topic. this is about 75 minutes. >> this hearing of the intellectual property subcommittee of the senate judiciary committee will come to order. i'd like to thank all four of our witnesses for participating today, and i'd like to especially thank my colleague, ranking member tom tillis and his staff for putting this hearing together again on a consensus basis.

this is our 10th, our 10th intellectual property subcommittee hearing of this congress, the most of any of the subcommittees. of the full committee we have conducted oversight on the pto and the copyright office, analyzed and worked through five different bipartisan bills, had a hearing on the intersection of ai and ip, and probed foreign threats to american ip. we've actually been doing the work our constituents sent us to washington to do, legislating and at every step senator tillis you and your team have been fantastic partners. thank you and i look forward god willing to continuing our work together in the next congress. i expect other members of this subcommittee will be joining us today. today's hearing examines the restore patent rights act, a bill i currently co-sponsor with senator cotton of arkansas, this one sentence bill would restore the presumption that a patent owner should receive an injunction when she demonstrates that a defendant has infringed her valid patent. this is in no way a new or novel

idea. our founding fathers made it clear that inventors should have exclusive rights to their inventions. in other words, the constitution in its script guarantees to inventors the ability to prevent others from using or selling their inventions without their permission. for more than 200 years, our federal courts recognize this exclusive right, and in nearly 100% of cases courts issued permanent injunctions against patent infringers when patent owners sought them. this system was predictable and orderly. parties who wanted to use patented technology negotiated with patent owners to pay for licenses, rather than infringing upfront and then risking a costly injunction, shutting down manufacturing and distribution operations. that changed in 2006 with the supreme court's decision in ebay versus mc exchange.

in that case, the supreme court held injunctions were not the per se remedy for patent infringement. instead courts were to apply the traditional four factor equitable test before deciding whether to award either money, damages, or injunctive relief. as you can guess, after ebay courts have much more frequently concluded money damages rather than injunctions are sufficient to compensate a patent owner for infringement. studies conducted since ebay have shown the number of injunctions sought and the number of injunctions granted have decreased substantially. the relative decrease in requests for permanent injunctions was 65% for operating companies and 90% for non-practicing entities, and even when parties did seek injunctive relief they were awarded at less frequently, so grants of injunctions to patent holders, who had proven validity and infringement dropped from 100% to about 70%. putting these trends together means courts are simply issuing far fewer permanent injunctions against infringers than they were before this decision. these numbers don't capture the full impact of the ebay decision. predatory infringement, an infringe now pay later model, is

broadly on the rise. it stands to reason why should a potential licensee negotiate with a patent owner in good faith when they can infringe now for free and maybe at some point later pay a court determined licensing fee, or better yet, maybe the infringer can wear the patent owner down with years of repeated litigation and with injunctive relief, uncertain extract licensing concessions. individual inventors, universities, and startups are especially vulnerable, because they often lack the significant financial resources to sustain prolonged litigation. as a result, in my view the value of a patent has diminished. if a patent owner can't be confident that they can exclude infringers from practicing the invention, how can they sell a high value license? they can't, and the post ebay data show a huge increase in lower value non-exclusive licenses, meaning patent owners have a tougher time recovering their investment, which leads to abandoning innovative ideas or

reducing r&d investment in the kind of ideas that can propel our economy. it's for these reasons i introduced the restore patent rights act, and as i've said before in a single sentence, this would restore the rebuttable presumption and undo the harmful effects of ebay. in all four of our previous hearings, examining specific bipartisan bills, we have witnesses who both support and oppose the legislation. we try to hear all sides on this hearing, it is no different with senator tillis's cooperation. we have a panel with diverse views and perspectives both on the challenge and the operational impact of ebay, and this bill and its potential consequence. we want to hear from you about whether you think this bill is needed, whether it's crafted the right way, although at one sentence, there's not a lot of details to work through, and tell us what you like and what you don't and how to make it better. before i introduce the panel of witnesses, i'd like to turn it to my friend and colleague senator tillis for any opening remarks. >> thank you, chair coons, and thank you for holding the

hearing on the restore patent rights act. before i get -- make a few comments and we hear from the witnesses, i just want to thank you for another great session of congress, working together 10 hearings, but what you may not know is how much work goes into those hearings, for which i think we both are very grateful to the staff who do the lion share of the work, but i also think it's important to mention on the broader subject of intellectual property how many meetings, work groups, the work of this committee i would put up against any subcommittee in the us senate for the past couple of congresses. and a lot of that has been through the cooperation, the active involvement of many mers members, but absolutely through our consensus-based leadership of the committee and through the hard work of the staff. so i thank you all for the work that you've done. we're going to hear from witnesses on both sides of the issue today, whether or not you support or have concerns with the bill or oppose, or oppose what we're trying to accomplish.

you all know what the bill does, so i'm not going to tell experts what it does. i'm here as a business person trying to solve problems, and i view this as another problem that is a threat to innovation. it's particularly a threat to the innovation ecosystem when we're talking about some of the smallest, less resourced inventors and innovators. there's got to be a way to get it right. now what i do like -- what i will tell the witnesses. thank you for coming, whether you're on the pro or the con side of the bill, either as written or any iteration of it. i thank you for coming here. i will tell you that when we have limited attendance and we have time i do sometime convert my questions into sort of an ad hoc debate club, so if any of you happen to hear something and i seem to think that you want to respond i will most likely do

that, but this is the first time i've actually given people notice that i want a good discussion. i don't want to hear any less from somebody who's opposed to the bill than someone who supports it, mainly because we want to get to a good, fair. -- fair, balanced, outcome. but i am convinced that senator cotton and senator coons are on to something here and i look forward to the testimony and look forward to the engagement afterwards. thank you all. thank you, mr. chair, and also we apologize for starting 15 minutes late. we had a vote that we had to take care of. >> thank you. thank you, senator tillis. thank you, senator, for joining us again. i'd now like to introduce our panel. first we have jacob babcock, ceo of new current, a 40 person company based in chicago that works on wireless power solutions and has a portfolio of more than 300 granted and pending patents. next we have joshua landow, senior council for innovation

