[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]



                   THE PATENT TRIAL AND APPEAL BOARD
                  AFTER 10 YEARS: IMPACT ON INNOVATION
                          AND SMALL BUSINESSES

=======================================================================

                                HEARING

                               BEFORE THE

    SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY, AND THE INTERNET

                                 OF THE

                       COMMITTEE ON THE JUDICIARY

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               ----------                              

                        THURSDAY, JUNE 23, 2022

                               ----------                              

                           Serial No. 117-71

                               ----------                              

         Printed for the use of the Committee on the Judiciary

		
		
		[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                           
                              
               Available via: http://judiciary.house.gov




 
 THE PATENT TRIAL AND APPEAL BOARD AFTER 10 YEARS: IMPACT ON INNOVATION
                          AND SMALL BUSINESSES
                          
                          



                   THE PATENT TRIAL AND APPEAL BOARD
                  AFTER 10 YEARS: IMPACT ON INNOVATION
                          AND SMALL BUSINESSES

=======================================================================



                                HEARING

                               BEFORE THE

    SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY, AND THE INTERNET

                                 OF THE

                       COMMITTEE ON THE JUDICIARY

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                        THURSDAY, JUNE 23, 2022

                               __________

                           Serial No. 117-71

                               __________

         Printed for the use of the Committee on the Judiciary


		[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

               Available via: http://judiciary.house.gov

                       	       __________

		     U.S. GOVERNMENT PUBLISHING OFFICE

48-844 			    WASHINGTON : 2022                       
                       
                       
                       
                       
                       
                       COMMITTEE ON THE JUDICIARY

                    JERROLD NADLER, New York, Chair
                MADELEINE DEAN, Pennsylvania, Vice-Chair

ZOE LOFGREN, California              JIM JORDAN, Ohio, Ranking Member
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
STEVE COHEN, Tennessee               LOUIE GOHMERT, Texas
HENRY C. ``HANK'' JOHNSON, Jr.,      DARRELL ISSA, California
    Georgia                          KEN BUCK, Colorado
THEODORE E. DEUTCH, Florida          MATT GAETZ, Florida
KAREN BASS, California               MIKE JOHNSON, Louisiana
HAKEEM S. JEFFRIES, New York         ANDY BIGGS, Arizona
DAVID N. CICILLINE, Rhode Island     TOM McCLINTOCK, California
ERIC SWALWELL, California            W. GREG STEUBE, Florida
TED LIEU, California                 TOM TIFFANY, Wisconsin
JAMIE RASKIN, Maryland               THOMAS MASSIE, Kentucky
PRAMILA JAYAPAL, Washington          CHIP ROY, Texas
VAL BUTLER DEMINGS, Florida          DAN BISHOP, North Carolina
J. LUIS CORREA, California           MICHELLE FISCHBACH, Minnesota
MARY GAY SCANLON, Pennsylvania       VICTORIA SPARTZ, Indiana
SYLVIA R. GARCIA, Texas              SCOTT FITZGERALD, Wisconsin
JOE NEGUSE, Colorado                 CLIFF BENTZ, Oregon
LUCY McBATH, Georgia                 BURGESS OWENS, Utah
GREG STANTON, Arizona
VERONICA ESCOBAR, Texas
MONDAIRE JONES, New York
DEBORAH ROSS, North Carolina
CORI BUSH, Missouri

         AMY RUTKIN, Majority Staff Director and Chief of Staff
               CHRISTOPHER HIXON, Minority Staff Director
                                 ------                                

           SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY, AND
                              THE INTERNET

             HENRY C. ``HANK'' JOHNSON, Jr., Georgia, Chair
                  MONDAIRE JONES, New York, Vice-Chair

THEODORE E. DEUTCH, Florida          DARRELL ISSA, California, Ranking 
HAKEEM JEFFRIES, New York                Member
TED LIEU, California                 STEVE CHABOT, Ohio
GREG STANTON, Arizona                LOUIS GOHMERT, Texas
ZOE LOFGREN, California              MATT GAETZ, Florida
STEVE COHEN, Tennessee               MIKE JOHNSON, Louisiana
KAREN BASS, California               TOM TIFFANY, Wisconsin
ERIC SWALWELL, California            THOMAS MASSIE, Kentucky
MONDAIRE JONES, New York             DAN BISHOP, North Carolina
DEBORAH ROSS, North Carolina         MICHELLE FISCHBACH, Michigan
JOE NEGUSE, Colorado                 SCOTT FITZGERALD, Wisconsin
                                     CLIFF BENTZ, Oregon

                      JAMIE SIMPSON, Chief Counsel
                     BETSY FERGUSON, Senior Counsel
                            C O N T E N T S

                              ----------                              

                        Thursday, June 23, 2022

                                                                   Page

                           OPENING STATEMENTS

The Honorable Henry C. ``Hank'' Johnson, Jr., Chair of the 
  Subcommittee on Courts, Intellectual Property, and the Internet 
  from the State of Georgia......................................     2
The Honorable Darrell Issa, Ranking Member of the Subcommittee on 
  Courts, Intellectual Property, and the Internet from the State 
  of California..................................................     3

                               WITNESSES

David J. Kappos, Partner and Co-Chair, Intellectual Property 
  Practice, Cravath, Swaine & Moore, LLP
  Oral Testimony.................................................    82
  Prepared Statement.............................................    84
Kirupa Pushparaj, General Counsel and Corporate Secretary, Step
  Oral Testimony.................................................    90
  Prepared Statement.............................................    92
Jonathan Rogers, Chief Operating Officer, Centripetal Networks, 
  Inc.
  Oral Testimony.................................................    95
  Prepared Statement.............................................    97
Joseph Matal, Partner, Haynes and Boone, LLP
  Oral Testimony.................................................   108
  Prepared Statement.............................................   110
Eldora L. Ellison, Director and Co-Chair, Patent Office 
  Litigation Practice, Sterne, Kessler, Goldstein & Fox
  Oral Testimony.................................................   123
  Prepared Statement.............................................   125
Earl ``Eb'' Bright, President & General Counsel, ExploraMed
  Oral Testimony.................................................   130
  Prepared Statement.............................................   132

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Materials submitted by the Honorable Darrell Issa, Ranking Member 
  of the Subcommittee on Courts, Intellectual Property, and the 
  Internet from the State of California, for the record
  A statement by the Honorable Senator Patrick Leahy, Chair of 
    the Subcommittee on Intellectual Property, United States 
    Senate Committee on the Judiciary............................     6
  A statement from Biosimilars Council, AAM......................     8
  A statement from United for Patent Reform......................    10
  A statement from Garrick Francis, Vice President, Federal 
    Affairs, Alliance for Automotive Innovation..................    14
Materials submitted by Honorable Henry C. ``Hank'' Johnson, Jr., 
  Chair of the Subcommittee on Courts, Intellectual Property, and 
  the Internet from the State of Georgia, for the record
  A statement from Robert A. Armitage, Consultant, IP Strategy & 
    Policy.......................................................    20
  A statement from Molly Metz, JumpNrope.........................    55
  A statement from Engine, ACT | The App Association, Consumer 
    and Technology Association, and Developers Alliance..........    63
  A statement from Brian Pomper, Executive Director, The 
    Innovation Alliance..........................................    66
Materials submitted for the record by the Honorable Thomas 
  Massie, a Member of the Subcommittee on Courts, Intellectual 
  Property, and the Internet from the State of Kentucky, for the 
  record
  An article entitled, ``China Hijacks US Patent System to Steal 
    American Inventions,'' US Inventor...........................   166
  An article entitled, ``How Google and Big Tech Killed the U.S. 
    Patent System,'' IPWatchdog..................................   178
  An article entitled, ``Big Tech's Sticky Fingers Are Still at 
    Work in Washington,'' Hudson Institute, Inc..................   189

                                APPENDIX

Materals submitted by the Honorable Darrell Issa, Ranking Member 
  of the Subcommittee on Courts, Intellectual Property, and the 
  Internet from the State of California, for the record
  A presentation entitled, ``An Analysis of Multiple Petitions in 
    AIA Trials,'' United States Patent and Trademark Office......   194
  A presentation entitled, ``Analysis of multiple petitions in 
    AIA Proceedings: (December 2020 update),'' United States 
    Patent and Trademark Office..................................   236
  A letter from Francisco R. Sanchez, Vice President & General 
    Counsel, Law & IP Unit, American Honda Motor Co., Inc........   250
  A statement from Engine, ACT | The App Association, Consumer 
    and Technology Association, and Developers Alliance..........   253
  A statement from Conservatives for Property Rights.............   256
  A statement from Eagle Forum Education & Legal Defense Fund....   262
A statement from the Software and Information Industry 
  Association, submitted by the Honorable Henry C. ``Hank'' 
  Johnson, Jr., Chair of the Subcommittee on Courts, Intellectual 
  Property, and the Internet from the State of Georgia, for the 
  record.........................................................   265

                 QUESTIONS AND RESPONSES FOR THE RECORD

Questions for the witnesses submitted by the Honorable Henry C. 
  ``Hank'' Johnson, Jr., Chair of the Subcommittee on Courts, 
  Intellectual Property, and the Internet from the State of 
  Georgia, for the record........................................   272
Questions for Joseph Matal, Partner, Haynes and Boone, LLP; 
  Jonathan Rogers, Chief Operating Officer, Centripetal Networks, 
  Inc.; and David Kappos, Partner and Co-Chair, Intellectual 
  Property Practice, Cravath, Swaine & Moore, LLP, submitted by 
  the Honorable Zoe Lofgren, a Member of the Subcommittee on 
  Courts, Intellectual Property, and the Internet from the State 
  of California, for the record..................................   276
Questions for Joseph Matal, Partner, Haynes and Boone, LLP, 
  submitted by the Honorable Scott Fitzgerald, a Member of the 
  Subcommittee on Courts, Intellectual Property, and the Internet 
  from the State of Wisconsin, for the record....................   278
Response from David Kappos, Partner and Co-Chair, Intellectual 
  Property Practice, Cravath, Swaine & Moore, LLP, submitted by 
  the Honorable Henry C. ``Hank'' Johnson, Jr., Chair of the 
  Subcommittee on Courts, Intellectual Property, and the Internet 
  from the State of Georgia, for the record......................   279
Response from David Kappos, Partner and Co-Chair, Intellectual 
  Property Practice, Cravath, Swaine & Moore, LLP, submitted by 
  the Honorable Zoe Lofgren, a Member of the Subcommittee on 
  Courts, Intellectual Property, and the Internet from the State 
  of California, for the record..................................   281
Response from Earl ``Eb'' Bright, President & General Counsel, 
  ExploraMed, submitted by the Honorable Henry C. ``Hank'' 
  Johnson, Jr., Chair of the Subcommittee on Courts, Intellectual 
  Property, and the Internet from the State of Georgia, for the 
  record.........................................................   284
Response from Eldora L. Ellison, Director and Co-Chair, Patent 
  Office Litigation Practice, Sterne, Kessler, Goldstein & Fox, 
  submitted by the Honorable Henry C. ``Hank'' Johnson, Jr., 
  Chair of the Subcommittee on Courts, Intellectual Property, and 
  the Internet from the State of Georgia, for the record.........   290
Response from Jonathan Rogers, Chief Operating Officer, 
  Centripetal Networks, Inc., submitted by the Honorable Henry C. 
  ``Hank'' Johnson, Jr., Chair of the Subcommittee on Courts, 
  Intellectual Property, and the Internet from the State of 
  Georgia, for the record........................................   292
Response from Jonathan Rogers, Chief Operating Officer, 
  Centripetal Networks, Inc., submitted by the Honorable Zoe 
  Lofgren, a Member of the Subcommittee on Courts, Intellectual 
  Property, and the Internet from the State of California, for 
  the record.....................................................   295
Response from Joseph Matal, Partner, Haynes and Boone, LLP, 
  submitted by the Honorable Henry C. ``Hank'' Johnson, Jr., 
  Chair of the Subcommittee on Courts, Intellectual Property, and 
  the Internet from the State of Georgia, for the record.........   297
Response from Joseph Matal, Partner, Haynes and Boone, LLP, 
  submitted by the Honorable Scott Fitzgerald, a Member of the 
  Subcommittee on Courts, Intellectual Property, and the Internet 
  from the State of Wisconsin, for the record....................   307
Response from Joseph Matal, Partner, Haynes and Boone, LLP, 
  submitted by the Honorable Zoe Lofgren, a Member of the 
  Subcommittee on Courts, Intellectual Property, and the Internet 
  from the State of California, for the record...................   308
Response from Kirupa Pushparaj, General Counsel and Corporate 
  Secretary, Step, submitted by the Honorable Henry C. ``Hank'' 
  Johnson, Jr., Chair of the Subcommittee on Courts, Intellectual 
  Property, and the Internet from the State of Georgia, for the 
  record.........................................................   323


