```

[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]

          EXAMINING THE SUPREME COURT'S TC HEARTLAND DECISION

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                     COURTS, INTELLECTUAL PROPERTY,
                            AND THE INTERNET

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 13, 2017

                               __________

                           Serial No. 115-35

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, JR.,          JOHN CONYERS, JR., Michigan
  Wisconsin                           JERROLD NADLER, New York
 LAMAR SMITH, Texas                   ZOE LOFGREN, California
 STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
 DARRELL E. ISSA, California          STEVE COHEN, Tennessee
 STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, JR., 
 TRENT FRANKS, Arizona                   Georgia
 LOUIE GOHMERT, Texas                 THEODORE E. DEUTCH, Florida
 JIM JORDAN, Ohio                     LUIS V. GUTIERREZ, Illinois
 TED POE, Texas                       KAREN BASS, California
 JASON CHAFFETZ, Utah                 CEDRIC L. RICHMOND, Louisiana
 TOM MARINO, Pennsylvania             HAKEEM S. JEFFRIES, New York
 TREY GOWDY, South Carolina           DAVID CICILLINE, Rhode Island
 RAUL LABRADOR, Idaho                 ERIC SWALWELL, California
 BLAKE FARENTHOLD, Texas              TED LIEU, California
 DOUG COLLINS, Georgia                JAMIE RASKIN, Maryland
 RON DeSANTIS, Florida                PRAMILA JAYAPAL, Washington
 KEN BUCK, Colorado                   BRAD SCHNEIDER, Illinois
 JOHN RATCLIFFE, Texas
 MARTHA ROBY, Alabama
 MATT GAETZ, Florida
 MIKE JOHNSON, Louisiana
 ANDY BIGGS, Arizona
          Shelley Husband, Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel

    Subcommittee on Courts, Intellectual Property, and the Internet

                 DARRELL E. ISSA, California, Chairman
                  DOUG COLLINS, Georgia, Vice-Chairman
 LAMAR SMITH, Texas                   JERROLD NADLER, New York
 STEVE CHABOT, Ohio                   HENRY C. ``HANK'' JOHNSON, JR., 
 TRENT FRANKS, Arizona                   Georgia
 JIM JORDAN, Ohio                     THEODORE E. DEUTCH, Florida
 TED POE, Texas                       KAREN BASS, California
 JASON CHAFFETZ, Utah                 CEDRIC L. RICHMOND, Louisiana
 TOM MARINO, Pennsylvania             HAKEEM S. JEFFRIES, New York
 RAUL LABRADOR, Idaho                 ERIC SWALWELL, California
 BLAKE FARENTHOLD, Texas              TED LIEU, California
 RON DeSANTIS, Florida                BRAD SCHNEIDER, Illinois
 MATT GAETZ, Florida                  ZOE LOFGREN, California
 ANDY BIGGS, Arizona                  STEVE COHEN, Tennessee
                                      LUIS GUTIERREZ, Illinois
                             
                             
                             C O N T E N T S

                              ----------                              

                             JUNE 13, 2017
                           OPENING STATEMENTS

                                                                   Page
The Honorable Darrell Issa, California, Chairman, Subcommittee on 
  Courts, Intellectual Property, and the Internet................     1
The Honorable John Conyers, Jr., Michigan, Ranking Member, 
  Committee on the Judiciary.....................................     5
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the 
  Judiciary......................................................     4

                               WITNESSES

Mr. Steven E. Anderson, Vice President and General Counsel, 
  Culver Franchising System Inc.
    Oral Statement...............................................     7
Professor Colleen V. Chien, Santa Clara University of Law
    Oral Statement...............................................     8
Professor Adam Mossoff, Antonin Scalia Law School, George Mason 
  University
    Oral Statement...............................................    11
Mr. John Thorne, Kellogg, Hansen, Todd, Figel and Frederick, 
  P.L.L.C.
    Oral Statement...............................................    12

 
          EXAMINING THE SUPREME COURT'S TC HEARTLAND DECISION

                              ----------                              

                         TUESDAY, JUNE 13, 2017

                        House of Representatives

                  Subcommittee on Courts, Intellectual

                       Property, and the Internet

                       Committee on the Judiciary

                             Washington, DC

    The subcommittee met, pursuant to call, at 10:03 a.m., in 
Room 2141, Rayburn House Office Building, Hon. Darrell Issa 
[chairman of the subcommittee] presiding.
    Present: Representatives Issa, Goodlatte, Collins, Smith, 
Chabot, Jordan, Poe, Marino, Labrador, Farenthold, Biggs, 
Nadler, Conyers, Johnson, Jeffries, Lieu, Schneider, and 
Lofgren.
    Also Present: Representative Jackson Lee.
    Staff Present: Joe Keeley, Chief Counsel, Zack Walz, Clerk; 
and Jason Everett, Minority Counsel.
    Mr. Issa. The Subcommittee on the Courts Intellectual 
Property and the Internet will please come to order. Today's 
hearing, ``Examining the Supreme Court's Decision in TC 
Heartland Decision'' will include, but certainly not be limited 
to the main question in everyone's mind here today: Have we 
fixed a pervasive problem that has gone on for a decade? Or 
have we half-fixed a pervasive problem? Or have we, in fact, 
fixed the problem in the most innovative, industrious and, 
perhaps, amazing and expensive lawyers will circumvent it 
before we are done?
    As we speak, new cases have been filed against Apple, yes, 
in the Eastern District of Texas, and we are here today to say 
what has the Supreme Court done, and will it be enough?
    Patent trolls, in my opinion, are the scourge of the patent 
world. We have, time and time again, attempted to stop patent 
trolls while, in fact, being objected to by genuine innovators 
who feel that they will be trampled in our effort to stop the 
worst of the worst.
    Local hotel chains, restaurants, small startups, have 
spoken out against the impact of the demand letter, and the 
effect it can have on their expanding businesses and, in fact, 
an outright hold-up for extortion.
    The bigger the legal bill--excuse me. A bigger legal bill 
is not the definition of innovation. Now that the Supreme Court 
has spoken in TC Heartland case, this subcommittee will hear 
testimony about the impact of the decision and about what is 
left for Congress to do.