policy at ccia, the computer and communication industry association, where he advises the association and patent issues. then professor kristen osinga, professor of law at the richmond school of law, where she focuses on patent litigation and patent law reform. and last, professor george andrew harris -- contreras, professor at the university of utah college of law, where he works on ip issues and directs the law schools program on ip and technology law. grateful to have you all here. after i swear in the witnesses, you'll each have roughly five minutes to provide an opening statement. we then proceed likely with two rounds of questioning, depending on attendance and time. so could you all please stand and be sworn? please raise your right hand and repeat after me. do you swear that the testimony you are about to give before this committee should be the truth, the whole truth, and nothing but the truth, so help you god? thank you all. mr. babcock, you may proceed with your opening statement. >> chairman coons, ranking

member tillis and members of the subcommittee, thank you for the opportunity to testify today. when i graduated from indiana university in 2004 i joint teach for america to help close the education gap. after finishing in 2006 i embarked on a career in tech and entrepreneurship, and did the nearly 20 years since i have watched a new type of gap emerge, an innovation and ip get treated via systematic cutting of our once great patent system. this did not happen by accident. magnetek special interests have driven judicial, legislative, and administrative changes that heavily tilt the system in their favor. for example, the 276 -- 2006 ebay decision eliminated injunctive relief, leaving inventors with adequate compensation well infringers profit. other harmful cases have

included the 2014 alice decision and the 2019 oil states decision which have combined tips essentially we can patent rights . on the legislative front, the 2011 american events act created pta be which invalidates patents at an alarming rate and drains investors resources. finally on the ms front the uspto has turned patents into vapor shields by lowering the standard of review, shifting the burden of evidence to patent and 11 different multiple bites at the apple. the result is a system that no longer protects innovators or provides clarity to investors. instead it rewards those who exploit our ideas, shifting and stifling competition and creativity. let me share with this looks like to me in a practical sense. at new current we specialize in wireless power and data transfer. we filed over 400 patents and partnered with leaders like hp and honeywell to bring breakthrough products to the market, but despite our success

we have experienced firsthand how the system fails to protect innovators. a major korean oem still our patented technology and enable their suppliers in china and i want to profit from our work. without injunctive relief, we could not block them. by the time financial remedies arrived years later, the damage was already done. billions of dollars in value floated overseas, and that is valued that we would have invested in american jobs and innovation. this was not just theft. it was a systematic failure of the u.s. patent system, and here is the bigger problem. the lack of injunctive relief distorts fair business dealings. megacorporations know that there is no urgency for them to act. without the threat of an injunction they can choose to infringe now and pay later, as you mentioned, if they pay at all. a former apple executive even called the strategy a fiduciary

obligation, because fort magnetek litigation -- magnetek -- megatech litigation is just a small tax on doing business, but for companies like mine it is devastating. instead of inventing, building, including jobs we are forced to fight endless legal battles. as a founding investor in the 81 collective venture fund i see this every day. 81% of u.s. gdp comes from injuries -- industries like manufacturing, health care, and energy, industries that are reliant on hard tech. yet these sectors receive less than half of venture capital investment. why is that? it is because investors see the rest of her broken patent system outweighing the rewards of making the investment. at a hard tech accelerator where i serve on the board, entrepreneurs often asked me is filing about word that? is it

worth the investment? today i often have to say no, and this may be the biggest tragedy of all. every time i give the answer i worry we are letting the next big american innovation slip away, only to be exploited by foreign competitors or entrenched players. at the good news is we can fix this. the restore act offers a commonsense solution by storing injunctive relief. it gives inventors the ability to stop proven infringers. this really is not complicated in my eyes. if you were found guilty of breaking the law, you should not get to keep profiting. no other area of the law works this way except for patents. the restore act will empower inventors to protect their work, rebuild trust in the patent system, drive investment in critical sectors like manufacturing, energy, and health care, and this is really about fairness. it is about ensuring that when

inventors take risks, work hard, and bring groundbreaking technologies to life their rights are respected. so too close i will say this is our moment. the restore act sends a clear signal that america values its innovators. >> mr. landow. >> thank you for inviting me to testify on behalf of the computer and communications industry is instigation. ccia has advocated for competition and innovation in the technology and communications industry since 1972. our members are leaders in many areas of technology, including semi, artificial intelligence, cloud computing, and e-commerce. members are also active participants in the patent system often appearing in the top five annual recipients of u.s. patents, as well as litigating industry courts and that pta be. the ebay decision has helped to ensure that the u.s. patent

system fairly rewards patentees without creating excessive burdens on innovators or rewarding patentee windfalls. after eve it was decided in 2006, research and development spending accelerated its rate of increase. patent filings likewise accelerated, and not just any patent, the patents that were more likely to be cited by others and thus more likely to contribute in nomination the future. some studies have even found an overall increase in social welfare due to the ebay decision. ebay did have an impact on innovation. it accelerated it. the restore act would reverse these benefits and incentivize manufacturing outside of the united states at the time of bolstering domestic and infected mink is a national priority. it is also unnecessary. prior to ebay operating companies could obtain injunctions in almost all cases, and after ebay those companies can obtain injunctions in almost all those cases.

for operating companies ebay represented almost no change in their ability to obtain an injunction, and for inventors that do not make anything themselves but to work with the exclusive licensee's, situations are small inventor partnering with the manufacturer or university working with the start up, injunctions were made available. there was a drop in injunctions after ebay, but the companies that have a harder time obtaining injunctions are companies that create lawsuits instead of products. we have a term for those, patent assertion entities, sometimes referred to as patent trolls. these are the companies that would significantly benefit from restore. beyond its positive impacts on innovation ebay also brought the patent system in line with the rest of american law. injunctions are an equitable remedy, and equitable remedies are governed by equitable principles. of those principles one of the most important is that equitable relief is only available when legal remedies are inadequate to make the plaintiff whole.

when there is some kind of farm that money cannot fix. this principle is so important that congress rode it the first judiciary act, so basic that the supreme court summarized injunctive relief by saying in brief the basis for injunctive relief are irreparable injury and inadequacy of legal remedies. this long-standing principle explains about the ebay decision and the outcomes in court it is after ebay. competitor litigation seeks to prevent irreparable harms, loss of market share, loss of consumer goodwill, loss of patent assertion entity. they can have a complete remedy through 35 usc 283 which instructs the factfinder to award damages adequate to compensate for the infringement, because of patent assertion entities only losses monetary there is no irreparable harm. there is no reason to grant injunction in that circumstance.

economic theory finds that the right an injunction distorts negotiations because injunctions take the entire product off the market. that makes sense when a patent covers the entire product, but modern high-tech products are complex, multicomponent devices when a defendant is faced with the ability with the inability to make or sell its product, it can't negotiate for the fair value of the patented technology. the risk of having your product taken off the market entirely is just too high. a patent owner is entitled to be made whole for the infringement of their patent. when their injury can be remedied solely by money damages, the impacts of the ebay decision, the entire history of the united states' legal system and economic theory, all tell us that an injunction is unneeded and inappropriate. ebay accelerated innovation. we should not reverse that. thank you for the opportunity to testify today, and i look forward to your questions. >> thank you, mr. landau, professor ozinga.