                      THE PATENT TRIAL AND APPEAL



    BOARD AFTER 10 YEARS: IMPACT ON INNOVATION AND SMALL BUSINESSES

                              ----------                              


                        Thursday, June 23, 2022

                        House of Representatives

             Subcommittee on Courts, Intellectual Property,

                            and the Internet

                       Committee on the Judiciary

                             Washington, DC

    The Committee met, pursuant to call, at 10:06 a.m., in Room 
2141, Rayburn House Office Building, Hon. Hank Johnson [Chair 
of the Subcommittee] presiding.
    Members present: Representatives Johnson of Georgia, Lieu, 
Stanton, Lofgren, Ross, Jordan, Issa, Gohmert, Johnson of 
Louisiana, Massie, Bishop, Fischbach, Fitzgerald, and Bentz.
    Staff present: Aaron Hiller, Chief Counsel and Deputy Staff 
Director; John Doty, Senior Advisor and Deputy Staff Director; 
David Greengrass, Senior Counsel; Moh Sharma, Director of 
Member Services and Outreach & Policy Advisor; Gabriel Barnett, 
Professional Staff Member; Casey Lee, Staff Assistant; Merrick 
Nelson, Digital Director; Jamie Simpson, Chief Counsel for 
Courts & IP; Kristi L. R. Sawert, Detailee for Courts & IP; 
Tyler Grimm, Minority Chief Counsel for Policy and Strategy; 
Ella Yates, Minority Member Services Director; Andrea Woodard, 
Minority Professional Staff Member; Kiley Bidelman, Minority 
Clerk; and John Lee, Minority USPTO Detailee.
    Mr. Johnson of Georgia. The Subcommittee will come to 
order. Without objection, the Chair is authorized to declare 
recesses of the Subcommittee at any time. We welcome everyone 
to this morning's hearing on The Patent Trial and Appeals Board 
after 10 Years: Impact on Innovation and Small Businesses.
    Before we begin, I would like to remind Members that we 
have established an email address and distribution list 
dedicated to circulating exhibits, motions, or other written 
materials that Members might want to offer as part of our 
hearing today. If you would like to submit materials, please 
send them to the email address that has been previously 
distributed to your offices. We will circulate the materials to 
Members and staff as quickly as we can.
    I'd like to ask all Members to please mute your microphones 
when you are not speaking. This will help prevent feedback and 
other technical issues. You may unmute yourself anytime you 
seek recognition.
    I will now recognize myself for an opening statement.
    The Leahy-Smith America Invents Act of 2011, or AIA, made 
the most fundamental changes to the patent laws that our 
country had not seen since the Patent Act of 1952. One of those 
fundamental changes was the creation of the Patent Trial and 
Appeal Board, an adjudicatory body within the United States 
Patent and Trademark Office. The PTAB as the Patent Trial and 
Appeal Board is known conducts trials to review the validity of 
patents that the patent office previously issued.
    Congress designed the PTAB with the intent of providing a 
faster and less expensive alternative to patent litigation 
before the District Courts for determining the validity of a 
patent. One of the most popular types of trial the PTAB 
conducts is called inter partes review, or IPR. I believe that 
we will hear this term frequently today.
    This September, the PTAB would be 10 years old, and it has 
been busy. To date, the PTAB has received more than 13,000 
petitions for trials and has issued nearly 4,000 decisions on 
the validity of patents. So, this is a natural time to evaluate 
the impact of the PTAB's work.
    Today, we will do so with an eye toward the backbone of 
America's economy, the small business. The importance of small 
businesses to job creation, economic productivity, and 
innovation in the United States cannot be understated. Small 
businesses create most of our country's new jobs. They drive 
our economy, and they are responsible for a substantial portion 
of our gross domestic product.
    Small businesses also drive innovation in our country. For 
example, the Small Business Administration reports that small 
businesses are more likely to develop emerging technologies 
than large business firms. In the U.S. Senate Committee on 
Small Business and Entrepreneurship reports that small 
businesses produce more than 14 times more patents that large 
businesses and universities and employ nearly 40 percent of 
America's scientists and engineers.
    Small businesses need to be able to protect their 
innovations with patents. Indeed, we know that small businesses 
that apply for patents and other types of intellectual property 
protections are more likely to grow quickly and succeed than 
businesses that do not. Economists studying the impact of the 
award of a patent to small businesses concluded that the award 
of the first patent to a startup on average leads to 16 
additional employees after five years and 10.6 million dollars 
in additional sales over five years.
    Businesses of all types have also come to Congress 
raising--excuse me. Businesses of all sizes have also come to 
Congress raising concerns about lawsuits based upon patents 
they believe should not have been issued, causing them to spend 
money on lawsuits instead of R&D. That brings us to the issue 
before us today.
    Has the PTAB with its goal of quickly and efficiently 
determining the validity of a patent hurt or helped small 
businesses? To be sure, the PTAB has both its defenders and its 
critics. I believe we will hear from both today.
    Some stakeholders are concerned that PTAB proceedings are 
unfair to small inventors and businesses. For example, some 
stakeholders argue that only large corporations benefit from 
the PTAB's high patent invalidation rate. Other stakeholders 
strongly support the need for PTAB proceedings to protect small 
businesses from unreasonable patent licensing demands.
    These companies point to the existence of PTAB as giving 
them a less expensive forum to challenge the patent which can 
also drive down the cost of settling cases. Our job in 
Congress, however, is to figure out how to balance the many 
competing interest to ensure that the patent system 
incentivizes and promotes innovation to the greatest extent 
possible. That is the conversation I hope to have here today.
    I'm pleased that we have a panel of distinguished 
practitioners, patent law experts, and representatives from 
small businesses who can speak directly to their experiences 
with the PTAB. Thank you for being here today, and I look 
forward to your testimony.
    With that, I will recognize the Ranking Member of the 
Subcommittee, the gentleman from California, Mr. Issa, for his 
opening statement.
    Mr. Issa. Thank you, Mr. Chair, and thank you for calling 
this hearing. A little over a decade ago, or a decade ago, I 
proudly voted for this act, often known as the Leahy-Smith 
America Invents Act. I did so not because it was a perfect. We 
don't do perfect bills here.
    I did so because for more than a generation, we hadn't had 
a real look at the problems and legislation to address them. 
Before I came into Congress and before those years that led to 
the Leahy-Smith bill and I might mention also the Patent Pilot 
bill, I had been an inventor with over 37 patents. I had been a 
plaintiff. I'd been a defendant.
    I'd been the user of ex parte reexamination and recipient 
of ex parte attempts. I'd additionally been in Article III 
Court and in the ITC. In other words, I got my law degree the 
hard way, one payment to my lawyers at a time.
    For that reason, I came with a passion to address these 
issues. That passion now 22 years later burns just as bright. I 
want to thank the Chair for his passion to deal with this.
    This is not a perfect system. PTAB is not perfect. Some of 
us do not even agree with the last administration's handling of 
many cases and have said so. I may not even agree with the 
Supreme Court decision on how they felt the authority at the 
Patent and Trademark Office should be vested in one Senate 
confirmed Under Secretary.
    All of these are the problems that are here today. Let us 
go back those 22 years where, as a freshman, I came in and had 
been quite frankly shocked at what it cost to go through patent 
litigation. Whether you were the plaintiff or the defendant, 
how terribly long it took to get through that litigation.
    How case after case in front of a busy Federal Article III 
Judge was, in fact, extended, delayed, put off where there are 
no timelines. Often, and in my case on multiple occasions, 
handed off to the next poor, dumb you know what who got 
elevated to the bench and they dump their cases on them because 
nobody really wanted patent cases, or at least most people 
didn't.
    We were dealing with over 40 percent reversal by the Fed 
Circuit which essentially meant that the Fed Circuit was 
viewing the work of Article III Judges as de novo as if they 
were in fact trying those cases. That was what we inherited 
when I came to Congress. The ex parte system worked very well 
as an inventor.
    Most of the time, you survived because what got winged at 
you behind closed doors you could argue was somehow not 
related. There was no real admission of your plaintiff's case. 
They couldn't say, well, this is how the plaintiff or the 
patent holder is defining their technology. Isn't that 
different than what they said when they got their patent? Oh, 
by the way, wouldn't that be so broad as to invalidated?
    That wasn't what a patent examinator or a review board was 
prepared to do. So, let's be honest. There was a problem. 
Senator Leahy very well put together some ideas. Now, 10 years 
later, we're here to talk about the strengths and the 
weaknesses of that implementation.
    I'd be pleased to ask unanimous consent to introduce into 
the record a statement by Senator Leahy who has certainly a 
unique perspective on this.
    Mr. Johnson of Georgia. Without objection.
    Mr. Issa. Thank you, Mr. Chair. I'd ask unanimous consent 
to insert into the record a statement from AAM, United for 
Patent Reform, and the Auto Inventors.
    Mr. Johnson of Georgia. Without objection.
    [The information follows:]



      

                        MR. ISSA FOR THE RECORD

=======================================================================

	[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Issa. Okay. In closing, and I'll put the rest of my 
opening statement in for the record so we can get to our 
distinguished panel, we have a patent system that in the 20-
plus years I practiced got much more expensive. By the way, the 
number of cases went up. In the 22 years that I've been honored 
to sit on this dais, we have seen cases increase, cases moved 
to interesting places, first the Eastern District of Texas, now 
the Western District of Texas, in spite of the Supreme Court's 
rulings that kind of concentration is inappropriate.
    We have seen so many cases end up in the technology area in 
the San Jose region that some would say it represents the 
second West Texas. We have certainly seen the cost of 
litigation spiral up. It is higher at the PTAB than we wanted 
it to be and takes exactly the amount of time we statutory 
allow.
    As you will hear today, there are some cases in which the 
process may be being abused and multiple demands for no reason 
other than delaying implementation may be used. We continue to 
have the ITC often consider cases in which two behemoth 
American companies are each calling the other one a sleazy 
importer and asking for exclusions because there would be no 
other choice, when I fact each of them has billions of dollars 
of assets in the United States. So, let's leave one thing 
clear.
    Our Witnesses will talk about what they don't like about 
the bill. I want to challenge every one of them to talk about 
possible solutions today. If you come without solutions, you 
come with exactly what many people on this panel know which is 
we can do better. Together, we must do better, and I'm 
committed to do that with our Chair. With that, I yield back.
    Mr. Johnson of Georgia. I thank the Ranking Member for his 
very informed testimony. We will now introduce the panel of 
Witnesses. Before I do, let me apologize to you for not being 
there in person. I have domestic issues here in Georgia that 
compelled me to be here.
    I did attempt to fly up yesterday afternoon so that I could 
be there in person to handle this hearing. Unfortunately, due 
to weather, all the flights ended up being canceled and then 
everything was booked this morning. So, it caused me to have to 
do this virtually.
    So, I appreciate you all bearing with me during this time. 
I do thank the Witnesses for being here. I want to first 
introduce the Honorable David Kappos who is an attorney 
engineer and former United States Patent and Trademark Office 
Director.
    When Congress passed the American Invents Act or the 
America Invents Act, I'm sorry, Director Kappos set the work by 
working the Act's provisions, including the establishment of 
the PTAB. Before holding this position, Mr. Kappos served for 
more than 25 years at IBM as Vice President and Assistant 
General Counsel. In that role, he managed IBM's patent and 
trademark portfolios.
    He's currently the Co-Chair of the intellectual property 
practice at Cravath, Swain & Moore. Director Kappos earned a 
B.S. in electrical and computer engineering from the University 
of California, Davis and a J.D. from the University of 
California, Berkeley. Welcome, sir.
    Mr. Jonathan Rogers has held multiple leadership positions 
at Centripetal, a company that provides cybersecurity services. 
He currently serves as Chief Operating Officer. Mr. Rogers is 
an inventor and patent owner on various patents related to 
methods and systems pertaining the cyber threat intelligence 
and the prevention of cyber-attacks.
    Mr. Rogers holds a B.A. in electrical engineering from 
Boston University. He also received an MBA from the University 
of Maryland, Robert H. Smith School of Business. Welcome, sir.
    Mr. Kirupa Pushparaj is the General Counsel and Corporate 
Secretary for Step, a company that gives families and teens 
tools to manage money while learning financial literacy. He was 
formerly counsel to other successful startup companies in 
Silicon Valley and an associate in a prominent law firm. 
Besides his legal practice, Mr. Pushparaj taught as an Adjunct 
Professor at Stanford Law School for six years.
    He received a B.S. in electronics and communication 
engineering from PSG College of Technology. He received a M.S. 
in electrical and computer engineering from UC Santa Barbara 
and a J.D. from the University of the Pacific, McGeorge School 
of Law. Welcome, sir.
    Mr. Joseph Matal is a partner at the law firm of Haynes and 
Boone, LLP. He previously held several positions at the Patent 
and Trademark Office, including as the Acting Director and the 
Acting Solicitor. Before that, he was counsel to the Senate 
Judiciary Committee.
    Mr. Matal also served as a clerk to the Honorable William 
Canby of the Ninth Circuit and the Honorable Justice Rabinowitz 
of the Alaska Supreme Court. He has a J.D. from UC Berkeley 
School of Law and B.A. from Stanford University. Welcome, sir.
    Ms. Eldora Ellison is the Co-Chair of the patent office 
litigation practice at Sterne, Kessler, Goldstein & Fox. Over 
the course of her distinguished career, she has represented 
clients in over 70 inter partes review and post-grant review 
proceedings, more than 15 patent interferences, and various 
patent reexaminations and District Court litigations. Ms. 
Ellison has been recognized as a leading practitioner in the 
life sciences field.
    She received LMG Life Sciences Post-Grad Proceedings 
Attorney of the Year award on two occasions and was inducted 
into the organization's prestigious Hall of Fame. Ms. Ellison 
earned her J.D. from Georgetown University Law Center, her 
Ph.D. in biochemistry, molecular, and cell biology from Cornell 
University where she serves on the Board of Trustees. She also 
holds a B.S. in biology from Haverford College. Welcome, ma'am.
    Mr. Earl Bright has many years of technology development, 
company formation, and financing experience. He is a founder of 
several companies, a patent attorney, and has served on the 
executive management teams of many startup companies in 
multiple capacities. He is a Co-Founder of and serves on the 
Alliance for U.S. Startups & Inventors for Jobs Advisory 
Committee.
    Mr. Bright is an inventor on 14 U.S. issued patents with 
others currently pending. He has an MBA from both Columbia 
University and the University of California, Berkeley, a J.D. 
and B.S. in mechanical engineering degrees from the University 
of Oklahoma. He currently leads ExploraMed as President, 
General Counsel, and Chief Officer. Welcome, sir.
    Before proceeding with testimony, I would like to remind 
all our Witnesses that you have a legal obligation to provide 
truthful testimony and answers to this Subcommittee and that 
any false statement you make today may subject you to 18 U.S.C. 
1001. Before turning to our panel of Witnesses, without 
objection, I will enter several written Witness statements that 
the Subcommittee has received before our hearing today. I make 
particular note of a few of those written statements.
    The first is a Witness statement from Robert A. Armitage, a 
well-known leader in the intellectual property law. Mr. 
Armitage's statement voices support for the work of this 
Subcommittee in holding this hearing and suggests several PTAB 
reforms for increasing the integrity of and respect for our 
patent system.
    The second is a written statement from Molly Metz, a former 
five-time world jump rope champion and owner of a small company 
called Jumping Rope. Ms. Metz statement describes how she was 
proud to have obtained two patents for her precision-based 
speed handle technology that was used to break Guinness Records 
in the sport of jump rope. She lost faith in our patent system 
following her attempts to enforce her patents against a larger 
company.
    A third is a written statement from Engine, ACT, The App 
Association, Consumer and Technology Association, and 
Developers Alliance Project, nonprofits and trade associates 
that support and advocate for the nation's tech startups and 
small businesses. This written statement urges us to remember 
the important role the PTAB plays in curbing abuse of the 
patent system and mitigating the harm of low-quality patents.
    The fourth is a written statement from Brian Pomper, 
Executive Director of the Innovation Alliance, a coalition of 
research and development-based technology companies. Mr. 
Pomper's statement emphasizes that maintaining a strong patent 
system is critical to supporting innovative enterprises of all 
sizes and for protecting our nation's economy and national 
security.
    [The information follows:]



      

                 MR. JOHNSON OF GEORGIA FOR THE RECORD

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    Mr. Johnson of Georgia. Now, turning back to our Witnesses 
with us today, please note that your written statements will be 
entered into the record in their entirety. Accordingly, I ask 
that you summarize your testimony in five minutes. To help you 
stay within that time frame, there is a timing light on your 
table.
    When the light switches from green to yellow, you have one 
minute to conclude your testimony. When the light turns red, it 
means that your five minutes have expired. We will have five-
minute rounds of questions after the Witnesses' testimonies. 
Mr. Kampos, you may begin.