    As a patent holder that has been both a defendant and a 
litigant in district court, in the ITC, and at the Fed circuit, 
I understand the importance of a strong patent system with 
strong patents that are not used to send endless streams of 
demand letters. For companies with no presence in eastern 
Texas, they are probably quite happy to be able to avoid 
Marshall, Texas, its fine hotels, and its predictable outcome, 
disproportionately in favor of the plaintiff.
    The excellent research of Professor Chien shows that in the 
wake of TC Heartland, many patent cases will migrate to 
Delaware and California. No one should be able to--excuse me. 
No one should be able to set up a sham business in order to 
generate revenue in Tyler, Texas, or elsewhere.
    I remain concerned that without reform, legitimate 
businesses in the Eastern District of Texas will now face the 
patent troll problem more directly. To the extent that the 
Eastern District of Texas has benefited from patent trolls, 
they will now suffer due to them. What business will want to 
set up in--excuse me. What business will want to set up shop in 
the Eastern District of Texas if it generates venue for the 
most abusive litigation tactics? The rule of law is key to 
preserving property rights, and nowhere is this more true than 
with respect to intellectual property.
    Intellectual property has become the backbone of the last 
half of the 20th century, and without a doubt, will be the 
leading revenue generator in the 21st century. Strong and 
reliable IP protections depend on Congress getting the rules 
right to both encourage the development and production of the 
next generation of innovation, and to make sure that our lives 
are better because of it.
    The court's recent decision is a tremendous step, in my 
opinion, in the right direction. However, additional efforts to 
reign in the abuse by our Nation's--of our Nation's patent 
system will need to happen. Today, we will hear 
recommendations.
    And with that, I would ask that the ranking member be able 
to present his opening statement.
    Without objection, the gentleman is recognized.
    Mr. Nadler. I want to begin by thanking the chairman for 
saying how good on timing I am.
    Thank you, Mr. Chairman.
    Today, we consider the Supreme Court's recent decision in 
TC Heartland LLC versus Kraft Foods Group Brands LLC, a case 
which significantly narrowed the venues statute governing 
patent infringement cases. We are not here to question the 
court's analysis, but rather to examine the impact this case 
may have on patent litigation and on broader efforts to curb 
abusive lawsuits.
    TC Heartland involved the relatively arcane subject of 
venue in patent infringement cases, but its potential impact on 
innovation and on economic growth should not be underestimated. 
If, as many people expect, it limits the flood of abusive 
patent litigation, it could enable businesses across the 
country to focus their resources on developing the next great 
invention, rather than on defending against the next costly 
frivolous lawsuit.
    The issue in TC Heartland was how to define where 
corporations deem to reside and, therefore, where venue is 
proper in patent infringement cases.
    In 1957 in Fourco, the Supreme Court held that under this 
statute, a corporation resides only in the State of 
incorporation. That was the law until 1990, when the Court of 
Appeals for the Federal Circuit in VE Holding Corporation 
versus Johnson Gas Appliance Company ruled that the definition 
of corporate residence contained in the general venue statute 
which governs most civil litigation applied to patent cases as 
well. Under that definition, the corporate defendant resides 
any place in which it is subject to a court's personal 
jurisdiction for that case.
    In practice, as applied to patent cases, this meant that 
every business with the goods that entered the streams of 
commerce could be sued in nearly any jurisdiction. The VE 
Holding decision had a dramatic effect on patent litigation and 
led to significant forum shopping by plaintiffs seeking 
friendly jurisdictions for their claims.
    Most notably, the Eastern District of Texas has developed a 
cottage industry of patent litigation, with more than a third 
of all patent cases between 2014 and 2016, for example, filed 
in just that one district, despite having no natural connection 
to patent intensive industries. Many of these cases are filed 
by entities that are often referred to as patent trolls, who 
use the courts as a weapon to extract settlements from innocent 
defendants.
    In many of those cases, it does not make financial sense 
for a defendant to expend the resources necessary to litigate a 
claim all the way to trial, and it is willing to settle even a 
spurious claim.
    Many defenders of the Eastern District argue that it is a 
popular forum not because of any bias towards plaintiffs but 
because its judges have developed expertise in the complex and 
technical field of patent litigation, and because they 
administer cases efficiently, and in a less costly manner than 
elsewhere.
    Critics, however, argue that judges in the Eastern District 
are slow to act on motions to transfer venue, and that summary 
judgment motions are denied at nearly twice the rate of other 
courts, all of which puts pressure on litigants to settle, 
which is, of course, the desired outcome for a patent troll.
    The Supreme Court's decision in TC Heartland made no 
mention of the Eastern District of Texas, or of the larger 
debate regarding abuse of patent litigation. The court simply 
reaffirmed the analysis defined in the Fourco decision and 
held, once again, that in patent infringement cases, 
corporations reside only in a State of incorporation, severely 
limiting where venue is proper.
    But whether or not the court had the current policy debate 
in mind, many people believe that its decision will go a long 
way toward curbing the abuses we have seen in recent years in 
so-called patent troll litigation. On the other hand, other 
observers think the decision will only make a marginal 
difference, and instead of concentrating cases in the Eastern 
District of Texas, we will simply see those cases migrate to 
Delaware and the Northern District of California, although it 
should be noted that neither jurisdiction is known to be 
particularly welcoming to abusive litigation. More concerning 
is the possibility that patent trolls have simply adapted their 
tactics in light of the decision by shifting their focus to the 
second part of the patent venue statute, which finds proper 
venue, quote, ``where the defendant has committed acts of 
infringement and has a regular and established place of 
business,'' close quote.
    If so, large retailers and others with a national physical 
presence may continue to find themselves sued in any plaintiff 
jurisdiction where they have a location, such as the Eastern 
District of Texas.
    Courts have held that physical presence is not even 
required to satisfy this test, and this could spur much 
litigation to find the boundaries of what constitutes a regular 
and established place of business. New defendants may also be 
targeted based solely on their presence in plaintiff-friendly 
jurisdictions. Before we move forward with further efforts to 
curb abusive patent litigation, it will be important to 
understand the practical impact of TC Heartland. Will it be a 
panacea that puts patent trolls out of business? Will it simply 
force them to adjust their practices as they continue business 
as usual? Or does the answer lie somewhere in between?
    TC Heartland was decided just 3 weeks ago, and the ink is 
barely dry on the opinion, which may make it difficult to reach 
any solid conclusions today. But I hope our witnesses will help 
us think through some of the many questions this decision has 
raised.
