[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE SUPREME COURT'S TC HEARTLAND DECISION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
COURTS, INTELLECTUAL PROPERTY,
AND THE INTERNET
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
JUNE 13, 2017
__________
Serial No. 115-35
__________
Printed for the use of the Committee on the Judiciary
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Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, JR., JOHN CONYERS, JR., Michigan
Wisconsin JERROLD NADLER, New York
LAMAR SMITH, Texas ZOE LOFGREN, California
STEVE CHABOT, Ohio SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, JR.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas THEODORE E. DEUTCH, Florida
JIM JORDAN, Ohio LUIS V. GUTIERREZ, Illinois
TED POE, Texas KAREN BASS, California
JASON CHAFFETZ, Utah CEDRIC L. RICHMOND, Louisiana
TOM MARINO, Pennsylvania HAKEEM S. JEFFRIES, New York
TREY GOWDY, South Carolina DAVID CICILLINE, Rhode Island
RAUL LABRADOR, Idaho ERIC SWALWELL, California
BLAKE FARENTHOLD, Texas TED LIEU, California
DOUG COLLINS, Georgia JAMIE RASKIN, Maryland
RON DeSANTIS, Florida PRAMILA JAYAPAL, Washington
KEN BUCK, Colorado BRAD SCHNEIDER, Illinois
JOHN RATCLIFFE, Texas
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona
Shelley Husband, Chief of Staff and General Counsel
Perry Apelbaum, Minority Staff Director and Chief Counsel
Subcommittee on Courts, Intellectual Property, and the Internet
DARRELL E. ISSA, California, Chairman
DOUG COLLINS, Georgia, Vice-Chairman
LAMAR SMITH, Texas JERROLD NADLER, New York
STEVE CHABOT, Ohio HENRY C. ``HANK'' JOHNSON, JR.,
TRENT FRANKS, Arizona Georgia
JIM JORDAN, Ohio THEODORE E. DEUTCH, Florida
TED POE, Texas KAREN BASS, California
JASON CHAFFETZ, Utah CEDRIC L. RICHMOND, Louisiana
TOM MARINO, Pennsylvania HAKEEM S. JEFFRIES, New York
RAUL LABRADOR, Idaho ERIC SWALWELL, California
BLAKE FARENTHOLD, Texas TED LIEU, California
RON DeSANTIS, Florida BRAD SCHNEIDER, Illinois
MATT GAETZ, Florida ZOE LOFGREN, California
ANDY BIGGS, Arizona STEVE COHEN, Tennessee
LUIS GUTIERREZ, Illinois
C O N T E N T S
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JUNE 13, 2017
OPENING STATEMENTS
Page
The Honorable Darrell Issa, California, Chairman, Subcommittee on
Courts, Intellectual Property, and the Internet................ 1
The Honorable John Conyers, Jr., Michigan, Ranking Member,
Committee on the Judiciary..................................... 5
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the
Judiciary...................................................... 4
WITNESSES
Mr. Steven E. Anderson, Vice President and General Counsel,
Culver Franchising System Inc.
Oral Statement............................................... 7
Professor Colleen V. Chien, Santa Clara University of Law
Oral Statement............................................... 8
Professor Adam Mossoff, Antonin Scalia Law School, George Mason
University
Oral Statement............................................... 11
Mr. John Thorne, Kellogg, Hansen, Todd, Figel and Frederick,
P.L.L.C.
Oral Statement............................................... 12
EXAMINING THE SUPREME COURT'S TC HEARTLAND DECISION
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TUESDAY, JUNE 13, 2017
House of Representatives
Subcommittee on Courts, Intellectual
Property, and the Internet
Committee on the Judiciary
Washington, DC
The subcommittee met, pursuant to call, at 10:03 a.m., in
Room 2141, Rayburn House Office Building, Hon. Darrell Issa
[chairman of the subcommittee] presiding.
Present: Representatives Issa, Goodlatte, Collins, Smith,
Chabot, Jordan, Poe, Marino, Labrador, Farenthold, Biggs,
Nadler, Conyers, Johnson, Jeffries, Lieu, Schneider, and
Lofgren.
Also Present: Representative Jackson Lee.
Staff Present: Joe Keeley, Chief Counsel, Zack Walz, Clerk;
and Jason Everett, Minority Counsel.
Mr. Issa. The Subcommittee on the Courts Intellectual
Property and the Internet will please come to order. Today's
hearing, ``Examining the Supreme Court's Decision in TC
Heartland Decision'' will include, but certainly not be limited
to the main question in everyone's mind here today: Have we
fixed a pervasive problem that has gone on for a decade? Or
have we half-fixed a pervasive problem? Or have we, in fact,
fixed the problem in the most innovative, industrious and,
perhaps, amazing and expensive lawyers will circumvent it
before we are done?
As we speak, new cases have been filed against Apple, yes,
in the Eastern District of Texas, and we are here today to say
what has the Supreme Court done, and will it be enough?
Patent trolls, in my opinion, are the scourge of the patent
world. We have, time and time again, attempted to stop patent
trolls while, in fact, being objected to by genuine innovators
who feel that they will be trampled in our effort to stop the
worst of the worst.
Local hotel chains, restaurants, small startups, have
spoken out against the impact of the demand letter, and the
effect it can have on their expanding businesses and, in fact,
an outright hold-up for extortion.
The bigger the legal bill--excuse me. A bigger legal bill
is not the definition of innovation. Now that the Supreme Court
has spoken in TC Heartland case, this subcommittee will hear
testimony about the impact of the decision and about what is
left for Congress to do.
As a patent holder that has been both a defendant and a
litigant in district court, in the ITC, and at the Fed circuit,
I understand the importance of a strong patent system with
strong patents that are not used to send endless streams of
demand letters. For companies with no presence in eastern
Texas, they are probably quite happy to be able to avoid
Marshall, Texas, its fine hotels, and its predictable outcome,
disproportionately in favor of the plaintiff.
The excellent research of Professor Chien shows that in the
wake of TC Heartland, many patent cases will migrate to
Delaware and California. No one should be able to--excuse me.
No one should be able to set up a sham business in order to
generate revenue in Tyler, Texas, or elsewhere.
I remain concerned that without reform, legitimate
businesses in the Eastern District of Texas will now face the
patent troll problem more directly. To the extent that the
Eastern District of Texas has benefited from patent trolls,
they will now suffer due to them. What business will want to
set up in--excuse me. What business will want to set up shop in
the Eastern District of Texas if it generates venue for the
most abusive litigation tactics? The rule of law is key to
preserving property rights, and nowhere is this more true than
with respect to intellectual property.
Intellectual property has become the backbone of the last
half of the 20th century, and without a doubt, will be the
leading revenue generator in the 21st century. Strong and
reliable IP protections depend on Congress getting the rules
right to both encourage the development and production of the
next generation of innovation, and to make sure that our lives
are better because of it.
The court's recent decision is a tremendous step, in my
opinion, in the right direction. However, additional efforts to
reign in the abuse by our Nation's--of our Nation's patent
system will need to happen. Today, we will hear
recommendations.
And with that, I would ask that the ranking member be able
to present his opening statement.
Without objection, the gentleman is recognized.
Mr. Nadler. I want to begin by thanking the chairman for
saying how good on timing I am.
Thank you, Mr. Chairman.
Today, we consider the Supreme Court's recent decision in
TC Heartland LLC versus Kraft Foods Group Brands LLC, a case
which significantly narrowed the venues statute governing
patent infringement cases. We are not here to question the
court's analysis, but rather to examine the impact this case
may have on patent litigation and on broader efforts to curb
abusive lawsuits.
TC Heartland involved the relatively arcane subject of
venue in patent infringement cases, but its potential impact on
innovation and on economic growth should not be underestimated.
If, as many people expect, it limits the flood of abusive
patent litigation, it could enable businesses across the
country to focus their resources on developing the next great
invention, rather than on defending against the next costly
frivolous lawsuit.
The issue in TC Heartland was how to define where
corporations deem to reside and, therefore, where venue is
proper in patent infringement cases.
In 1957 in Fourco, the Supreme Court held that under this
statute, a corporation resides only in the State of
incorporation. That was the law until 1990, when the Court of
Appeals for the Federal Circuit in VE Holding Corporation
versus Johnson Gas Appliance Company ruled that the definition
of corporate residence contained in the general venue statute
which governs most civil litigation applied to patent cases as
well. Under that definition, the corporate defendant resides
any place in which it is subject to a court's personal
jurisdiction for that case.
In practice, as applied to patent cases, this meant that
every business with the goods that entered the streams of
commerce could be sued in nearly any jurisdiction. The VE
Holding decision had a dramatic effect on patent litigation and
led to significant forum shopping by plaintiffs seeking
friendly jurisdictions for their claims.
Most notably, the Eastern District of Texas has developed a
cottage industry of patent litigation, with more than a third
of all patent cases between 2014 and 2016, for example, filed
in just that one district, despite having no natural connection
to patent intensive industries. Many of these cases are filed
by entities that are often referred to as patent trolls, who
use the courts as a weapon to extract settlements from innocent
defendants.
In many of those cases, it does not make financial sense
for a defendant to expend the resources necessary to litigate a
claim all the way to trial, and it is willing to settle even a
spurious claim.
Many defenders of the Eastern District argue that it is a
popular forum not because of any bias towards plaintiffs but
because its judges have developed expertise in the complex and
technical field of patent litigation, and because they
administer cases efficiently, and in a less costly manner than
elsewhere.
Critics, however, argue that judges in the Eastern District
are slow to act on motions to transfer venue, and that summary
judgment motions are denied at nearly twice the rate of other
courts, all of which puts pressure on litigants to settle,
which is, of course, the desired outcome for a patent troll.
The Supreme Court's decision in TC Heartland made no
mention of the Eastern District of Texas, or of the larger
debate regarding abuse of patent litigation. The court simply
reaffirmed the analysis defined in the Fourco decision and
held, once again, that in patent infringement cases,
corporations reside only in a State of incorporation, severely
limiting where venue is proper.
But whether or not the court had the current policy debate
in mind, many people believe that its decision will go a long
way toward curbing the abuses we have seen in recent years in
so-called patent troll litigation. On the other hand, other
observers think the decision will only make a marginal
difference, and instead of concentrating cases in the Eastern
District of Texas, we will simply see those cases migrate to
Delaware and the Northern District of California, although it
should be noted that neither jurisdiction is known to be
particularly welcoming to abusive litigation. More concerning
is the possibility that patent trolls have simply adapted their
tactics in light of the decision by shifting their focus to the
second part of the patent venue statute, which finds proper
venue, quote, ``where the defendant has committed acts of
infringement and has a regular and established place of
business,'' close quote.
If so, large retailers and others with a national physical
presence may continue to find themselves sued in any plaintiff
jurisdiction where they have a location, such as the Eastern
District of Texas.
Courts have held that physical presence is not even
required to satisfy this test, and this could spur much
litigation to find the boundaries of what constitutes a regular
and established place of business. New defendants may also be
targeted based solely on their presence in plaintiff-friendly
jurisdictions. Before we move forward with further efforts to
curb abusive patent litigation, it will be important to
understand the practical impact of TC Heartland. Will it be a
panacea that puts patent trolls out of business? Will it simply
force them to adjust their practices as they continue business
as usual? Or does the answer lie somewhere in between?
TC Heartland was decided just 3 weeks ago, and the ink is
barely dry on the opinion, which may make it difficult to reach
any solid conclusions today. But I hope our witnesses will help
us think through some of the many questions this decision has
raised.
I look forward to their testimony, and I yield back the
balance of my time.
Mr. Issa. I thank the gentleman.
Without objection, the chair may call a recess at any time.
And with that, we recognize the chairman of the full
committee, the gentleman from Virginia, Mr. Goodlatte.
Chairman Goodlatte. Well, thank you, Mr. Chairman. This
committee has regularly heard from American businesses
nationwide about the challenges that they face due to patent
trolling behavior. Patents of questionable quality have been
used to drag defendants into court, and loopholes in procedural
rules have been used to ensure that these cases are brought in
judicial districts that are favorable to these questionable
claims.
For example, venue has been repeatedly found to exist based
upon the creation of sham offices in what would appear to be
simple warehouses with no one actually working in them. The
Eastern District of Texas has been frequently cited by patent
reform advocates as a judicial district that is very favorable
to those with questionable patent claims.
In response to these challenges, the Judiciary Committee
held several hearings to document patent litigation abuses, and
in 2013, I authored the bipartisan Innovation Act that was
cosponsored by 16 of my colleagues to reign in abuses of our
patent laws. After several discussion drafts and hearings to
improve the legislation, the Innovation Act was passed out of
the Judiciary Committee by a bipartisan vote of 33-to-5. The
legislation then passed the House by an overwhelming vote of
325-to-91.
