principles, where debates unfold, decisions are made, and in the nation's course is charted. democracy in real time. if this is your government at work. this is c-span giving yo democracy unfiltered. >>day esident elect trump's pick for ty secretary businessman scott be ssenwill appear before the senate finance committee for a confirmation hearing. watch live on c-span now, c-span, or c-span3. next beat senators hold a hearing on legislation intended to strengthen patent holders. testifying that a major korean manufacturers still patented technology from his company. it is about an hour 15 minutes.

>> this hearing of the intellectual property subcommittee of the senate judiciary committee will come to order. i want to thank all of our witnesses and my colleague, ranking member thom tillis and his staff for putting the hearing together again on a consensus basis. this is our 10th intellectual property subcommittee hearing of this congress, the most of any of the subcommittees of the full committee. we conducted oversight on the

pto and copyright office, analyzed and work through five different bipartisan bills with the hitters -- hearing on the intersection of ai and ip. we have probed foreign threats to american ip. we have been doing the work our constituents sent us to washington to do, legislating and at every step the senator tillis and your team have been fantastic partners and i work -- look forward to continuing our work in the next congress. i expect other members of the subcommittee to join us. today's hearing examines the restored patent rights act a bill i cosponsored with senator cotton of arkansas, a one sentence bill that would restore the presumption a patent owner receives an injunction where she demonstrates a defendant infringed her valid patent, in no way a new or novel idea. our founding fathers made it clear inventors should have exclusive rights to their invention.

the constitution guarantees the ability to prevent others from using or selling inventions without permission. for more than 200 years our federal courts recognized this exclusive rights. in nearly 100 percent of cases courts issued permanent injunctions against patent infringers when patent owners sought them. the system was predictable and orderly. parties that wanted to use patented technology negotiated with patent owners to pay for licenses rather than infringing up front and risking a costly injunction shutting down manufacturing and distribution. it changed in 2006 with the supreme court decision in ebay versus mercexchange when the supreme court held injunctions were not the remedy for patent infringement. instead courts were to apply the four factor equitable test before deciding to award ease her money damages or injunctive relief. after ebay, courts have 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 number of injunctions granted have decreased substantially. the relative decrease in requests for permanent injunctions was 65% for operating companies and 90% for nonpracticing entities. even when parties did seek injunctive relief they were awarded that less frequently. grants of injunctions to patent holders that had proven validity and infringement dropped from 100% to around 70%. putting the trends together means courts are issuing far fewer permanent injunctions against infringers then before the decision. the numbers do not capture the full impact of the ebay decision. predatory infringement and 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 to determine licensing fees. or better yet, may be that verdure can where the patent owner down with years of repeated litigation and with injunctive relief uncertain extract licensing can -- concessions. individual inventors, universities, and start ups are especially vulnerable because they often lack significant financial resources to sustain prolonged litigation. in my view the value of a patent has diminished. if a patent owner cannot be confident they can exclude infringers from practicing -- patenting the invention how can they sell a high-value license? they can't. post ebay data shows a huge increase in lower value nonexclusive licenses meeting patent owners have a tougher time recovering investment leading to abandoning innovative ideas or reducing r&d investment i did that kind of ideas that can propel our economy. it is for that reason i

introduced the restored patent rights act. as i have said before in a single sentence, it would restore the rebuttal presumption and under the harmful effects of ebay. in all four previous hearings examining brief -- specific bipartisan bills we have witnesses who both support and oppose the legislation. we try to hear all sides. this hearing is no different. with the cooperation of senator tillis, we have a panel with diverse views and perspectives both on the challenge and operational impact of ebay and this bill and its potential consequences. we want to hear from you about whether you think the bill is needed, whether it is crafted the right way. although in one sentence, there is not a lot of detail to work through. tell us what you like and do not like and how to make it better. before i introduce the witnesses i want to turn to my friend and colleague senator tillis for opening remarks. sen. tillis: thank you for holding the hearing on the restored patent rights act. before i make comments and we hear from witnesses i want to thank you for another great

session of congress working together. 10 hearings. what you may not know is how much work goes into the hearings, for which, i think we are both very grateful to the staff that do the lion's share of the work. it is important to mention the broader subject of intellectual property. how many meetings, workgroups, the work of this committee. i would put it up against any subcommittee in the u.s. senate for the past couple congress is. a lot of that has been through the cooperation and active involvement of many members and absolutely through our consensus-based leadership of the committee and through the hard work of our staff. thank you for the hard work you have done. we will hear from witnesses on both sides of the issue today. whether or not to support or who have concerns or oppose what we are trying to accomplish. you know what the bill does. i won't tell experts.