                   STATEMENT OF DAVID KAPPOS

    Mr. Kappos. Good morning, Chair Johnson, Ranking Member 
Issa, and Members of the Subcommittee. Thank you for the 
opportunity to provide my views on the USPTO's Patent Trial and 
Appeal Board and ways to improve the PTAB to enhance innovation 
and competitiveness. I'm testifying today solely on my own 
behalf.
    I was director of the USPTO 11 years ago when the AIA 
created the PTAB. Since then, the PTAB has on balance been a 
success, providing our country a cost-efficient way to 
reevaluate important patents. Invalid patents are eliminated, 
and the owners of valid patents are timely assured of their 
rights.
    My appreciation goes out to Congress, the Federal Circuit, 
the USPTO, and the PTAB, especially the chief judges and the 
many APJs for their work in building a first-class adjudication 
body within the USPTO. The PTAB on balance has achieved the 
vision that Congress set for it. We've learned a lot during the 
PTAB's first 10 years with some things going extremely well and 
others of course not so well. While there's plenty that should 
be preserved, there are some places where the PTAB's operations 
can be improved and I'm here to talk about those.
    Turning to those specific improvements, Congress should 
address the PTAB's Fintiv Rules. Now, while the number of 
Fintiv challenges have significantly declined, a congressional 
fix to this divisive issue would benefit U.S. innovation. I 
encourage Congress, however, to strike a balance between 
opposing interests when addressing Fintiv.
    In that regard, I'm concerned with fixes that are too 
extreme or too easily gamed. Any legislation requiring an 
expert agency to ignore obvious and important facts, for 
example, requiring the USPTO to ignore one or more court cases 
considering a patent at issue in a PTAB proceeding, is 
problematic. Fixes to abusive IPR filings that address IPRs 
filed on different days but not multiple IPRs filed on the same 
day will be easily gained.
    Well-founded concerns have been raised over IPR petitioners 
holding up good faith patent owners indefinitely with multiple 
proceedings. The law must provide mechanisms to discourage 
these abusive practices by petitioners. Congress should also 
codify the Phillips standard for claim construction.
    Congress should refrain from limiting IPR estoppel based on 
a final written decision that the claims are not unpatentable. 
Estoppel currently applies to enforceability, eligibility, and 
other non-prior art issues. Limiting estoppel would encourage 
duplicative validity challenges in parallel proceedings.
    Significant estoppel implications were a critical component 
of the original AIA. Good policy calls not for limiting 
estoppel but for applying it to the full scope of PTAB 
decisions. I'd also like to mention two other critically needed 
improvements to the PTAB.
    As a threshold matter, any changes to the law that governs 
the PTAB must account for something we did not anticipate in 
2011. The PTAB has become the dominant venue for determining 
patent validity. The law should reflect the role that PTAB has 
taken on.
    First, Congress should move the PTAB from the preponderance 
of evidence to the clear and convincing evidence standard of 
proof to invalidate a patent. As the predominant venue for 
determining patent validity, the PTAB's standard of proof 
should be aligned with the standard of proof used in all other 
venues, clear and convincing evidence.
    Second, Congress should create an IPR off ramp to 
reexamination to permit efficient claim amendments.
    This provision makes for sound policy. The PTAB has 
struggled with claim amendments. The central reexamination unit 
is well suited to manage such amendments.
    With the IPR offramp to reexamination, the ability to 
narrow claims affords fairness to patent owners and challengers 
enabling our post-grant system to meet the AIA's challenge. 
Thank you, Mr. Chair, Ranking Member. I look forward to your 
questions.
    [The statement of Mr. Kappos follows:]
    
    
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    Mr. Johnson of Georgia. Thank you, Mr. Kappos.
    Mr. Pushparaj, you may now begin.

                 STATEMENT OF KIRUPA PUSHPARAJ

    Mr. Pushparaj. Thank you, Members of the Subcommittee, for 
having me over and for allowing me an opportunity to talk about 
PTAB and what I consider positive impacts of PTAB, especially 
for small businesses. I'm the general counsel at Step which is 
a small business, a startup based in California which builds 
critical tools, financial tools to empower the next generation, 
a banking platform, a credit card that allows teams to build 
credit history even before they turn 18, investment tools, and 
many more to allow them to build a strong financial future. 
We're a small team of 100 people, including about 10 or 12 
engineers who built all this and are still hurting from the 
economy and trying to raise funds and offer a product that 
makes a difference.
    Prior to here, I was at Square, currently called Block, 
where I saw the company go from a small startup to the global 
leader, it is now in financial payments--in the payments 
industry. There as the head of patents and patent litigation, I 
saw the company's patents grow from a few patents to hundreds 
of patents, and also defended of the company--helped defend the 
company in many, many patent litigation trials and led over 30 
IPRs and CBMs trials, oversaw them. From that perspective, I'm 
here to talk about how PTAB have, in fact, been impactful to 
small businesses.
    When as a small business you are faced with patent 
litigation, on one hand, we build patents. Patents are 
important for our innovation. They help showcase our 
innovation. They help us raise funds. They establish credence 
in the technical field and help us attract talent and also 
deter abuse of litigation.
    It is important. It is important to build quality patents 
that are indeed valid patents. Just as much as I respect our 
patents, I respect quality valid patents of third party rights 
as well.
    Even as a startup, we face many threats for patent 
litigation coming in from various sources, a predominant source 
of which is nonpracticing entities. So, if you were in District 
Court, as you all know, there are two avenues to defend 
yourself. Show the patent is invalid or show that you don't 
infringe the patent.
    Often situations, you're doing both simultaneously in a 
lawsuit in a District Court which is enormously expensive and 
burdensome to a company like ours. It costs in the millions of 
dollars to have to go through the discovery burdens and to 
pursue both avenues simultaneously. It's equally expensive for 
patent owner.
    They also have to prove infringement and defend against 
validity. Take an example from our situation. I received a 
letter a couple months ago about this entity that claimed to 
have a patent which literally went on sending a receipt over 
internet, the advancement and innovation being ability to send 
a receipt over the internet.
    We immediately knew that patent was invalid, and there were 
countless amounts of prior art to show that patent was invalid. 
We could've end up being in court to defend those over years, 
the ten engineers we have through discovery burdens and 
technical analysis. The majority of the company drain our 
resources and spend millions of dollars literally which could 
be a death knell for small startups in defending these claims.
    Or it is not expensive but go over to the PTAB and go over 
the threshold matter of whether there was validity in the 
patent to start with and spend a couple hundred thousand 
dollars which gives us leverage. Instead of going and 
immediately settling with a known invalid patent, just to avoid 
the threat of litigation, we have an avenue through that we 
don't infringe and that there is a path for a solution here. 
That is where the PTAB is the best forum to address validity 
issues.
    The PTAB is not taking on an avenue of defense that was not 
available. You have to prove invalidity or validity of the 
patent, either side. The PTAB is a much more efficient forum to 
deal with.
    As you all know, you need to get it done within a certain 
time frame. The PTAB is a body of expert bodies, people who 
have experience in the very technical field that you are 
working on. Ability to take this on, I feel that especially--
I'm coming up on time--especially the notion that--I want to 
counter the notion that the PTAB is a death squad and want to 
look into how decisions from the PTAB had, in fact, been 
balanced on both sides.
    I'd love to talk more on this, and I am here to answering 
any questions this Committee may have. I yield the rest of my 
time. Thank you.
    [The statement of Mr. Pushparaj follows:]
    

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    Mr. Johnson of Georgia. Thank you, Mr. Pushparaj.
    We will now here from Mr. Rogers. Mr. Rogers, you may 
begin.

                  STATEMENT OF JONATHAN ROGERS

    Mr. Rogers. Chair Johnson, Ranking Member Issa, and Members 
of the Subcommittee, it is an honor to testify before you 
today. My name is Jonathan Rogers, and I'm the COO and a Co-
Founder of Centripetal. Prior to starting the company with my 
father in his basement in Vienna, Virginia, I served as a Navy 
cryptologist at the NSA and as a technical intelligence officer 
at the CIA.
    Similarly, my father was an Air Force cryptologist who was 
responsible for communication security of critical systems like 
the National Military Command Center and Air Force One. Our 
other founders have also spent their entire careers in 
communication security. We started Centripetal to solve one of 
the enduring failures of traditional network security, and we 
developed each of Centripetal's patented innovations to deliver 
a new paradigm of predictive intelligence-based security.
    They are implemented in our solutions today. To do this, we 
invested nearly 200 million dollars in research and 
development, and we now hold approximately 50 U.S. patents. We 
have nearly 100 employees located in Virginia and New 
Hampshire, and our customers come from every segment, including 
major U.S. hospital systems, banks, insurance firms, power 
plants, retailers, universities federal and local government 
agencies, and others.
    With our breakthrough technology and backed by 
exceptionally strong patents, our intent was to usher in a new 
paradigm for network security. However, we quickly ran headlong 
into the power of a dominant incumbent who has mastered the use 
of a patent system filled with loopholes and stacked against 
innovators. Between 2015 and 2017, Centripetal has numerous 
meetings with network giant Cisco Systems.
    We're under a nondisclosure agreement. We discussed our 
business, our products, our algorithms, and our patented 
technology. We had months of meetings and demonstrations. Cisco 
then walked away only to launch new versions of its core 
products that incorporated our patented technologies, call them 
the, quote, ``network of the future'' and having, quote, 
``solved the unsolvable.''
    Centripetal had no choice but to sue Cisco for patent 
infringement. I've included a more detailed description of the 
trial in my written statement, but here are the facts. First, 
Cisco filed 14 inter parte review petitions before the Patent 
Trial and Appeal Board to challenge the validity of our 
patents. Most of Centripetal's patent claims were found to be 
valid.
    However, this delayed the District Court litigation for 
nearly a year, during which time Centripetal was forced to 
compete in the market against our own patented technology but 
sold by Cisco's massive global sales force. The District Court 
trial finally started in April of 2020 during the COVID-19 
pandemic. After eight weeks of testimony from dozens of experts 
and numerous employees of both parties and a review of hundreds 
of trial exhibits, Centripetal prevailed and defended the 
validity of our patents yet again.
    In October of 2020, the court found that Cisco had 
willfully infringed four of the five asserted Centripetal 
patents and awarded damages of 2.6-3.2 billion dollars for 
Cisco's egregious infringement. As of this morning when I 
walked into this room, this case was vacated for a late 
discovered 4,500-dollar interest in Cisco stock held by the 
judge's wife and purchased independently by a stockbroker. We 
will have to do it all again.
    Our one opportunity to prove infringement, we did so 
overwhelmingly. You might things this is a true David and 
Goliath story. Unfortunately, the battle over the Cisco 
judgment is still raging, and serial attacks on Centripetal's 
patents continue even now.
    When we do finally conclude the Cisco litigation, we will 
have defended the validity of each patent at least three times 
after its issuance and likely more. The odds become impossible 
where David has to slay Goliath over and over again. Companies 
like Cisco know this, and it is why predatory patent 
infringement has become an institutionalized business model.
    Unfortunately, the current State of the patent system is 
helping them do it. As I understand it, Congress intended the 
PTAB process to lower costs and to provide an alternative. 
However, the opposite has happened.
    The PTAB has become an extra tool for abuse which 
multiplies the cost and opens repeated validity challenges at 
the PTAB, District Court, and the Federal Circuit at a minimum. 
We have faced over 30 IPRs from very large competitors. Our 
patents are targeted not because they are bad but because they 
are valuable, and defending each IPR can cost a million 
dollars.
    Centripetal has learned many hard lessons from our 
experience, and we welcome the opportunity to suggest changes 
that can support the next generation of great American 
startups. The playing field should be leveled. There should be 
one bite at the apple.
    The rules and standards should be consistent, and Congress 
should legislate what the goal of quiet title that will support 
technology investment. Thank you for the opportunity to appear 
before you today, and I look forward to your questions.
    [The statement of Mr. Rogers follows:]
    
    
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    Mr. Johnson of Georgia. Thank you, sir.
    We will now hear from Mr. Matal. Mr. Matal, five minutes.

                   STATEMENT OF JOSEPH MATAL

    Mr. Matal. Chair Johnson, Mr. Issa, if there's one point I 
would hope to impress on the subcommittee, it's that Patent 
Trial and Appeal Board proceedings are the most technically 
accurate and reliable system that we have in the United States 
for assessing patent validity. By law, PTAB judges are required 
to be person of, quote, ``competent legal knowledge and 
technical ability.'' The agency requires that each PTAB judge 
have at least an undergraduate education in a technical field.
    Indeed, many PTAB judges have master's degrees and even 
doctorates in science and engineering. In addition, all the 
PTAB judges have substantial legal experience before they're 
appointed to the board. Many of them have previously served as 
patent examiners.
    On balance, every PTAB judge has substantially more 
qualifications to decide patentability issues than does a 
typical District Judge or a lay jury. So, you might ask, are we 
getting our money's worth for all these qualifications? Is it 
working?
    There's actually no data on this issue. There's a recent 
study which I site in my written testimony that analyze the 
results of all patent appeals that were docketed at the U.S. 
Court of Appeals for the Federal Circuit during a two-year 
period. This study compared the results of patentability 
determinations that were made by the PTAB versus those that are 
made by a District Court and what happened on appeal.
    What the study found is that the PTAB's patent validity 
determinations affirmed notably more often than those of 
District Courts when they're reviewed on appeal. In fact, 
District Courts are about two and a half times more likely to 
be reversed on appeal than is the board when they're making 
patentability determinations. The study states, and I quote, 
``the most straightforward conclusion'' is that PTAB judges' 
technical knowledge has, quote, ``aided decision-making on the 
thorny scientific questions endemic to patent law.''
    It turns out to make the basic patentability determination 
to decide whether the claimed invention would've been obvious 
to those skilled in the art, it helps to actually be a person 
of skill in the art to have that background technical 
knowledge. The focus of this hearing, however, is small 
businesses. Even if PTAB proceedings are more technically 
accurate with sound results, a question still arises. Are these 
proceedings fair to small businesses?
    In assessing that question, I'd urge the Committee to 
consider to two facts. First, small businesses are sometimes 
the party asserting a patent. On the other hand, just as often, 
if not more so, a small business will be the party that's being 
accused of infringement of an invalid patent.
    In fact, some patents' litigation entities when they mount 
their campaigns will start out by suing small businesses 
because they know that they're more likely to settle and they 
can provide funds for the more difficult levels of the 
campaign. The other fact about Patent Trial and Appeal Board 
proceedings is that they're substantially less expensive than 
District Court litigation. On average, a PTAB proceeding costs 
about one-ninth as much as a District Court lawsuit.
    The costs are typically measures, the legal fees, in 
hundreds of thousands of dollars rather than millions of 
dollars. So, what would happen if Congress enacted legislation 
that cut off access to these proceedings? What would be the 
impact on small businesses?
    Well, for a small business that's asserting a patent, there 
would be a modest benefit that business would no longer need to 
defend itself in these proceedings. On the other hand, for a 
small business that's being accused of the infringement of an 
invalid patent, such a result would be deeply unfair. In many 
cases, that small business defendant won't even be able to 
defend itself.
    It simply won't have the millions of dollars that it cost 
to go through a District Court trial and obtain a patentability 
determination there. Then there's also the issue of litigation 
risk. Even if that small business defendant can present a 
strong case that the patent is invalid, at least one that would 
be clear to a person of skill in the art, there's no guarantee 
that a jury would recognize that or will even engage in an 
obviousness analysis.
    Because of that litigation risk, a small business will 
often be forced to settle. When I reviewed the testimony of my 
co-panelists last night, I was gratified to see that many of us 
actually basically agree on these issues. Everyone basically 
agrees that the board is actually reaching more technically 
sound results, and no one disputes that these proceedings are 
cheaper than District Court litigation.
    Nevertheless, you're hearing all kinds of proposals, here 
and from others, for ways we should restrict these proceedings. 
People pain scenarios where they allege it would actually be 
efficient. We'd all benefit if Congress cut off access to a 
PTAB validity determination in that circumstance.
    In assessing these scenarios, I'd simply urge the Committee 
to keep the public interest in mind. The businesses that are 
before you all are pursuing their private interest which is the 
way the system works. It's this Committee and the USPTO that 
are charged with protecting the public interest with ensuring 
that the patent system strikes the right balance between 
incentivizing innovation and avoiding undo costs on consumers.
    I would submit that whether the enforcement of a patent is 
consistent with the public interest will always depend on the 
patent's validity on whether it creates a new innovation or 
whether that patent claims technology that was already in the 
public domain and that should be freely available to everyone. 
As this Committee and as the USPTO pursue the public interest, 
I would simply urge them to preserve and maintain access to 
Patent Trial and Appeal Board proceedings, the most technically 
reliable and accurate system that we have in the United States 
for assessing questions of patent validity.
    [The statement of Mr. Matal follows:]