Since the House passage of the Innovation Act, the courts
have also taken some action, most recently by taking up the TC
Heartland case concerning venue. In this case, the defendant
headquartered in Indiana was sued in Delaware, despite the fact
the defendant was not even registered to do business in
Delaware and had no meaningful local presence there.
Much to the chagrin of patent trolls, the Supreme Court
unanimously found that venue in patent cases is grounded in
statute at 28 U.S.C. Section 1400. This means that a
corporation resides only in the State of incorporation for
patent venue purposes. This decision will close the door on a
loophole that allows patent trolls to hand-pick courts that are
favorable to them.
This morning's hearing has a range of witnesses who have
experienced the patent troll problem firsthand, including a
company that is faced with reducing its presence in the Eastern
District of Texas in order to avoid patent trolls. As its
testimony points out, patent trolls are causing direct economic
harm to the districts in which it operates, and also to small
startups whose company and resources are insufficient to
indemnify purchasers of their products.
We also have a witness this morning who can speak to the
expected change in filing patterns going forward, along with a
witness who can speak to the patent world at large.
Finally, the minority has invited a witness who believes
the Supreme Court has gone too far. I want to thank the
witnesses for making themselves available this morning, and I
yield back to the chairman.
Mr. Issa. I thank the chairman.
We will recognize the ranking member, if he wants to be
recognized, when he appears. He has been delayed at a
conference.
Without objection, all other members will be able to have
their opening statements placed in the record.
It is now my distinguished pleasure to introduce our panel.
But, first, I would ask all witnesses to please rise, raise
your right hand, to take the oath.
Do you swear that the testimony you are about to give will
be the truth, the whole truth, and nothing but the truth?
Please be seated.
Let the record indicate that all witnesses answered in the
affirmative.
Our witnesses today include Mr. Steven Anderson, Vice
President and General Counsel for Culver Franchising Systems,
Inc.; Professor Colleen Chien, Associate Professor of Law at
Santa Clara University School of Law; Professor Adam Mossoff,
Professor of Law at--oh, at Antonin Scalia School of Law at
George Mason, how appropriate; and Mr. John Thorne, partner at
Kellogg, Hansen, Todd, Figel & Frederick, and probably several
other people no longer with us, law firm. I am sorry, that is
not right.
And as promised, it is now my pleasure to introduce the
gentleman from Michigan, the ranking member of the full
committee, for his insightful opening statement.
Mr. Conyers.
Mr. Conyers. Thank you, Mr. Chairman, and my colleagues,
and distinguished witnesses, and friends assembled. Our
Nation's economic future depends on the ability of inventors to
innovate and create, while at the same time being able to
efficiently and effectively protect their products.
Accordingly, Congress must continue to ensure that we
promote policies that will provide for a strong patent system.
As part of our ongoing oversight on this issue, today's hearing
provides an excellent opportunity for us to consider the impact
of the Supreme Court's recent decision in TC Heartland versus
Kraft Foods Group Brands on our patent system.
In the Heartland decision, the Supreme Court unanimously
clarified the venue rules governing patent infringement
litigation. The court held that a corporation is deemed to
reside only in its State of incorporation in patent
infringement cases.
As we consider the impact of this decision and the issue of
abusive patent litigation, there are several factors to keep in
mind. To begin with, one of the most effective steps we can
take in responding to abusive patent litigation is making sure
poor quality patents are not issued to begin with. To do that,
patent examiners must have the resources to review and analyze
the hundreds of thousands of complex and interrelated patent
applications they receive every year.
If the Patent and Trademark Office receives all of its fees
and is protected from the unpredictability of the annual
appropriation cycle, this will encourage innovation and ensure
that our patent system remains the envy of the world.
Secondly, we should examine how broad of an impact the
Heartland decision will actually have. After the decision was
issued, some have construed its impact as having a positive
effect on abusive patent litigation because it, arguably,
places tighter limits on where patent lawsuits may be filed.
But, on the other hand, there are those, including one of
today's witnesses, who says this decision will have a limited
impact.
To that end, I would appreciate the witnesses' thoughts on
the following questions: Does TC Heartland sufficiently tighten
the venue rules to prevent abusive patent litigation? Will this
decision overly restrict the rights of patent owners? How will
pending cases be affected where venue is no longer proper? And,
finally, will plaintiffs be able to avail themselves of other
avenues to continue forum shopping?
In addition, we should assess how this decision will affect
litigation in the Eastern District of Texas, which as we have
learned from our previous hearings, has spawned a growth of
patent litigation in that district.
And, finally, we must take a cautious approach to any
future legislative proposals.
For myself, I continue to support reasonable changes to
improve and enhance the patent system, but cannot support any
changes, which taken as a whole, will undermine our Nation's
patent system.
Over the last several Congresses, we have been examining
how to prevent abusive patent litigation generally and
specifically with respect to the patent venue system.
The TC Heartland case was just handed down last month.
Clearly, additional time will be needed to assess its
ramifications and how it will be implemented.
I thank the chairman for holding this important hearing. I
appreciate the witnesses for participating in this timely
endeavor.
Thank you.
Mr. Issa. I thank the gentleman. We now go to our
witnesses. Under a 5-minute rule, we have a wonderful, highly
automated system, but to keep it simple, stay as close as you
can to those 5 minutes. And there is extra points for those who
come in underneath.
Mr. Anderson.
STATEMENTS OF STEVEN ANDERSON, VICE PRESIDENT AND GENERAL
COUNSEL, CULVER FRANCHISING SYSTEM, INC.; PROFESSOR COLLEEN
CHIEN, PROFESSOR, SANTA CLARA UNIVERSITY SCHOOL OF LAW;
PROFESSOR ADAM MOSSOFF, PROFESSOR, ANTONIN SCALIA LAW SCHOOL,
GEORGE MASON UNIVERSITY; AND JOHN THORNE, KELLOGG, HANSEN,
TODD, FIGEL & FREDERICK, P.L.L.C.
STATEMENT OF STEVEN ANDERSON
Mr. Anderson. Subcommittee Chairman----
Mr. Issa. Oh, and microphone on is when we start the clock.
If we don't hear you, we won't start the clock.
Mr. Anderson. Subcommittee Chairman Issa, Ranking Member
Nadler, and members of this subcommittee, I am Steve Anderson,
vice president and general counsel of Culver Franchising System
Inc. Thank you for the opportunity to testify about the TC
Heartland decision and the ongoing impact of abusive patent
litigation on Culver's restaurants. My testimony, on behalf of
Culver's today, also represents the views of the National
Restaurant Association and the United For Patent Reform
Coalition.
Culver's is a family business that opened its first
restaurant in Sauk City, Wisconsin, in 1984. Today, there are
over--there are 624 Culver's restaurants with a total of 24,000
employees serving customers in 24 States. All but eight of our
Culver's restaurants are franchised, which means they are
individually owned and operated family businesses.
Just 2 months ago, an infringement action was filed against
Culver's in the Eastern District of Texas. The plaintiff claims
their patents covering the very abstract idea of sending
promotional offers to a mobile device. The plaintiff asserts
that its principal place of business is in Plano, Texas, but
when we had someone visit that address just last week, they
found nothing but one locked room office with no one there.
As far as we can tell, plaintiff's principal place of
business, you can see it right here, is nothing but an address
from which to sue other companies. It is a mailbox with a door.
This is in stark contrast to our business, which has been
located in Wisconsin for nearly 33 years, and we have 124
employees working there. Yet, in this suit, here we go again,
being forced to use our time and resources to hire high-priced
defense attorneys to defend another questionable patent
infringement claim more than 1,000 miles away from our home
office in a court that is known to be friendly to patent
trolls, instead of using those resources to drive traffic to
our franchisee's businesses.
I know the TC Heartland decision has been touted as a cure
to rampant venue shopping by patent assertion entities.
Unfortunately for us, venue--the patent venue statute still
provides that patent infringement actions may be filed in the
State where the defendant has a regular and established place
of business.
For businesses that operate from bricks and mortar
locations in multiple States such as Culver's and many other
restaurants and retailer chains, this decision is likely to
have no impact.
And what is our regular and established place of business
in the Eastern District of Texas that subjects us to this
jurisdiction? We have three Culver's, all of which are
franchised, located in this district. And those three
restaurants, collectively, generate less than one-third of 1
percent of our revenue. Despite this, we find ourselves back in
the Eastern District of Texas.
With the patent venue statute and the TC Heartland decision
as they stand to date, we will continue to see venue shopping
and patent infringement claims against us as well as other
bricks and mortar businesses. To avoid the seemingly inevitable
situation, Congress must act swiftly to correct the inequity in
the patent venue statute that was not fixed by the TC Heartland
decision.
And while we support patent reform concerning venue, please
know that this alone will not resolve the patent troll problem.
I also urge you to revise patent litigation reform efforts to
curb frivolous behavior and stiff--and shift the economic
incentives away from patent trolls making baseless claims.
I do, however, want to address one development that has
been particularly useful to businesses like ours in fighting
patent trolls; that is, the U.S. Supreme Court decision in
Alice v. CLS Bank. The decision created a two-step framework to
distinguish low-quality patents for abstract ideas and
activities done simply on a computer from high-quality claims.
In 2011, Culver's, along with dozens of other restaurants
and retailers, was sued in the diet cola case in Eastern
District of Texas. The plaintiff claimed that we infringed upon
their patents simply by using an online calculator that added
and subtracted nutritional information.
Thankfully, due to the Alice decision, the courts found
that the diet cola patent was drawn to patent ineligible
subject matter and was invalid, resulting in dismissal of the
case against Culver's and other defendants.
The Alice decision gives Culver's a reasonable opportunity
to defend against low-quality infringement claims before
entering into the cost prohibitive discovery stage of
litigation, which effectively forces a settlement.
In closing, let me be clear about one final and important
point, Culver's fully supports the ability of individual
inventors and legitimate patent holders to market their
products and bring claims to protect their intellectual
property. But we also believe that appropriate patent
litigation reform can continue to protect incentives for
innovation while discouraging the exploitation and abuse that
runs rampant in the patent system today and actually stifles
innovation.
Mr. Issa. Thank you.
Mr. Anderson. Thank you once again.
Mr. Issa. Thank you.
Professor Chien.
STATEMENT OF COLLEEN V. CHIEN
Ms. Chien. Chairman Issa, Ranking Member Nadler----
Mr. Issa. If you could pull the microphone just a little
closer. Thank you.
Ms. Chien. Here we go.
Chairman----
Mr. Issa. And turn it on.
Ms. Chien. Oh, yes. That would help.
Mr. Issa. Thank you.
Ms. Chien. On the third try.
Chairman Issa, Ranking Member Nadler, Chairman Goodlatte,
and Ranking Member Conyers, thank you so much for inviting me
to testify today. I will address three issues: The likely near-
term impacts, possible long-term impacts, and opportunities and
risks associated with the TC Heartland decision. In other
words, what just happened? What will happen? And do we need to
do anything about it?
My coauthor, Professor Michael Risch of Villanova is not
here today, but he deserves much credit for the research I will
present. The opinions I express are solely my own.
What just happened? The short answer is that the Supreme
Court decided that the patent--that patent cases must be
brought on defendants' turfs, not plaintiffs'. This is a sea
change that will substantially curb forum shopping and impact
every single patent case, but it is also a return to business
as usual over the long arc of patent history. What do I mean?
For most of the 200-plus years of the patent system, the
rule has been that patent holders can sue only where the
defendant inhabits or is present. This was the law of all civil
cases for the first 100 years or so. For the next 100 years,
civil venue changed, but patent venue stayed the same.
But from about 1990 to about 3 weeks ago, things took a
detour. The Federal circuit's decision flipped the rule,
changing proper venue from defendant's turf to plaintiff's
choice. I wanted to provide that context just so we understand
that when the Supreme Court decided the TC Heartland decision
it, in effect, restored the longstanding rule. That is what
just happened.
The honest answer to the question what will happen after TC
Heartland is, of course, no one really knows. But the upshot is
that all plaintiffs will have fewer options. Patent trolls
won't be able to file as easily in the Eastern District of
Texas or wherever they want, but neither will California
companies or individuals from Georgia.
Based on our number crunching, which we applied the new
rule to about 1,000 cases, about 60 percent of patent trolls
would need to move their cases, not all of them, but 60
percent. But 50 percent--51 percent of operating companies
cases would also move as well. Individuals and universities
would have to move less than either trolls or operating
companies we found.