    I look forward to their testimony, and I yield back the 
balance of my time.
    Mr. Issa. I thank the gentleman.
    Without objection, the chair may call a recess at any time.
    And with that, we recognize the chairman of the full 
committee, the gentleman from Virginia, Mr. Goodlatte.
    Chairman Goodlatte. Well, thank you, Mr. Chairman. This 
committee has regularly heard from American businesses 
nationwide about the challenges that they face due to patent 
trolling behavior. Patents of questionable quality have been 
used to drag defendants into court, and loopholes in procedural 
rules have been used to ensure that these cases are brought in 
judicial districts that are favorable to these questionable 
claims.
    For example, venue has been repeatedly found to exist based 
upon the creation of sham offices in what would appear to be 
simple warehouses with no one actually working in them. The 
Eastern District of Texas has been frequently cited by patent 
reform advocates as a judicial district that is very favorable 
to those with questionable patent claims.
    In response to these challenges, the Judiciary Committee 
held several hearings to document patent litigation abuses, and 
in 2013, I authored the bipartisan Innovation Act that was 
cosponsored by 16 of my colleagues to reign in abuses of our 
patent laws. After several discussion drafts and hearings to 
improve the legislation, the Innovation Act was passed out of 
the Judiciary Committee by a bipartisan vote of 33-to-5. The 
legislation then passed the House by an overwhelming vote of 
325-to-91.
    Since the House passage of the Innovation Act, the courts 
have also taken some action, most recently by taking up the TC 
Heartland case concerning venue. In this case, the defendant 
headquartered in Indiana was sued in Delaware, despite the fact 
the defendant was not even registered to do business in 
Delaware and had no meaningful local presence there.
    Much to the chagrin of patent trolls, the Supreme Court 
unanimously found that venue in patent cases is grounded in 
statute at 28 U.S.C. Section 1400. This means that a 
corporation resides only in the State of incorporation for 
patent venue purposes. This decision will close the door on a 
loophole that allows patent trolls to hand-pick courts that are 
favorable to them.
    This morning's hearing has a range of witnesses who have 
experienced the patent troll problem firsthand, including a 
company that is faced with reducing its presence in the Eastern 
District of Texas in order to avoid patent trolls. As its 
testimony points out, patent trolls are causing direct economic 
harm to the districts in which it operates, and also to small 
startups whose company and resources are insufficient to 
indemnify purchasers of their products.
    We also have a witness this morning who can speak to the 
expected change in filing patterns going forward, along with a 
witness who can speak to the patent world at large.
    Finally, the minority has invited a witness who believes 
the Supreme Court has gone too far. I want to thank the 
witnesses for making themselves available this morning, and I 
yield back to the chairman.
    Mr. Issa. I thank the chairman.
    We will recognize the ranking member, if he wants to be 
recognized, when he appears. He has been delayed at a 
conference.
    Without objection, all other members will be able to have 
their opening statements placed in the record.
    It is now my distinguished pleasure to introduce our panel. 
But, first, I would ask all witnesses to please rise, raise 
your right hand, to take the oath.
    Do you swear that the testimony you are about to give will 
be the truth, the whole truth, and nothing but the truth?
    Please be seated.
    Let the record indicate that all witnesses answered in the 
affirmative.
    Our witnesses today include Mr. Steven Anderson, Vice 
President and General Counsel for Culver Franchising Systems, 
Inc.; Professor Colleen Chien, Associate Professor of Law at 
Santa Clara University School of Law; Professor Adam Mossoff, 
Professor of Law at--oh, at Antonin Scalia School of Law at 
George Mason, how appropriate; and Mr. John Thorne, partner at 
Kellogg, Hansen, Todd, Figel & Frederick, and probably several 
other people no longer with us, law firm. I am sorry, that is 
not right.
    And as promised, it is now my pleasure to introduce the 
gentleman from Michigan, the ranking member of the full 
committee, for his insightful opening statement.
    Mr. Conyers.
    Mr. Conyers. Thank you, Mr. Chairman, and my colleagues, 
and distinguished witnesses, and friends assembled. Our 
Nation's economic future depends on the ability of inventors to 
innovate and create, while at the same time being able to 
efficiently and effectively protect their products.
    Accordingly, Congress must continue to ensure that we 
promote policies that will provide for a strong patent system. 
As part of our ongoing oversight on this issue, today's hearing 
provides an excellent opportunity for us to consider the impact 
of the Supreme Court's recent decision in TC Heartland versus 
Kraft Foods Group Brands on our patent system.
    In the Heartland decision, the Supreme Court unanimously 
clarified the venue rules governing patent infringement 
litigation. The court held that a corporation is deemed to 
reside only in its State of incorporation in patent 
infringement cases.
    As we consider the impact of this decision and the issue of 
abusive patent litigation, there are several factors to keep in 
mind. To begin with, one of the most effective steps we can 
take in responding to abusive patent litigation is making sure 
poor quality patents are not issued to begin with. To do that, 
patent examiners must have the resources to review and analyze 
the hundreds of thousands of complex and interrelated patent 
applications they receive every year.
    If the Patent and Trademark Office receives all of its fees 
and is protected from the unpredictability of the annual 
appropriation cycle, this will encourage innovation and ensure 
that our patent system remains the envy of the world.
    Secondly, we should examine how broad of an impact the 
Heartland decision will actually have. After the decision was 
issued, some have construed its impact as having a positive 
effect on abusive patent litigation because it, arguably, 
places tighter limits on where patent lawsuits may be filed.
    But, on the other hand, there are those, including one of 
today's witnesses, who says this decision will have a limited 
impact.
    To that end, I would appreciate the witnesses' thoughts on 
the following questions: Does TC Heartland sufficiently tighten 
the venue rules to prevent abusive patent litigation? Will this 
decision overly restrict the rights of patent owners? How will 
pending cases be affected where venue is no longer proper? And, 
finally, will plaintiffs be able to avail themselves of other 
avenues to continue forum shopping?
    In addition, we should assess how this decision will affect 
litigation in the Eastern District of Texas, which as we have 
learned from our previous hearings, has spawned a growth of 
patent litigation in that district.
    And, finally, we must take a cautious approach to any 
future legislative proposals.
    For myself, I continue to support reasonable changes to 
improve and enhance the patent system, but cannot support any 
changes, which taken as a whole, will undermine our Nation's 
patent system.