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    Mr. Johnson of Georgia. All right, sir. Thank you for your 
testimony.
    Ms. Ellison, you are now recognized for five minutes.

                 STATEMENT OF ELDORA L. ELLISON

    Ms. Ellison. Chair Johnson, Ranking Member Issa, and 
Members of the Subcommittee, thank you for the opportunity 
appear here today. Thank you for the kind introduction earlier. 
I'll simply add that Sterne, Kessler, Goldstein & Fox, the firm 
at which I work, has been one of the most active firms at the 
PTAB for the last 10 years.
    I have practiced before the PTAB regularly since its 
inception, both on behalf of patent owners and petitioners, 
both large and small entities, and on behalf of parties engaged 
in parallel District Court litigation. Today, however, I am 
testifying in my personal capacity to offer the perspectives of 
a PTAB practitioner. When I reflect on the last 10 years, I 
view it as a time of great opportunity for petitioners but also 
a time of significant uncertainty for both petitioners and 
patent owners.
    In my view, post-grant proceedings have improved patent 
quality primarily because applicants have been incentivized to 
devote more resources to preparing and prosecuting quality 
patents in the first place. We need to continue to invest in 
quality patent prosecution on the front end, including 
providing better training in patent law for examiners and 
providing better guidance and assistance for small entities. 
I'd like to briefly touch on various additional areas where 
further advancements can be made to the existing system.
    First, I urge you to consider whether the PTAB has 
sufficient resources to do its job well. From a practitioner's 
perspective, it frequently seems that judges are burdened with 
very busy dockets, making me question whether all three members 
of a PTAB panel are given adequate time to fully consider the 
issues raised in a case. Ensuring that the PTAB has adequate 
resources is fundamental to achieving just results and 
instilling confidence in the system.
    Second, it is important to increase predictability. While 
the PTAB has made much progress in issuing precedential 
decisions, it remains difficult to predict how a given panel 
will apply that precedent in a given proceeding. While I am 
pleased that Director Vidal has just announced interim 
procedures for discretionary denials, uncertainty will remain 
if there is not consistent application of those procedures or 
if those procedures are not followed by future directors.
    Third, stakeholders would benefit from codification of the 
claim construction standard used in IPRs and PGRs. This 
standard should be the same as the standard used in District 
Court. It is important to clarify how the PTAB should account 
for any claim construction order that has been issued by a 
court.
    Next, I encourage you to consider whether the PTAB could be 
better equipped to make credibility determinations of 
witnesses. It seems as though witnesses too often shade truth. 
It appears that APJs sometimes struggle to make credibility 
determinations because there's virtually no live testimony at 
the PTAB.
    It would be helpful if the PTAB promulgated guidelines and 
procedures for considering live testimony on key issues in 
cases. Regarding standing, while some stakeholders have 
suggested requiring that petitioners have Article III standing 
to file petitions, I do not favor such an approach. The current 
system serves an important function in allowing stakeholders of 
all sizes to resolve patent issues before expending large sums 
of money and effort on research, development, and 
commercialization.
    Next, I submit that the PTAB's treatment of requests for 
rehearings warrants further consideration and potentially 
revision. Requesting rehearing of PTAB decisions often appears 
to be an exercise in futility without fresh consideration of 
the issues. To increase confidence in the system, consider 
promulgating a process to allow more regular use of expanded 
panels or even alternate panels at the request of a party.
    I also submit that the current system for motions to amend 
does not appear to work well for patent owners given its 
adversarial nature, low usage rate, and fairly low rate of 
success. Many patent owners instead opt to pursue additional 
claims in ex parte proceedings. Reevaluation of motion to amend 
practice would be welcomed.
    Finally, I'd like to applaud the PTAB for recognizing the 
importance of diversity, equity, and inclusion, both within the 
PTAB and within the patent bar. I encourage the Office to 
continue to develop innovative programs to address this 
important issue. In closing, ongoing efforts are needed to 
improve confidence in the PTAB for entities of all sizes and to 
provide a balanced system that fosters innovation. Thank you 
for your consideration of these views.
    [The statement of Mr. Ellison follows:]
    
    
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    Mr. Johnson of Georgia. Thank you for your testimony.
    Mr. Bright, you are now recognized for five minutes.

                    STATEMENT OF EARL BRIGHT

    Mr. Bright. Thank you. Chair Johnson, Ranking Member Issa, 
and Members of the Subcommittee, it's an honor to be here. I 
perspective I want to bring today is one that is focused on 
public policy and one that is a more holistic view that looks 
beyond just disputes at the PTAB and what is going on in the 
courts. There is a tremendous impact that occurs in the 
business environment outside of what goes on at the PTAB just 
because of observing the activities of the PTAB. That's the 
perspective that I want to bring today.
    So, my name is Eb Bright. I've spent over 20 years working 
as an innovator in the medical device field. I currently lead a 
venture-backed medical device incubator called ExploraMed which 
was started by our Executive Chair, Dr. Josh Makower.
    We have successfully launched six companies, and I'm also 
an inventor on 26 U.S. patents. Patent protection directs and 
shapes the potential solutions developed in incubators like 
ours that nurture fragile and risky innovations. It has also 
influenced the investment decisions that venture capitalists 
make who provide the funding for our companies and many like 
ours.
    Changes to the patent system in recent years, particularly 
the IPR process with its high invalidity rates, duplicative 
serial challenges, and overreaching basis for obviousness 
challenges and the ability to challenge patents that have 
already been found valid puts many startups at constant risk 
and makes venture capital harder to attract. This has led to 
outcomes that shouldn't be surprising. There's been a decrease 
in capital invested in patent-intensive industries and less 
capital available to put at risk in the earliest stage 
companies.
    This is a matter of great strategic importance to our 
nation. Most critical technology such as IT hardware, 
cybersecurity, medical devices, biopharmaceuticals, clean 
energy, quantum computing just to name a few require patents to 
justify long-term investments in risky new technologies. I can 
assure you that potential investors in these areas look at 
every conceivable risk factor facing a young company or a young 
entrepreneur who has an idea for a new technology.
    They make their investment decisions, particularly those 
that involve tens or hundreds of millions of dollars and a 
decade or more to potentially provide a return on that 
investment. In recent years, we've seen a continued migration 
of venture capital away from critical patent-intensive sectors 
into much less patent intensive pursuits. Consider that in 
2021, over 300 billion dollars in venture capital was invested 
in software, consumer products, and crypto.
    Meanwhile, biotech, cybersecurity, semiconductors, and 
medical devices only attracted 64 billion. I raised many of 
these points at a hearing held in the Senate Judiciary 
Committee in 2019. I'm pleased to note that several 
improvements have been made since that time that address some 
of the most egregious PTAB abuses, particularly serial and 
duplicative IPRs.
    These improvements came in the General Plastics, Sotera, 
and Fintiv precedential decisions made by the USPTO in 2019 and 
2020. Not surprisingly, these reforms have been strongly 
opposed by the heaviest users of the PTAB. Several of them have 
even been challenged--several large companies have challenged 
these rules all the way to the Supreme Court losing every time.
    Casting aside the reforms made by General Plastics and 
Fintiv and Sotera would again make innovative venture-backed 
startups vulnerable to extensive campaigns by large companies 
to invalidate their best patents. In addition to maintaining 
these improvements, there are several other legislative changes 
that Congress should consider to restore PTAB to its original 
intent as a cost effective alternative to litigation. It seems 
very clear now that there should be a standing requirement for 
challenging patents at the PTAB.
    Simply allowing any party to challenge a valid U.S. patent 
has led to a number of almost unbelievable abuses that the 
authors of the AIA did not intend. We have seen the rise of 
well-funded and sophisticated proxies such as unified patents 
which literally offer bounties for information that could be 
used to attack patents held by companies that compete with 
their members. More recently, PTAB abusers like OpenSky and 
Patent Quality Assurance have been formed for the sole purpose 
of filing IPRs on small companies whose patents have already 
been upheld in court.
    The USPTO director has statutory discretion to address 
these situations. A standing requirement would also help stamp 
out this abuse. Congress should also require PTAB to assume the 
validity of patents it is issued and require PTAB petitions to 
meet the same invalidity requirements as District Court, namely 
clear and convincing evidence of invalidity.
    Lastly, I would suggest that Congress insist that PTAB 
strictly enforce the very clear statutory limits that Congress 
put into the statute that said that obviousness is to be 
established only based on patents or printed publications. I 
greatly appreciate the opportunity to participate today as an 
entrepreneur, inventor, and patent attorney. I believe that you 
are taking the exact right approach in assessing the impact of 
PTAB from the perspective of small business and U.S. 
innovation, and I look forward to your questions.
    [The statement of Mr. Bright follows:]