Defendants will benefit. After all, it is their turf now,
but less uniformly. The smaller you are, the less likely you
are to get dragged into an unfamiliar venue. That is good news
for startups and small businesses, though it might mean going
to Delaware instead of Texas.
But firms that are present all over like Culver's and
others, retailers, can still be sued all over. Foreign
defendants will get no relief.
What about the districts? Again, our best guess is that
cases will be more evenly distributed, although still
concentrated in the top three. The Eastern District will see
hundreds fewer cases, and Delaware and districts in California
will see many more, though not more than they have ever seen.
We are already seeing this start to happen.
Now, how many cases are going to move? Specifically, it is
hard to tell, and some cases are not going to survive that. But
so far, based on the predictions we have made and looking at
2017 trends, things are moving in those directions.
But beyond less forum shopping, though, we should see other
positive impacts. That is because in my personal opinion, the
rise of the Eastern District has stunted other parts of the
patent system. At most Federal, the things like interparty
review, section 101, and the Alice decision that Mr. Anderson
referred to, and even the patent pilot program, have been
implemented differently in the Eastern District than in the
rest of the country.
Lax venue has enabled parties to, in effect, select a
different plaintiff-friendly version of the system. While
differentiation is healthy, the districts' gamesmanship has not
been. TC Heartland will have a positive multiplier effect,
advancing not only patent law, but a more consistent,
predictable, and uniformed patent system.
What might the subcommittee do? Well, what else might
happen is anyone's guess. The subcommittee could keep its eye
on three things, going to the questions presented by the
chairman and Ranking Member Conyers.
First, we could see adaptation. Instead of going away,
trolls may adapt their behavior. We have certainly seen this
before with response to the joinder rules. They, in this case,
could focus on foreign defendants and defendants with large
footprints, like retailers and their customers. Customers' stay
or other provisions may become more urgent.
You also may see a move from moderation. Patent holders may
say that a more moderate rule is appropriate, because if the
rule before was plaintiff-friendly, then the current rule, the
century's old rule, could be considered defendant friendly with
equity, perhaps, lying somewhere in between.
TC Heartland impacts all plaintiffs, but the Senate's VENUE
Act, which we also modeled, takes a more surgical approach,
impacting a majority of troll cases but only a minority of
nontroll ones.
Finally, other problems can remain unresolved or get worse.
The best options for small defendants, while less expensive
than litigating in Texas, still costs tens or hundreds of
thousands of dollars, making nuisance settlements attractive.
The small plaintiffs, likewise, who can't afford to defend
against challenges to their patents, will have fewer options to
sell them. Poor patent quality as well as changes to the law
are expensive to keep up with, placing the smallest parties at
a disadvantage. How we encourage innovation in the patent
system through technology transfer, licensing and
commercialization, not litigation, should remain in the
subcommittee's view.
I thank and commend the subcommittee for its commitment and
attention to the proper functioning of the patent system.
Mr. Issa. Thank you.
Professor Mossoff.
STATEMENT OF ADAM MOSSOFF
Mr. Mossoff. Chairman Issa, Ranking Member Conyers, Ranking
Member Nadler, and members of the subcommittee, thank you for
this opportunity to speak with you today about TC Heartland and
its impact on the innovation economy.
My name is Adam Mossoff, and I would like to note that I am
speaking in my personal capacity as a law professor at Antonin
Scalia Law School at George Mason University, and not on behalf
of my employer or of any other organization with which I am
affiliated.
It is undeniable that there are a handful of bad actors in
the patent system, just as there are in every other area of
law. The important question is whether there is a systemic
problem requiring legislation like the Senate's VENUE Act, or
court decisions like TC Heartland that restrict rights for all
patent owners, such as individual inventors, small businesses,
universities, and even the long-established R&D intensive
companies working in the high-tech and bio-pharmaceutical
sectors.
These patent owners rely upon stable and effective property
rights to create and commercialize new technological
innovation. Unfortunately, the impact of the TC Heartland
decision is that it further weakens the ability of all patent
owners to protect their property rights against infringers.
In this context, TC Heartland is very concerning given the
recent erosion of patent rights and many other Supreme Court
decisions, and in legislation over the last decade that have
consistently restricted and weakened all U.S. patent rights.
In the U.S. Chamber of Commerce's annual ranking of
countries' IP systems, the U.S. patent system has now slipped
this year from its long-held rank of number 1 in the world to
number 10. Adding TC Heartland to this mix further contributes
to this deeply concerning decline of what was once a gold
standard patent system. Congress should care about this,
because this imperils our innovation economy, threatening both
jobs and economic growth.
The advocates for a more restrictive venue rule do not
discuss or acknowledge the resulting costs to inventors,
startups, small businesses, universities, and R&D intensive
high-tech and bio-pharmaceutical companies. But like the
economic law of supply and demand, refusing to acknowledge
real-world costs neither negates them nor makes them go away as
a policy concern.
The reason why there are high costs for all patent owners
now in seeking protection of their property rights is that TC
Heartland, like the VENUE Act, does not change the
concentration of patent lawsuits in a few districts. As
Professors Chien and Risch's study show, out of 94 total
districts, it only shifts the lawsuits from one district to
two: from the Eastern District of Texas to the Northern
District of California and the District of Delaware.
The District of Delaware and Northern District of
California are widely recognized as more friendly jurisdictions
for defendants who are sued for patent infringement. This
explains why the many amnesty who supported TC Heartland
comprise mostly the same companies that have been lobbying for
the Senate's VENUE Act.
High-tech companies and retailers with an online presence
who were sued in the Eastern District of Texas, they responded
to this through lobbying and strategic litigation. They want
these lawsuits to be in districts that are more favorable to
them, either the classic home-court advantage for the high-tech
companies in Silicon Valley in the Northern District of
California, or through the higher costs imposed on plaintiffs
from the long delays of litigation in the District of Delaware.
This is significant for patent owners who are
undercapitalized and are very sensitive to litigation costs.
For example, Dallas inventor Josh Malone reports that he has
already spent $12 million of his own money suing numerous
defendants selling pirated knockoffs of his patent invention.
Now, as an aside, Josh Malone meets the definition of patent
troll that is being used today by many of--by many people in
the patent policy debates.
He told me last week that, quote, ``Filing suit in every
defendant's place of incorporation will be impossible to
afford,'' unquote, and that, quote, ``TC Heartland will be the
nail in the coffin for any would-be inventors or startups that
rely on patents to protect their technology,'' end quote.
The main takeaway from TC Heartland is that it is now more
expensive for everyday patent owners to protect their property
right against infringers. This weakening of U.S. patent rights
by the Supreme Court undermines the foundations of the U.S.
innovation economy, sinking economic growth and killing jobs.
The media is already reporting on venture capital going
overseas to China. In an article published just 2 weeks--2
months ago, your next cancer drug may come from China, The Wall
Street Journal reported on R&D investment shifting to China,
given the inability of U.S. companies to get patents on their
bio-tech drugs. Now that the TC Heartland decision has followed
the same pattern of these many other Supreme Court decisions
that narrowed or eliminated outright patent rights, Congress
should take special care not to pursue any legislation that
would further weaken inventors' abilities to protect their
property rights.
There are tradeoffs in all changes to legal rules. As with
all matters in which the innovation economy, economic growth,
and jobs are at stake, the guiding principle for patent
legislation ought to be, first, do no harm. Thank you.
Mr. Issa. Thank you.
Mr. Thorne.
STATEMENT OF JOHN THORNE
Mr. Thorne. Mr. Chairman, Mr. Ranking Member, other members
of the subcommittee, thank you for holding today's hearing.
I am a partner at a trial firm, and I have represented both
plaintiffs and defendants in patent cases. I have been in the
Eastern District of Texas on both sides. Today, I am expressing
just my own views, not the views of any clients or my law firm,
to the extent that my law firm would have views here.
TC Heartland will have a positive effect on U.S. patent
litigation and, therefore, a positive effect on real
innovation. Going forward, we will not have 40 percent of all
patent cases filed in a single district with 1 percent of the
U.S. population. The citizens of Marshall, Texas, currently,
until 3 weeks ago, were 500 times more likely to serve on a
patent jury trial than an average U.S. citizen. They are going
to get a reprieve.
Cases that remain in the Eastern District of Texas will now
get more attention from the judges there who were overburdened
by the docket. Going forward, for example, the Eastern District
of Texas, judges might be able to reconsider their standing
rules, which generally discourage any pretrial motions which
will stop an unmeritorious case from going to trial.
So to echo the chairman's opening, I guess, venue issues
are not over. There will be important fights on two fronts:
First, what constitutes a regular and established place of
business; and second, when, in the interests of justice, should
a District Court transfer to a more convenient forum?
So just a word about TC Heartland itself as a decision.
Professor Mossoff's testimony, written testimony, says TC
Heartland was, quote--this is on page 1 of his testimony--``a
result of extensive lobbying.'' Quote, ``TC Heartland arose
from a coordinated campaign of lobbying, strategic litigation
and public relations efforts.'' On page 3 he says, ``Heartland,
TC Heartland, was hijacked by the campaign to weaken patent
rights.'' Nothing in the opinion supports those statements.
And as the ranking member said in his opening, TC Heartland
doesn't talk about patent policy. The words ``Texas'' and
``Marshall'' don't appear in the opinion.
Professor Mossoff also says, ``TC Heartland is one-sided
and unbalanced in its result.'' I think he is right there in
the sense that all eight justices voted to bring the law back
to what Congress had written originally. It was eight-to-zero,
because Justice Gorsuch hadn't been appointed and confirmed
quickly enough to be able to hear the case. But Justice Thomas'
decision for the court cited Justice Scalia's work as further
authority for the opinion. So if Justice Scalia were still with
us, maybe it would have been nine-to-zero.
So a word or two about what hasn't finished. As the ranking
member noted at the beginning, section 1400(b), the venue
statute, has a second half. In addition to talking about where
the defendant resides, venue may exist, quote, ``where the
defendant has, first, committed acts of infringement; and,
second, has a regular and established place of business.'' I
looked, and I could not find any modern cases interpreting the
second half of that provision. And the reason was you could
find venue anywhere. You didn't need to focus on the more
exacting standard.
So three ideas for how that ought to be interpreted by the
courts and, perhaps, fixed by Congress if that becomes
necessary:
First, 1400(b) should be interpreted according to its plain
text and ordinary meaning. So regular and established should
not be rendered meaningless. Some places of business, maybe the
Culver restaurants, should be considered not sufficiently
regular or established to satisfy 1400(b), nor should courts
ignore the term, ``place of business.'' Place is a physical
place, it is not cyberspace.
Second idea, this is a venue statute. So it is not about
the court's power to reach conduct but the judgment of where
should the courts take cases. That is about efficiency,
convenience, and fairness.
In most patent cases, unlike the general run of commercial
litigation, the evidence is in the hands of the defendant. The
location of the evidence will drive the efficiency and the
convenience and the fairness of the case, meaning you want to
hear the case where the product was manufactured or designed.
So selling a product from one State to another, and having the
product delivered shouldn't create venue. In fact, that is the
exact conduct that TC Heartland said didn't create venue here.
And last, and I will stop and say more maybe in response to
questions, it is important for 1400(b) to be interpreted to
avoid perverse incentives on business. It didn't used to matter
where--in the TC Heartland world, it didn't matter how you
thought about regular established business. You could be found
any place if residence just meant personal jurisdiction's
reach.
But now going forward, companies are going to be faced with
a choice, do we keep our restaurants in the Eastern District of
Texas? Do we allow workers to work remotely in places that
would be unfavorable forums? If the courts are not careful, the
incentives will be against employees, against growth, against
building things, and the correct way to look at this is where
is the evidence necessary to have a fair and efficient trial?
That is the proper place for venue.
And so, just one more word, which is, I think I agree with
the sentiments that have been expressed that it is just too
soon following TC Heartland for Congress to intervene, but I
would urge you to monitor this.
And thank you, again, for the opportunity to be here.
Mr. Issa. Thank you. And I would suspect that there may be
less need for fast food restaurants in Marshall pretty soon
anyway.
With that, it is my pleasure to go to the chairman of the
full committee for his round of questionings. The gentleman
from Virginia is recognized, Mr. Goodlatte.
Chairman Goodlatte. Thank you, Mr. Chairman.
Mr. Anderson, thank you for your testimony. Can you tell
the committee in some more detail how patent trolling
discourages you from buying products from smaller companies and
startups?