i am here as a business person trying to solve problems. i view this as another problem that is a threat to innovation. it is particularly a threat to the innovation ecosystem when we are talking about some of the smallest, less -- least resourced inventors and innovators. there has to be a way to get this right. what i do like, and what i will tell the witnesses is thank you for coming. whether you are on the pro or con side of the bill, either as written or any iteration of it, thank you for coming here. i will tell you, when we have limited attendance and way -- we have times i sometimes convert my questions into sort of an ad hoc debate club. if any of you happen to hear something and i seem to think you want to respond i would do that. this is the first time i have given people notice. i want a good fulsome

discussion. i don't want to hear any less from somebody opposed to the bill that somebody who supports -- than someone who supports it because we want a full and balanced outcome. but i am convinced of that senator cornyn senator coons are onto something here and i look forward to the testimony and engagement after and we apologize for starting 15 minutes late. we had a vote to take care of. chair coons: thank you for joining us. i want to introduce our witness panel. jacob babcock ceo of nucurrent 840 prison company in chicago that works on wireless power solutions with a portfolio of more than 300 granted and pending patents. joshua landau, senior counsel for innovation policy at ccia, the computer and communication industry association where he advises the association on patent issues and professor kristin at the richmond school

of law where she focuses on patent litigation and log reform. the last professor is a george confederates, professor of the university of utah college of law where he works on ip issues. grateful to have you here. after i swear in witnesses you will have roughly five minutes to provide an opening statement and then proceed likely with two rounds of questioning. can you stand and be sworn in? raise your right hand and repeat after me. do you swear the testimony you are about to give before the committee should be the truth, whole truth, and nothing but the truth, so help you god? thank you all. mr. babcock, proceed with your opening statement. mr. babcock: chairman coons, ranking member tillis and members of the subcommittee thank you for the opportunity to testify. when i graduated from indiana university in 2004, i joined

teach for america to close the education gap. after finishing in 2006, i embarked on a career in technology and entrepreneurship and over the last years i have watched a new gap emerge, and innovation and ip gap created by a systematic gutting of our once great patent system. it did not happen by accident. mega technology special interests have driven judicial, legislative, and administrative changes that heavily tilt the system in their favor. for example, the 2006 ebay decision eliminated injunctive relief leaving inventors with inadequate compensation while infringing on profit. other harmful cases included the 2014 alice decision and the 2018 oil state decisions which combined to substantially weaken patent rights. on the legislative front of the 2011 america invents act created the p cap that invalidates patents at an alarming rate and

drains inventor resources. finally on the administrative front the u.s. pto turned patents into paper shields by lowering the standard review, shifting the burden of evidence to patent holders and allowing defendant multiple bites of an apple. the result is a system that no longer protects innovators or provides clarity to investors. it awards to those that exploit our ideas, shifting and stifling competition and creativity. let me share what this looks like to me in a practical sense, in my business, and as an investor. at nucurrent company i founded in 2009 we specialize in wireless and a data transfer. we filed over 100 patents partnering with leaders like hp to bring new products to the market. despite success, we experienced firsthand how the system fails to protect innovators. a major korean oem stole our

patented technology enabling suppliers in china and taiwan 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 flowed overseas. it is value we would have invested in american jobs and innovation. it was not just theft. it was a systematic failure of the u.s. patent system. the bigger problem is that the lack of injunctive relief distorts fair business dealings. megacorporations know there is no urgency for them to act. without the threat of injunction they can choose to infringe now and pay later, as you mentioned, if they pay at all. a former apple executive called this strategy a fiduciary obligation. for mega tech, litigation is just a small tax on doing business. for companies like mine it is devastating. instead of inventing, building,

and creating jobs, we are forced to fight endless legal battles. this broken system also discourages the next generation of innovators. as a founding investor in the 81 collective venture fund, i see this every day. 81% of u.s. gdp comes from industries like manufacturing, health care, and energy. industries reliant on hard technology. yet, the sectors reynolds -- received less than 50% of the venture capital investment. it is because investors see the risks of a broken patent system outweighing the award of making the investment. at mhub a hard tech accelerator where i serve on the board entrepreneurs ask me is filing a patent worth the investment? today i often have to say no and that may be the biggest tragedy of all. every time i give that answer i wonder -- worry we are letting