>> chairman koontz, ranking mem tillis, and members of the subcommittee, thank you for this opportunity to speak with you today about why congress should enact the restore patent rights act. this bill, by establishing a rebuttable presumption in favor of injunctive relief for patent infringement, would bring back a patent system based on reliable and effective patent rights that serves as a foundation for this country's innovation ecosystem. for over 2 centuries, if a valid patent was found to be infringed, the patent owner could generally rely on the court granting a permanent injunction to prevent further infringement, and this stems from the constitution's grant of power to congress to secure exclusive rights to incentivize authors and inventors. a patent grants only exclusive rights, no positive rights, just the right to exclude others from using the patented technology. if a patent owner cannot stop an infringer from using their patented technology, the patent loses its value. because of this, prior to 2006, courts would presumptively grant a permanent injunction in nearly all cases where patent infringement was found.

this high grant rate was not just aligned with the patents grants of an exclusive right, but also provided a level of certainty important to both patent owners and infringers. in 2006, the supreme court issued ebay versus merck exchange and dramatically altered the patent landscape. under the test imposed by ebay, injunctive relief is no longer certain. instead, some patent owners can be more certain they will not be granted an injunction and will have to settle for an ongoing royalty set by a court while the infringer is permitted to continue using the patent owner's innovative technology. studies after ebay show that permanent injunctions were granted much less frequently than before ebay, especially for patent licensing firms. there's some new research that shows that patent owners, regardless of business type, are not even asking for injunctive relief at the same rate as they did before ebay. if you take into account these patent owners who don't even seek injunctive relief, the decrease in granted injunctions where infringement is found is

down 66% for operating companies and 91% for licensing firms. the shift from a presumption of injunctive relief to a patent system where injunctive relief is uncertain has serious negative effects on the patent system. first, the lack of injunctive relief has led to predatory infringement, where infringers who know they are unlikely to be enjoined make a calculated decision to infringe now and pay later. this forces the patent owner to litigate rather than negotiate, to obtain payment for use of their patented technology. a predatory infringer is basically a squatter living in a room of your house without your permission. this rewards the infringer in a number of ways. first, they may never face litigation and they can use someone else's patented technology for free. second, even if they face litigation and lose, they will have been using this technology for free for a number of years, basically getting an interest-free loan during their period of infringement. and infringement cases are expensive and take many, many

years to conclude. and third, there is empirical evidence that court determined royalty rates are often lower than negotiated fees. so after years of using the technology for free, infringers end up having to pay less than they would have if they had agreed to license the patent up front. what is a win-win situation for the infringer who is a bad actor is a lose-lose situation for the patent owner, decreasing the value of their patents and depriving them of revenue that could be used to further innovate or even expand their business. second, where injunctive relief is uncertain, licensing negotiations are distorted and push patent values lower. when an injunction is available, a patent owner can say, no, i will not license this to you at that price. to use the technology, the other party will need to pay the asking price or will need to design around or use a different technology. but when an injunction is unlikely to be granted, the other party has no need to negotiate in good faith or even at all. some may choose to engage in predatory infringement, but even those who choose not to infringe end up negotiating in a market in which patents are devalued as

an asset class. one recent study showed exclusive licenses, which are typically high value, have decreased post ebay, while non-exclusive licenses, which are typically lower valued, have increased. the problems created by ebay can be fixed by enacting restore, which in fact restores the patent system to the state it was prior to ebay. injunctions would be generally granted unless there were a compelling reason not to do so. certainty and injunctions serves as a deterrent to predatory infringement and facilitates fair negotiations. with these qualities, the patent system provides effective and reliable patent rights, which in turn drive the united states' innovation ecosystem. thank you, and i look forward to your questions. >> thank you, professor. professor contreras. >> i'm a professor of law and have 33 years of experience practicing, teaching, and studying intellectual property law, including remedies.

in these opening remarks, i'd like to offer some perspectives on the heated debate concerning injunctive relief in patent cases, particularly the supreme court's 2006 case. >> professor, is your microphone on? >> sorry about that. i'll just continue. that was intro. every empirical study to date shows that even after the ebay decision, permanent injunctions are still issued in roughly 75% of patent infringement cases. thus, legislative measures responding to complaints that patent injunctions are lost or off the table are hardly necessary. second, concerns that courts are allowing hordes of patent infringers to continue to violate patents with impunity are grossly exaggerated. my own work shows that during the 15 year period from 2006 to 2021, courts have authorized continued infringement in exchange for an ongoing royalty after denying a permanent injunction only 32 times. that's just twice per year

across thousands of patent infringement lawsuits in this country, hardly an avalanche of infringement that will derail the innovation economy. third, there are already strong legal mechanisms in place to deter what has been called holdout and predatory infringement. these include recovery of litigation costs and enhanced damages under the patent act. in which a judge can penalize an infringer up to 3 times the awarded damages for willful infringement. following the supreme court's 2016 decision in halo versus pulse, it has become even easier to get enhanced damages, and a recent study shows that between 2016 and 2020, willfulness was found in approximately 65% of patent infringement cases. the very real likelihood of such damages multipliers is a significant deterrent to patent infringement, even without the threat of an injunction that does not meet the ebay standards. by the same token, there is no evidence that ebay has depressed patent damages awards.