Mr. Anderson. Sure. We have had four instances with patent
trolls, which cost our company hundreds of thousands of
dollars. As a result, we shy away from technology. Our
customers want the use of technology. And when I say
technology, I am talking website, social media; not high
technology, just basic technology. But we shy away from it
because we have been stung four times, I anticipate it will
happen again, using things like cell phones and social media
and website-type things. So when my marketing department comes
to me with an idea, even though our customers want technology,
through mobile ordering and things like that, our guests
certainly do and our franchisees do, and we owe it to our
franchisees, we take a step back, and we are very careful,
because there is no way to check ahead of time before we
engage. And when we do, we are very wary of the small provider
who we would love to give the business to, but who can't
indemnify us from a patent troll.
Chairman Goodlatte. Thank you.
Mr. Mossoff, I get your concern about what is going to
happen with how cases are heard elsewhere around the country,
but I can't believe you think it is acceptable for one judge to
hear 25 percent of all the patent cases in the country, and
they go to him not because it is a special patent court but
because the historic results there are especially pleasing to
one form of party in the patent cases. That is not a good
solution, is it? The current environment?
Mr. Mossoff. Well, thank you, chairman, because that does
give me an opportunity to expand more upon the data that I
actually talked about in my written testimony.
There are--there have been a lot of allegations that the
Eastern District of Texas was pro-patent, but if you look at
whether there is any actual rigorous, data-driven statistical
studies that confirm this claim, one will find them wanting.
There is one informal study that looked at 18 cases that drew a
conclusion from 18 cases in one year that they had a higher
reversal rate at the Federal Circuit. But what you find,
actually, with longer studies by--for instance,
PricewaterhouseCoopers did a much longer study, which found
that the Eastern District of Texas had affirmative rates
largely in line, slightly below the rest--other districts
throughout the rest of the country.
So it is a little unclear, exactly, why we ended up in the
Eastern District of Texas. I think some of the indications
that--of why this happened may have been already raised by
Chairman Issa in the sense that the judges, for instance,
decided after the Supreme Court handed down the slew of what
are known as the 101 decisions, the patentable subject matter
decisions as to what counts as a patentable invention, they
said, Well, we can't assess whether this covers an unpatentable
invention until we know what the patent covers.
Chairman Goodlatte. Let me--I have only got so much time.
Mr. Mossoff. Okay.
Chairman Goodlatte. Accepting your argument, then why would
the Supreme Court decision moving these cases around the
country necessarily be anti-patent holder?
Mr. Mossoff. Well, as I indicated in my written testimony
and as--as well, the--is that both the Northern District of
California and the District of Delaware are recognized as being
more defendant-friendly jurisdictions counter to the Eastern
District of Texas, which is perceived, for some reason, to be
pro-patent.
Chairman Goodlatte. So, if we wanted to make sure that the
cases were not forum shopped by either the plaintiffs or the
defendants, then I think your answer would be, we shouldn't
rest with the Supreme Court's decision; we should look beyond
it and see what the implications are of the decision as it has
been made, because that is now the law of the land. The
Congress has to decide whether or not we need to do something
further with regard to venue to make sure that there is a
balanced approach, and that both plaintiffs and defendants feel
like they are going to have a fair opportunity to be heard in a
jurisdiction that has a reputation for fairness.
Mr. Mossoff. Well, I think that the exact issue here is
that we need to be concerned about the unintended consequences
and the costs imposed by the innovators.
Chairman Goodlatte. No question about it. That is why we
are having the hearing.
Mr. Mossoff. Yes.
Chairman Goodlatte. But if you have some ideas on what this
committee should do beyond the Heartland case, we would
definitely welcome those.
Mr. Mossoff. I would--my recommendation would be to pause,
and to take and wait for the data on the impact of all of the
legislation and the Supreme Court decisions of the past 10
years, which have excessively limited, narrowed and
consistently come out, as I mentioned, limiting or narrowing
the patent rights of owners of patents in this country, which
highly affects, as I say, individual startups, small
businesses, universities, and the bio-pharmaceutical industry.
Chairman Goodlatte. I get that, but I would just say that
with regard to this particular venue case, I am not sure I buy
your argument. If you are citing data that says that this court
in eastern Texas is more balanced than the public perception
has been, and now the question is, okay, the court has made the
decision that has narrowed the places where plaintiffs can seek
redress, what should we do about it? What should we do in
response? Are we going to wait for years to see, or should we
look at the arguments that you and others are making and decide
what response Congress should make to a court decision, that
Congress has the ultimate legislative authority here?
Thank you, Mr. Chairman. I appreciate it.
Mr. Issa. I thank you, Mr. Chairman. And I might note that
you have pending legislation that lies somewhere between do
nothing at all and overreact. So hopefully, that middle ground
is coming this year.
And with that, I recognize the ever smiling and jovial
ranking member and former chairman of the full committee, Mr.
Conyers.
Mr. Conyers. Thank you, Mr. Chairman.
Let me start off with Professor Mossoff. Can you explain,
sir, why you believe the TC Heartland decision restricted
patent rights for all patent owners?
Mr. Mossoff. It impact--yes, because it changes the ability
to file patent infringement lawsuits for all patent owners--no,
it changed the law with respect to venue for all patent owners
under section 1400 of the U.S. Code. And so it applies to Josh
Malone, the Dallas-based inventor, for instance, just as much
as it applies to other companies and individuals. And it
applies to all universities, all startups, all small
businesses, and the bio-pharmaceutical industry, who actually
engages in significant litigation in the Hatch-Waxman regime,
and this will actually make it more costly for them as well as
a result.
Mr. Conyers. So is legislation still necessary, in your
view, to make the venue statute more fair to patent holders?
Mr. Mossoff. I believe that the legislation is necessary to
balance out the patent system in what has become an unbalanced
and biased system against patent owners. We need to have broad-
ranging, balanced system to promote innovation.
And as I mentioned, a significant number of decisions from
the U.S. Supreme Court, both on what counts as a patentable
invention, how you license patent inventions, how you litigate,
and what remedies you give have consistently come out in favor
of defendants and accused infringers and not in favor of patent
owners, and this has led to the situation that I mentioned in
my opening remarks how we have now slipped from number 1 to
number 10th in the world in U.S. Chamber's famous ranking of IP
systems.
Mr. Conyers. And why do you believe that the Heartland
decision will impose higher costs on all innovators?
Mr. Mossoff. So, for instance, Josh Malone, to come back to
my individual inventor who I would recommend and commend as a
witness, perhaps, to understand the impact of potential future
legislation and the TC Heartland decision, now has to file suit
in Delaware and/or in the Northern District of California where
the--where the defendants would be incorporated. And he can't
file suit in Texas, where he is based and where they may or may
not be doing business under what is a highly variable and
unsettled definition of regular and established business in the
case law.
So he--so unlike before, he now has to hire counsel in
Delaware to represent him, and he has to travel to Delaware,
and the same as hiring counsel in California. So this just
imposes an additional cost on top of the $12 million that he
has already spent to defend his patents, even in Texas.
Mr. Conyers. Okay. Very good.
Mr. Thorne, what questions are unresolved, in your view,
after the Heartland decision? Do you think that how to
determine venue for foreign corporations, including those in--
those with U.S. subsidiaries remains unresolved?
Mr. Thorne. Thank you for that question. Foreign defendants
currently can be sued wherever they can be found, and that may
be clear, and it may require additional clarification. We will
have to see on that. But the most important unresolved
question, though, is one you touched on in your opening
remarks, which is, what should count as a regular and
established place of business?
And the courts are going to work that out in--at the
District Court level, I hope, in the next few weeks and months,
and we will probably see from the Federal Circuit in the next
year to 2 years what the Federal Circuit thinks on that issue.
My experience is that in patent cases, the defendants, or
the defendant's supplier, tends to have the evidence that is
necessary to determine whether there is an infringement. And
the most efficient way to make that determination is filing
someplace you can get that evidence. And the plaintiff's side
of it is important too, but it is typically right that a
plaintiff's side of the case has been submitted to the patent
office with the application. The patent itself describes what
the patent covers, and it has the prior art that the inventor
had. So the plaintiff has less to do and in the case of a non-
practicing entity, there may be a door with a number on it like
what you saw in the picture, but not much more. The NPEs, the
non-practicing entities, don't have much evidence to bring to
bear. So their location matters less to the efficient, fair
resolution.
Mr. Conyers. Thank you.
Squeezing one in for Professor Chien. In your testimony,
ma'am, you noted that no one really knows what will happen
after the Heartland case. Do you believe that all plaintiffs
will have fewer options for where to file?
Ms. Chien. Yes. Thank you for the question, Mr. Conyers.
The decision essentially goes from being a rule where
plaintiffs could file anywhere they want to now having to file
on defendant's turf. So that will mean fewer options for all
plaintiffs.
However, against certain defendants, they are still going
to have a lot of options. So if you are a retailer, and you
have places of business everywhere, which is what we want to
encourage, and we want to encourage employment in every
district, that also subjects you to jurisdiction in all these
different places. If you are foreign, that is the case. But if
you are small, you don't have very many places of business. You
will likely be sued only in your own areas, and near your
headquarters.
Mr. Conyers. Thank you so much.
Thank you, Mr. Chairman.
Mr. Issa. Thank you, Mr. Ranking Member.
With that, we go to the gentleman from Pennsylvania, Mr.
Marino.
Mr. Marino. Chairman, may I reserve at this point?
Mr. Issa. Absolutely.
We--the gentleman from another part of Texas, then, Mr.
Farenthold.
Mr. Farenthold. Thank you very much. And I don't represent
the Eastern District of Texas. I would rather be----
Mr. Issa. And I want to thank you for that.
Mr. Farenthold. All right. I do have a couple of questions.
Mr. Mossoff, you indicated that the studies showed that,
actually, the Eastern District of Texas reversal rate was only
substantially--was only slightly higher than other districts
over a longer term. Is that correct?
Mr. Mossoff. It was framed in terms of affirmance rates
from PricewaterhouseCooper's. It was--the affirmance rate was
slightly less than other districts, yes.
Mr. Farenthold. All right. So based on the number of patent
cases that are heard there, it would seem like that court would
have developed a level of expertise where they wouldn't be
being reversed as often. How would you explain that other than,
perhaps, they are a little more plaintiff-friendly?
Mr. Mossoff. It is--from what I understand, and I have not
gone into the details behind the PricewaterhouseCooper's number
and methodology. It is a statistically relatively insignificant
difference. So it is not something that you can draw any
systemic inference about--about a--as an institutional matter
or practice.
Mr. Farenthold. And the chairman asked Mr. Anderson about
the impact on startups. I would like to ask a similar question
to Ms. Chien.
What effect does the NPE problem or issue, depending on how
you look at it, what effect do you see that having on startups?
Ms. Chien. So there are a number of different ways in which
it is harder in the system if you are a little guy. If you are
a defendant and faced with a suit, then that is something that
ends up taking up a lot of your time, a lot of your management,
attention. And essentially, when startups are young, they are
very fragile. So any sort of disruption like this can be very
devastating. So in a survey that I did in 2012 and 2013,
several surveys, I was surprised to see that startups said that
they would make huge changes in response to getting a letter.
And it is not dissimilar to what Mr. Anderson talked about,
pivoting the products, changing the course of the business,
delaying hiring, and making substantial changes in order to pay
for and deal with litigation.
And in that light, you can see why settlement is very
attractive. Using settlements of below 10,000, you know, are
something that are still happening.
And so, I want to actually take this opportunity to address
the questions that were asked earlier about whether or not the
Eastern District, in fact, is more favorable to plaintiffs. And
Professor Mossoff is correct that the rates in terms of
reversals and affirmances may not show a huge spread, but what
we found--and this is detailed in my paper with Professor
Risch--is that there is this perception of more friendliness
based on the favorable ways and procedures that the district
takes out.
So the substantive law is not different, but the procedures
are different. So you won't get your 101 motion heard in a
timely matter, the relief that Mr. Anderson talked about. You
won't get your case stayed for the patent office to revisit its
validity.
So if you look at the report actually done on a totally
separate topic, the patent pilot program, last year at its 5-
year mark, they mention all the ways in which litigating in the
Eastern District is different. Only 1 percent of eastern
district cases reach a judgment as compared to 7 percent
nationwide because people are looking for these quick
settlements. If I am a startup, I am not going to want to go
ahead and spend my time litigating this case all the way, and
then get it appealed.
Mr. Farenthold. Startups work at warped speed. I
understand. I have got one more question for you, and I am
running out of time. I don't mean to cut you short. I saw some
of that data in your written material, so.
Mr. Farenthold. Over the past several years, the Judiciary
Committee has examined the rise in venue abuse, not within the
district courts, but also the rise of the ITC as an alternative
forum for these types of disputes. I have introduced
legislation, along with Congressman Cardenas, called the Trade
Protection Not Troll Protection Act, which basically deals with
the ITC jurisdiction.
Do you see TC Heartland increasing or decreasing ITC
litigation as forum shopping, and what do you see happening
there?