the next big american innovation slip away only to be exploited by foreign competitors or entrenched players. the good news is, we can fix this. the restore act offers a commonsense solution by restoring injunctive relief giving inventors the ability to stop proven infringers. it really is uncompensated in my eyes. if you are 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. it's about fairness. it is about ensuring that when inventors take risks, work hard, and bring groundbreaking technologies to life as they are right to respect it. the restore act sends a clear signal america values its innovators, protects its creators and will tolerate ip

theft, whether from foreign competitors -- will not tolerate ip theft whether from foreign competitors or domestic giants. mr. landau: thank you for inviting me to testify on behalf of the computer and communications industry association that has advocated for competition and innovation in the technology and communications industries since 1972. our members are leaders in many areas of technology including semiconductors, artificial intelligence, cloud computing, and e-commerce. our members are active participants in the patent system often appearing in the top five recipients of u.s. patents and litigating in district courts and at the ptab. we support a balanced patent system. the ebay decision help ensure the u.s. patent system fairly rewards patentees without creating excessive burden and encourage innovation and commercialization.

after ebay in 2006, research and develop in spending accelerated. patent filings accelerated. not just any patent, patents more likely to be cited by others and contribute to new innovation in the future. some studies found an overall increase in social welfare due to the ebay decision. ebay did impact innovation. it accelerated it. the restore act would reverse the benefits at incentivize manufacturing outside the united states at a time when bolstering domestic manufacturing is national priority. it is simply unnecessary. prior to ebay, operating companies, companies that make products, could obtain injunctions in almost all cases. after ebay, those companies can obtain injunctions in almost all 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 work with exclusive licensees, like a small inventor partnering with a manufacturer, or a university

working with a start up, injunctions do remain available where there was a drop in injunctions after ebay. by the companies that have a harder time obtaining injunctions create lawsuits instead of products. we have a term for those. patent distortion entities sometimes referred to as patent trolls. contrary to some claims, patent trolls are still out there and represent the plurality of all patent lawsuits. these companies would significant leap benefit from restore. beyond positive impacts on innovation ebay 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. one of the most important is equitable relief is only available when legal remedies are inadequate to make a plaintive hole, when there is harm money cannot fix. thuis principle is so basic the supreme court summarized injunctive relief by saying that the bases for injunctive relief

are irreparable injury and inadequacy of legal remedy. if there is no irreparable injury there is no basis for this explained that ebay decision and court cases after ebay. preventing irreparable harm, loss of market share, loss of competitive advantage. an entity that exists to only make money through patents does not suffer the harms. instructing the factfinder to award damages adequate to compensate for infringements. a patent assertion entity only has loss that is monetary. economic theory finds the threat of injunction distorts negotiations because injunctions take the entire product off the market. it makes sense when a patent

covers the entire market but modern products are high-tech multicomponent devices that could involve tens or even hundreds of thousands of patents. when a defendant is faced with the inability to form a course -- to make or sell products he cannot negotiate for the fair value of technology and the risk of having your product taken off the market entirely is too high. a patent holder is entitled to be made whole. when the injury can be remedied solely by money damages, the impact of the ebay decision, the entire history of the united states legal system and economic theory tell us an injunction is unneeded and inappropriate. ebay accelerated innovation. we should not reverse that. thank you for the opportunity to testify today. i look forward for your quest -- to your questions. prof. osenga: thank you for the opportunity to speak today about why congress should enact the

restore patent rights act. the bill would bring back a patent system based on reliable and effective patent rights serving as the foundation for the country's innovation ecosystem. for over two centuries if a valid patent was found infringed the patent owner could generally rely on the court granting an injunction to prevent further infringement stemming from the constitution grant of power to congress to secure exclusive rights to incentivize authors and inventors. if a patent owner cannot stop an infringer from using their patented technology, the patent loses value. because of this, prior to 2006, courts would, presumptively, grant permanent injunction in nearly all cases where patent infringement was found. the high grant rate was not just aligned with the patent grant of exclusive right but provided a level of certainty important

abou -- important to both patent owners and infringers. in 2006 ebay versus mercexchange dramatically altered the patent landscape. injunctive relief is no longer certain. instead, some patent owners can be more certain they will not be granted injunction and will have to settle for ongoing royalty set by court. the infringer is permitted to continue using the patent owner's innovative technology. studies show permanent injunctions were granted much less frequently than before ebay especially for patent licensing firms. new research shows patent owners, regardless of business type, aren't even asking for injunctive relief as the same rate as before ebay. take into account the patent owners that don't seek injunctive relief. the decrease in granted injunctions, where infringement is found, is down 66% for operating companies and 91% for licensing firms for the shift from a presumption of injunctive relief to a patent system for injunctive relief is uncertain