if you exclude default judgments, median patent damages awards significantly increased in the years after ebay. so let me turn briefly to the proposed restore patent rights act. the act claims that it is intended to help undercapitalized entities, individuals, and institutions of higher education, which are entirely worthy goals. but these entities are not likely to be the principal beneficiaries of the act. the entities that will most benefit are for-profit patent assertion entities or paes. whose main source of revenue is suing larger companies for patent infringement, and many of which are based offshore, as reported by bloomberg in 2022, all 10 of the top 10 filers of patent litigation in the united states were paes. the top filer was single-handedly responsible for suing 179 separate defendants. in contrast, the targets of pae litigation are typically large domestic companies that employ millions of american workers and

create the products and services that fuel the american economy. for example, in 2022, the top defendants in patent infringement suits included walmart, at&t, amazon, apple, microsoft, google, cisco, and verizon. the act's creation of a presumption of irreparable harm would make it significantly easier for paes to obtain injunctive relief and use that leverage to extract higher payments from american companies at the cost of consumers. it has also been argued that firms that don't readily enter into patent licensing agreements with paes are acting in a predatory or unethical manner. some have gone so far as to decry this refusal as contrary to the rule of law. yet far from being unethical, it is entirely reasonable for a firm to resist a pae licensing demand. that involves patents of questionable validity where, as is often the case, patents are not even mapped to the allegedly infringing products. finally, critics claim that the ebay framework has made the us

an outlier in terms of international patent enforcement, especially compared to jurisdictions like germany that have a reputation for issuing injunctions automatically when a patent is infringed. but if this were ever the case, things have changed. in recent years, other countries, including germany, have implemented their own rules regarding the need for proportionality when considering patent injunctions. as a result, the ebay framework has placed america in a position of global leadership in the reform of patent remedies. so in conclusion, i believe that courts should be permitted to continue to judiciously apply the ebay four-factor analysis when continuing the issuance or considering the issuance of permanent injunctive relief in patent cases, this analytical framework has served american businesses and the economy well over nearly two decades and has done so in an effective, clear, and exemplary manner. ceding these benefits to patent asserters, many of which are foreign corporations and paes,

would cause more harm than good to the american economy. >> and thank you all. i look forward to our questions and your answers. i'm going to start by just exploring the use and efficiency of injunctions so i better understand your testimony in a second round of questions. i'll get to the legislation itself and its likely impact. mr. babcock, we just heard two witnesses really predominantly focus on patent assertion entities as outside the united states, predominantly extractive, not contributing anything to american innovation and manufacturing, and they are the principal target of the concerns expressed by two of the witnesses. do you make anything? >> yeah, we, we design, we invest a lot in r&d and we design wireless power data and wireless power and data circuits and components that are then built into products for our customers. one thing that's unique about us is that we work in an arm's

length relationship with the engineering organizations of our customers, which is usually distinct from what they're calling paes, which are just patent holders that usually are buying the patents from companies that have been put out of business because they couldn't get arm's length deals done. >> could you tell us a little bit more about how did you discover your ip was stolen? and what were the legal remedies available to you, because as you described it, a korean entity stole a critical piece of ip and was literally able to generate, i think you said, billions in value before you were able to find any meaningful relief. >> yeah, thanks for asking too, because the timeline is one of the most egregious elements here. so we didn't really even discover the infringement until a few years after it started where the technology was put into phones. so it had already been put into a couple hundred million phones at that point. then by the time we filed a lawsuit, worked through some of those issues, and ultimately decided to settle with them, it was about 7 years after the initial infringement. by that time, their suppliers were enabled with the technology, and they had

proliferated it not only to the company that we sued, but also to others in the cell phone industry. the cat was out of the bag and we couldn't put it back in. >> what difference would it have made if you'd had a presumption of injunctive relief in your tool kit as you proceeded? i believe that it would have made the companies more seriously consider who the suppliers of the technology were and whether they had a license or the legal ability to provide that technology. it was basically a free for all on the technology, and those companies got the benefit, but it didn't return the benefit to us, the inventors. >> you talked a little bit about, as did professor singa, efficient infringement. what's the order of magnitude difference between your company and the korean company you're describing that that ultimately then took advantage of your technology. >> multiple orders, these

companies have trillion dollar market caps right now and you know, despite the increase in investments in venture capital over the past 10 years, i think if you look at the increases in valuations of hard tech companies, you're not going to see a significant uptick in investment or in valuation. so we're talking, you know, 345 , 4, 5 orders of magnitude differences. >> professor asanga, you used the term predatory infringement. i think an apple executive was cited as talking about efficient infringement or the obligation of shareholders to engage in infringement. what do you mean by predatory infringement? >> thank you for the question, and i think it's important because efficient infringement makes it sound like it's good. we like efficiency. efficiency is a positive thing, . i think by continuing to name intentional, purposeful theft of other person's intellectual property as efficient, we're sort of blessing it.

so, i'd like to change the narrative to predatory infringement because what it is is what we often see. a larger company that is better resourced, able to use the intellectual property of a smaller company who has less resources, may not be able to find the infringement, may not be able to sustain litigation to stop the infringement. that seems rather more predatory than efficient. >> you use the example of someone being a squatter in your home. i think that's accessible to people, the idea that your home is your property and someone manages to get into a room of your house and just live there. until you're able to physically evict them, which would be the equivalent of injunctive relief rather than paying you the rent that they decide they'd like to years later, which would be a predatory infringement. why do you think that intellectual property rights aren't treated or viewed the same as physical property rights? >> thank you, yeah, so i believe particularly with homes there's a level of personhood and so

we're much more attached to our homes. maybe you'd be less concerned if they lived out in the corner of your yard. but for some inventors, especially small inventors, small companies, oftentimes those also represent personhood as well as livelihood. so i do think it's a lot more like homes. i think we should think about it as squatters within homes. i think it's a mistake to not think about intellectual property in the same way that we think about real property. >> let me just across the four of you. does everyone agree that injunctive relief is being sought and granted substantially less frequently post ebay? mr. landau asserted that that really only applies to paes. >> that primarily applies to paes. i believe the study you're referring to when you said a 66% decrease in effective rates is by christina ari. i read that study. i noted several problems with it. for one, in 2016, she reports requests for permanent injunctions in 12 cases, grants in 11 cases.