Ms. Chien. That is a great question. I think we will have
to keep our eye on that. But I will say that one development
that has been interesting is thinking about the different
options that the committee and Congress have created through
inter partes review, the ITC, the district court, and the
different options there, now you see a lot of folks electing
into using inter partes review at the PTO. So some of the
competition, I think, that has been created through that new
procedure has migrated traffic towards there and perhaps away
from the ITC to some degree.
Mr. Thorne. May I add a word to that?
Mr. Farenthold. My time has expired. With the chairman's
indulgence, I will be happy to let Mr. Thorne answer.
Mr. Issa. The gentlemen certainly may answer.
Mr. Thorne. I have seen in the past 3 weeks patent
plaintiffs looking at the ITC as an alternative to the Eastern
District of Texas and also Germany. There is a chance that
Germany may also become one of the next forums of choice.
Mr. Farenthold. Thank you very much. My time has expired.
Mr. Issa. We go to the gentlemen from New York, the ranking
member of the subcommittee, Mr. Nadler.
Mr. Nadler. Thank you very much, Mr. Chairman.
Mr. Anderson, press reports immediately after the decision
labeled it a clear victory over patent trolls and declared that
it would be a death knell for patent litigation in the Eastern
District of Texas.
Your testimony indicates that, for many brick-and-mortar
businesses with locations in the Eastern District, it may
continue to be business as usual. Is there a danger that we
will see two classes of defendants, those of proper venue in
Texas and those without? Will we see new classes of defendants
facing litigation merely because venue is proper against them
in plaintiff-friendly jurisdictions?
Mr. Anderson. Well, I am not sure I understand the
question. I am certainly concerned, from our standpoint, in any
bricks-and-mortar businesses that have any presence in the
Eastern District of Texas. And I do--the decision may be good
for Internet businesses and businesses that don't have physical
presence, but bricks-and-mortar businesses, I don't see any
change. It all comes down to, from my understanding, the
regular established place of business and the lack of the
definition----
Mr. Nadler. Your answer is essentially yes. And now you
urge Congress to pass legislation to correct this inequity that
you identified, whereby only certain types of defendants will
benefit from TC Heartland, internet and so forth. Do you have a
specific proposal in mind?
Mr. Anderson. I don't have a specific proposal, but if we--
one thing is if we defined regular and established place of
business--we saw a picture of where, what we believe, is our
regular and established place of business, and that is where I
go to everyday when I am not here. And if we were to define
that more narrowly versus any of our 624 restaurants are
located, which promotes venue shopping, and retailers and
bricks-and-mortar businesses are all going to be in the same
situation as we are.
Mr. Nadler. Thank you.
Ms. Chien--Professor Chien, your study suggested that a
substantial number of cases that are currently filed in Texas
would simply move to Delaware and the Northern District of
California. I have two questions for you on this.
One, the second part of this statute, which was quoted by
Mr. Thorne, I think, finds proper venue where the defendant has
committed acts of infringement and has a regular and
established place of business, closed quote. Why will that
prevent forum shopping into the Eastern District of Texas? Why
won't--can't they simply rely on that language and keep doing
business as usual?
Ms. Chien. So I think the answer that Mr. Anderson gave
earlier is that some companies--for some companies and
defendants, the answer is yes, they will still be able to be
sued in the Eastern District. But for many--under what we
looked at, when we looked for where they were incorporated,
where they had established places of business, it was primarily
in other locations. So, for those defendants, they won't be
seeing cases in the same place.
Now, they will still have to travel, if they are not based
in Delaware, to Delaware, but the Delaware court does not have
the same plaintiff-friendly procedure, so they can expect to
get a more fair outcome.
Mr. Nadler. So what you are really suggesting is that we
will now have three districts: Eastern District of Texas for
some, the Delaware for some, and northern California for some.
Now, if cases being--end up being concentrated in three
districts rather than just one, will this decision be
considered a success in curbing abusive litigation? Or are the
judges in two of those jurisdictions likely to approach patent
cases in a--well, you have already stated that they are likely
to approach cases in a meaningfully different way than in
Texas. But are we likely to end up being in three districts
rather than just one, with some of them getting the advantage
of being in the other two districts?
Ms. Chien. Well, that is one thing to consider, which is
dynamic effects. Certain cases are not going to survive the
transfer. They only made sense when they were filed in Texas
and you could get a certain amount of settlement just from the
threat of being there.
Second of all, though, you will see then the sort of
dispersion--yes, still a high concentration within the three
districts, but what you will see is cases that are based more
on the merits and less on where you were able to get venue. And
so I think that is a healthy outcome, even if there still is
concentration in the top three.
Mr. Nadler. Thank you.
Mr. Thorne, your testimony describes many of the reasons
that plaintiffs favor the Eastern District of Texas and the
reasons defendants may find it unfair.
Setting aside this particular jurisdiction, however, is
there a value in concentrating patent cases in one or a limited
number of jurisdictions? Given the complex and technical nature
of these cases, should Congress consider selecting certain
courts to hear all patent cases or consider encouraging more
cases to be filed with courts participating in the Patent-Pilot
program?
Mr. Thorne. So I am a big fan of the Patent-Pilot program.
I think that is a great idea. That is in 13 different district
courts. As a general rule, not just for patent cases but for
all sorts of cases, you have got a concentration of power to
make the laws; that happens here. The application, if possible,
ought to be dispersed. Dispersal is better; it is healthier.
Mr. Nadler. Why?
Mr. Thorne. Because different judges will have different
experiences. And in the case of patents where--I really do
think it is where the evidence is that makes the case most
efficient. The evidence is going to be where the companies
decide to build their products. So that will be dispersed. By
the way, I don't agree that all the cases are going to the
Northern District of California and Delaware. The most prolific
patent filer--I cited this in my testimony--in the last couple
weeks filed five cases in Illinois.
Mr. Nadler. Four districts. Thank you very much. My time
has expired.
Mr. Issa. I thank the gentleman.
We now go to the gentleman from Arizona, Mr. Biggs.
Mr. Biggs. Thanks, Mr. Chairman.
Mr. Thorne, in your testimony, you conclude by saying that
maybe Congress should not do anything at this time, and yet you
talked about 1400(b), and it needs to be accurately interpreted
and particularly with the clause regular and established. Tell
me if Congress maybe should weigh in on that and expand the
definition for some kind of predictability.
Mr. Thorne. My advice is to give it a little bit of time.
Even Professor Mossoff, in his letter to Congress a year ago,
suggested on the topic of venue, give it a little bit of time.
I think if Congress has to weigh in, you will be able to better
tailor whatever is needed.
Mr. Biggs. Thanks.
Mr. Anderson, back to you. This gets to what the gentleman
from New York, Mr. Nadler, was talking about, I think when he
said two types of plaintiffs really or defendants; you have a
two-tier system basically where you have those who have brick-
and-mortar and places of business where you can identify, like
in your instance, three actual Culver's in the Eastern District
of Texas versus cyberspace. Do you have any language or what do
you think is the sweet spot there? How do you resolve the
difference in those two types of litigants?
Mr. Anderson. Professor Thorne talked about it a little in
his paper as well. The venue statute for patents is different
than venue in the nonpatent arena. And in the nonpatent arena,
you are looking for efficiency and convenience and fairness,
because the patent statute talks about the regular and
established place of business.
I would like to see the patent statute for venue read more
like other cases. And, again, Mr. Thorne has summed it up
pretty well. So you will be where the evidence--where the
witnesses are and be more like a regular case.
Mr. Biggs. And, Professor Chien, when you--in your
statement, you were talking about this is a return to business
as usual over the long arc of patent history, and you explained
that. What do you say to businesses like Culver's or defendants
like Culver's?
Ms. Chien. I personally don't believe that they should be
dealing with patent litigation assertions. They are a retail
business. They are selling products. They are supporting their
franchisees. They are adopting technology, but they are not on
the cutting edge of developing it. So I don't think they should
be dealing with suits in the Eastern District or in Wisconsin.
And the question is, how do we get the market and the law
to get us to that result, and part of it is the question of
making sure that people that they work with are providing the
protections, that suits are properly against the maker of the
technology, and that there are customer stays. So, even though
we have gotten back to the old established rule, I think
adapting to the business model and making sure that we are
aligned with--making sure that businesses like theirs can focus
on what they are good at, pushing out a product, developing and
pleasing customers, and not involving patent litigation, that
is where we need to be moving.
Mr. Biggs. So what is your remedy for--what is Congress'
role in that remedy, because you propose something remedial, so
what would Congress' role be in that?
Ms. Chien. Well, I think we need to take a look at what is
going to be happening now as the case law has carried itself
out and the decisions the companies are making and stay in
close touch with these businesses to figure out, again, how to
come up with a solution.
So I really commend the committee for paying attention--and
continue to pay attention to these issues. I think we need to
still see how things are going to settle after this case
develops and then see if intervention perhaps laser focused on
customer stays or other interventions will still be
appropriate.
Mr. Biggs. And then, Professor Mossoff, I am just curious
about your testimony. And where do we find the sweet spot in
protecting patent holders and also protecting against frivolous
lawsuits?
Mr. Mossoff. Thank you for that question, Congressman,
because that allows me to get to I think a really important
point, which is that you don't have any actual rigorous studies
that follow standardized norms and statistical analysis that
have concluded anything about widespread systemic abusive
patent litigation. So no studies on that.
Moreover, the debate and the discussion, even about the
Eastern District of Texas, is just as much about patent
litigation more generally, is really infected with a lot of
just rhetorical epithets, like the term troll. Everyone thinks
of troll as a bad person, but when you look at the definitions
of what people include under those terms, such as the
definition used by Unified Patents used in Professor Chien and
Risch's paper and used by Professor Chien in other papers, it
includes individual inventors, it includes startups who have
patents, it includes small businesses, it includes
manufacturers actually who sometimes license, it includes
licensing companies: long established drivers of innovation in
this country. And this is exactly licensing, not manufacturing,
is a key component of what has been the success of the U.S.
patent system in driving our innovation economy for well over
200 years. This has repeatedly been shown by economists and
historians, that the licensing activity in secondary markets
and patents was fundamental in the 19th century and the 20th
century. It was used by Thomas Edison and Nikola Tesla and
others. So these are the people that we are condemning as
trolls.
Mr. Biggs. I hate to cut you off, but we are out of time.
But I am still looking for that answer of where the sweet spot
really is between the two ends of the spectrum there.
Mr. Issa. I thank the gentleman. I lived a long time; I
never thought I would hear Edison called a troll in a hearing
before Congress.
With that, we go to the gentleman from Georgia, Mr.
Johnson.
Mr. Johnson. Thank you, Mr. Chairman.
Mr. Thorne, you state in your testimony that you have, over
your 30-year-plus legal career, represented parties in more
than 100 patent disputes, both on the side of the patent holder
and on the side of the accused infringer. Is it fair to
conclude that most of your cases have involved your
representation of accused infringers?
Mr. Thorne. I actually have not counted. Some of my
favorite cases were on the plaintiff's side. We brought a
case----
Mr. Johnson. I am just----
Mr. Thorne. In Virginia. And then we got an injunction to
shut down Vonage.
Mr. Johnson. I know that there have been cases on both
sides, but my question is whether or not most of your cases
have involved representing accused infringers. Isn't that
correct?
Mr. Thorne. As I said, I have not counted the number.
Again, I think I was the first to bring a large commercial
lawsuit in the Eastern District of Texas.
Mr. Johnson. I don't think you want to answer that
question.
Let me move on to Professor Mossoff. But before I go to
Professor Mossoff, he states in his testimony, Mr. Thorne, that
TC Heartland is just one case in a--what he calls, quote,
pattern of incremental erosion of patent rights by the U.S.
Supreme Court and the Congress which imperils our innovation
economy and contributes to the decline of what was once a gold
standard or gold-standard-plated system in the United States,
end quote.
Do you take issue with that?
Mr. Thorne. Mr. Johnson, I do. Two examples. One is in the
Eye for Eye Microsoft case, the Supreme Court decided that
unlike all other property rights cases, which are decided based
on a preponderance of the evidence, in the patent system, there
would be a higher burden of proof to invalidate a patent, in
Eye for Eye. And that was not withstanding something like $3
trillion of companies urging that the normal burden of proof--
and more recently in the Halo case----
Mr. Johnson. Well, I don't want you to give me a
background. I just want to you answer my question.
Let me ask Professor Mossoff--and I am sorry for
interrupting, but my time is limited.
Professor Mossoff, what do you mean when you say that the
TC Heartland case is just one step in an incremental erosion of
patent rights and the impact that that has on our patent system
in this country and our ability to be competitive as a country?