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    Mr. Johnson of Georgia. Thank you. We will now proceed 
under the five-minute rule with questions. I will begin by 
recognizing myself for five-minutes. Mr. Bright, as I said in 
my opening statement, studies show that small businesses are 
more likely to develop emerging technologies than large 
business firms.
    I understand from your testimony that venture capitalists 
are not investing as much in these small businesses as they did 
years ago. Can you explain the long-term consequences of the 
shift in venture capitalist funding? Specifically, is there a 
risk that the United States will lose its competitive edge to 
other countries if our patent policies do not support the 
funding and growth of small innovative companies?
    Mr. Bright. Yes, thank you for your question. Yes, there is 
a risk that we're going to lose our technology advantage. One 
of the things that is important to take into consideration is 
that there are a number of different technologies that in the 
earliest days are very uncertain.
    So, it's important to seed as many of those different ideas 
and technologies as possible to have continuous improvement in 
an industry. One of the best ways to do that is by making it an 
incentive that venture capitalists and other investors will put 
their money into their seed stage investments. That will 
establish a number of large opportunities, any of which will 
emerge as being the best business opportunity and also the best 
technology for our nation.
    There is no shortage of venture capital dollars. There is 
no shortage of investment dollars. There's not an either/or 
situation that exists. As long as the incentives are there to 
protect investment that's made in early stage, there's plenty 
of dollars to go around. Those dollars can go anywhere in the 
world.
    So, any intellectual property system around the world that 
incentivizes and protects those earliest investments is going 
to attract the businesses and is going to attract the 
investments. It is not necessarily going to stay here in the 
U.S. So, we should be doing everything we can to make our 
system the system that investors have the most confidence in, 
that inventors and entrepreneurs have the most confidence in so 
that we are maintaining investment in the brightest and best 
ideas here in this country.
    Mr. Johnson of Georgia. Thank you. Mr. Kappos, I understand 
that you were the director of the Patent Office when the AIA 
was enacted and the PTAB came into being. Looking back over the 
last 10 years at the PTAB, what were the biggest surprises or 
unintended consequences of creating IPRs and PRGs--excuse me, 
PGRs in your opinion?
    Mr. Kappos. Yes, thank you for the question, Chair Johnson. 
So, I would say a couple of surprises, first, the usage rate of 
the PTAB. When we conducted the congressionally mandated 
studies regarding anticipated usage, what we came up with at 
the PTO turned out to be about one-third of how much the PTAB 
has actually been used. So, that has been a huge surprise. You 
might say a good surprise, but in any event a huge one.
    The second thing that I think has been unexpected is the 
rate of, in some cases, the serial challenges and the 
difficulty of managing them. You've heard about that from some 
of the other Witnesses. We built in and negotiated, if you 
will, from the PTO with Congress to give the agency flexibility 
to frankly beg-off challenges where there was significant 
District Court activity, maybe even Federal Circuit activity.
    What we didn't expect was the rate of serial challenges in 
the PTO around the same time between unaffiliated or loosely 
affiliated parties. So, those have been a couple of challenges. 
I hope Congress is able to deal particularly with the second 
one in this legislative effort.
    Mr. Johnson of Georgia. Thank you. Ms. Ellison, I 
understand that out of the thousands of trials the PTAB has 
conducted, only a handful have allowed for live testimony. In 
your view, do you think live testimony should be more common? 
If so, why?
    Ms. Ellison. Thank you for the question. I do think it 
should be available more frequently. I think it would be 
helpful for judges in assessing the credibility of witnesses.
    As the system currently stands, judges are presented with 
briefs, and the briefs cite to deposition testimony that is 
provided as exhibits and a brief cite to direct testimony 
that's provided as exhibits. The judges never get the 
opportunity or very, very rarely have the opportunity or take 
the opportunity to actually see a witness, to actually make a 
determinate as to whether that witness is credible. Moreover, 
from the practitioner's perspective, it's not even clear that 
the judges even read all the testimony.
    There are lengthy documents that have to be submitted here. 
I think if there's limited testimony that's provided directly 
to judges. They'll be better equipped to judge the character of 
the witnesses and judge the strength of the witnesses' 
testimony.
    Mr. Johnson of Georgia. Thank you. My time has expired, and 
I will now--
    Mr. Issa. Mr. Chair, would you please go to Mr. Massie as 
the other holder of patents and one-time holder of the solar 
vehicle land speed record?
    Mr. Johnson of Georgia. I will. I'll recognize the 
gentleman, Mr. Massie, for five minutes.
    Mr. Massie. My speeds are greatly exaggerated. Let me ask 
this first question. We've heard here today that there were 
intentions for PTAB, what it was set up for 10 years ago. I'd 
like to know who--I'll ask you, Mr. Kappos, first. Who are the 
most frequent filers at PTAB?
    Mr. Kappos. So, I think some other Witnesses have put 
statistics in the records. My understanding is that there are a 
number of very large tech companies that are the biggest filers 
by far.
    Mr. Massie. Mr. Matal, who are the biggest filers--the most 
frequent filers, sorry.
    Mr. Matal. Basically, the people who get sued the most 
often. It does tend to be the larger companies. In fact, larger 
companies use the proceedings more than the proportion that 
they are of the litigation. Part of that is the fault of 
lawyers like me. When you have a client that's a smaller 
business or only a secondary liability or using something or 
selling it, you often go to them and say, this is who really 
made product.
    Mr. Massie. Ostensibly, what are these companies that are 
getting sued for?
    Mr. Matal. For patent infringement.
    Mr. Massie. Okay. Thank you. Mr. Bright, who are the 
biggest filers at PTAB.
    Mr. Bright. So, the top--
    Mr. Massie. Most frequent, sorry.
    Mr. Bright. Yeah, the top petitioners include Apple, 673 
petitions; Samsung, 549 petitions; Google, 354 petitions; and 
Microsoft, 227 petitions. Eighty-two percent of 14,000 PTAB 
cases are large corporations. Forty percent of the 14,000 PTAB 
cases are large corporations against small competitors. Only 
two percent of the 14,000 PTAB cases are small businesses 
versus NPEs. So, that's kind of the top stats.
    Mr. Massie. Can companies from China file in PTAB and 
invalidate American patents?
    Mr. Bright. Yes.
    Mr. Massie. How frequently does that happen?
    Mr. Bright. I would have to double check the stats on that 
and get back to you with that.
    Mr. Massie. Okay. Thank you very much. So, forgive me if 
I'm a little leery of this theory that the PTAB was set up and 
established and has succeeded in helping small companies and 
small inventors. Mr. Rogers, can you tell us how much does it 
cost if you're an inventor? You had to go against Cisco and are 
still trying. How much does a PTAB case cost for your company?
    Mr. Rogers. It cost an enormous amount. Part of that is 
driven by the standards. There's no presumption of validity on 
the patent. If a trial gets instituted, the statistics are that 
you have overwhelming odds of having the patent revoked.
    So, there's a huge amount of expense that is incurred right 
up front to try to not be instituted. This isn't a case of a 
single bad patent. As you saw in the case with Cisco, it's a 
salvo of 14 multiple overlaps, different theories on the exact 
same patent. So, it can be quite extensive.
    Mr. Massie. The Witness, Pushparaj, mentioned a patent that 
on its face sounds ridiculous and maybe never should've been 
issued. He said that it was for sending a receipt over the 
internet. I would suggest that his beef is with the patent 
office, with the patent examiners.
    I appreciate, Ms. Ellison, your comment on the need for 
more resources. The PTAB, it seems to me like it was 
established with the assumption that the patent examiners screw 
up so frequently that there needs to be a brand-new court 
established to deal with the number of screw ups at the patent 
office. Then we're going to put this within the patent office.
    Now, this comes from a small inventor. By the way, all the 
people who complained to me about PTAB are small inventors. The 
big tech folks aren't the ones complaining.
    An inventor asked me, well, if the PTAB is the final say, 
why can't I put my patent through the PTAB after it's examined? 
Like, give me that extra guarantee that I've got a valid 
patent. Why can't they just go through something like that the 
PTAB and validate their patent before they invest millions of 
dollars, Ms. Ellison?
    Ms. Ellison. Well, I think the recent use of discretionary 
denials, particularly under section 325(d), has shown that--and 
with cases like Advanced Bionics have shown that the PTAB is 
giving more deference to the original examination. As I said 
earlier, I think more resources need to be invested in quality 
prosecution on the front end, including training examiners to 
make sure that the examiners are not making errors as they 
examine patents.
    Mr. Massie. It seems to me if the expertise exists within 
PTAB to really find out if you got a real patent, why don't we 
apply that expertise before we issue the patent? I yield back.
    Mr. Johnson of Georgia. The gentleman yields back. We will 
now recognize the gentlelady from California, Ms. Lofgren, for 
five minutes.
    Ms. Lofgren. Thank you, Mr. Johnson. Listening today, it 
has been a decade. It was a bipartisan, bicameral effort that 
was made to do the improvements to the patent system.
    It was really in response to this very abusive sort of 
patent troll shakedowns that were occurring across the economy, 
not just between actual patent holders, but coffee shops that 
were using
Wi-Fi, for instance. I think that's what motivated the Congress 
to act, and it wasn't easy. I realize that my friend from 
Kentucky didn't agree at the time and still does not agree.
    It was a response to something that was a real problem and 
a growing problem. That doesn't mean that what we did 10 years 
ago was perfect. I think if there is an opportunity to make 
improvements.
    Obviously, we should all be open to looking at it and 
taking that opportunity. Along those lines, I saw that the 
USPTO issued new guidelines on Fintiv earlier this week. I'm 
particularly interested since they served in the office, 
although Mr. Matall as acting, what Mr. Kappos and Mr. Matal 
might think if they've had a chance to look at the new 
guidance, what they think of it.
    Mr. Kappos. Yes. Well, thanks, Congresswoman Lofgren. Great 
to see you again. Relative to the Fintiv guidance issued by the 
PTO earlier this week, I haven't had an opportunity to look at 
it. I would briefly say I think it's constructive. I think it 
is appropriately taking account of facts that are evident to 
the office. I think it is retaining some flexibility which is 
good.
    One thing I might've done a little bit differently was the 
part about the ITC because while the ITC certainly does use 
different standards and has different processes, in many cases, 
its processes can be the source of a decision on the part of 
the PTO to beg-off or decline to take up a matter. Those are a 
bit on the fringes. Short answer is I think the new guidance 
out of the PTO is a constructive move.
    Mr. Matal. I'll just add I agree largely with Mr. Kappos. 
It's definitely a step in the right direction. One of the 
things the new guidance does is it no longer allows ITC 
proceedings to be a basis for a Fintiv denial.
    The PTAB shouldn't be deferring to the ITC which is a 
proceeding that lacks the authority to actually cancel the 
claims, even if it finds them invalid. It also looks like 
they're not going to be quite as reliant on these arbitrary 
schedule trial dates to cut off proceedings. We're a little 
confused about the new standard about plainly, clearly, 
preponderance, et cetera.
    We'll have to see how that works out. Overall, it's a 
positive step, especially if the next step is to repeal Fintiv 
entirely. I've always thought Fintiv as a legal--it's something 
that Congress already addressed when it enacted the America 
Invents Act.
    Congress had a debate about this issue. The original bill 
actually set a six-month deadline for filing a proceeding after 
you're sued. It was actually originated in the House that they 
said, ``look, these proceedings, it's going to be a burden to 
file them.''
    You're hit with a heavy estoppel. It often takes a while 
for the litigation to mature. Congress consciously chose a one-
year deadline.
    When that balance is struck by Congress and it's in the 
statute, the agency doesn't have authority to readjust that. 
Again, a good step today. Let's hope the next step is just to 
follow the law as it's written.
    Ms. Lofgren. Thank you for saying that. I'll just be frank 
that I did express some frustration to the PTO during the last 
administration that they took a statute that we had worked on 
in the Congress for a number of years. It was not easy to 
actually reach consensus and to enact this law. It was done.
    I remember Chair Goodlatte at the time was very active and 
Mr. Conyers as well and the Senate as well. Then they acted as 
if it was a suggestion instead of a law. I'm glad to see it.
    I don't think the guidance has got us exactly where we need 
to be yet. I do think it is moving back in the right direction. 
I thank the Witnesses for their testimony today. Mr. Chair, I 
yield back.
    Mr. Johnson of Georgia. Thank you, Representative Lofgren. 
I will now recognize the gentleman from North Carolina, Mr. 
Bishop, for five minutes.
    Mr. Bishop. Thank you, Mr. Chair. Mr. Bright, it almost 
sounded like you were saying that without some reforms, the 
PTAB mechanism has created sort of a reverse patent troll 
phenomenon. Is that an accurate understanding?
    Mr. Bright. Yes, that's correct.
    Mr. Bishop. If the reforms are made that you recommended or 
perhaps some others if you think there are others that are 
needed, can it be rendered a balanced mechanism? Or are we 
stuck either choosing in favor of the patent trolls on the one 
hand--and that is a phenomenon that's real or was. On the other 
hand, this reverse patent troll phenomenon where big companies 
seems to get the advantages?
    Mr. Bright. No, I think that there is a possibility of 
striking a balance. The question is, is in terms of balance, 
where does the focus end up being? My view is the focus should 
be on making sure that we create an environment in which we're 
creating robust new company formation, entrepreneurs, inventors 
to feel like that they're inspired and are going to generate 
new technologies and new ideas and new companies. So, sometimes 
that means that the most wealthy corporations of the world are 
going to bear what's perceived to be a heavier burden in favor 
of that greater good. So, I would just say that's my general 
belief as to what's good for the country in the long term.
    Mr. Bishop. How about taking for a moment seriously or 
giving a serious response to what Mr. Massie maybe rhetorically 
asked about would it be possible--is there some reason you 
could not have some sort of precedent-setting PTAB examination 
as an optional part of the patent issuance process? It goes 
through the regular process and then an inventor and applicant 
can say, I also want to go through the second phase. Therefore, 
it, yeah, eliminate the possibility of a PTAB review later on 
in lieu District Court. Would that work?
    Mr. Bright. Yeah, that is something that could be done and 
created. I think several years ago one of the suggestions we 
made to Director Kappos at the time was the opportunity to have 
essentially a gold-plated patent in some way. That definitely 
would probably involve all of Congress getting involved in how 