    Over the last several Congresses, we have been examining 
how to prevent abusive patent litigation generally and 
specifically with respect to the patent venue system.
    The TC Heartland case was just handed down last month. 
Clearly, additional time will be needed to assess its 
ramifications and how it will be implemented.
    I thank the chairman for holding this important hearing. I 
appreciate the witnesses for participating in this timely 
endeavor.
    Thank you.
    Mr. Issa. I thank the gentleman. We now go to our 
witnesses. Under a 5-minute rule, we have a wonderful, highly 
automated system, but to keep it simple, stay as close as you 
can to those 5 minutes. And there is extra points for those who 
come in underneath.
    Mr. Anderson.

   STATEMENTS OF STEVEN ANDERSON, VICE PRESIDENT AND GENERAL 
  COUNSEL, CULVER FRANCHISING SYSTEM, INC.; PROFESSOR COLLEEN 
    CHIEN, PROFESSOR, SANTA CLARA UNIVERSITY SCHOOL OF LAW; 
 PROFESSOR ADAM MOSSOFF, PROFESSOR, ANTONIN SCALIA LAW SCHOOL, 
  GEORGE MASON UNIVERSITY; AND JOHN THORNE, KELLOGG, HANSEN, 
               TODD, FIGEL & FREDERICK, P.L.L.C.

                  STATEMENT OF STEVEN ANDERSON

    Mr. Anderson. Subcommittee Chairman----
    Mr. Issa. Oh, and microphone on is when we start the clock. 
If we don't hear you, we won't start the clock.
    Mr. Anderson. Subcommittee Chairman Issa, Ranking Member 
Nadler, and members of this subcommittee, I am Steve Anderson, 
vice president and general counsel of Culver Franchising System 
Inc. Thank you for the opportunity to testify about the TC 
Heartland decision and the ongoing impact of abusive patent 
litigation on Culver's restaurants. My testimony, on behalf of 
Culver's today, also represents the views of the National 
Restaurant Association and the United For Patent Reform 
Coalition.
    Culver's is a family business that opened its first 
restaurant in Sauk City, Wisconsin, in 1984. Today, there are 
over--there are 624 Culver's restaurants with a total of 24,000 
employees serving customers in 24 States. All but eight of our 
Culver's restaurants are franchised, which means they are 
individually owned and operated family businesses.
    Just 2 months ago, an infringement action was filed against 
Culver's in the Eastern District of Texas. The plaintiff claims 
their patents covering the very abstract idea of sending 
promotional offers to a mobile device. The plaintiff asserts 
that its principal place of business is in Plano, Texas, but 
when we had someone visit that address just last week, they 
found nothing but one locked room office with no one there.
    As far as we can tell, plaintiff's principal place of 
business, you can see it right here, is nothing but an address 
from which to sue other companies. It is a mailbox with a door.
    This is in stark contrast to our business, which has been 
located in Wisconsin for nearly 33 years, and we have 124 
employees working there. Yet, in this suit, here we go again, 
being forced to use our time and resources to hire high-priced 
defense attorneys to defend another questionable patent 
infringement claim more than 1,000 miles away from our home 
office in a court that is known to be friendly to patent 
trolls, instead of using those resources to drive traffic to 
our franchisee's businesses.
    I know the TC Heartland decision has been touted as a cure 
to rampant venue shopping by patent assertion entities. 
Unfortunately for us, venue--the patent venue statute still 
provides that patent infringement actions may be filed in the 
State where the defendant has a regular and established place 
of business.
    For businesses that operate from bricks and mortar 
locations in multiple States such as Culver's and many other 
restaurants and retailer chains, this decision is likely to 
have no impact.
    And what is our regular and established place of business 
in the Eastern District of Texas that subjects us to this 
jurisdiction? We have three Culver's, all of which are 
franchised, located in this district. And those three 
restaurants, collectively, generate less than one-third of 1 
percent of our revenue. Despite this, we find ourselves back in 
the Eastern District of Texas.
    With the patent venue statute and the TC Heartland decision 
as they stand to date, we will continue to see venue shopping 
and patent infringement claims against us as well as other 
bricks and mortar businesses. To avoid the seemingly inevitable 
situation, Congress must act swiftly to correct the inequity in 
the patent venue statute that was not fixed by the TC Heartland 
decision.
    And while we support patent reform concerning venue, please 
know that this alone will not resolve the patent troll problem. 
I also urge you to revise patent litigation reform efforts to 
curb frivolous behavior and stiff--and shift the economic 
incentives away from patent trolls making baseless claims.
    I do, however, want to address one development that has 
been particularly useful to businesses like ours in fighting 
patent trolls; that is, the U.S. Supreme Court decision in 
Alice v. CLS Bank. The decision created a two-step framework to 
distinguish low-quality patents for abstract ideas and 
activities done simply on a computer from high-quality claims.
    In 2011, Culver's, along with dozens of other restaurants 
and retailers, was sued in the diet cola case in Eastern 
District of Texas. The plaintiff claimed that we infringed upon 
their patents simply by using an online calculator that added 
and subtracted nutritional information.
    Thankfully, due to the Alice decision, the courts found 
that the diet cola patent was drawn to patent ineligible 
subject matter and was invalid, resulting in dismissal of the 
case against Culver's and other defendants.
    The Alice decision gives Culver's a reasonable opportunity 
to defend against low-quality infringement claims before 
entering into the cost prohibitive discovery stage of 
litigation, which effectively forces a settlement.
    In closing, let me be clear about one final and important 
point, Culver's fully supports the ability of individual 
inventors and legitimate patent holders to market their 
products and bring claims to protect their intellectual 
property. But we also believe that appropriate patent 
litigation reform can continue to protect incentives for 
innovation while discouraging the exploitation and abuse that 
runs rampant in the patent system today and actually stifles 
innovation.
    Mr. Issa. Thank you.
    Mr. Anderson. Thank you once again.
    Mr. Issa. Thank you.
    Professor Chien.

                 STATEMENT OF COLLEEN V. CHIEN

    Ms. Chien. Chairman Issa, Ranking Member Nadler----
    Mr. Issa. If you could pull the microphone just a little 
closer. Thank you.
    Ms. Chien. Here we go.
    Chairman----
    Mr. Issa. And turn it on.
    Ms. Chien. Oh, yes. That would help.
    Mr. Issa. Thank you.
    Ms. Chien. On the third try.