has serious negative effects on the patent system. first, the lack of injunctive relief has led to predatory infringement. infringers who know they are unlikely to be enjoined make a decision to infringe now, and pay later forcing the patent owner to litigate rather than negotiate, to obtain payment for use of their patented technology. a predatory infringer is a squatter living in a room of your house without your permission. it awards the infringer in a number of ways. first, they may never face litigation. they can use someone else's patented technology for free. second, even if they face litigation and lose, they will have been using the technology for free for a number of years, basically getting an interest-free loan during the period of infringement. infringement cases are expensive and take many years to conclude. there is empirical evidence. the court determined royalty rates are often lower than negotiated fees. after years of using the

technology for free infringers end up having to pay less than they would have if they agreed to license the patent up front. what is a win-win situation for the infringer, 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 expand their business. second, where injunctive relief is uncertain, licensing negotiations are distorted and pushed patent values lower. when an injunction is available a patent owner can say no i won't license this to you at that price. to use the technology, the other party needs to pay the asking price or design around or use a different technology. 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. even those that 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, typically high-value, have decreased post

ebay, while nonexclusive licenses, typically lower value, have increased. the problems created by ebay can be fixed by enacting restore which 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. certainty in injunctions serves as a deterrent to predatory infringement and facilitates fair negotiations. with these qualities the patent system provides effective, reliable patent rights intern driving the u.s. innovation ecosystem. thank you. i look forward to your questions. prof. contreras: [inaudible] teaching and studying intellectual property law. sometimes heated debate concerning injunctive relief. particularly the supreme court 2006 decision.

chair coons: professor, if your microphone on? prof. contreras: sorry. every empirical study to date shows 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 is hardly necessary. concerns in court are allowing hordes of patent infringers to violate with immunity are exaggerated. from 2006 until 2021 courts exercise continued infringement after exchange for an ongoing rodeo after denying injunction 32 times, twice per year across thousands of patent infringement lawsuits in the country, hardly the avalanche of infringement that would derail the innovation

economy. third, there are already strong legal mechanisms in place to deter what has been called hold out and predatory infringement including recovery of litigation costs and enhanced damages under the patent act in which a judge can penalize an infringer up to three times the awarded damages for willful infringement. following the supreme court 2016 decision in halo versus polls it is even easier to get enhanced damages and between 2016 and 2020 willfulness was found in 65% of patent infringement cases. the likelihood of such damages multipliers is a significant deterrent to patent infringement even without the threat of injunction that does not meet the ebay standards. by the same token, there is no evidence ebay has depressed patent awards. if you exclude default judgments, median patent damage awards increased in the years after ebay.

let me turn briefly to the proposed restore patent rights act. this act claims 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 search entities whose main source of revenue is suing larger companies for patent infringement and many of which are based off shore. as reported by bloomberg in 2022 all 10 of the top 10 fathers of patent litigation in the united states where patent assertion entities. the top fighter was single-handedly responsible for suing 179 separate defendants. the targets of this 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 extract payment from american companies at the cost of consumers. firms that don't readily enter -- it has been agreed that there is a predatory or unethical matter decrying the refusal is contrary to the rule of law. far from being unethical it is entirely reasonable for a firm to resist a pae licensing demand that involves patents of questionable validity where patents are not even mapped to the allegedly infringing products. critics came to it -- claim the ebay framework made the u.s. an outlier in terms of international patent enforcement especially compared to jurisdictions like germany with

a reputation for issuing injunctions automatically when a patent is infringed. if this was ever the case, things have changed. other countries including germany implemented their own rules regarding the need for proportionality when considering patent injunctions. the ebay framework placed america in a position of global leadership in the reform of patent remedies. are believe courts should be permitted to continue to judiciously apply the ebay four factor analysis when considering the issuance of permit to -- permanent injunctive relief. this has served the american economy well for over two decades in an effective, clear, exemplary battl -- matter. ceding this would cause more harm than good to the american economy. chair coons: thank you. i look forward to the questions and answers. i will start by exploring the

use and efficiency of injunctions so i better understand your testimony and in a second round of questions i will get to the legislation itself. and its likely impact. mr. babcock, we heard two witnesses predominantly focused on patent assertion entities, outside the u.s., extractive, not contributing anything to american manufacturing. they are the principal target of the concerns expressed by the two witnesses. do you make anything? yes --. mr. babcock: yes. we invest a lot in r&d and we designed wireless power and data circuits and components that are then built and built into products for customers. one thing that is unique about us is we work in an arms length relationship with the engineering organizations with our customers. usually that is distinct from what they are calling paes, patent holders that are usually buying patents from companies that have been put out of