i independently reviewed 2016 just at random. and located 22 cases filed that resulted in not just a request but a grant of that injunction. so, i don't know how trustworthy those numbers are. the other problem with it is that her denominator is total patent cases when she looks at request rate, and changes after the aia in the joinder rules made it so that npes filed significantly more lawsuits than they used to. not that they were targeting more defendants necessarily, but because they couldn't target 10 defendants in one lawsuit, there's a larger number of cases overall. operating companies didn't experience that same shift. as a result, using the operating company request rate but putting the total number of cases at the bottom distorts what the actual result is. if you rerun it, there is a reduction, but it is much less significant than that reported . >> mr. babcock, you were making

an expression. >> yeah, my experience is different. i'm not an academic or a lobbyist. i just run businesses and invest in them, and my experience working with lawyers in this case is they say we're not even going to request injunctive relief in cases anymore because we can't get it. it's just not given after the ebay decision, and they just want to focus on what they think can be achieved, which is financial remedies. >> professor singa and professor contreras about whether or not injunctive relief is still sought and available to actual manufacturing companies. >> i disagree with mr. landau's assertion that professor acri's work is suspect. i think she found a very clever way to look at the change in the system after ebay, a lot of what the numbers are often based on is how many of the requested injunctions are granted, and it really doesn't take into account how many cases in which the requests aren't even made, as mr. babcock said. so i think professor akre's study is fair, and i do believe that the number has gone down substantially both for operating and for licensing firms.

>> professor contreras, you get the last question in this round. >> thanks very much. i also have some concerns about the study that was cited for many of the same reasons as mr. landau and a couple of others, but rather than go into that, i would say two things. first, if the number of requests for injunctions has gone down and i would be willing to concede that it probably has. that is probably a good thing because it probably weeds out meritless cases for injunctive relief, and i think that that saves judicial resources and makes litigation less expensive for everyone. so if we can weed out meritless cases in that way, i think that is a positive. that being said, i would disagree with mr. babcock's characterization of what practicing lawyers are doing and saying out in the field. i work with lots of lawyers and am involved in many cases

involving operating companies and paes and patents and i have yet to see lawyers in major cases who give up any possible motion that they can file, any remedy that they can seek, and generally injunctions are very much on the table, very much a threat even under ebay and still shape the settlement negotiations in these cases. >> thank you for your testimony. senator tillis. >> mr. landau, i think you mentioned in your opening testimony that a plurality of the cases out there now are from patent assertion entities or patent trolls. >> that's correct. and in some months it's the majority. >> where are the rest? >> the rest are primarily operating companies and then to a much lower extent you have university cases, some inventors started company cases, others that are sometimes called npes

but are not part of that sort of pae situation. >> i actually believe that there are patent assertion assertion entities, and there are patent trolls. and one of the things we need to do is figure out how to distinguish between the two so that we can try and downward trend. i don't think any of you would say, look, an inventor who has a legitimate case should be able to get compensated properly and at the same time we shouldn't disrupt that innovation being enjoyed and brought to market. it's a very difficult thing, and i've heard arguments from either side. it's also important to mention that we're not all patent assertion entities are bad people. sometimes, to mr. babcock's point, there are entities out there that didn't invent, but they own the patent. they just simply are an entity that may have the scale to win if they pursue a patent infringement. i think we need to be realistic

about that. my team will spend a little bit more time really getting down into the details so that i better understand the good actors, the bad actors, and some of the actors that are in the middle. mr. babcock, you were the only one who took a few notes when mr. landau was doing his opening statement. are there any things that you want to get off your chest before i go to the academic end of the dias? >> one thing that really stood out to me again just from in practice as a business person, i'm hearing a lot of concern about the paes, but i think a lot of the shift of burden shifting that's happened over the past decade or so where the time, money, and power is now on the side of the infringers and it takes a lot of money and time for these patent holders to assert what that's led to is a lot of challenges for those companies that might put them out of business or put them in jeopardy of getting more

funding. and so these paes are almost a creation of big tech by putting companies out of business, and the patents then end up getting aggregated into more financial entities that assert them professionally at the scale you're talking about. so i don't think that gets brought up a lot in the discourse. it's like there's some belief that there's some like natural order, that there's some paes, some npes, some operating companies, some professors that invent. i think these are related and i actually think that some of the evils in the system are created by the burden shifting that has happened. >> and now for the professorial side of the dais here. kind of curious, tell me about if restore patent rights act were to pass, what elements of the ebay decision would still, if any, be applicable?

>> i understand the act, and i do congratulate you on writing a one sentence statute that that's very good. so this would presumably affect only factors 1 and 2 of the ebay test, right, whether there's irreparable harm can be shown and whether monetary damages would be sufficient to compensate the infringer. the 3rd and 4th elements of the ebay test, which are balancing of the equities between the parties and the public interest, my understanding is that those aren't affected by the act. they're certainly not mentioned. and so i assume that those would be those would continue in effect. >> thank you. i believe the way i understand it, it's the rebuttable presumption of injunctive relief to pre-ebay times. -- would bring us back to pre-ebay times. that wasn't the wild west. during pre ebay times, what was happening was actually injunctions were granted on the basis of equity. if there was a reason perhaps in the public interest or otherwise for an injunction not to issue

it wouldn't, and that's that rebuttable part of the presumption of injunction. i think it doesn't mess with the ebay factors at all. it just returns us to a time prior to ebay when injunctions were generally granted. >> mr. landau, i had a question for you on that. i think pre-ebay decision injunction rates were pretty high. what are they today? >> pre-ebay, the injunction rate, it varies depending on exactly which study you look at, but the overall injunction rate was about 95% for operating companies. after ebay, it's about again looking at different numbers. you get slightly different numbers, but about 2% lower. for npes, for patent assertion entities, it is significantly lower than that. typically i've seen numbers in the 20s. >> i see mr. babcock agreeing with that. >> i would say disagreeing. i'm surprised at the only 2% difference, but yeah, it seems -- >> it seems odd.

