Alabama, 377 U.S. 184 (1964)
(2) 209 U.S. 123 (1908)