business because they could not get arm's-length deals done. chair coons: how did you discover your ip was stolen? what legal remedies were available to you? as you described it a korean entity stole a critical piece of ip and was literally able to generate billions in value before you can find any meaningful relief. mr. babcock: yes. thank you for asking because the timeline is egregious here. we did not discover the infringement until a few years after it started when the technology had already been put into a couple hundred million phones. by the time we filed a lawsuit, work through some of those issues, and, ultimately, decided to settle with them it was about seven years after the initial infringement. by that time, their suppliers were enabled with the technology and had proliferated it not only to the company we sued, but others in the cell phone industry. the cat was out of the bag and we cannot put it back in. chair coons: what difference

would it have made if you had a presumption of injunctive relief in your toolkit as you proceeded? mr. babcock: i believe it would have made the company more seriously consider who the suppliers of the technology were and read it -- whether they had a license or the legal ability to provide the technology. it was basically a free-for-all on the technology and those companies got the benefit, but did not return the benefit to us, the inventors. chair coons: you talked a little bit about, as did prof. osenga efficient infringement. what is the order of magnitude difference between your company and the korean company you are describing that ultimately took advantage of your technology? mr. babcock: these companies have trillion dollar market caps right now. despite the increase in investments in venture capital over the past 10 years, i think if you look at increases in

valuations, of hard technology companies, you won't see a significant uptick in investment or in valuations. we are talking 3, 4, 5 orders of magnitude differences. chair coons: prof. osenga you used the term predatory infringement. an apple executive was cited as talking about efficient infringement, or the obligation to shareholders to engage in infringement. what you mean by predatory infringement? by that term? prof. osenga: thank you for that question. i think it is important because efficient infringement makes it sound like it is good. we like efficiency. efficiency is positive. i think that by continuing to name intentional, purposeful theft of other persons intellectual property as efficient we are sort of blessing it. i want to change the narrative to predatory infringement. because, what we often see is a larger company that is better resourced, able to use the

intellectual property of a smaller company with less resources that may not be able to define the infringement or sustained litigation to stop the infringement. that seemed rather more predatory than efficient. chair coons: you use the example of a squatter in your home. i think that is accessible to people. the idea that your home with your property. someone manages to get in to a room of your house and just live there. until you are able to physically evict them. that would be the equivalent of injunctive relief. rather than paying you the rent they decided they would like two years later, a predatory infringement. why do you think intellectual property rights are not treated or viewed the same way as physical property rights? prof. osenga: thank you. yes. i think -- i believe, particularly with homes, there is a level of personhood. we are much more attached to our homes. maybe you would be less concerned if they lived i don't know, in the corner of your yard? for some inventors, small inventors, small companies,

those often represent personhood as well as livelihood. i think it is a lot more like homes. i think we should think of it as a squatter's within homes. i think it is a mistake to not think about intellectual property in the same way we think about real property. chair coons: across the four of you, does everybody agree injunctive relief is being sought and granted substantially less frequently post ebay? mr. landau asserted it really only applies to paes. mr. landau: it primarily applies to paes. the 66% decrease in affective rates is from a study that i read and i noted several problems with it. in 2016 she reports request for permanent injunctions in 12 cases, grants in 11 cases. i independently reviewed 2016 at random and located 22 cases filed of resulted in not just a

request, but grant, of the injunction. i do not know how trustworthy the numbers are and the other problem with it is that her denominator is total patent requests when she looks at that rate. changes made it so that mps file significantly more lawsuits than they used to. not that they are targeting more defendants, necessarily, but because they could not target 10 defendants in one lawsuit there are a larger number of cases overall. operating companies did not experience the same shift. 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 report. chair coons: mr. babcock you are making an expression. mr. babcock: my experience is different. i am not an academic or lobbyist but i run businesses and invest in them. my experience working with lawyers in this case is that they say we will not even request injunctive relief in

cases anymore because we can't get it. it is just not given after the ebay decision. they want to focus on what they think can be achieved, financial remedies. chair coons: prof. osenga then mr. contreras about whether or not injunctive relief is sought or available to actual manufacturing companies. prof. osenga: i disagree with mr. landau's assertion that that professor'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. it really does not take into account how many cases in which requests are not even made, as mr. babcock said. i think that professor's study is fair and i do believe that the number has come down substantially, both for operating and licensing firms. chair coons: mr. contreras you get the last question of the round. mr. contreras: thank you very much. i mean, i also have some concerns about the study that