    Chairman Issa, Ranking Member Nadler, Chairman Goodlatte, 
and Ranking Member Conyers, thank you so much for inviting me 
to testify today. I will address three issues: The likely near-
term impacts, possible long-term impacts, and opportunities and 
risks associated with the TC Heartland decision. In other 
words, what just happened? What will happen? And do we need to 
do anything about it?
    My coauthor, Professor Michael Risch of Villanova is not 
here today, but he deserves much credit for the research I will 
present. The opinions I express are solely my own.
    What just happened? The short answer is that the Supreme 
Court decided that the patent--that patent cases must be 
brought on defendants' turfs, not plaintiffs'. This is a sea 
change that will substantially curb forum shopping and impact 
every single patent case, but it is also a return to business 
as usual over the long arc of patent history. What do I mean?
    For most of the 200-plus years of the patent system, the 
rule has been that patent holders can sue only where the 
defendant inhabits or is present. This was the law of all civil 
cases for the first 100 years or so. For the next 100 years, 
civil venue changed, but patent venue stayed the same.
    But from about 1990 to about 3 weeks ago, things took a 
detour. The Federal circuit's decision flipped the rule, 
changing proper venue from defendant's turf to plaintiff's 
choice. I wanted to provide that context just so we understand 
that when the Supreme Court decided the TC Heartland decision 
it, in effect, restored the longstanding rule. That is what 
just happened.
    The honest answer to the question what will happen after TC 
Heartland is, of course, no one really knows. But the upshot is 
that all plaintiffs will have fewer options. Patent trolls 
won't be able to file as easily in the Eastern District of 
Texas or wherever they want, but neither will California 
companies or individuals from Georgia.
    Based on our number crunching, which we applied the new 
rule to about 1,000 cases, about 60 percent of patent trolls 
would need to move their cases, not all of them, but 60 
percent. But 50 percent--51 percent of operating companies 
cases would also move as well. Individuals and universities 
would have to move less than either trolls or operating 
companies we found.
    Defendants will benefit. After all, it is their turf now, 
but less uniformly. The smaller you are, the less likely you 
are to get dragged into an unfamiliar venue. That is good news 
for startups and small businesses, though it might mean going 
to Delaware instead of Texas.
    But firms that are present all over like Culver's and 
others, retailers, can still be sued all over. Foreign 
defendants will get no relief.
    What about the districts? Again, our best guess is that 
cases will be more evenly distributed, although still 
concentrated in the top three. The Eastern District will see 
hundreds fewer cases, and Delaware and districts in California 
will see many more, though not more than they have ever seen. 
We are already seeing this start to happen.
    Now, how many cases are going to move? Specifically, it is 
hard to tell, and some cases are not going to survive that. But 
so far, based on the predictions we have made and looking at 
2017 trends, things are moving in those directions.
    But beyond less forum shopping, though, we should see other 
positive impacts. That is because in my personal opinion, the 
rise of the Eastern District has stunted other parts of the 
patent system. At most Federal, the things like interparty 
review, section 101, and the Alice decision that Mr. Anderson 
referred to, and even the patent pilot program, have been 
implemented differently in the Eastern District than in the 
rest of the country.
    Lax venue has enabled parties to, in effect, select a 
different plaintiff-friendly version of the system. While 
differentiation is healthy, the districts' gamesmanship has not 
been. TC Heartland will have a positive multiplier effect, 
advancing not only patent law, but a more consistent, 
predictable, and uniformed patent system.
    What might the subcommittee do? Well, what else might 
happen is anyone's guess. The subcommittee could keep its eye 
on three things, going to the questions presented by the 
chairman and Ranking Member Conyers.
    First, we could see adaptation. Instead of going away, 
trolls may adapt their behavior. We have certainly seen this 
before with response to the joinder rules. They, in this case, 
could focus on foreign defendants and defendants with large 
footprints, like retailers and their customers. Customers' stay 
or other provisions may become more urgent.
    You also may see a move from moderation. Patent holders may 
say that a more moderate rule is appropriate, because if the 
rule before was plaintiff-friendly, then the current rule, the 
century's old rule, could be considered defendant friendly with 
equity, perhaps, lying somewhere in between.
    TC Heartland impacts all plaintiffs, but the Senate's VENUE 
Act, which we also modeled, takes a more surgical approach, 
impacting a majority of troll cases but only a minority of 
nontroll ones.
    Finally, other problems can remain unresolved or get worse. 
The best options for small defendants, while less expensive 
than litigating in Texas, still costs tens or hundreds of 
thousands of dollars, making nuisance settlements attractive.
    The small plaintiffs, likewise, who can't afford to defend 
against challenges to their patents, will have fewer options to 
sell them. Poor patent quality as well as changes to the law 
are expensive to keep up with, placing the smallest parties at 
a disadvantage. How we encourage innovation in the patent 
system through technology transfer, licensing and 
commercialization, not litigation, should remain in the 
subcommittee's view.
    I thank and commend the subcommittee for its commitment and 
attention to the proper functioning of the patent system.
    Mr. Issa. Thank you.
    Professor Mossoff.

                   STATEMENT OF ADAM MOSSOFF

    Mr. Mossoff. Chairman Issa, Ranking Member Conyers, Ranking 
Member Nadler, and members of the subcommittee, thank you for 
this opportunity to speak with you today about TC Heartland and 
its impact on the innovation economy.
    My name is Adam Mossoff, and I would like to note that I am 
speaking in my personal capacity as a law professor at Antonin 
Scalia Law School at George Mason University, and not on behalf 
of my employer or of any other organization with which I am 
affiliated.
    It is undeniable that there are a handful of bad actors in 
the patent system, just as there are in every other area of 
law. The important question is whether there is a systemic 
problem requiring legislation like the Senate's VENUE Act, or 
court decisions like TC Heartland that restrict rights for all 
patent owners, such as individual inventors, small businesses, 
universities, and even the long-established R&D intensive 
companies working in the high-tech and bio-pharmaceutical 
sectors.
    These patent owners rely upon stable and effective property 
rights to create and commercialize new technological 
innovation. Unfortunately, the impact of the TC Heartland 
decision is that it further weakens the ability of all patent 
owners to protect their property rights against infringers.
    In this context, TC Heartland is very concerning given the 
recent erosion of patent rights and many other Supreme Court 
decisions, and in legislation over the last decade that have 
consistently restricted and weakened all U.S. patent rights.