we'll dig into it we're looking at the same numbers. it seemed odd to me, but i'm not an attorney, so i do ask questions. i don't know the answer to. my staff may, but i was just more curious. i wanted to touch on a point because i think it was something said by an apple executive about performing their fiduciary responsibility. i don't disagree with that, to be honest with you. they need to press the system to the maximum extent possible. so i say that to say that i'm not demonizing one end of the spectrum that i generally enjoy a good relationship with because i'm a product of it. i came from big tech, but i still think we have a problem to solve here, and i hope, i know that with a one sentence bill it's kind of hard to come up. with an alternative, but i do believe that i would like for cooler heads to prevail and try to figure out a way that we're getting to the root cause, and this is fundamental fairness for inventors here who want to build

things. where it seems to me the status quo puts some of them at a disadvantage. more importantly, the invention that we never get to enjoy. i don't know what impact that is but that's what happens when innovation gets stifled and people think that they just can't, as a small inventor , break through. let's figure out how we continue the dialogue and get to a fair and just outcome. >> thank you, senator tillis. senator hirono? >> i thank both of you for having this hearing and for the panel. i do want to start by saying that this subcommittee does work that tends to be bipartisan, so that's more than refreshing. it enables us to get things done. on the topic of injunctions, i am a strong supporter of patent rights, especially the patent rights of small inventors, because i'm also told that a lot

of our competitiveness comes from the work of small inventors. i am all for enabling them to effectively protect their inventions. i co-sponsored the stronger patents act in previous years and am inclined to support this legislation as well. i think back to all these many years ago when i took property law and my professor described property law as being a bundle of rights and the most important of these rights is the right to exclude. we won't even get into the rule of perpetuity and all that. property, you know, the right to exclude, and that is what we're talking about i would say with injunctive relief. so it seems to me that i don't see how a decision like ebay could not have some sort of an impact on these business

dealings. because often the remedies that are available really turn on who bears the burden of going forward. so under ebay, the burden lies with the inventor who it's already been deemed that his or her invention has been infringed upon, and now the inventor bears a burden of showing that an injunctive relief should ensue. so that is a pretty tough burden to bear. i don't understand how it is that the ebay decision could not have the effect of making it a lot harder for inventors to protect their patents if it's much harder to get injunctive relief, and i do recognize that professor -- i'm sorry, contreras -- you cited to that

we don't really have a problem here, but i can't see how we don't. i'd like to ask mr. babcock. the non-lawyer in the group, right? so. over the past decades, as far as i'm concerned, we've seen a number of efforts to weaken patent rights. i think that's been the impact of some of these laws that we've enacted. i would cite the supreme court's ebay decision among those. america invents act. i'm one of the few people that voted against that act because i thought it had a negative effect, especially on small inventors, to the growing number of things that are not patent eligible. so for mr. babcock, what has the weakening of patent rights meant to innovative companies like yours and the startups that you support? >> thank you for the question, and i want to go back to something mr. tillis said and add to it.

the inventions that we don't see are the most important ones that we're missing, and it's really hard to quantify those. but where i think you see it showing up is in the lack of venture capital that goes into those businesses because venture capitalists and angel investors cannot rely on patents as strong property. if venture capitalists were able to rely on intellectual property, they would be able to invent, invest in the most promising people and the most promising technologies because they could do the scientific. diligence to understand if this is meaningful. but the problem is today you can invest in great meaningful, exciting technology, but you don't know as a business person if you'll ever have the ability to monetize it. it's not showing up as as big of a problem as it actually is because it's really hard to measure what's missing. >> i tend to agree with you. so what would passing this measure mean both financially and symbolically if you want to

think of it that way to innovators? >> i think it's one step in the right direction. i think the pendulum has swung dramatically over the past 20 years. you mentioned the legislation. you've mentioned some court cases, and there's also administrative changes that have happened. this would be a step back in the right direction, get the pendulum swinging back towards a more moderate middle system, and there's more that needs to be taken care of. i think the pta is particularly problematic, but this would be a very good starting point because it shifts the burden back to the defendants. they can still avoid injunctive outcome but they have to be the ones that prove it, and i think that's a fair way to put it. >> i agree with you because i don't see why the infringer should not have the burden of going forward regarding whether an injunction should ensue. thank you, mr. chairman. >> thank you, senator hirono.

mr. babcock said that time, money, and power have shifted -- and i may mischaracterize big tech infringers. most of the largest technology companies, household names apple, meta are members of your association. i'd be interested in your perspective on the impact of the restore patent rights act on members of your organization, and are there any revisions to this bill that in your view could make it better? >> i'll start at the end of your question with the revisions point. at the end of my testimony, i actually do propose a revision that i think would really address a lot of the concerns you're hearing from myself, from professor contreras, while also strengthening that providing a presumption of injunctive relief. and that would be to attach it to some form of working requirement to say you get the presumption. if you are making a product or if you're working with an exclusive licensee to make a

product. if you're working with a startup to make a product, if you're doing something with your patents, you get the presumption. otherwise you have the ebay test as we have it today. you can still receive an injunction. it might just be a little harder to receive. >> thank you. mr. babcock, you talked both about your company and also about mhub, an incubator that supports a lot of small startups, and part of your assertion, let me make sure i understand it correctly, is that the cost and the uncertainty and the length of litigation were key barriers to pursuing injunctive relief. how important is making sure that this system is balanced and that injunctive relief is available to small startups of the type that mhub supports? >> it's critical because it gives some balance to those

smaller companies that are, let's just face it, when you're a small company, it's unlikely you're going to be successful . stacking more chips against those companies makes it less likely that they will raise the money they need to bring their innovations to market. giving them a little bit, giving them a small arrow in the quiver of competitiveness would be essential. >> you could give them a bigger arrow in the quiver, professor asinga, some have argued that the restore patent rights act doesn't go far enough because it establishes only a rebuttable presumption. rather than finding a mandate that upon a finding of infringement, there must be injunctive relief. what do you think of the balance that the current statute? or the proposed bill, what do you think of the balance that it strikes? does it go too far? does it go far enough? and would you suggest any additional changes? >> i believe that the one sentence bill is perfect. sorry. >> record this moment. >> for these reasons, first of all, the rebuttable presumption brings us back to the 200 years