Mr. Mossoff. Thank you, Congressman, for the question. And
the United States Supreme Court has been engaging with the
patent system in terms of hearing cases at a rate that we have
not seen for well over a century. And a substantial majority of
those decisions, contrary to a couple of cases identified by
Mr. Thorne, have come out in terms of weakening, eliminating,
or narrowing patent rights, whether you are talking about
making it harder to get injunctions on eBay, harder to license
and engage with commercialization through MedImmune, through
Quanta, and the recent decision in Impression Products, whether
you are talking about the four cases that have substantially
restricted the ability to obtain actual patents on innovation,
and the statistics continually are showing more and more that
this is a rising concern for the innovators who are driving
this country, the inventors and the heavy R&D-intensive
companies that produce patented innovation. Just to take a
quick moment as an example to show, if I may, that we--I have a
paper coming out this month of--where we talk about 1,700
patent applications on the same invention.
Patent applications were filed in China, in the European
Union, and the United States. All 1,700 patent applications
were granted in China and the European Union, and they were
denied in the United States for being unpatentable inventions
under the new Supreme Court rulings, the four cases that
address the 101 issue, patent eligibility. These are inventions
on radical diagnostic methods for treating cancer, diabetes,
and whatnot.
So we repeatedly have seen this, that inventors are going
overseas now and obtaining patents in other countries, such as
China and Europe. And if that is the case, that is where their
venture capital funding will go; that is where businesses will
be set up, and manufacturing and licensing will occur, and they
will benefit from that with their economic growth and their
innovation economies, just like the United States did with
stable and effective property rights and innovation for a very
long--for the first 200 years of this country.
Mr. Johnson. Thank you.
I yield back.
Mr. Issa. Thank you.
I will now note that I have now heard that China is the
country where we are going to base the high mark of patent
tolerance on.
Mr. Thorne, you had something that you wanted to complete,
and I will give you time to complete it if you can be brief.
Mr. Thorne. I will be very brief. The other case recently
that I wanted to mention that came out in favor of stronger
patent enforcement is the Halo case, which gave district courts
more discretion to award enhanced damages than the Federal
circuit had previously allowed. So it is not correct, as
Professor Mossoff says, that the Supreme Court has been biased
in favor of infringers. I think they are biased in favor of
reading the statutes that Congress has passed. And to the
extent there is any leeway in the statutes, they are biased,
just like we are, in favor of innovation.
Mr. Issa. Thank you.
The gentleman from Texas, Mr. Poe.
Mr. Poe. I thank the chairman.
Thank you all for being here.
In my other life, I was a judge in Texas for 22 years, and
I tried felony cases--only felony cases, everything from
stealing to killing and everything in between. So I understand
the concept of having a specialized court, for example.
When I first got elected, I represented Jefferson County,
Texas, where the Eastern District of Texas holds court from
time to time. You go through Jefferson County, Port Arthur-
Beaumont, and you see everywhere billboards for attorneys, for
patent attorneys, for plaintiffs' attorneys, torts attorneys.
Any type of lawyer, there are billboards there. And there are
storefronts with, in my opinion, very little activity, but it
is a storefront for lawyers.
After redistricting took place, the powers that be
redistricted me out of Jefferson County and sent me to the
Houston area. I don't think that is because of the plaintiffs'
lawyers in the county, but anyway.
Mr. Anderson, you represent Culver's. There is a Culver's
down the street from me. And listening to y'all's testimony
just makes me wonder whether the Reuben sandwich, which is
great, happens to pass just through my county and goes on to
some other county, does that give jurisdiction or venue,
rather, because the sandwich happened to pass through the
county that I am in? It is a difficult question. And it
concerns me that--this whole issue concerns me.
We have a lot of issues, but the bottom line is Congress
many times passes legislation and makes the matter worse, not
better. I think we have done that. I am not saying we have done
it here, but we have the courts that have ruled, and we follow
the courts' rulings. And the question is, should we just not do
anything and let the courts figure it all out down the road, or
should we set a standard and try to make the issue better and
resolve the problems that have been mentioned here by all of
you all, or stay out of it?
So I will ask the two professors that question. Should
Congress get involved and make a standard on this issue?
Mr. Mossoff. Thank you for the question, Congressman. I
believe it is always dangerous to ask professors what should--
--
Mr. Poe. I know, because you all are always asking the
questions. When I was in law school, I wasn't prepared enough;
I admit that. So I am just asking you the question now.
Mr. Mossoff. I mean--Congress should set and has set
historically the standards in enacting the legislation. And in
your example that you gave, I don't believe it would fall even
under the second prong of section 1400(b), because it says,
where the acts of infringement occurred and where you have a
regular and established place of business. So a single sandwich
passing through a district could not be the basis.
Mr. Poe. Would a single burger--would a single Culver's in
the district be enough?
Mr. Mossoff. You know, this is one of the issues, I
believe, why, in VE Holding, the Federal circuit went with the
standards set forth in 1391 was precisely because of the
competing definitions in the case law and the lack of certainty
in the case law at the time about what counted as regular and
established place of business.
But the ongoing introduction of bills over the past 5 or 6
years, combined with the impact--the substantial majority of
the Supreme Court decisions that I have highlighted in my past
answers has created a lot of uncertainty for patent owners who
do not have stable and effective property rights in innovation
right now.
Mr. Poe. So you think we should get involved and make it
clearer?
Mr. Mossoff. Well, if Congress gets involved, it should
also address the pressing areas concerned in 101, and it should
address other areas or pressing concerns, such as remedies and
damages, among others, yes.
Mr. Poe. Okay.
Ms. Chien. I would say, in this case, we should still
continue talking to constituents and seeing how this is
affecting their business. That is the bottom line. And so what
professors say from the view--the high up and can kind of see
the cases, that is one perspective, but really talking to
constituents and figuring out what impact they are seeing on
the ground, again, as I had mentioned before, adaptations, as
trolls change their business models, or some patent holders not
being able to bring their suits anymore; these are the folks
that we are going to have to be consulting with.
So I think there is certainly a service in having the
hearings because this helps the judiciary understand what is
actually happening as well on the ground and then adapting
their case law. I think in terms of the back and forth, you see
a lot of issues that have been surfaced here taken on by the
courts, and so I think that is a healthy dynamic.
Mr. Poe. Thank you all for being here.
Thank you, Mr. Chairman. I will yield back the rest of my
time.
Mr. Issa. The gentleman is very generous with the rest of
his time.
We now go to the gentleman from Brooklyn, New York, Mr.
Jeffries.
Mr. Jeffries. Thank you, Mr. Chairman.
And I thank the witnesses for your presence here today.
Mr. Anderson, in your testimony, you mentioned that you are
at a disadvantage in being able to, I think, anticipate, plan,
and react to the demands of patent trolls. Is that right?
Mr. Anderson. That is correct.
Mr. Jeffries. And would the disadvantage be anchored in the
fact, in your view, that you represent a brick-and-mortar
business?
Mr. Anderson. The disadvantage is that we are not
intentionally playing in an intellectual property and patent
troll arena. We have been hit with patent troll demands for
things such as using hyperlinks in emails, something everybody
does. And we have been told that is a violation of the patent.
We also have been hit with a patent troll demand that says
having time content in something we send out, ``Get your
ButterBurger today,'' violates a patent because we used the
word ``today,'' or we say, ``The deal is good until 3
o'clock.'' We have no idea how to compete with that.
So I mentioned earlier, our marketing department, we are up
in arms because we know we are going to be sued no matter what
we do. So that is a real disadvantage to us.
Mr. Jeffries. Now, you testified that addressing the patent
troll problem will, in your view, require shifting the economic
incentives away from advancing baseless claims. Is that right?
Mr. Anderson. That is correct.
Mr. Jeffries. And are you familiar with the Supreme Court
decision in Octane Fitness that lowered the bar for attorneys'
fees to prevailing parties in patent litigation?
Mr. Anderson. I am not.
Mr. Jeffries. Okay. Well, in Octane Fitness, pursuant to, I
believe, section 285, the Supreme Court indicated that the
standard for awarding attorneys' fees that had been applied
actually was too rigorous in terms of prevailing defendants in
patent litigations and, as a result, I believe has opened up
the opportunity for additional attorneys' fees to be awarded in
patent litigation cases.
I don't know. Professor Chien, can you speak to that issue?
Ms. Chien. Yes. I think this is a promising development
that, in a case where you feel like the patent assertion was
brought against you baselessly, then you could try to recover
your fees. But, in practice, it is a lot more difficult to
actually count on that reimbursement at the bottom line at the
end of the suit, first, because the Supreme Court can only go
as far as the statute does. It doesn't enforce or make shifting
automatic; it is still in the discretion of the Court for the
more egregious cases.
Second of all, to actually withstand a whole litigation, go
all the way, and then finally try to get a motion for fees
together is still a lot of stress and distraction for
companies. They would rather just settle in most cases. I don't
think that that set of Court decisions has necessarily shifted
the balance substantially.
Mr. Jeffries. To the extent that you think there is room
for reform, would you say that it would be anchored in the
discovery area and the high cost of discovery in patent
litigations, which seems to be uniquely prohibitive in some
instances?
Ms. Chien. I think, in a lot of cases, that is very
daunting. So a company will get involved--a defendant in a case
and say, ``We are pretty sure we don't infringe this, or ``The
patent isn't valid,'' but once they get to the discovery phase
and get a six or seven figure estimate for how much it is going
to cost, it is clearly a settlement discussion.
So I have seen the congressional proposals around
streamlined discovery and have seen those as being very
productive. What I think, though, has also given relief to
parties aside from discovery reform is sort of having these--if
the patent is clearly not valid under Alice, now being able to
bring these one on one motions that we have talked about, and
now the Eastern District of Texas not being as popular, more
courts, given that, there will be relief as well.
Mr. Jeffries. Professor Mossoff, do you think that there is
room to do anything to make sure that we strike the right
balance between a robust patent litigation system that is not
abused but that does allow small inventors and tech
entrepreneurs and startups to vindicate any rights that may be
infringed?
Mr. Mossoff. Thank you for that question, Congressman,
because I think the best thing that Congress can do is to
stabilize and sit back and, in fact, either try to have
balanced legislation, not the entirely one-sided legislation
that continually looks at so-called abuses by patent owners,
but recognizes abuses and costs on both sides of the equation.
But I would also like to just, if I may, answer your
question about the attorneys' fees because, actually, we do
have the data after the Octane Fitness decision, and motions
for attorneys' fees dramatically went up and so did the awards.
And rightly so. Because this is traditionally and historically
exactly what the court should be allowed to do, they control
their own docket. This is classic Article III power. And so
that is what--and that is what they have been doing now.
Mr. Jeffries. Thank you. If the chairman would indulge one
final question. You made the point that this venue decision may
simply just result in continued concentration of cases, perhaps
from the Eastern District of Texas, where currently you see a
high concentration of these actions brought to the Northern
District of California and the District of Delaware, and you
expressed concern with that. But I am just wondering, do you
have any empirical evidence--I didn't see any in your
testimony--that a shift to those two jurisdictions would
actually result in changes in substantive decisions that are
made as opposed to your concern with Delaware, for instance,
that the docket may simply be overwhelmed?
Mr. Mossoff. Congressman, that is a great question, because
it gets at the exact issue, because when you are talking about
these issues about, is it bad, the question is always, as
compared to what? And we don't have any indications
substantively that the decisions in the Eastern District of
Texas are bad as compared to what or good as compared to what.
All we know through Professor Chien and Professor Risch's
study is that if continued litigation practices remain the
same, that you will see the shift. But the assertion is always
concentration is bad for the system, as Chien and Risch said in
an op-ed about a year ago. But why is concentration bad for the
system, especially when you are talking about 94 districts
shifting from 1 to 2 districts, it isn't a change in
concentration; that is a shift from 1 percent to 2 percent. And
there hasn't been an argument yet as to, what difference does
that make? And so then you have to ask, what is the elephant in
the room? Why go to the District of Delaware and the Northern
District of California? And those are just--as I mentioned,
those are districts widely viewed, as Professor Chien said, the
Eastern District of Texas was widely perceived to be favorable
to plaintiffs. The District of Delaware and the Northern
District of California are widely recognized as being more
favorable to defendants.
Mr. Jeffries. I thank the witness. I thank the chair. And I
would just point out that it will be useful if there is any
empirical evidence suggesting that the decisions in those two
venues are substantively different, because I haven't seen any.
Thank you.
Mr. Issa. I thank the gentleman. I might note that, in TC
Heartland, it is leaving Delaware and going to Indiana, if I am
correct.
With that we go to the other gentleman from Georgia, Mr.
Collins.