    In the U.S. Chamber of Commerce's annual ranking of 
countries' IP systems, the U.S. patent system has now slipped 
this year from its long-held rank of number 1 in the world to 
number 10. Adding TC Heartland to this mix further contributes 
to this deeply concerning decline of what was once a gold 
standard patent system. Congress should care about this, 
because this imperils our innovation economy, threatening both 
jobs and economic growth.
    The advocates for a more restrictive venue rule do not 
discuss or acknowledge the resulting costs to inventors, 
startups, small businesses, universities, and R&D intensive 
high-tech and bio-pharmaceutical companies. But like the 
economic law of supply and demand, refusing to acknowledge 
real-world costs neither negates them nor makes them go away as 
a policy concern.
    The reason why there are high costs for all patent owners 
now in seeking protection of their property rights is that TC 
Heartland, like the VENUE Act, does not change the 
concentration of patent lawsuits in a few districts. As 
Professors Chien and Risch's study show, out of 94 total 
districts, it only shifts the lawsuits from one district to 
two: from the Eastern District of Texas to the Northern 
District of California and the District of Delaware.
    The District of Delaware and Northern District of 
California are widely recognized as more friendly jurisdictions 
for defendants who are sued for patent infringement. This 
explains why the many amnesty who supported TC Heartland 
comprise mostly the same companies that have been lobbying for 
the Senate's VENUE Act.
    High-tech companies and retailers with an online presence 
who were sued in the Eastern District of Texas, they responded 
to this through lobbying and strategic litigation. They want 
these lawsuits to be in districts that are more favorable to 
them, either the classic home-court advantage for the high-tech 
companies in Silicon Valley in the Northern District of 
California, or through the higher costs imposed on plaintiffs 
from the long delays of litigation in the District of Delaware.
    This is significant for patent owners who are 
undercapitalized and are very sensitive to litigation costs. 
For example, Dallas inventor Josh Malone reports that he has 
already spent $12 million of his own money suing numerous 
defendants selling pirated knockoffs of his patent invention. 
Now, as an aside, Josh Malone meets the definition of patent 
troll that is being used today by many of--by many people in 
the patent policy debates.
    He told me last week that, quote, ``Filing suit in every 
defendant's place of incorporation will be impossible to 
afford,'' unquote, and that, quote, ``TC Heartland will be the 
nail in the coffin for any would-be inventors or startups that 
rely on patents to protect their technology,'' end quote.
    The main takeaway from TC Heartland is that it is now more 
expensive for everyday patent owners to protect their property 
right against infringers. This weakening of U.S. patent rights 
by the Supreme Court undermines the foundations of the U.S. 
innovation economy, sinking economic growth and killing jobs.
    The media is already reporting on venture capital going 
overseas to China. In an article published just 2 weeks--2 
months ago, your next cancer drug may come from China, The Wall 
Street Journal reported on R&D investment shifting to China, 
given the inability of U.S. companies to get patents on their 
bio-tech drugs. Now that the TC Heartland decision has followed 
the same pattern of these many other Supreme Court decisions 
that narrowed or eliminated outright patent rights, Congress 
should take special care not to pursue any legislation that 
would further weaken inventors' abilities to protect their 
property rights.
    There are tradeoffs in all changes to legal rules. As with 
all matters in which the innovation economy, economic growth, 
and jobs are at stake, the guiding principle for patent 
legislation ought to be, first, do no harm. Thank you.
    Mr. Issa. Thank you.
    Mr. Thorne.

                    STATEMENT OF JOHN THORNE

    Mr. Thorne. Mr. Chairman, Mr. Ranking Member, other members 
of the subcommittee, thank you for holding today's hearing.
    I am a partner at a trial firm, and I have represented both 
plaintiffs and defendants in patent cases. I have been in the 
Eastern District of Texas on both sides. Today, I am expressing 
just my own views, not the views of any clients or my law firm, 
to the extent that my law firm would have views here.
    TC Heartland will have a positive effect on U.S. patent 
litigation and, therefore, a positive effect on real 
innovation. Going forward, we will not have 40 percent of all 
patent cases filed in a single district with 1 percent of the 
U.S. population. The citizens of Marshall, Texas, currently, 
until 3 weeks ago, were 500 times more likely to serve on a 
patent jury trial than an average U.S. citizen. They are going 
to get a reprieve.
    Cases that remain in the Eastern District of Texas will now 
get more attention from the judges there who were overburdened 
by the docket. Going forward, for example, the Eastern District 
of Texas, judges might be able to reconsider their standing 
rules, which generally discourage any pretrial motions which 
will stop an unmeritorious case from going to trial.
    So to echo the chairman's opening, I guess, venue issues 
are not over. There will be important fights on two fronts: 
First, what constitutes a regular and established place of 
business; and second, when, in the interests of justice, should 
a District Court transfer to a more convenient forum?
    So just a word about TC Heartland itself as a decision. 
Professor Mossoff's testimony, written testimony, says TC 
Heartland was, quote--this is on page 1 of his testimony--``a 
result of extensive lobbying.'' Quote, ``TC Heartland arose 
from a coordinated campaign of lobbying, strategic litigation 
and public relations efforts.'' On page 3 he says, ``Heartland, 
TC Heartland, was hijacked by the campaign to weaken patent 
rights.'' Nothing in the opinion supports those statements.
    And as the ranking member said in his opening, TC Heartland 
doesn't talk about patent policy. The words ``Texas'' and 
``Marshall'' don't appear in the opinion.
    Professor Mossoff also says, ``TC Heartland is one-sided 
and unbalanced in its result.'' I think he is right there in 
the sense that all eight justices voted to bring the law back 
to what Congress had written originally. It was eight-to-zero, 
because Justice Gorsuch hadn't been appointed and confirmed 
quickly enough to be able to hear the case. But Justice Thomas' 
decision for the court cited Justice Scalia's work as further 
authority for the opinion. So if Justice Scalia were still with 
us, maybe it would have been nine-to-zero.
    So a word or two about what hasn't finished. As the ranking 
member noted at the beginning, section 1400(b), the venue 
statute, has a second half. In addition to talking about where 
the defendant resides, venue may exist, quote, ``where the 
defendant has, first, committed acts of infringement; and, 
second, has a regular and established place of business.'' I 
looked, and I could not find any modern cases interpreting the 
second half of that provision. And the reason was you could 
find venue anywhere. You didn't need to focus on the more 
exacting standard.