of history with the injunctive relief being an equitable remedy. there are certain times when it doesn't and shouldn't apply, so a mandatory injunction would be not in line with equity, not in line with historical practices. going forward with the ebay test as it is, as mr. babcock says, puts a lot of burden on the in patentee to show that they deserve injunctive relief, which is an extra layer that shouldn't have to be once they've already been able to prove that their patent has been infringed upon. mr. landau's proposal also adds a lot of burden to the patentee. they're going to have to show that they're the good guy, that they're doing the right things, and so that that doesn't alleviate some of the concerns that mr. babcock raises. but also i want to point out that even in the ebay decision, in the majority opinion, they cite to the paper bag case to say, basically starting in 1908, that injunctive relief doesn't require a working or operating

company in order to receive it. and so for all of those reasons, i think that the bill as proposed hits exactly all the right notes. >> professor contreras and professor asinga, i'll let you kick this around. some commentators have argued that the result was actually not mandated by the ebay decision, that it was an outgrowth of justice kennedy's concurrence, that his concurrence, which is not the holding of the case, which really focused on business method patents and on patent trolls, drove this outcome, the application of ebay. do you think that's correct or incorrect, professor contreras? >> i would say that's not correct. courts, when they are reviewing a request for injunctive relief, they look at the majority opinion. they cite the majority opinion, and that is the law. i think district courts understand very well what a concurring opinion is from the supreme court, and they understand that that is not precedential and not binding.

my research assistants and i reviewed every single case in which an injunction was not granted and an ongoing infringement was allowed, and they were not citing a concurring opinion except, you know, possibly just by way of greater explanation. certainly, the holding of the majority is what was being cited. >> professor asinga, would you disagree or agree with that characterization of the impact of kennedy's concurrence? >> i disagree with professor contreras. whether the courts are citing it or not, if you look to who isn't receiving injunctive relief, it falls into the categories that the kennedy concurrence lays out. licensing firms, it's business it islicensing firms, it's business methods, and then it also sometimes gets into the multiple patents covered in a single component. that's essentially when we get into standard essential patents. so those are the times when we don't see injunctions granted. whether they're citing it or not, i think it may have a big

impact. >> thank you all for your testimony. senator tillis? >> mr. landau's suggestion to a non-attorney that doesn't necessarily take a position that the one sentence bill is perfect. i've just tried to figure out, ms. osenga you said something to , the effect that adds an extra burden to identify the good guys, but that was my point about patent assertion versus patent trolling. why isn't there some way to, and mr. babcock, if you want to opine, i'm just assuming the attorneys are going to give me an answer that my attorneys will have to explain. but isn't there something there why isn't there something there to that concept? at the end of the day that's really what we're trying to do is just make the good guys not have a burden that could create could cause an invention never to occur.

so what am i missing in terms of trying to find a way that does that, that doesn't increase the burden? it kind of gets to the point that mr. landau made and mr. landau or mr. contreras or mr. babcock or professor osenga, any of you can answer, but why aren't we trying to get to that? is it just so cut and dried, mr. chair, that we have to pick a winner and loser here? is there any thought process to bridge in the middle ground? >> nobody else seems to want to jump in. i will say that it would create a different burden, but i don't think it creates an additional burden to show a working. >> the reason i was asking is mr. babcock talked about if we had created more of a sense that people were going to be able to assert their intellectual

property rights, then we would have more people investing earlier. and wouldn't that create an environment where the people who are incentive to invest earlier would then be able to invest in defending the intellectual property if it got that point in the life cycle? does that make any sense to you all because i'm kind of a project guy. do you understand what i'm talking about? i thought what i heard you say, mr. babcock, is that one of the reasons why angel investors and private equity are hesitant now is because they don't necessarily -- they're not willing to invest in the science and technology to see if it's a deal worth investing in because they're not really sure if the intellectual property rights would be preserved if they did. but isn't it fair to say that those folks would also, if they saw a promising invention or a promising idea that they would , likely have the resources to prove that they're good actors or working with a good actor?

i'm just trying to figure out what i'm missing here. >> i think a lot of it comes back to that burden at every step of the way. if you think about the process here, so you go through the invention, so you invent something meaningful. then maybe you had a little seed funding for that or maybe you did that out of your own pocket or from friends and family. then you want to file patents and you pay, you know, tens of thousands of dollars to law firms and you go through a uspto office to prosecute those patents to earn the patent. usually, i think historically, once you earn patents then you can fundraise significantly more money on top of those because it meant something. today i don't think it means that much. i think that once you have that first patent or that second or third, it's a little bit of credibility building, but it doesn't really change the financial picture much to get that next stage of real funding to now bring it to market and to do something with it. so as an as an inventor or as an entrepreneur, you're required to find other ways of competing. >> professor osenga, does that

mean i thank you all in advance , for coming here with your opinions, but does that mean that that that mr. landau's decision is sort of a poison pill? it doesn't really do anything? his suggestion i'm just trying , to understand it. i'll give you a chance to, mr. landau, take notes. >> thank you. i do think that mr. landau's proposal leaves us in the same ebay space. it's just changing the words of the test. >> same result, different approach? >> correct. >> mr. contreras, and then i'll let mr. landau finish up my time. >> thank you, senator. i have to say in my view that the ebay framework itself is the middle ground. it offers the balance that we need. >> so you're in the ain't broke category. >> excuse me? >> you're in the ain't broke,

not broke category. >> in this case, i believe i am, yes, because and it's industry dependent. one thing we haven't really talked about is this is industry dependent. in some industries, pharmaceuticals for example, you get injunctions all the time, almost every time. it's in industries where patent claims are harder to parse. they're more vague and where they can be asserted against very broad swaths like sear lane and its campaigns against hundreds of companies in the tech space just because they do something involving a computer that they're going to get one of these claims. that's where the failure to be able to show a reparable harm, -- irreparable harm, inability to get compensated by money damages, where those factors really make a difference, and i think they work. >> mr. landau. >> i hear a lot about the sort of excessive burden, but before i was doing this, i was a litigator. i was a patent litigator, and a big portion of any case is proving your damages. and i don't think there are any

inventors out there who would just abandon their damages case. you're always going to want damages for past infringement, even if you do want an injunction for future infringement. so you are always going to have this component of your case where you prove what harm you suffered, and that's normal. we don't award remedies that we have no evidence behind them, nor should we. so i don't think it is an excessive burden. i think it changes the burden a little bit. and i deeply respect professor contreras, but i think i disagree with him that this doesn't change anything from ebay. presumptions matter. i can say innocent until proven guilty. i can say guilty until proven innocent. those are very different things. so putting a presumption of irreparable harm. is meaningful. it means that you have that presumption. the other party has to push back and prove that you didn't experience an irreparable harm. so i think it is a meaningful difference. >> thank you all for being here. we'll continue the dialogue, mr. chair you don't intend to get a , markup and get this bill

passed before the end of your tenure? >> tomorrow. >> so you know, outside of the hail mary here, this is a dialogue to be continued and hopefully we can continue it early next year. >> senator hirono? >> thank you. i'd like to make sure that i have clarification on this. this is for professor osenga. didn't ebay shift the burden of going forward to the patent holder in terms of getting an injunction? >> yes, thank you. >> so one of the things that mr. babcock mentioned, and this is in line with senator tillis's line of questioning, it has to do with the importance of the availability of venture capital for startups. that would include small inventors in particular.