was cited for many of the same reasons as mr. landau. 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 it probably has, that's probably a good thing because it probably weeds out meritless cases for injunctive relief. i think that saves judicial resources and makes litigation less expensive for everyone. so if we can weed out meritless cases in that way, i think it is positive. that said, i wouldn't disagree with mr. babcock's characterization of what practicing lawyers are doing and saying out in the field. i work with lots of lawyers. i am involved in many cases. involving operating companies and paes and passions. i have yet to see lawyers in

major cases that give up any possible notion that they can file, any remedy that they can seek. generally, injunctions are very much on the table, very much a threat. even under ebay. they still shape the settlement negotiations in these cases. chair coons: thank you for your testimony. senator tillis. sen. tillis: thank you for everybody being here. mr. landau, you mentioned in your opening testimony that a plurality of the cases out there now are from patent assertion entities or patent trolls. mr. landau: correct, in some months the majority. sen. tillis: where are the rest? mr. landau: primarily operating companies and to a lower extent, university cases, some inventor start up company cases some that are sometimes called mps but aren't part of the paes situation. sen. tillis: i believe there are

paes and patent trolls and we need to figure out how to distinguish between the two so we can try to downward trend -- i do not think any of you would say an inventor that has a legitimate case should be able to get compensated -- should not be able to get compensated properly and at the same time we should not disrupt the innovation being enjoyed and brought to market. it is a very difficult thing and i have heard arguments from either side. i think it is also important to mention, we are not all patent assertion entities or bad people. sometimes to mr. babcock's point, there are entities out there that did not invent, but on the patent. they are simply an entity that may have the skill to win if they pursue a patent infringement. we need to be realistic about that. my team will spend a little more time really getting down into the details. so that i better understand the good actors, the bad actors,

some of the actors that are in the middle. it is to babcock, you are the only one that took a few notes when mr. landau was doing his opening statement. is there anything you want off your chest before i go to the academic into the dais? mr. babcock: one thing that really stood out to me. again, in practice, as a businessperson, i am hearing a lot of concern about the paes. but i think a lot of the shift of burden shifting that has happened over the last decade or so, where the time, the money come in and the power is now on the side of the infringers. a it takes a lot of money and time for these patent holders to assert that what that has led to its a lot of challenges for companies that might put them out of business or in jeopardy of getting more funding. the paes are almost a creation of big tech, by putting companies out of business, patents end up getting aggregated into more financial

entities that are then asserted professionally at the skill you are talking about. i don't think that gets brought up a lot on the discourse. there is some belief that there is natural order that there are paes, mps, operating companies, and professors that invent. these are related and i think that some evils in the system are created by the burdens shifting that has happened. sen. tillis: for the professorial side of the dais, i am curious. tell me if the restore patent rights act were to pass, what elements of the ebay decision would still, if any, be applicable? mr. contreras: the way i understand the act, and i congratulate you on writing a one sentence statute. presumably it would only affect factors one and two of the ebay test.

whether irreparable harm can be shown and whether monetary damage would be sufficient to compensate the infringer. the third and fourth elements of the ebay test, which are balancing of the equity of the parties and public interest is my understanding is those aren't affected by the act, certainly, not mentioned in the act. i would assume those would continue to be in effect. prof. osenga: i believe the way i understand it is the rebuttable presumption of injunctive relief would bring us back to pre-ebay times. that was not the wild west. during pre-ebay times what was happening was actually injunctions were granted on the basis of equity. so, if there was a reason, perhaps, in the public interest, or otherwise, for an injunction not to issue, it would not. that is the rebuttal part of the presumption of injunctions. it does not mess with the ebay factors at all. it just returns us to a time

prior to ebay when injunctions were generally granted. sen. tillis: mr. landau, i had a question for you on that. i think that pre-ebay decision injunction rates were pretty high. what are they today? mr. landau: three ebay the injunction rate -- it varies depending on the study -- but the overall injunction rate was about 95%. for operating companies after ebay now it is, looking at different numbers, you get slightly different numbers, but about 2% lower. for mps or paes it is less than that, numbers in the 20's. sen. tillis: i say -- see mr. babcock agree with that. chair coons: disagreeing. --. mr. babcock: disagreeing. the only 2% increase. sen. tillis: it seemed odd to me too. we will get into it. to the point.