    So three ideas for how that ought to be interpreted by the 
courts and, perhaps, fixed by Congress if that becomes 
necessary:
    First, 1400(b) should be interpreted according to its plain 
text and ordinary meaning. So regular and established should 
not be rendered meaningless. Some places of business, maybe the 
Culver restaurants, should be considered not sufficiently 
regular or established to satisfy 1400(b), nor should courts 
ignore the term, ``place of business.'' Place is a physical 
place, it is not cyberspace.
    Second idea, this is a venue statute. So it is not about 
the court's power to reach conduct but the judgment of where 
should the courts take cases. That is about efficiency, 
convenience, and fairness.
    In most patent cases, unlike the general run of commercial 
litigation, the evidence is in the hands of the defendant. The 
location of the evidence will drive the efficiency and the 
convenience and the fairness of the case, meaning you want to 
hear the case where the product was manufactured or designed. 
So selling a product from one State to another, and having the 
product delivered shouldn't create venue. In fact, that is the 
exact conduct that TC Heartland said didn't create venue here.
    And last, and I will stop and say more maybe in response to 
questions, it is important for 1400(b) to be interpreted to 
avoid perverse incentives on business. It didn't used to matter 
where--in the TC Heartland world, it didn't matter how you 
thought about regular established business. You could be found 
any place if residence just meant personal jurisdiction's 
reach.
    But now going forward, companies are going to be faced with 
a choice, do we keep our restaurants in the Eastern District of 
Texas? Do we allow workers to work remotely in places that 
would be unfavorable forums? If the courts are not careful, the 
incentives will be against employees, against growth, against 
building things, and the correct way to look at this is where 
is the evidence necessary to have a fair and efficient trial? 
That is the proper place for venue.
    And so, just one more word, which is, I think I agree with 
the sentiments that have been expressed that it is just too 
soon following TC Heartland for Congress to intervene, but I 
would urge you to monitor this.
    And thank you, again, for the opportunity to be here.
    Mr. Issa. Thank you. And I would suspect that there may be 
less need for fast food restaurants in Marshall pretty soon 
anyway.
    With that, it is my pleasure to go to the chairman of the 
full committee for his round of questionings. The gentleman 
from Virginia is recognized, Mr. Goodlatte.
    Chairman Goodlatte. Thank you, Mr. Chairman.
    Mr. Anderson, thank you for your testimony. Can you tell 
the committee in some more detail how patent trolling 
discourages you from buying products from smaller companies and 
startups?
    Mr. Anderson. Sure. We have had four instances with patent 
trolls, which cost our company hundreds of thousands of 
dollars. As a result, we shy away from technology. Our 
customers want the use of technology. And when I say 
technology, I am talking website, social media; not high 
technology, just basic technology. But we shy away from it 
because we have been stung four times, I anticipate it will 
happen again, using things like cell phones and social media 
and website-type things. So when my marketing department comes 
to me with an idea, even though our customers want technology, 
through mobile ordering and things like that, our guests 
certainly do and our franchisees do, and we owe it to our 
franchisees, we take a step back, and we are very careful, 
because there is no way to check ahead of time before we 
engage. And when we do, we are very wary of the small provider 
who we would love to give the business to, but who can't 
indemnify us from a patent troll.
    Chairman Goodlatte. Thank you.
    Mr. Mossoff, I get your concern about what is going to 
happen with how cases are heard elsewhere around the country, 
but I can't believe you think it is acceptable for one judge to 
hear 25 percent of all the patent cases in the country, and 
they go to him not because it is a special patent court but 
because the historic results there are especially pleasing to 
one form of party in the patent cases. That is not a good 
solution, is it? The current environment?
    Mr. Mossoff. Well, thank you, chairman, because that does 
give me an opportunity to expand more upon the data that I 
actually talked about in my written testimony.
    There are--there have been a lot of allegations that the 
Eastern District of Texas was pro-patent, but if you look at 
whether there is any actual rigorous, data-driven statistical 
studies that confirm this claim, one will find them wanting. 
There is one informal study that looked at 18 cases that drew a 
conclusion from 18 cases in one year that they had a higher 
reversal rate at the Federal Circuit. But what you find, 
actually, with longer studies by--for instance, 
PricewaterhouseCoopers did a much longer study, which found 
that the Eastern District of Texas had affirmative rates 
largely in line, slightly below the rest--other districts 
throughout the rest of the country.
    So it is a little unclear, exactly, why we ended up in the 
Eastern District of Texas. I think some of the indications 
that--of why this happened may have been already raised by 
Chairman Issa in the sense that the judges, for instance, 
decided after the Supreme Court handed down the slew of what 
are known as the 101 decisions, the patentable subject matter 
decisions as to what counts as a patentable invention, they 
said, Well, we can't assess whether this covers an unpatentable 
invention until we know what the patent covers.
    Chairman Goodlatte. Let me--I have only got so much time.
    Mr. Mossoff. Okay.
    Chairman Goodlatte. Accepting your argument, then why would 
the Supreme Court decision moving these cases around the 
country necessarily be anti-patent holder?
    Mr. Mossoff. Well, as I indicated in my written testimony 
and as--as well, the--is that both the Northern District of 
California and the District of Delaware are recognized as being 
more defendant-friendly jurisdictions counter to the Eastern 
District of Texas, which is perceived, for some reason, to be 
pro-patent.
    Chairman Goodlatte. So, if we wanted to make sure that the 
cases were not forum shopped by either the plaintiffs or the 
defendants, then I think your answer would be, we shouldn't 
rest with the Supreme Court's decision; we should look beyond 
it and see what the implications are of the decision as it has 
been made, because that is now the law of the land. The 
Congress has to decide whether or not we need to do something 
further with regard to venue to make sure that there is a 
balanced approach, and that both plaintiffs and defendants feel 
like they are going to have a fair opportunity to be heard in a 
jurisdiction that has a reputation for fairness.
    Mr. Mossoff. Well, I think that the exact issue here is 
that we need to be concerned about the unintended consequences 
and the costs imposed by the innovators.
    Chairman Goodlatte. No question about it. That is why we 
are having the hearing.
    Mr. Mossoff. Yes.
    Chairman Goodlatte. But if you have some ideas on what this 
committee should do beyond the Heartland case, we would 
definitely welcome those.