mr. babcock, you said that venture capitalists are not going to be inclined to invest in inventions that cannot be protected as a property right. so are there a vc people that you talk with who can tell us that this is in fact a limiting factor for their wanting to provide venture capital money? >> yes, and in my experience, probably 9 out of 10 venture capitalists you reach out to for fundraising purposes. once they understand that it's a hard tech patent-based business, they just say that's not in our expertise. we don't invest in those businesses. >> and do you think that if this bill were to pass to create more protective certainty, protection for certainty, that they may have a different view of investing in these kinds of startups, including small inventors? >> i think it's a starting point. i don't think it does enough, but i think it starts swinging the pendulum back towards fairness in the middle ground.

>> i think the availability of vc capital is very important. that's an added factor that um. i think we need to support a bill like this. thank you. >> given that a close friend of mine is about to give his farewell speech on the floor of the senate, i'm going to defer to senator tillis to close this hearing out. and i look forward to hearing about senator blackburn's questioning. >> thank you, mr. chairman, and i want to thank you all for being here and doing this hearing. one of the things that has concerned me and intellectual property and its protections are something we hear a lot about in tennessee. whether it is our auto engineers or it's our singers, or songwriters, our authors, our

publishers, they're concerned about ai. they're concerned about losing ip protections, so i appreciate this, and many times china comes up. and one of the things we've paid attention to, if you go back and you look at 2021, china really moved ahead when it came to patent filings. in 2021 they did 1.59 million. patent filings. that was more than double what we had in the u.s. and that acceleration rate is something that was of tremendous concern to me because we know china is repeatedly trying to take our r&d.

and take our ip. mr. babcock, you talked about this in your testimony, and i'll quote you. you said to donate our r&d and american ip to aggressive foreign competitors was a statement you made. why don't you elaborate on that one for me? >> we were trying to work in good faith with a korean oem for putting wireless power into their cell phones. once they realized the ingenuity of the invention, they worked with their suppliers in china and taiwan to figure out a way to reverse engineer it and build it, and it ended up proliferating into over a billion cell phones since then. and as i mentioned earlier, it just let the cat out of the bag and you can't put it back in. we have gotten financial damages. >> so then talk about how the restore act would help with that type of situation. >> the restore act can actually

stop it from proliferating because it will actually enjoin those companies from being able to ship products if it has the infringing technology in it . versus the paradigm we're in today. they might just have to pay some amount of money at a future date, and they might not have to if we don't come up with the money to go around and sue the entire cell phone industry, which is a very expensive proposition, risky and distracting when we want to spend our time inventing new technologies, not litigating. >> i can appreciate that. well, we have watched very closely at how china has significantly increased their r&d efforts, and they lead the world in 57 critical and emerging technologies. now in the early 2000s, we were the leader in those critical and emergency technologies. and right now, we lead in just

7. and this is of tremendous concern to me. it's why senator welch and i did the leadership in critical and emerging technologies act, which would require the pto to put in place a pilot program that would expedite the examination of 10,000 patents in microelectronics, artificial intelligence, quantum information. mr. landau, let me ask you, why in your opinion, why would the patent system be a great place to do this? to do this expediting and pushing this innovation? >> i think that the patent system is of course the appropriate place to place that sort of process. the patent system exists to promote the progress of science

and the useful arts. that's why we have a patent system. it's actually one of the unique things about the u.s. patent system. ours is one of the only that puts that progress as the reason rather than some other rationale. i think it makes sense that if we think these are important technologies, and they are, my members are heavily involved in many of them. we do want to have that sort of accelerated process through the patent office. we do want to have an accelerated examination process. i think that makes perfect sense. >> we think that this will help push the leadership, push us back into that leadership position. so that it is something that is encouraging our innovators. we don't want them leaving the country. we want to keep this innovation here. we don't want to have have that ip stolen from them. we don't want predatory infringement. and professor, i know you talked about that a little bit earlier,

and protecting these innovators and their constitutional right to benefit from their innovations is something that should be a priority of this committee. thank you, mr. chairman. yield back. >> thank you all for being here. senator blackburn, before you leave, i'd like to seek unanimous consent to have senator coons, chairman coons, ' closing remarks submitted to the record. i do on behalf of senator coons, want to thank you all for being here. i do agree with him. i think injunctive relief is no longer near the certainty it used to be. i'm just in the category of trying to figure out how we can produce certainty and not have unintended consequences, which i think is part of the concern with the opposition about the only thing i will read in his speech is he wants to especially thank me and my staff for being great partners at the hearing. i don't want to miss that one, but thank you all for being here. the thing i like about this

committee, and frankly, one of the only reasons why i continue to be on the judiciary is we try to present ourselves in a professional respectful manner. really just trying to get to a fair outcome. i don't think either one of you want to prevent fewer mr. babcocks and all of you want innovation. it's about trying to figure out how we can tune the dial to get the best of both. if we engage in a constructive way, we'll come out with an outcome that maybe not everyone likes. but if i'm convinced it's going to move the ball down the field, then i'm going to support it, and i appreciate senator cotton and senator coons for pressing on this issue. thank you all for your testimony. i should say that the record will be held open. any kind of questions will be due a week from today, but given the holidays, we're going to extend the deadline to 5 p.m. friday, january 3rd, so that if anyone has questions, wants to submit other information to the record, you can by january 3rd.

thank you all. have a great holiday. meeting is adjourned. [gavels] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]