i wanted to touch on a point. i think it was something said by an apple executive about performing their fiduciary responsibility. i do not disagree with that, to be honest with you. they needed to press the system to the maximum extent possible. i say that to say, i'm not demonizing one end of the spectrum that i generally enjoy a good relationship with because i am a product of it. i came from big tech. but i still think that we have a problem to solve here. i know that with a one sentence bill it can be hard to come up with an alternative. but, i do believe i would like for cooler heads to prevail and try to figure out a way we are getting to the root cause. this is fundamental fairness for inventors here that want to build things. where it seems to me that the status quo puts some of them at a disadvantage. and, more importantly, the

invention that we never get to enjoy. i do not know what impact that is, but that is what happens when innovation is stifled. people think they just cannot, as a small inventor, breakthrough. let's figure out how we continue the dialogue and get to a fair, just outcome. chair coons: thank senator tillis. senator hirono. sen. hirono: thank you for having this hearing in this panel. i want to start by saying, the subcommittee does work that tends to be bipartisan. that is more than refreshing. this 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 am also told that a lot of competitiveness comes from the work of small inventors. i am all for enabling them to effectively protect their

inventions. i cosponsored the stronger patents act in previous years and i am inclined to support this legislation as well. i think back to many years ago when i took property law and my professor described property law as a bundle of rights and the most important of the rights is the right to exclude. we won't even get into the rule of perpetuity and all that. property rights. the right to exclude. that is what we are talking about with injunctive relief. it seems to me that -- i do not see how a decision like ebay could not have some sort of an impact on the business dealings. because often, the remedies that are available really turn on who bears the burden of going forward. under ebay, the burden lies with the inventor who has already

been deemed that his or her invention has been infringed upon. now, the inventor bears the burden of showing injunctive relief should ensue. that has been a tough burden to bear. so, i do not understand how it is that the ebay decision could not have an effect on making it a lot harder for inventors to protect patents. if it is much harder to get injunctive relief. i do recognize that professor contreras -- i'm sorry. yes, contrary spirit -- yes, professor contreras. you said we don't really have a problem here. i don't see how we don't. i want to ask mr. babcock, the nonlawyer in the group, over the past decades, as far as i am

concerned, we have seen a number of efforts to weaken patent rights. i think that has been the impact of some of these laws we have enacted. i want to cite the supreme court ebay decision. the america invents act, i am one of the few people have voted against that act because i think it had a negative effect especially on small inventors to the growing number of things that are not patent eligible. for mr. babcock, what has that the weakening of patent rights meant to innovative companies like yours and at the start of sue's support. mr. babcock: thank you for the question. i want to go back to something senator tillis said and add to that. the inventions we do not see are the most important ones we are missing and it is really hard to quantify those. i think you see it showing up in

the lack of venture capital that goes into those businesses. because, venture capital, angel investors, cannot rely on patents as strong property. if venture capitalists were able to rely on patents as intellectual property they could invest in the most promising people and the most promising technologies because they could do the scientific diligence to understand if this is meaningful. the problem is, today, you can invest in great, meaningful, exciting technology but you do not know is a business person if you will ever have the ability to monetize it. it is not showing up as big of a problem as it actually is because it is hard to measure what is actually missing. sen. hirono: i tend to agree with you. what would passing this measure mean financially and symbolically if you want to think of it that way, to innovators? mr. babcock: i think it is one step in the right direction.

i think the pendulum has swung dramatically over the past 20 years. you mentioned legislation. you mention some court cases. there are also administrative changes. this would be a step in the right direction to get the pendulum swinging back towards a more moderate middle system. there is more that needs to be taken care of. i think that the ptab is particularly problematic but this would be a good starting point because it shifts the burden back to the defendants. they can still avoid injunctive outcomes. but, they have to be the ones that prove it and i think it is a fair way to put it. sen. hirono: i agree. i do not see why the infringer should not have the burden of going forward regarding whether an injunction should ensue. thank you, mr. chairman. chair coons: thank you, senator hirono. mr. babcock said time, money, and power have shifted, and i

may mischaracterize, big tech infringers. mr. landau, most of the largest technology companies are household names. apple, meta, they are members of your association. i want to hear your perspective of the impact on the restore patent rights act on members of your organization. are there any revisions to the bill that in your bill -- view could make it better. mr. landau: yes. i will start at the end of your question. at the end of my testimony i propose a revision that i think would really address a lot of the concerns you are hearing from myself and professor contreras while also strengthening providing a presumption of injunctive relief, to attach it to some form of working requirement. to say, you get the presumption if you are making a product or working with an exclusive licensee to make a product. if you are working with a start up to make a product. if you are doing something with your patent you get the presumption. otherwise, you have it as we