to create that system.
    I'll also just make a comment about the issue of the 
sending a receipt across the internet type of issue. There was 
already before the PTAB a preexisting mechanism for taking care 
of that kind of issue. There was a reexamination process that 
existed. It's not anywhere near as expensive as the PTAB is in 
terms of doing it or anywhere near as expensive as the District 
Court to invalidate that.
    Mr. Bishop. Interesting. I'm going to yield to Mr. Massie. 
I would've got from the other gentleman, but I want to give Mr. 
Massie an opportunity.
    Mr. Massie. Mr. Bright, you said something that kind of 
caught my ear. You said that people without standing can bring 
cases in front of the PTAB. Is that correct?
    Mr. Bright. Yeah, anybody can bring a patent case to the 
PTAB.
    Mr. Massie. I'm not a lawyer, but that seems to run afoul 
of some of the principles of the real court system that exists. 
Mr. Kappos, was that the intent of PTAB to allow people who 
have no standing to basically bring forth a patent and try to 
invalidate it?
    Mr. Kappos. Yes, that was the original intent. The thinking 
was that the estoppel that came with--the consequence of 
estoppel that came with bringing an IPR or a PGR would create 
accountability for parties. This is why I mentioned before that 
degrading estoppel actually moves away from the original intent 
of the IPR system and it creates more problems for the issue 
that Mr. Bright is raising.
    Mr. Massie. Mr. Bright, is it an appropriate analogy here 
to patents was the closest thing, one that I used but is it 
appropriate to say that they're like deeds to property?
    Mr. Bright. Yeah, one of the really fundamental important 
aspects of a patent is that it's an opportunity to facilitate 
transactions. So, when you have certainty of patent rights, it 
allows parties to know what's being transferred from one party 
to the next. It allows investors to know with certainty what 
exactly they're investing in.
    So, it's really fundamentally important that it be a solid 
determined right. Then just really quickly for the record on 
your question about the Chinese companies. So, Huawei filed 114 
petitions, HTC, 115, ZTE, 127.
    Mr. Massie. Thank you very much. I would like to submit to 
the record if it's possible the dissenting decision from 
Justice Gorsuch on a recent case. He says, after much hard work 
and no little investment, you devise something you think truly 
novel, then you endure further costs and effort for applying 
for a patent, devoting maybe 30,000 dollars to the process, 
affords you exclusive rights to the fruits of your labor for 
two decades.
    What happens if someone later emerges from the woodwork 
arguing that it was all a mistake and your patent should be 
cancelled? Can a political appointee and his administrative 
agents instead of an independent judge resolve the dispute? 
That's the basis of PTAB is to say that we're not going to give 
you a real court, that you're going to get a political 
appointee who's going to decide whether you get to keep that 
right or not that was guaranteed frankly and very clearly in 
the constitution. I yield back.
    Mr. Johnson of Georgia. Without objection, the document 
will be entered into the record. With that, I will now 
recognize the gentlewoman from North Carolina, Ms. Ross for 
five minutes.
    Ms. Ross. Thank you, Mr. Chair. Thank you to the Chair and 
the Ranking Member for holding this important hearing. I 
represent a lot of larger tech and biotech companies. I 
represent so many more entrepreneurs in the Research Triangle 
area of North Carolina.
    This issue is important to both of those groups. As we all 
know, supporting a robust patent filing and litigation system 
is paramount to ensuring American innovation. The American 
Innovation Act that it established PTAB is efficient, low cost, 
and sometimes can avoid lengthy litigation. The administrative 
tribunal has been instrumental in fast tracking patent claims 
and appeals and delivering results.
    Despite these advantages, there are legitimate questions 
about fairness and the structure of PTAB, many of which we've 
discussed today. While I share concerns about potential for 
powerful actors to out-litigate small businesses and inventors 
who have strong claims, I also know that small businesses save 
money when their claims are heard quickly. For PTAB to properly 
serve its intended purpose, we must ensure that it gives a fair 
and equal opportunity for parties of all sizes and backgrounds 
to make their cases and receive decisions informed by 
impartiality.
    My first question is for Mr. Matal. I've actually asked 
this question of some of the larger companies in my district. 
I'd like to hear from you. How do large companies respond when 
the other party has a strong claim to a particular patent?
    Mr. Matal. Well, it's a strong patent, you have to pay a 
licensing fee for it. That's the way these rules work. I'd also 
note that if you do have a strong patent, whether you're small 
or large, there's not much to fear from PTAB proceedings. 
You're going to get an accurate result.
    I'd also like to highlight one of the innovations that was 
built into the AIA. Unlike a District Court litigation which 
anyone can start, you actually have to make a strong up-front 
showing to even institute a PTAB proceeding. You have to 
present a complete invalidity case that shows a reasonable 
likelihood of invalidity.
    One-third of all petitions are turned away at this initial 
stage. So, if you have a strong patent, you have a good chance 
of getting it turned away at institution. The whole proceeding 
is over within a few months.
    Ms. Ross. Thank you very much for that answer. It actually 
dovetails nicely into my next question. This issue was raised 
by Mr. Bright. So, to the other Witnesses, because, Mr. Bright, 
we know your position, with surveys showing it around 80 
percent of PTAB proceedings have parallel District Court 
litigation, it seems like PTAB is used obviously as an 
alternative to District Court litigation.
    We have a different standard of proof. PTAB employees a 
lower standard of proof than District Court litigation. Do 
other Witnesses agree with Mr. Bright that we should have more 
of a parallel standard of proof?
    Mr. Kappos. Well, this is Dave Kappos. Thanks for the 
question. I would say I do agree. We have definitely learned 
with the PTAB taking on such a dominant role in being the forum 
in the U.S. that decides patent validity that its standard of 
proof needs to be aligned with that of the District Courts 
which is the clear and convincing evidence standard.
    Ms. Ross. Would that help with your estoppel situation?
    Mr. Kappos. Well, it's a different issue from estoppel. It 
would likely result in petitioners being more circumspect about 
bringing PTAB challenges in the first place, though.
    Ms. Ross. Do other Witnesses have anything to say about 
aligning the standards of proof?
    Mr. Matal. This is Joe. I hate to disagree with anything 
about anything with Mr. Kappos. I do have to disagree on this 
issue.
    This issue was actually discussed when the AIA was 
developed. It was actually the USPTO itself, the agency during 
the Bush Administration, that most strongly argued against a 
clear and convincing standard. The rationale for that standard 
is the District Court applies it because it's deferring to the 
agency's expertise.
    When you go before the PTAB, it's the same expert agency 
that it was before. In fact, when the PTAB is making its 
decision, it has much more time to analyze the decision. In 
virtually every case, it has prior art that wasn't before the 
examiner.
    So, when you're making a decision twice and the first time 
you only had limited information and less analysis, the second 
time you have more. When you have more information, why would 
you defer to what you decided the first time? You're the same 
person. The decision that's made by the same expert agency that 
has more information in front of it at that time should be the 
final decision.
    Mr. Rogers. Congresswoman, if I may add to Mr. Matal's 
point, I disagree completely because the Federal rules of 
evidence are not in place, and you don't actually have more 
information. You've not gone through discovery. You don't have 
access to source code. All of that may be highly operative to 
whether or not the technology is novel.
    Ms. Ross. Thank you all, and I yield back, Mr. Chair.
    Mr. Johnson of Georgia. Thank you. We will now recognize 
the distinguished gentleman from Ohio, the Ranking Member of 
the Full Committee, Mr. Jordan for five minutes.
    Mr. Jordan. Thank you, Mr. Chair. I yield to the gentleman 
from Kentucky, Mr. Massie.
    Mr. Massie. I thank the gentleman from Ohio. Mr. Kappos, 
how many IPRs are permitted against a single patent to be 
filed?
    Mr. Kappos. No limit could be infinite.
    Mr. Massie. There's no limit? Like, what's the most you've 
heard of?
    Mr. Kappos. I don't have specific data. I know of cases in 
which multiple IPRs have been filed against the same patent.
    Mr. Massie. Has there been as many as 26?
    Mr. Kappos. Sounds like you've got data better than mine on 
that. That's a large number. Mr. Massie, I would say we did 
not--
    [Simultaneous speaking.]
    Mr. Massie. Let me get to the point of it. Yeah, I think 
you understand. The point of the question is, was that an 
intent to allow serial filings at PTAB from people who were 
trying to invalidate patents?
    Mr. Kappos. No, not to that level or anywhere near it.
    Mr. Massie. Okay. So, unintended consequence. Mr. Rogers, 
does the PTAB shorten the during of litigation or does it 
lengthen it?
    Mr. Rogers. Absolutely not. It lengthens it and quite 
considerably.
    Mr. Massie. So, in your case, can you assign a number of 
months to how much longer you think it's put you in the market 
watching your competitor use your patented technology against 
you? How much longer have you had to endure that because of 
going through PTAB?
    Mr. Rogers. Well, the tactics now are to foul the docket at 
the District Court, telling the District Court that you're 
going to assemble IPRs and putting the process in jeopardy and 
to try to get a say. Then upon institution, maybe if some or 
not, then there will be the actual stay. There's the year that 
the PTAB process has to go to conclude. Then after that, you 
have to go back to the court and try to get rescheduled to pick 
back up again. So, it's very easy to have 1-3 years of added 
delay.
    Mr. Massie. What was the amount in your case?
    Mr. Rogers. In our case, it was at least a year.
    Mr. Massie. At least a year. Mr. Bright, if the PTAB is 
faster, cheaper, and accurate at resolving disputes, why are 
inventors opposed to it?
    Mr. Bright. Well, because I think they would--I disagree 
with that characterization.
    Mr. Massie. Which one? Is it--
    Mr. Bright. All three of those, yes.
    Mr. Massie. It's been said here today that it's more 
accurate. Can you say why you disagree with that?
    Mr. Bright. I think that it's looking at it through a 
filtered lens. So, if you lower the standard in terms of what 
is the standard of review and you allow there to be multiple 
sets of arguments made over and over again, then just a mere 
probability, you're increasing the opportunity of hindsight 
bias. So, the vast majority of patents that get thrown out 
don't get thrown out on anticipation which is a single 
reference that already described that invention. Most of the 
time, it's built on a combination of references of what's known 
as obviousness. That hindsight bias is something the Supreme 
Court has warned against for years because the more you look at 
something that feels like it's normal, everyday, that you get 
used to, the more likely that you're going to assume that it 
was an obvious invention.
    Mr. Massie. Mr. Rogers, can it be more accurate if it 
doesn't allow discovery? You've been through PTAB and a court 
case. Is that correct?
    Mr. Rogers. We have.
    Mr. Massie. How did discovery--the ability to have 
discovery change the decision or influence the decision of the 
judge or the jury?
    Mr. Rogers. Well, a telling example is Cisco made certain 
arguments that our patents were obvious. We went through the 
PTAB. Then when we ultimately got discovery, we got access to 
emails that said, we need to go and study Centripetal's patent 
claims. That was pretty telling. Source code tells a very 
different story about when technology was implemented and why 
than just looking at some reference.
    Mr. Massie. Do judges take that into consideration when 
they make a determination of obviousness, for instance?
    Mr. Rogers. At the PTAB, they do not.
    Mr. Massie. In the courtroom, they do?
    Mr. Rogers. In the District Court, you have the full 
benefit of that.
    Mr. Massie. So, it's been said that after PTAB, you can 
still get your day in court. A lot of inventors talked to me 
about section 36. Anybody here who feels they should opine on 
that or can opine on that; can you tell me what section 36 is? 
Like, the courts, they try to get an appeal and the court says, 
well, we're going to agree with the PTAB but we're not going to 
review it. Mr. Bright?
    Mr. Bright. I think what you're referring to is just a 
summary affirmance at the Federal Circuit. So, they don't issue 
a written record or an opinion about why they agree or disagree 
with the lower court, the PTAB's ruling. They just give it a 
Rule 36 affirmance and say, affirmed.
    Mr. Massie. Maybe one of the fixes we need is to say you 
can't do that, that you've actually got to get a day in court. 
The court can't rubberstamp the decision. I don't know, but--
    Mr. Johnson of Georgia. The gentleman's time has expired. 
I'll now recognize the gentleman from California, Mr. Lieu, for 
five minutes.
    Mr. Lieu. Thank you, Mr. Chair. I'm going to yield time to 
you.
    Mr. Johnson of Georgia. Thank you, Mr. Lieu. Ms. Ellison, 
you stated earlier in response to my question that you believe 
that live testimony should be more fostered or there should be 
more live testimony before the PTAB tribunal because it would 
give the tribunal a better opportunity to hear from the 
Witnesses because they are not necessarily reading or you fear 
that they may not be reading all the materials and that live 
testimony would assist them in their ruling on the merits. 
Demeanor of the witnesses was something I think that you 
mentioned also. What is your response to PTAB's position that 
the credibility of experts does not turn on demeanor but 
instead on the plausibility of their theories?
    Ms. Ellison. I think to instill confidence in this system, 
it's important to stakeholders that they understand that the 
judges have given fair consideration to witness testimony, 
including making fair determinations as to whether a witness 
has been testifying credibly. It's not always clear again, from 
a practitioner's perspective it's not always clear that the 
judges have had the opportunity and the time to fully read and 
digest the record.
    Even on top of that, I think many practitioners will tell 
you that there's a real difference between reading dry 
testimony on paper versus seeing someone directly answer your 
questions. We're here today live to answer your questions. I 
think you get an opportunity to assess our credibility in doing 
that. I think that's quite different than just reading the 
words on paper.
    Mr. Johnson of Georgia. Thank you. Mr. Rogers, thank you 
for sharing your story with us today. In your view, what are 
some changes that should be made to PTAB proceedings to make 
them fairer to small business owners like yourself?
    Mr. Rogers. Thank you, Chair Johnson. Thank you for your 
question. To make the proceedings fairer, I think we have to 
consider the interests of the legitimate patent owner.
    It's been mentioned a couple times here, the issue of 
standing. You should not be able to come with no interest and 
randomly challenge a patent, as has been done to us. You should 
also have only one opportunity to challenge the validity of a 
patent in this way.
    In the case with Cisco, we had a first petition at the 
PTAB. The PTAB said it's valid. We went to District Court. The 
District Court said it's valid.
    They came back and did a post-grant proceeding. The post-
grant proceeding said it was valid. Then we had a third party 
come in and try to petition it again, and the PTAB again said 
it's valid.