Mr. Collins. Thank you, Mr. Chairman.
I think one of the issues--and I think this--I am glad we
are discussing this today, but I think it is in a different
context after the Heartland decision now, I think, you know, we
sort of leave it to where the courts have now said we are going
to go. Whether it is, in the good professor's determination,
that you are just bringing it to a smaller--you know, maybe
just a percentage higher, or is it going to actually, you know,
make a difference in some other areas, I think we will deal
with that.
But I want to get back to, ultimately, I believe that
legitimate litigants benefit from lower costs. Whether it is a
big, you know, a large company, a small company, the startup
inventor, the tech company, the content--this is an issue that
we have got to deal with because I firmly believe, and if you
have ever -- if you have listened to some of my concerns here,
is that you got to protect content. You got to protect the
patentability. You got to protect those issues. Subject matter
is going to be an issue here; how do we determine that?
But, also, how do we make sure that the protection of that
is also good for the process as a whole? So my concern is
dealing with things as we look beyond venue and forum shopping
to the real things that I have talked to, whether they be tech
companies, traditional companies, or the smaller companies that
end up on the lower end of some of these cases and being
dragged into them.
My question has become more of, why can't we begin to look
at what many general counsels offline will begin to talk about.
They want to talk about expedited Markman hearings. They want
to talk about discovery reform. They want to talk about
subject-matter issues. They want to talk about motion practices
in general. Let's look at customers today. Let's look at those
kinds of things. Because, at the end of the day, we are going
around the edges of something that is, frankly--and whether it
be--and I appreciate my friend, and I do believe that there is
a punitive nature to attorney fees, and that is fine. But at
the end of the day, most companies--and if you took--and there
are a lot of representing companies of tech and everybody else;
I can see you in the room--which would you rather do, worry
about getting your attorneys' fees and slapping at the end of
the thing, or getting this thing stopped early? Getting a
frivolous lawsuit out of the system early so that we can get to
legitimate cases that do need to be solved and do need to be
settled, litigants benefit from that.
So, Ms. Chien, take that--I am sort of opening up--you had
a lot of specifics today. I am sort of opening this up a little
bit more, and I would like you, Professor, to start--talk about
some of those--actually, if you talk to GCs, if you talk to
general counsels in many of these companies, this is where they
would rather us focus. What are your thoughts?
Ms. Chien. So it is a great question, and I think, again,
what companies want is certainty, and they want to be able to
report up to their CEOs that this is what we are looking at in
terms of exposure. And they don't want to say that this case is
hinging on, again, this luck of having been--this bad luck of
being sued in this one district. It is really not about the
concentration issue that is the issue. The issue is that, once
you know you are stuck in the Eastern District, that is going
to be a certain amount of money you pay; no matter how bad the
suit is, you are just going to be stuck with that bill.
And it is outrageous for a lot of firms that feel like they
would rather fight the suit, but they can't because it makes a
lot more sense to settle it. So that is what creates the, I
guess, incentive for companies to continue coming up with
business creative approaches, having the least cost, you know,
operations, and still be able to bring their suits there.
So I think that, you know, what I can see, though, in terms
of all the different interventions Congress has come up with,
again, going back to IPR, thinking about joinder, thinking
about what the courts have done, what companies gravitate
towards is certainty and efficiency. So whether it is a Alice
101 motion for a patent that clearly should not have been
issued and is no longer patentable and be able to get in there
and get out in 50- to 100,000 dollars early. Or it is being
able to say: Well, I know I am going to be in inter partes
review, and it is going to be an 18-month period, that is
certain; I know that. Or even the ITC provides that certainty
in terms of timeframe. I think that is what firms are looking
for. They want to be able to get on with the business of what
they are doing, innovating, rather than trying to figure out
how to manage this lawsuit----
Mr. Collins. Mr. Anderson, I want you to jump in and just
answer this.
But I want to take something you just talked about. Just
briefly touch this, because I have touched on this and you
would believe the sort of the hair that went up on the back of
some folks; when you just simply talked about subject matter
101, Alice, you start looking at this and saying--but the
question is--I think that we are getting into a conflation here
of 101, 102, 103, 112. We're getting to, how do determine that
patentability issue?
And, look, I am not wanting just to throw this out, but I
think that is a discussion to be had. So I appreciate you
bringing that concern up.
Mr. Anderson, you had a----
Mr. Anderson. Well, you are asking what general counsels
are thinking. I am one, a general counsel of a small company. I
will tell you what: My biggest concern is we cannot afford to
try one of these cases. I am told they are 3-, 4-, 5 million
dollars. We cannot afford it. So we need a way to get out
early. And the 101 Alice is one of those.
But when someone says, ``You can't put the day or a time in
a text message that goes out, you are violating our patent,''
and I say, ``That can't be true,'' and they say, ``Well, let's
go to trial,'' I need this to be able to challenge that. And if
we can't get rid of that case early, we can't afford to
challenge it. In that particular case, we paid them--I can't
tell you how much--a large amount of money for that silly
patent claim. We had no choice.
Mr. Collins. So, at the end of day, it doesn't--and we can
talk about a lot of issues and attorneys' fees and all these
that are always talked about, but at the end of day, for you,
that is an irrelevant issue for you. And in some ways, if you
could punish--because you can't go through the process to get--
--
Mr. Anderson. We can't go through the process. We can't go
through the process. The attorneys--the attorney we hired right
now, $900 an hour.
Mr. Collins. I appreciate the chairman and the subcommittee
chairman and also both members of the aisle--sides of this
aisle, this is an issue that we want to address in a proper
way. And I think, frankly, the issue here is we can deal in the
pieces, but at the end of the day, we got to start on what
actually--it is like almost another issue we have around the
healthcare: What are you doing to bend the cost curve? What are
we actually doing to get litigants protected, the small vendor
protected from the big, and the big protected from just
frivolous suits? And I think we got to go to some issues. Venue
was definitely an issue. The Supreme Court has addressed it.
Now, I think some of these, discovery, motions, practice,
customer stay, Markman hearings, all get to what you are
looking at, and I appreciate it.
Mr. Anderson. Extremely important, yes.
Mr. Collins. I appreciate it.
Mr. Chairman, I yield.
Mr. Issa. I thank the gentleman.
And, Mr. Anderson, if we could just have had you here
pursuant to subpoena, then you could be compelled to answer
that question, and we would be delighted to hear it. But my
parliamentarian reminds me that you are here voluntarily. Next
time.
Mr. Anderson. Thank you.
Mr. Issa. And now the gentlelady from Texas, who has been
patiently waiting. Ms. Jackson Lee.
Ms. Jackson Lee. Let me thank the chairman and the ranking
member for their courtesies and courtesies of the full
committee chairman and ranking member. I have served on this
committee in sessions back and continue to have, coming from
the 18th Congressional District in Houston, where there are any
number of patent holders through the Texas Medical Center,
research, and, of course, energy.
I think I am going to be limited to the context in which we
as Members of Congress function, and that is, we hold a
hearing. And as we hold that hearing, we project how we can, as
legislators, ultimately be helpful. And I think, as I have
listened to my colleagues, a number of them have weaved through
the question of how we can be effective in responding to this.
What I see is the conflicting--and a confliction on a
number of court of appeals decisions and Supreme Court
decisions on the question of venue, which can, I believe, some
of the witnesses might suggest make or break a case. I have
also made an assessment as a litigator, a time or two in the
courtroom myself, that a court having knowledge and expertise
may help my presentation of the facts because the court
understands it, particularly in cases of complexity that we see
in a lot of district courts.
So I am just going to ask each person, what is the direct
action you want from the United States Congress? What would be
helpful? I think, Professor, you indicated that is a wrong
direction for a professor, but I am going to ask you to do so.
And the other is to not counter, but to sort of answer my point
that expertise in the court is helpful to both plaintiff and
defendant. As I looked at some numbers, I saw that the
percentages weren't that extreme. It was suggesting a numbers
difference in the Eastern District, for example, that seems to
be in the midst of the storm of a difference between 34
percent--let me read it correctly: 94 Federal district courts
in the United States; 34 percent of all patent suits were filed
in the Eastern District. It is not 50 percent, but it is
certainly a decent number. And I think I saw a number of 70 and
89 percent.
But, in any event--here it is. In 2015 to 2016, 89 percent
of the cases in the Eastern District settled compared to 70
percent in all other courts. So, if you would answer those two
questions: How we can be best effective as we deliberate; and,
number two, the issue of expertise does not help in the overall
scheme of patent law.
Mr. Anderson.
Mr. Anderson. Well, I will answer the expertise first. I
certainly agree that it is complicated. These are all IP
attorneys; I am not. It is incredibly complicated. If it was a
fair playing field, aside from convenience, I would agree. But
I also hear that summary judgment is very difficult to get to.
There are all kinds of procedural things that happen in the
Eastern District of Texas that make it a disadvantage to
litigate as a defendant.
Let me state: We would never intentionally violate a
patent. We have people that violate our trademarks. What I do
when somebody does that, I pick up the phone and I call them
and we work out a solution. We don't sue them for millions of
dollars. That is just the way we do things.
Ms. Jackson Lee. What would you want us to do?
Mr. Anderson. What I would like you to do is--first off, as
far as the not do, the 101 or Alice motion, please don't change
that. That gives us somewhat of a chance. I am told in our
current case, the attorney, this abstract idea of sending a
promotional item to a mobile device, that we might prevail on
that. Please don't take that away from us. It is our only
chance to fight these things. If we lose that, we have to
settle. That is what we hope you don't do.
As far as doing, anything that stays the discovery so
that--we are the end user of any of this technology--so that
the provider of this technology can litigate and determine
prior--and we can stay out of the case until that is resolved
would be wonderful.
Ms. Jackson Lee. If the chairman would indulge me, my time
is running out.
If you could quickly go through, Professor Chien.
Ms. Chien. I believe that the system should be designed to
be more fit towards specific business models. And so what I
mean by that is proportionality. One problem is that we have a
one-size-fits-all patent system that has to work for all
different industries, but, more importantly, it has to work for
all different business models. If we could try to introduce
more proportionality in the system so that companies that don't
infringe intentionally are not put in the same boat as those
who infringe unintentionally, that those who are small
defendants versus large defendants are treated differently,
then I think this would go far to resolving the issues at hand.
Ms. Jackson Lee. Thank you, Professor.
Mr. Mossoff. Thank you, Congresswoman.
I think the most important thing that Congress can keep in
mind is that legislation with respect to the patent system
affects dynamic innovation, what is coming tomorrow. And you
are, instead, framing based upon what has happened in the past
and what we know today. So the laws often have unintended
consequences, like what the America Invents Act did by creating
the Patent Trial and Appeal Board, and by the prohibition on
joinder defendants.
And so, in talking with high-tech--representatives from
high-tech industry and biotech industry who invest billions of
dollars to create innovation that they need to secure through
the patent system through licensing and manufacturing and
through all different business models, they say that they need
security and stability. They need to be able to license freely.
They need to be able to get the injunction against trespassers,
regardless of what those trespassers might be on their rights.
And they need to go back to the very strong and stable patent
rights that drove innovation in this country for 150 years. We
have, I mean, smartphones came from the system that we are now
moving away out of, and I think that we should always keep that
in mind.
Ms. Jackson Lee. Mr. Thorne.
Mr. Issa. The gentleman can answer briefly.
Ms. Jackson Lee. Thank you, Mr. Chairman.
Mr. Thorne. My experience has been very similar to what you
described. I think expertise on the part of the judge is a
benefit to both sides, plaintiffs and defendants. The Patent-
Pilot program in 13 district courts is an example of where that
is working now. So my experience is the same, that expertise is
important.
I did not come prepared to recommend any legislative
action. But I would like to note that, yesterday morning, the
Supreme Court granted certiorari review in a case called Oil
States Energy Services against Greene's Energy Group. One of
the most significant things Congress has done in the 2011
America Invents Act was create a more efficient way to
challenge bad patents at the patent office.
The Supreme Court is now going to review in this next term
whether Congress had power to do that, whether the Congress had
power, or is canceling a bad patent an example of deprivation
of property rights that can't be done by an Article III court--
--
Mr. Issa. Can only be done by an Article III court.
Mr. Thorne. Right. I point that out as a concern, a
potential loss of something important that Congress has done.
Ms. Jackson Lee. Thank you very much.
Thank you, Mr. Chairman. I yield back.
Mr. Issa. Thank you.
Every once in a while, I pull this off the wall and bring
it. And I know that you all can read from here. This is patent
No. 1, bearing the signature of both George Washington and
Thomas Jefferson, then, I guess, Secretary of State. And any
time somebody wants to talk about 101 and Alice, I am always
reminded that it is a 227-year-old standing of what Thomas
Jefferson believed it should be.