have it today. you can still receive an injunction, it just might be a little harder. chair coons: thank you. mr. babcock, you talked both about your company and also about mhub an incubator that supports a lot of small startups. in part of your assumption, if i understand it correctly, it is that the cost, uncertainty, and length of litigation were key barriers to pursuing injunctive relief. how important is making sure the system is balanced and injunctive relief is available. two small startups of the type that emhoff supports. -- to small startups of the type that mhub supports. mr. babcock: it's critical. when you are a small company it is unlikely you will be successful. stacking more chips against e coanies makes it less likely they can raise the money they needed to bring their innovations to market. giving them a small arrow in the quiver of competitiveness would

be essential. chair coons: you could give them a bigger arrow. mr. babcock: yes please. chair coons: some have argued the restore patent rights act does not go far enough because it establishes only a rebuttable presumption rather than a mandate that upon a finding of infringement there must be injunctive relief. what do you think of the balance the current statute, or the proposed bill, what you think of the balance it starts? does it go too far? does it go far enough? would you suggest additional changes? prof. osenga: thank you. i believe the one sentence bill is perfect. sorry. chair coons: i will record this moment. prof. osenga: for these reasons. first, the rebuttable presumption brings us back to the 200 years of history with injunctive relief being an equitable remedy. there are certain times when it does not and should not apply. a mandatory injunction would not

be in line with equity, not in line with historical practices. going forward with the ebay test, as it is, as mr. babcock says, it puts a lot of burden on the patentee to show that they deserve injunctive relief, an extra lay or. it should not be when they have already been able to prove their patent has been infringed upon. mr. landau's proposal they're going to have to show that they're the good guy, that they're doing the right things, and so 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. chair coons: professor contreras

and professor osenga, 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? prof. contrearas: 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. chair coons: professor osenga, would you disagree or agree with that characterization of the impact of kennedy's concurrence? literally no impact? prof. osenga: 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. its licensing firms, its 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. so whether they're citing it or not, i think it may have a big impact. chair coons: thank you all for your testimony. senator tillis? sen. 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 why isn't there 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 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? mr. landau: since 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 -- sen. tillis: 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 incented 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. mr. babcock: 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 inventor or as an entrepreneur, you're required to find other ways of competing. sen. tillis: ok. so, professor osenga, does that mean -- again, 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? os his suggestion? i'm just trying to understand it. i'll give you a chance to, mr. landau, take notes. prof. osenga: 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. sen. tillis: same result, different approach? prof. osenga: correct. sen. tillis: mr. contreras, and then i'll let mr. landau finish up my time. prof. contrearas: thank you, senator. i have to say, in my view, the ebay framework itself is the middle ground. it offers the balance that we need. sen. tillis: so you're in the ain't broke category. prof. contrearas: excuse me? sen. tillis: you're in the ain't broke, not broke category? prof. contrearas: 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 irreparable harm, inability to get compensated by money damages, where those factors really make a difference, and i think they work. sen. tillis: and mr. landau. mr. landau: so, 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 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. sen. tillis: 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? chair coons: yes, tomorrow. sen. tillis: 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. thank you. chair coons: senator hirono? sen. hirono: thank you. i'd like to make sure that i have clarification on this. so, this is for professor osenga. didn't ebay shift the burden of going forward to the patent holder in terms of getting an injunction? prof. osenga: yes, thank you. sen. hirono: 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. and of course that would include small inventors in particular. mr. babcock, you mentioned -- 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? mr. babcock: 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. sen. hirono: 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? mr. babcock: 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. sen. hirono: i think the availability of vc capital is very important. so, that's an added factor that

i do think we need to support a bill like this. thank you. chair coons: 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. sen. blackburn: 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, our 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. and 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? mr. babcock: yes. 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. sen. blackburn: so then talk about how the restore act would help with that type of situation. mr. babcock: yeah, so, 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 the past. sen. blackburn: yeah, 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 2000's, we were the leader in those critical and emergency technologies. and right now, we lead in just seven. of those. 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. and, mr. landau, let me ask you, why would -- in your opinion, why would the patent system be a great place to do this, to do this expediting and pushing this innovation? mr. landau: so, 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 the only, or one of the only that puts that progress as the reason rather than some other rationale. so 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. sen. blackburn: well, 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 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. sen. tillis: 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 no, 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 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. and 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. so, thank you all for your testimony. and 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 5:00 p.m. friday, january 3, so that if anyone has questions, wants to submit other information to the record, you can by january 3. thank you all. have a great holiday. meeting is adjourned. [captions copyright national cable satellite corp. 2025] [captioning performed by the national captioning institute,

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