    So, when you have six or seven serial opportunities that 
you have to defend, that's just far too many. So, the 
procedures need to be harmonized such that if there's going to 
be a challenge, there's one. Then it's quiet title and then you 
move on.
    Mr. Johnson of Georgia. Thank you. Any other Witness want 
to respond to that question who has not shared their formula 
for changes to the PTAB?
    Mr. Matal. Mr. Johnson, I would suggest something that's 
actually I understand is going to be a topic of one of your 
upcoming hearings. About a year ago, this Committee asked GAO 
to investigation allegations of political interference in post-
issuance proceedings at the board. I understand report is 
coming forward shortly.
    It's likely that report will raise troubling questions 
about the independent of the board. These cases are very 
valuable to the parties. You really want an independent 
decision maker making these decisions. The board used to have 
structural independence.
    This came up in the briefing on Arthrex (phonetic). Before 
1975, all PTAB judges, they were then called examiners-in-
chief, were appointed by the President and confirmed by the 
Senate as all military officers still are today above the level 
of captain. The Committee may want to think about returning to 
that structure or something else that guarantees independent 
decision making by the judges without anything going on behind 
the scenes. You really want that expert judge exercising their 
own judgment about the facts and the law before them.
    Mr. Johnson of Georgia. Thank you. We will next turn to the 
gentleman from Texas, Mr. Gohmert, for five minutes.
    Mr. Gohmert. Thank you, Mr. Chair. I sure appreciate having 
this hearing. I appreciate your comment, Mr. Matal. In fact, it 
sounds like you're advocating for a District Judge to make 
these decisions which is where we were before 2012.
    Of course, I was accused of being concerned about the bill 
back then simply because I had a lot of litigation in my 
district in East Texas that this was the patent troll capital 
area when actually the reason a case got filed in the first 
place, it was not an individual inventor or patent troll. It 
was something called Texas Instruments. They were desperate to 
find a place where they could get a trial less than five years 
and get some conclusion.
    They did that. Then as people found out, there was not only 
a brilliant lawyer judge there, but also, he was an engineer. 
More and more people began to file there. It seemed to me that 
an 18-month-2-year average was not bad for a District Court.
    I understood we had a problem with patent trolls, and it 
was a real problem. I could see from reviewing the legislation 
back then, wait, this isn't going to fix the patent troll 
situation. It got passed.
    Then years later, we were provided more legislation. We're 
going to have to fix this because we have a problem with patent 
trolls. You know what? It turns out that legislation didn't fix 
the problem.
    We've had that a couple times actually. Gee, we got to fix 
the problem, patent trolls. That bill in 2012 didn't really fix 
it. Now, we're dealing.
    I really do appreciate this hearing because we're getting 
to the crux of concerns that some of us had 10 years ago. Since 
then, having heard from so many individual inventors about the 
very thing, Mr. Rogers, you just outlined, this hasn't made 
things faster. It hasn't made things quicker.
    In fact, instead of having a more independent decision 
made, we seem to have more political effects being made. For 
heaven's sake, to be able to have foreigners come in to PTAB 
and question the validity of patents when at least on the 
surface they don't have any standing. They would've been 
allowed to come in our Federal court because as far as we know, 
they don't have standing.
    Now, if they want to come in and say, we're getting paid a 
bunch of money by our country to come in and create chaos in 
the U.S. patent system, that would be nice. That's why I say on 
the surface we don't know that they had any standing. So, these 
are things that need to be addressed.
    I appreciate the comments, Mr. Kappos, that we need to 
move--and others have made it. Let's get away from 
preponderance. When you're talking about ripping out a patent 
that took so much to get established, let's move to clear and 
convincing evidence. That really should be one of the first 
things we do.
    We're not always accused of being prudent in our decisions 
which is why parenthetically there's a rush to have a gun bill 
even though the U.S. Supreme Court has just ruled a New York 
law unconstitutional. Prudence would say let's hold up and make 
sure that what we're about to do is constitutional under the 
law right now. Like I say, prudence is not normally a real 
attribute here in Congress.
    Mr. Massie. Would the gentleman--
    Mr. Gohmert. I would yield to my friend Mr. Massie.
    Mr. Massie. Thank you. I have just a quick question for Mr. 
Bright.
    Would private capital, angel investors, venture 
capitalists, would they be more likely to invest in new 
technologies and ideas if PTAB did not exist?
    Mr. Bright. Yes.
    Mr. Massie. Oh, interesting. That kind of runs counter to 
some of the narratives here that have been circulating for 10 
years.
    Mr. Rogers, would you have been better off if PTAB didn't 
exist? Would you be more likely to prevail in court?
    Mr. Rogers. Absolutely. The case today of the disqualifying 
financial interest that eventually, coincidentally, snuck into 
the situation, we were delayed for years.
    That happened days before the decision was entered. So, the 
PTAB is a very effective--
    Mr. Johnson of Georgia. The gentleman's time has expired. 
You may continue with your response though, sir. I didn't mean 
to interrupt you.
    Mr. Rogers. Thank you, Chair. The PTAB is a very effective 
dilatory tool.
    Mr. Massie. I yield back to the gentleman from Texas.
    Mr. Johnson of Georgia. Thank you. At this time, we will 
now hear from the distinguished Ranking Member of the 
Subcommittee, Mr. Issa, for five minutes.
    Mr. Issa. Well, I maybe the only dissenting voice on this 
side. So, let's see if I can get the most out of five minutes.
    Mr. Rogers, have you ever had a PTAB proceeding in which 
one or more of your claims were invalidated?
    Mr. Rogers. Yes, Congressman.
    Mr. Issa. Were they affirmed by the--on appeal by the Fed 
circuit to be invalid?
    Mr. Rogers. Yes, Congressman.
    Mr. Issa. So, the system has at time found that you asked 
for claims that on further reconsideration were invalid.
    Mr. Rogers. Congressman, yes. In many of those cases, one 
example, we've talked here about a--
    Mr. Issa. Well, no, no, no. I apologize. I have a very 
limited time. The Fed circuit is, unless the Supreme Court 
takes it up, is the final adjudicator of it, and they found it.
    So, the system, you mentioned when it was abused, and we 
want to hear that. Also, failed to mention that sometimes 
inventors ask for that which, on further reflection, they're 
not entitled to.
    For Mr. Kappos and Mr. Matal, I'm going to ask you a series 
of questions. Try to be as brief as possible in your answers.
    Ex parte reexaminations, which have been around for many, 
many decades, do they use the standard of clear and convincing?
    Mr. Kappos. No. They use the--
    Mr. Issa. Preponderance of the evidence.
    Mr. Kappos. Preponderance standard, yes.
    Mr. Issa. Okay. They continue to be available?
    Mr. Kappos. Yes.
    Mr. Issa. That standard and those.
    Mr. Kappos. Yes.
    Mr. Issa. Isn't it true that every inventor has the ability 
to take any piece of information given to him, even by, even in 
litigation, and send it into an ex parte reexamination for 
further consideration?
    Mr. Kappos. Sure.
    Mr. Issa. So, isn't it possible for any inventor to utilize 
that to strengthen their patent, because once reexamined, the 
courts show deference to that reexamination, correct?
    Mr. Kappos. I would say that is true, yes.
    Mr. Issa. So, those tools are available, perhaps not as 
available once you're in PTAB, but certainly they're available.
    Isn't the ex parte reexamination process, which still 
exists, one in which if you're the owner of the patent, and you 
send the information into them, let's say that you got from a 
defendant, you're there alone able to argue for the best 
interest of sustaining your patent?
    Isn't that true?
    Mr. Kappos. In ex parte we can, yes.
    Mr. Issa. Okay. So, those tools are available and will 
continue to be available but are extremely inexpensive. Isn't 
that true?
    Mr. Kappos. Yes. That is.
    Mr. Issa. Okay. Now, there's about 250 judges, and Mr. 
Matal, you had said that there was good science study now that 
these judges are reversed less often.
    Now, oddly enough as the author of the Patent Pilot Bill, I 
made every effort to try to get judges to do a better job. 
Haven't judges improved as far as their reversal rate at the 
Fed circuit?
    Mr. Matal. District judges are good at many things. The 
system is improving. There's less forum shopping then there 
used to be.
    You still run into the problem a lot of these patents claim 
very complex technology. It's just invaluable to have a 
background guiding in that technology, when evaluating whether 
it's obvious.
    Mr. Issa. As Mr. Massie said, don't we still suffer from 
the fact that the rocket docket is an oxymoron in many places 
when you get before a judge. Even if there's no PTAB 
proceeding, you get delayed for years.
    Mr. Matal. That is correct.
    Mr. Issa. Okay. So, if 250 judges were laid off today, and 
PTAB went away, what would be the impact to Article III 
caseloads as far as time?
    Because my point here, of course is, if we end it, are we 
better off than if we mend it?
    Mr. Matal. Well, it would certainly be a burden on the 
judiciary. It would be an even bigger burden on American 
manufacturers who would, in many cases, find it impossible to 
get what is obviously an invalid patent to someone who's 
skilled in the art, invalidated.
    Juries simply are not a reliable check on patent validity.
    Mr. Issa. Now, there's a lot made, talked about as far as 
expert witnesses giving live testimony. As a litigator, let's 
sort of see if I can get the ultimate in honesty.
    In these cases, most of the time, we both bring in paid 
experts who give completely different testimony and ask a jury 
to believe one of them?
    Mr. Matal. I have heard of things like that happening, yes.
    Mr. Issa. Okay. So, perhaps with an expert who's looking at 
the facts and the data, that may not be as constructive. It may 
be one of the reasons that you don't see them in PTAB 
proceedings.
    Isn't the cost also driven up by live testimony?
    Mr. Matal. This controversy came up when I was still at the 
agency. The conclusion was at the board that people very rarely 
ask for live testimony.
    These are paper-based cases based on patents and printed 
publications. The prior art either reads on the claim 
limitation or not.
    It doesn't matter if someone looks you in the eye and seems 
very confident that it's one way or another. It ultimately 
depends on what the references and disclosures show.
    Mr. Issa. Thank you. Thank you for your indulgence, Mr. 
Chair. I yield back.
    Mr. Johnson of Georgia. Thank you, Mr. Issa. We will next 
turn to the gentleman from Wisconsin, Mr. Tiffany for five 
minutes.
    Mr. Tiffany. Thank you, Mr. Chair. I yield to the gentleman 
from Kentucky.
    Mr. Massie. I want to thank the gentleman from Wisconsin. I 
want to follow up on that live testimony request.
    Ms. Ellison, do you think that's something the judges would 
like? Or the petitioners or the defenders?
    Ms. Ellison. I think some of the parties would like to see 
that happen more often.
    Mr. Massie. That's what I've heard. I have one inventor who 
said that the judges, like there was a dog barking in the 
background when her case was being heard in front of these PTAB 
judges.
    She thought it was extremely disrespectful and didn't 
convey the weight and the gravity of what was happening. That 
she was possibly losing her livelihood.
    Mr. Bright, you've talked about how when there's no good 
presumption of validity to a patent, there's less deal flow, 
there's less investment into those technologies.
    I'd like to ask you, and I'll ask you also, Mr. Rogers, the 
U.S. military relies on secure communications, technology 
equipment, satellites, networks, and do you think that it's 
possible that PTAB has contributed to the lack of development 
of that here domestically?
    Or that possibly China's taking advantage of the fact that 
we have a weakening patent system due to PTAB? That we don't 
have enough investment in things that could provide more 
national security?
    Mr. Bright. Yeah, I'll defer to the experts about the 
actual security in technology, and what is involved in that.
    What I'll say is, is the overall trends that when we look 
at the venture capital data and where they're making 
investments, over the last several years they have not been 
investing as much in those technologies as they have been in 
other shorter term technologies and things that are not in that 
cyber security area, or in that security, national defense 
security area.
    Mr. Massie. Let me ask you that question, Mr. Rogers. You 
worked in this field for the government, is that correct?
    Mr. Rogers. Yes, I have.
    Mr. Massie. So, do you think there could be a problem here 
in the fact that we don't have the presumption, the validity 
that we should have in our patent system?
    Mr. Rogers. Absolutely. I know from my experience that's 
the case, because when you are going to disrupt a big legacy 
technology industry, like ours for example, there's embedded 
software, there's next generation hardware, there's application 
software.
    There's all the support infrastructure around that. We 
build and manufacture all that in the United States. It's a 
massive investment. Unless you have that quiet title to be able 
to protect that investment, investment isn't going to be made.
    We've seen over the past decade venture capitalists fly 
exceptionally fast to what is the app that we can back, and 
flip, and sell as quickly as possible?
    That isn't the strategic technology that is needed for 
national security.
    Mr. Massie. So, China clearly has a national security 
policy of trying to develop those things domestically in their 
country.
    Do you think they are advanced enough or smart enough to 
take advantage of our patent system using PTAB to tilt the 
table?
    Mr. Rogers. Absolutely. It's another tool in a very long 
strategic effort.
    It's no coincidence the former head of software for the Air 
Force resigned, and on his way out, he said we have lost the 
war on artificial intelligence technology, but we just don't 
know it yet.
    That's happening rapidly right now.
    Mr. Massie. That's troubling. I'd like to ask unanimous 
consent to submit for the record an article called, ``China 
Hijacks U.S. Patent System to Steal American Inventions.''
    Mr. Massie. I don't think they even really have to steal 
these American inventions. They just have to take away the 
desire, or the ability for people to invest in these inventions 
that are critical to national security.
    Do you have something to add, Mr. Bright?
    Mr. Bright. Yes, if I could, Congressman Massie. Another 
issue besides the one you raised is the lack of a presumption 
of an injunction against an infringer. So, the fact that this 
was taken away 15-16 years ago now, allows a Chinese company to 
assume that even if they did appropriate somebody else's 
technology, they're going to still be allowed to use it.
    Mr. Massie. Isn't an injunction the biggest thing that 
deters somebody from infringing?
    I mean, if you merely get caught and have to pay the 
royalties that you owed before, that's not much of a 
disincentive to steal technology.
    Isn't it true that most inventors and investors really do 
rely on injunctions?
    Mr. Bright. Yes. That is correct.
    Mr. Massie. That's because if you're a big company, that's 
the biggest threat you have, is that you have quit shipping 
something that you've already marketed.
    I'll just continue my unanimous consent request. I ask 
unanimous consent to submit this article that was in U.S. 
Inventor.org for the record.
    Mr. Johnson of Georgia. Without objection.
    [The information follows:]