And I always ask a question, and maybe I will ask each of
you that question as my opening salvo. After 227 years of 101
being what Thomas Jefferson thought it should be, have we had
too little innovation as a result of that standard?
Mr. Anderson, in your nonpatent lawyer opinion.
Mr. Anderson. I think the United States is doing pretty
well in that category.
Mr. Issa. Professor Chien?
Ms. Chien. I would have to agree.
Mr. Issa. We are on a roll. How about it?
Mr. Mossoff. Mr. Chairman, our patent system has been
fantastic. Unfortunately, that very first patent, which is for
a method of making potash is probably now not patentable under
the patentable jurisprudence decisions that the Supreme Court
has handed down.
Mr. Issa. You know, with the knowledge of the time and the
innovation of the time, I think even the patent No. 5, the
improvement of rye whiskey distillation probably would still be
patentable. One would have to go back and look at those of
ordinary skill in the art at the time, including George
Washington as a distiller.
Mr. Thorne.
Mr. Thorne. Our patent system is second to none, and
innovation is what is going to drive our economy.
Mr. Issa. Well, thank you. I opened up with that because,
you know, when everyone is asked the questions and all
questions have been answered, one has to be a little innovative
to try to close out the hearing, and I am going to try and do
that.
I am going to ask you--first of all, I am going to ask you
to all revise and extend with your thoughts, because as Mr.
Thorne said, you didn't come here expecting to tell us how to
legislate to deal with TC Heartland and other issues. But let
me just go through a couple of words for a moment that might
help you in both in a short answer today and then extending on
it.
If we do look--and, by the way, Mr. Thorne, you are now my
favorite witness because I think you said Patent-Pilot was
great about 20 times. As the author of Patent-Pilot, I am very
proud that it is being used. We have extended it. And the
vision always was to have every judge who regularly takes cases
and chooses to take them have the expertise he needs.
And I might note that Justice Breyer, who considers himself
the author of the Fed circuit during his time in the Senate as
a staffer, also has a similar opinion, which is we must
maintain a robust ability to decide cases closest to the
defendant, or there is no reason to have cases decided in
District Court. And Justice Breyer always muses that he
considered, instead of the Fed circuit, he considered just
simply moving it to D.C. and having a single court here. And if
we had a single court here, it would be a court, an Article III
court of jurisdiction. And for some reason, just as a school
kid in me, Marshall, Texas, 23,000 people--God bless God for
putting it there; there is a special reason--or Washington,
D.C., which one seems to be more logical considering the
expertise?
But leaving that aside. If we were to revise the test--
recognizing that small businesses are the majority of
businesses and they do not reside in Tyler, Texas; Washington,
D.C.; or, for that matter, the Northern District of
California--if our test was, first of all, based on the
corporate headquarters as a consideration, the number of
employees, the likelihood of who was going to be discovered or
deposed in the process, based on elements such as the decision
to infringe--and I bring up the decision to infringe, having
been sued both corporately and personally in the past, and not
released all the way through the Fed circuit, I might mention,
on an individual capacity, the decision to infringe is
certainly an element. And then the comparative balance between
the harm to the plaintiff, the harm to the defendant of a
particular jurisdiction. If we were to take all of those--and,
Mr. Anderson, you brought this out earlier--it would
effectively eliminate the double standard. You would be taking
the standards, and maybe enhancing them, that we have for
nonpatent cases.
What do you think if those and other tests were to be part
of it? Would that give us the diversity, taking places to the
appropriate venue, which would likely not be in Delaware,
simply as a matter of incorporation, not be in Marshall, simply
as a result of three of your franchises there, and I might say,
not always in the Northern District of California--being in the
Southern District of California, the second most prolific
biocenter in the country, I kind of think some of it might come
to us. By the way, we are one of those 13 districts that are in
Patent-Pilot, but go ahead.
Mr. Anderson. Well, in trying to be your favorite witness,
I would agree with everything you just said. I certainly agree
with that. No question about it. And, by the way, we don't do
business and we aren't in California and we aren't in Delaware,
so I don't think all the cases are going to be in California or
Delaware.
I certainly agree, where the headquarters are and where the
witnesses are and where the decisions are made, those
decisions--and, again, we never intentionally would violate a
patent or anybody else's intellectual property--but those
decisions, those marketing decisions, are made in Prairie du
Sac, Wisconsin. They are not made by our franchisees. They are
not made at the restaurant level. They are made where I work.
And, again, we are not trying to violate, but if there is an
action brought, it should be brought where we are and where the
witnesses are and where the decisions are made and not in the
Eastern District of Texas.
Mr. Issa. Following up on that. In the case in suit that
you were referring to, I would assume that they subpoenaed a
number of people for depositions. Is that correct?
Mr. Anderson. They will. It was just filed 2 months ago. We
just filed our answer. So we are early in the process. Again,
we will try the 101----
Mr. Issa. Do you have anyone in Marshall or Tyler, Texas,
that would be deposed there?
Mr. Anderson. No. No. They are all in Wisconsin.
Mr. Issa. Professor Chien.
Ms. Chien. I would agree with the commonsense venue reform
that you have outlined, that it should be based on where it
makes sense. That said, I think that it is important to try to
make sure that parties have the certainty of knowing that ahead
of time and not get involved in a mini litigation each time
just on the subject of venue. And so that is, I think,
something to also consider.
Mr. Issa. Now, normally, of course, let's say it was
copyright or trademark, and you have been involved in that,
first to file is pretty common. You know, you start off
wherever you file. If I am filing a DJ because I believe you
threatened me versus you filing because you believe I
infringed, the presumption is, it starts where it was filed
based on the first to file, and then you must overcome that.
Would that standard give you the level of certainty, assuming
that there is a series of tests that would allow you to
overcome that?
Ms. Chien. I think the convenience of the parties, both on
the plaintiffs' side and defendant, it will depend on the
nature of the suit a bit. So I think it shouldn't necessarily
be about who is rushing to forum quickly, although in the
patent case it's the patentee who will do that, unless there is
grounds for declaratory judgment, but----
Mr. Issa. If you are foolish enough to send me a letter,
there is.
Ms. Chien. I think the issue for the parties I have talked
to is that they don't necessarily know all the details about
who is on the other side even of who is bringing the suit. So
they don't know where those parties' witnesses might be ahead
of time. So an early disclosure might obviate the need for mini
satellite litigation on this. So I think getting that--those
details correct is very important.
Mr. Issa. And, Professor, since the University of
California files a lot of cases through their proxies in
Marshall, Texas, you mentioned the little guy and so on. And,
you know, they--and you mentioned universities, and I found
that interesting, because why is it that the University of
California doesn't file, or cause their licensees to file in
California?
Mr. Mossoff. I don't know.
Mr. Issa. Could it be that, in fact, Marshall, Texas just
seems like a great place to win?
Mr. Mossoff. You would need to ask someone from the
University of California. But as a professor, I don't have any
particular insights or expertise about how patent litigation
and venue choices should work. What I would think the Congress
should particularly do in considering these issues is speak
with the people who are the primary users and creators of
patent innovation and commercialization in this country.
As I mentioned, the individual inventors, the startups, the
small businesses, and the research intensive companies in the
bio-pharmaceutical sectors, and even in the high-tech sectors
and speak with them about what is efficient and best secures
their property rights.
Mr. Issa. Thank you.
Mr. Thorne, I gave a whole litany of hypotheticals, you
know, where you are headquartered, where you are incorporated,
where witnesses would likely come from both for deposition and
trial. I wasn't doing that to be an exhaustive list, but the
approach of three or more balancings to overcome the location
in which it is filed, does that work for you as a litigant,
particularly if we order that that--that there be a stay until
that is discovered and there be expedited discovery? Because I
think without bifurcation, we could end up exactly back where
we are in Marshall, right?
Mr. Thorne. So I would like to think just a little more
about the factors you articulated. But on first hearing, I
thought they sounded great. And my second thought was, why
don't we have that already? Because I think 1400(b), the second
half of it that is--still, that is now prominent, I think that
can be interpreted to encompass those factors. I will cite as
an example, Fortress Investment Group, a pretty very large
hedge fund, filed a case against Apple in the District of New
Jersey following TC Heartland describing factors similar to
that. Where--their allegation of venue now says that they have
sued where the field engineers, the managers, the other
employees directly involved in the direct infringement are
located, that is why they said New Jersey was the right place
for that new case.
Mr. Issa. Because, although there may--there is almost
infinite cases in which Apple has substantial and regular with
their stores, that isn't necessarily where expertise is, right?
Mr. Thorne. That is correct. And then, of course, the
other--the other safety valve that can achieve the factors that
you described is the discretionary transfer under 1404. If
there are several places the defendant could have been sued,
there may be one of them that is clearly more convenient and
more efficient, and it should be transferred there.
Mr. Issa. Okay. I am going to--and I appreciate that.
I am going to close with a question for probably all three
of you, but Mr. Thorne, you will probably be the one most aware
of it, since you mentioned it.
With the TC Heartland decision, I am going to predict that
we do have some devolving of the concentration that there will
not be 40 percent in Delaware, for example, that we will tend
to have--we will have more in Marshall, I predict, 2 years from
now than its fair share based on corporate presence.
But when we look at patent pilot that is in 13 locations
right now, it had some provisions to stop concentration,
essentially, referral to only one judge, should we consider
expanding it to where it is anywhere that there is likely to be
a judge whose expertise needs to have clerical assistance,
which is one of the keep elements in patent pilot?
Mr. Thorne. I would be strongly in favor of expanding the
patent pilot program any place that made sense, whether a judge
is interested or where the cases tend to gravitate towards
that. That is something--again, I actually didn't realize you
were the author of it, but I think----
Mr. Issa. It was a long time ago.
Mr. Thorne [continuing]. That is a program that deserves
expansion.
Mr. Issa. Professor?
Mr. Mossoff. I--certainly, I mean, if it is something that
is shown to bring additional expertise to patent litigation and
to the--and to the adjudication of cases, then certainly, we
should expand it.
Mr. Issa. Well, they use it a lot in Marshall. You said
that is working out good.
Professor Chien?
Ms. Chien. The patent pilot project offers litigants,
judges who want their cases and offers some specializations.
That has been attractive, but it has been hard to compete with
plaintiff-friendly jurisdiction in Texas. With that removed as
a factor, I think the next 5 years can be very different than
the first. We really have a chance to see whether
specialization can reach its potential.
What I think would be extremely important as the program I
do support it being expanded and growing, is to really try to
think about the factors that are being introduced, like
technical advisers, like other procedures, and try to test how
those are doing. I think right now we are--the sample size is
too small. There is one paper that says there isn't necessarily
a higher rate of success, necessarily, in these cases. But I
think with expansion of program, we can really see this and
test this.
What I do think we also are seeing is that there are many
studies of judges having more expertise, but still not
necessarily getting better success rates. But we do know that
technical expertise, for example, in the PTAB has been viewed
favorably.
So I think there is a lot of innovation that can happen in
this program, and I look forward to seeing it reach that
potential.
Mr. Issa. Thank you.
Mr. Anderson, any thoughts?
Mr. Anderson. I will defer to my fellow witnesses on this
one.
Mr. Issa. Well, thank you.
You know, it is--I remember when there was a 40 percent
reversal rate at the Fed circuit, and then the Supreme Court
reminded us the Fed circuit got it wrong in some of those
reversals. So we never had patent pilot for the Supreme Court,
but it has been suggested.
I want to thank my witnesses today. I will ask you, both as
intellectuals, as somewhat of a victim, and as a practicing
attorney in the field, if you would submit to the greatest
extent you can, some of those elements to 1400 that you think
would go into part B. Because I think, as we look, and the
chairman--the chairman is here again, and he will speak for
himself better than I shall, but I think as we look at making
sure that what is left in venue has a meaning that is
definable, consistent, and if there is an argument, can be
adjudicated fairly by an Article III judge.
Lastly, I am very interested in the case they just took up.
I am a strong believer that for decades, we have had ex parte
PTO re-examination that invalidated all or some of the claims.
So I will be submitting an amicus in that case, without a
doubt, based on the question of is--are these administrative
law judges under the PTO doing something different than was
done for decades, and if the interparty re-examination is
invalid, then is the ex parte re-examination invalid, and if
that is the case, then is the Article III judge to continue to
use a deferral standard to an entity that is not allowed to
correct what might be their own mistake based on less knowledge
than they would have presented to them at a later date. That
may just be my entire amicus.
Mr. Chairman, do you have any further comments?
With that, I thank you. We stand adjourned.
[Whereupon, at 12:06 p.m., the subcommittee was adjourned.]
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