      

                       MR. MASSIE FOR THE RECORD

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    Mr. Massie. Mr. Chair, I yield back.
    Mr. Johnson of Georgia. Thank you. The gentleman from 
Arizona, Mr. Stanton is now recognized.
    Mr. Stanton. Thank you very much, Chair Johnson. Thank you 
for your leadership. Thank you to our panel of outstanding 
Witnesses for taking the time to join us today.
    In my home district in Arizona, it's a hub for high tech 
manufacturing. Patent issues are always top of mind for many of 
my constituents.
    More broadly, patent issues are of vital importance to our 
nation's economy and our competitiveness in the global market.
    So, I'm grateful that Chair Johnson has made it the focus 
of today's hearing. You see, we have long understood that our 
patent laws stoke the fires of America's innovation.
    From the cost of prescription drugs, to our investment in 
manufacturing facilities, Americans are affected every day by 
the complex and technical issues surrounding our patent system.
    In recent decades, as our economy and technologies have 
modernized, it has become increasingly clear that Congress must 
also Act to ensure that those patent laws, which have 
benefitted all Americans, from some small inventor in their 
garage, to the cutting-edge researcher in their university lab, 
that those laws are modernized as well.
    That's why 10 years ago, through the America Invents Act, 
Congress has established the Patent Trial and Appeal Board, 
commonly known as PTAB, to offer an alternative patent review 
process to suspense with District Court litigation.
    We all understand that attorney's fees and trial court 
costs can be very, very expensive. That court calendars can 
change, and legal matters can drag on and on.
    By establishing PTAB, Congress has intended to offer 
parties a speedier, more technical, and more efficient way to 
challenge the validity of patents that has already been issued 
by the USPTO.
    In the years since the AIA was enacted, issues arising 
within the patent system have shown us that it may be time for 
Congress to Act again.
    Big pharmaceutical companies have too often gamed the 
system to delay lower cost generic from hitting the market. So, 
called nonpracticing entities have continued buying up patents 
and asserting them on behalf of investors against American 
manufacturers.
    The so-called NHK-Fintiv Rule has allowed PTAB more 
discretion to deny petitions for review when there is a 
parallel District Court lawsuit already filed.
    So, as we examine the patent space for potential 
legislative action, I appreciate the input from all our 
Witnesses today. My first question is for Mr. Matal.
    Mr. Matal, as one of the lead Senate staffers who worked on 
AIA, can you give us some insight into the purpose of the 
discretion that was baked into the bill?
    Was it to provide flexibility as the AIA was being 
implemented? Did you see it evolving into what is now the NHK-
Fintiv Rule?
    Mr. Matal. Thank you, Congressman. The agency was intended 
to have some discretion to manage these proceedings.
    There were, under the previous system of inter-parties 
reexamine, the agency felt it couldn't even impose a page 
limit. The thinking was it should have the same authority to 
manage these cases that a District Judge does to manage their 
docket.
    However, agencies are purely creatures of statute. Agency 
discretion is always bounded by law.
    I'm not a critic of all these discretionary policies. The 
325(d) is statutory. General Plastic, I signed off on myself 
when I was Acting Director.
    When the statute does things like set a deadline in 
relation to District Court proceedings, the agency doesn't have 
authority to shorten that deadline. The agency is obligated to 
follow the law.
    Mr. Johnson of Georgia. Mr. Stanton, you need to unmute.
    Mr. Stanton. Thank you very much, Mr. Chair. My next 
question is directed to Mr. Pushparaj.
    I understand that you work with many startups in the 
Silicon Valley. In my home State in Arizona, we are fortunate 
to have many small business startups as well.
    Even though PTAB proceedings cost less than District Court 
litigation, they are still expensive. I imagine it's not where 
small startups want to be spending their money.
    Can you explain how PTAB helps small businesses, even if 
they don't file many IPRs?
    Mr. Pushparaj. So, first, I want to dispel this notion. A 
patent is not invalid because the PTAB said it's invalid. It's 
invalid because it's invalid.
    As a start up, I am faced with, and I'll be blunt about it, 
nonpracticing entities. There are many nonpracticing entities 
knocking on our doors.
    There are questions about whether we get basic funding 
because we're not able to file patents. There's more an issue 
of whether we're in business. PCs want to fund companies that 
are in business, whether we make a revenue, whether we are 
actually in business.
    These threats, multiple threats from nonpracticing entities 
over patents that are practically silly, threaten us because 
every litigation, spending millions of dollars on every 
litigation, is indeed threatening to our existence.
    So, PTAB and the ability for us to do this, it's not the 
cheapest forum in the world, but it is an option for us to be 
able to still manage expectations on cost and time, to be able 
to resolve these issues.
    When we have a pending litigation that exists for six years 
at a time, that also staves out the cost that a PCs going to 
put in, because there's pending litigation. The timeliness is 
as important as the ability for us to go to a forum and resolve 
it.
    So, yes, startups, PTAB has indeed had a positive impact on 
startups in the manner.
    Mr. Stanton. Thank you so much. I yield back, Mr. Chair.
    Mr. Johnson of Georgia. Thank you. I will now recognize the 
gentleman from Oregon, Mr. Bentz for five minutes.
    Mr. Bentz. Thank you, Mr. Chair. Thank you all for your 
testimonies. It's extraordinarily interesting. I have a 
question for Ms. Ellison.
    You referenced the fact that the judges in the PTAB process 
are giving more a quote, ``deference,'' end quote, to initial 
patent issuance. Do you think that should rise to the level of 
a presumption?
    Ms. Ellison. I think it effectively has risen to the level 
of a presumption. So, under the recent case law, if a reference 
has been considered by an examiner during original prosecution, 
then the petitioner bears the burden of showing that there's 
been some error that's material to patentability.
    So, I think that's been an effective way of giving more 
deference to the original prosecution and brings us a little 
closer to Mr. Massie's proposed gold-plated patent.
    Mr. Bentz. Right. Thank you. As I want to hear a little 
more on the other side of this issue, I yield the balance of my 
time to Ranking Member Issa.
    Mr. Issa. Thank you. Thank you very much for yielding.
    One question I want to resolve, the reason that we allow 
third parties to submit information that may tend to reduce or 
invalidate a patent, is one of those reasons from original 
legislation to be consumer interest, that every person is 
affected by a patent and the cost that it brings on?
    Would it be fair to say that most of the claim, or more of 
the PTAB proceedings that began with companies in China or 
outside the U.S., had to do with having been challenged in 
similar court cases or accusation of infringement?
    Mr. Matal. Yes. I think according to Schrab Vishnaboch's 
(phonetic) study, over 85 percent of these cases are brought by 
parties that have been sued for infringement.
    Mr. Issa. Wouldn't it be fair to say that if you receive a 
threatening letter that you have a choice, you can do a DJ and 
go right into Article III, or can do a PTAB if you think you 
have prior art?
    Someone might argue whether you have standing. Wouldn't it 
be fair to say that it's cheaper on everybody if you've got 
prior art?
    Mr. Matal. Yes. Sometimes when you get that letter, you 
can't go to court, you won't have standing.
    Other situations that come up where someone hasn't been 
threatened, but they see a patent out there that reads on a 
product they're planning to develop, and they do a clearance 
IPR just to test, am I allowed to develop this product or not.
    You also see the proceedings used in customer suit cases, 
where someone's customer is sued. If you don't have an 
indemnity agreement with that customer, you typically can't get 
standing to even challenge the patent.
    Finally, just quickly, Unified Patents is a substantial 
client of the firm, so take what say with a grain of salt.
    If you look at the cases Unified is bringing, they're 
bringing it against some of the worst actors in the system. 
People who are harassing small business, quickly seeking quick 
settlements. I don't think we would want those cases to go 
forward.
    Mr. Issa. Now, there's been a lot of talk about stays. For 
all of you would you say that a single stay in a Federal court, 
even if there were multiple PTAB applications, would be 
appropriate?
    In other words, if there are serial applications, should 
that be allowed to further delay an Article III Judge going 
forward?
    Or should we begin to just tighten up the amount of time 
that an Article III Court could stay based on a process in the 
PTO?
    That's an opinion. It's one that I think we all want to 
know, because it certainly for those cases where there have 
been repeated ones, should we try to make sure that we 
establish some procedure to limit delay?
    Mr. Matal. I don't want to consume more than my fair share 
of time, but not all serial challenges are created equally.
    Sometimes it's the same party challenging. In that case, 
these days, they'll probably be cut off by General Plastic. 
Sometimes those serial challenges are because the patent owner 
has sued multiple people in a staggered series.
    Whether to stay a case the District Courts just need 
discretion. Sometimes not all the claims are instituted. 
Sometimes they are.
    It just, it would be nice if the District Courts exercised 
that discretion in a more consistent manner.
    Mr. Issa. Mr. Kappos?
    Mr. Kappos. Yes. Thank you, Congressman Issa. But, to cut 
to the question directly, I would say that there does need to 
be some limit to staying of District Court cases in your 
hypothetical where there are multiple petitions.
    Otherwise, the patentee never has an opportunity to get 
finality and quiet title.
    Mr. Issa. Okay. One for Mr. Pushparaj. I'm sorry to mess up 
your name.
    In your experience, the question of whether a patent has 
been examined or reexamined properly, relative to when a patent 
holder begins to assert what they say it means, have you seen a 
huge difference in what appears to be prosecuted before the 
patent, the PTO, and what later is brought before an Article 
III Court case?
    Mr. Pushparaj. So, oftentimes the resolution on validity is 
dispositive to a party being able to resolve. This is true on 
both sides of the plaintiff or the defendant.
    Having certainty that a patent is in fact valid has seen in 
firsthand experience. Everyone needs for parties to go and say 
yes, we will settle your licensing demands.
    The reverse is also true. Having disposition that a patent 
is in fact invalid, grounds both parties to arrive at a faster 
position, be it licensing or a settlement that the parties walk 
away from the lawsuit.
    So, having this ability, and having a fresh resolution from 
the PTAB, which is the cheaper and faster alternative, does, in 
fact, make a big difference in the parties having a resolution.
    Mr. Issa. Thank you. Thank you, Mr. Chair. I yield back.
    Mr. Johnson of Georgia. Thank you. The Chair will now 
recognize the gentleman from Louisiana, Representative Johnson 
for five minutes.
    Mr. Johnson of Louisiana. Thank you, Mr. Chair. It takes on 
average 30 months for a District Court patent case to get to 
trial. Whereas, every IPR by statute has to be completed within 
12 months, as has been discussed.
    Additionally, patent litigation typically costs several 
million dollars to handle. Whereas, IPR costs several hundred 
thousand dollars.
    The IRP process only assesses the validity of a patent, 
which means that litigants are still required to go to District 
Court to bring an infringement action or other claim related to 
patents.
    So, this means that a single patent could have to go 
through both the IPR and the Federal District Court process. 
So, my question was for Ms. Ellison, or Mr. Rogers, maybe both 
of you.
    Do you believe this dual system works well in practice? Or 
should we consider maybe expanding the claims that can be 
considered via IPR?
    Mr. Rogers. Yeah, Congressman, that's an excellent point 
that you made. We filed our case against Cisco in 2018. It's 
now 2022. There are likely many years ahead.
    When the point of a patent for a small company is to be 
able to break down the barriers to enter a market, well at what 
point can you actually do that?
    So, for the patent owner, it becomes an exceptional 
existential problem, if you actually intend to participate in 
the market.
    Mr. Johnson of Louisiana. Ms. Ellison, do you have thoughts 
on that?
    Ms. Ellison. So, I don't favor expanding the basis on which 
IPRs can be brought. We do have PGRs that are available, of 
course, within a limited time period.
    I think the legislation that led to IPRs and PGRs, struck a 
reasonable balance in that regard, between the two proceedings.
    Sure, there can be both IPRs and District Court litigation. 
I think practitioners and parties have come to accept that.
    I don't think that we should get rid of the IPR or PGR 
system in its entirety, because it serves an important 
function, in particular, for entities that don't currently have 
Article III standing to appear in court.
    Mr. Johnson of Louisiana. Very good. I know a big complaint 
that patent owners have against the IPR process, is that 
opponents can file multiple petitions against the same patent.
    So, it seems logical to me that once a patent has been 
deemed valid by PTAB it shouldn't any longer be subject to 
scrutiny by that board.
    Let me move to another subject. Mr. Pushparaj and Mr. 
Bright, I wonder if you could tell me how PTAB and the IPR 
process either benefit or burden small businesses?
    I know that there are currently several pieces of 
legislation between the House and the Senate that are up for 
consideration. I know one of them has been introduced by my 
good friend, Mr. Massie.
    I wonder about your thoughts on that, the burdens or the 
benefits to small business?
    Mr. Pushparaj. I've stated this before, not having a forum 
to be able to quickly resolve issues, especially with the 
numerous patents that are asserted against us by nonpracticing 
entities, does heavily burden small businesses.
    The very threat of existence to small businesses such as 
ourselves, tech startups, whether you have an app, it is out 
there in public view, then there's ten patents being asserted 
against you.
    In firsthand experience again, I've seen the presence of 
PTAB have an impact to the number of claims asserted against us 
by nonpracticing entities. That is an important effect on small 
businesses.
    Mr. Johnson of Louisiana. Mr. Bright, your thoughts?
    Mr. Bright. Yes. So, I'll just give a perspective from a 
medical device company to give a more realistic example.
    So, it generally takes us 8-10 years to get a product to 
market through the FDA and ready to be sold. It then takes 
generally another two to five years after that to even reach 
profitability.
    So, it takes tens of millions of dollars, sometimes 
hundreds of millions of dollars to get through that entire 
phase.
    Once your patents are out there, if somebody sees them and 
knows that you're working towards that goal, and you are 
worried about the threat that they will be able to take out 
your patents and undermine your further investment in it; it 
does create a stress in the operating environment of the 
company and in its investors.
    So, you do have to be quite mindful and protective of it.
    Mr. Johnson of Louisiana. Very good. I've only got 25 
seconds left. I just want to thank all the Witnesses for your 
expertise.
    This is obviously a really important set of issues. I'm 
grateful, in particular, for Mr. Issa and Mr. Massie, and their 
expertise in helping our side at least, guide through all this.
    Mr. Chair, I thank you for your time. I will yield back my 
remaining seven seconds.
    Mr. Johnson of Georgia. The Chair thanks the gentleman. The 
Chair now recognizes the gentleman from Wisconsin, Mr. 
Fitzgerald for five minutes.
    Mr. Fitzgerald. Thank you, Mr. Chair. I know we're getting 
into the area where some of this stuff might be a little 
redundant.
    I certainly believe in strong property rights. One practice 
that has evolved out of PTAB is particularly concerning, which 
is this serial petitioning, which has been brought up numerous 
times already.
    After the filing of multiple petitions against the same 
patent owner or even the same patent, given the high 
cancellation rates of PTAB, a company with multiple petitions 
can suffer, obviously, severe damage to its stock, particularly 
if it does not have resources to go against some of these big 
tech companies.
    At the same time, to be able to make large investments in 
plants and equipment, a lot of manufacturers right now need to 
be able to obtain accurate and reliable review of the patents 
that they are asserted against them.
    We're also seeing, obviously, some of the shell companies 
that are able to purchase broad, low quality patents, such as a 
company MPHJ, that had the quote, ``scam to email technology,'' 
unquote, technology.
    Effectively holds companies hostage for some of these huge 
paydays that we're seeing. So, it would be to everyone's 
advantage if you dealt with those patents quickly.
    At the risk of burning through my entire 3:30, I'd like, is 
there anybody that would like to comment on that, I certainly 
would welcome that. Just describe any changes that could be 
made to the current system to strike a balance, which are 
obviously competing goals.
    Mr. Kappos, if you wanted to start?
    Mr. Kappos. Yes. Thank you for the question, sir. I would 
say the clear and convincing evidence standard that a number of 
us have mentioned, would be a sure way to hold petitioners 
accountable.
    Further guidance through Congress, modification of the 
Fintiv Rule that's been talked about, would help with the issue 
you've raised to avoid serial petitions.
    Still leaving some flexibility for the PTO to be able to 
beg off or decline to take a challenge where a challenge has 
already been taken before. Where a District Court has already 
made a judgment. Where the Federal circuit has already made a 
judgment.
    Mr. Bright. If I can just add a couple more ideas if it's 
okay? Yeah?
    Mr. Fitzgerald. Sure.
    Mr. Bright. So, I think that if the PTAB would prohibit 
multiple petitions on overlapping claims, that would help.
    Also, I think that the petitioner should be required to 
disclose all the entities that are behind the petitioner. All 
those petitioners should be made privies to the case.
    That once a decision has been made with respect to the 
petition, whether it's denial or institution, or whatever it 
is, that all those parties are then subject to that ruling.
    Mr. Rogers. I think that the points made by Mr. Kappos and 
Mr. Bright are excellent. The only additional perspective that 
I'd offer is that we've gone very hard over in this balance of 
equities to the users of this system who are largely trillion-
dollar firms.
    The legal budgets here are likely a small fraction of a 
quarterly dividend. To get balance back in the system, we need 
to think about patent owners.
    Mr. Matal. Yeah, I'll just add, as long as Congress is 
considering changes, I might suggest adding the issue of 112(d) 
patent indefiniteness to IPRs.
    Nowadays, you occasionally get these decisions where the 
board is asked to review something as obvious. They say, we 
have to decline to institute the petition, because the claim is 
indefinite, and I don't know what it reads on.
    That doesn't really benefit either party. That's obviously 
a Black mark on the patent. The claim is left forward.
    If the board is doing that analysis anyway as part of the 
institution decision, you might as well let them reach the 
final decision. It's a decision on the paper.
    So, I'd recommend adding 112(d) to the grounds that can be 
raised at an IPR.
    Ms. Ellison. I'll just add, I think it's important for the 
PTAB to maintain discretion when it comes to instituting 
trials.
    I think no one wants to see abuse of the patent system. So, 
limiting to some degree the number of petitions that can be 
filed, makes sense.
    On the other hand, having hard and fast rules that say, oh, 
only one petition should ever be filed on a patent, arguably 
goes too far. Particularly when you could have potential 
petitioners who are completely unrelated, and the second person 
doesn't get their day to be heard.
    Thank you.
    Mr. Johnson of Georgia. The gentleman's time has expired. 
We are now at the conclusion of this hearing.
    The gentleman from Kentucky, Mr. Massie, is recognized for 
the purpose of introduction of items into the record. Mr. 
Massie?
    Mr. Massie. Thank you, Mr. Chair. Thank you to all the 
expert Witnesses here. I have two articles to submit.
    One is called, ``How Google and Big Tech Killed the U.S. 
Patent System,'' by Michael Shore and IP Watchdog. The second 
is called, ``Big Tech's Sticky Fingers are Still at Work in 
Washington,'' by Adam Mossoff. He's a patent expert at George 
Mason University.
    Mr. Johnson of Georgia. Without objection, so ordered.
    [The information follows:]


      

                       MR. MASSIE FOR THE RECORD

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    Mr. Johnson of Georgia. We are now at the conclusion of the 
hearing today. The Witnesses, I thank you for participating.
    Without objection, all Members will have five legislative 
days to submit additional written questions for the record, or 
additional materials for the record.
    Without objection, this hearing is now adjourned.
    [Whereupon, at 12:20 p.m., the Subcommittee was adjourned.]



      

                                APPENDIX

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                 QUESTIONS AND RESPONSES FOR THE RECORD

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