    Mr. Mossoff. I would--my recommendation would be to pause, 
and to take and wait for the data on the impact of all of the 
legislation and the Supreme Court decisions of the past 10 
years, which have excessively limited, narrowed and 
consistently come out, as I mentioned, limiting or narrowing 
the patent rights of owners of patents in this country, which 
highly affects, as I say, individual startups, small 
businesses, universities, and the bio-pharmaceutical industry.
    Chairman Goodlatte. I get that, but I would just say that 
with regard to this particular venue case, I am not sure I buy 
your argument. If you are citing data that says that this court 
in eastern Texas is more balanced than the public perception 
has been, and now the question is, okay, the court has made the 
decision that has narrowed the places where plaintiffs can seek 
redress, what should we do about it? What should we do in 
response? Are we going to wait for years to see, or should we 
look at the arguments that you and others are making and decide 
what response Congress should make to a court decision, that 
Congress has the ultimate legislative authority here?
    Thank you, Mr. Chairman. I appreciate it.
    Mr. Issa. I thank you, Mr. Chairman. And I might note that 
you have pending legislation that lies somewhere between do 
nothing at all and overreact. So hopefully, that middle ground 
is coming this year.
    And with that, I recognize the ever smiling and jovial 
ranking member and former chairman of the full committee, Mr. 
Conyers.
    Mr. Conyers. Thank you, Mr. Chairman.
    Let me start off with Professor Mossoff. Can you explain, 
sir, why you believe the TC Heartland decision restricted 
patent rights for all patent owners?
    Mr. Mossoff. It impact--yes, because it changes the ability 
to file patent infringement lawsuits for all patent owners--no, 
it changed the law with respect to venue for all patent owners 
under section 1400 of the U.S. Code. And so it applies to Josh 
Malone, the Dallas-based inventor, for instance, just as much 
as it applies to other companies and individuals. And it 
applies to all universities, all startups, all small 
businesses, and the bio-pharmaceutical industry, who actually 
engages in significant litigation in the Hatch-Waxman regime, 
and this will actually make it more costly for them as well as 
a result.
    Mr. Conyers. So is legislation still necessary, in your 
view, to make the venue statute more fair to patent holders?
    Mr. Mossoff. I believe that the legislation is necessary to 
balance out the patent system in what has become an unbalanced 
and biased system against patent owners. We need to have broad-
ranging, balanced system to promote innovation.
    And as I mentioned, a significant number of decisions from 
the U.S. Supreme Court, both on what counts as a patentable 
invention, how you license patent inventions, how you litigate, 
and what remedies you give have consistently come out in favor 
of defendants and accused infringers and not in favor of patent 
owners, and this has led to the situation that I mentioned in 
my opening remarks how we have now slipped from number 1 to 
number 10th in the world in U.S. Chamber's famous ranking of IP 
systems.
    Mr. Conyers. And why do you believe that the Heartland 
decision will impose higher costs on all innovators?
    Mr. Mossoff. So, for instance, Josh Malone, to come back to 
my individual inventor who I would recommend and commend as a 
witness, perhaps, to understand the impact of potential future 
legislation and the TC Heartland decision, now has to file suit 
in Delaware and/or in the Northern District of California where 
the--where the defendants would be incorporated. And he can't 
file suit in Texas, where he is based and where they may or may 
not be doing business under what is a highly variable and 
unsettled definition of regular and established business in the 
case law.
    So he--so unlike before, he now has to hire counsel in 
Delaware to represent him, and he has to travel to Delaware, 
and the same as hiring counsel in California. So this just 
imposes an additional cost on top of the $12 million that he 
has already spent to defend his patents, even in Texas.
    Mr. Conyers. Okay. Very good.
    Mr. Thorne, what questions are unresolved, in your view, 
after the Heartland decision? Do you think that how to 
determine venue for foreign corporations, including those in--
those with U.S. subsidiaries remains unresolved?
    Mr. Thorne. Thank you for that question. Foreign defendants 
currently can be sued wherever they can be found, and that may 
be clear, and it may require additional clarification. We will 
have to see on that. But the most important unresolved 
question, though, is one you touched on in your opening 
remarks, which is, what should count as a regular and 
established place of business?
    And the courts are going to work that out in--at the 
District Court level, I hope, in the next few weeks and months, 
and we will probably see from the Federal Circuit in the next 
year to 2 years what the Federal Circuit thinks on that issue.
    My experience is that in patent cases, the defendants, or 
the defendant's supplier, tends to have the evidence that is 
necessary to determine whether there is an infringement. And 
the most efficient way to make that determination is filing 
someplace you can get that evidence. And the plaintiff's side 
of it is important too, but it is typically right that a 
plaintiff's side of the case has been submitted to the patent 
office with the application. The patent itself describes what 
the patent covers, and it has the prior art that the inventor 
had. So the plaintiff has less to do and in the case of a non-
practicing entity, there may be a door with a number on it like 
what you saw in the picture, but not much more. The NPEs, the 
non-practicing entities, don't have much evidence to bring to 
bear. So their location matters less to the efficient, fair 
resolution.
    Mr. Conyers. Thank you.
    Squeezing one in for Professor Chien. In your testimony, 
ma'am, you noted that no one really knows what will happen 
after the Heartland case. Do you believe that all plaintiffs 
will have fewer options for where to file?
    Ms. Chien. Yes. Thank you for the question, Mr. Conyers.
    The decision essentially goes from being a rule where 
plaintiffs could file anywhere they want to now having to file 
on defendant's turf. So that will mean fewer options for all 
plaintiffs.
    However, against certain defendants, they are still going 
to have a lot of options. So if you are a retailer, and you 
have places of business everywhere, which is what we want to 
encourage, and we want to encourage employment in every 
district, that also subjects you to jurisdiction in all these 
different places. If you are foreign, that is the case. But if 
you are small, you don't have very many places of business. You 
will likely be sued only in your own areas, and near your 
headquarters.
    Mr. Conyers. Thank you so much.
    Thank you, Mr. Chairman.
    Mr. Issa. Thank you, Mr. Ranking Member.
    With that, we go to the gentleman from Pennsylvania, Mr. 
Marino.
    Mr. Marino. Chairman, may I reserve at this point?
    Mr. Issa. Absolutely.
    We--the gentleman from another part of Texas, then, Mr. 
Farenthold.
    Mr. Farenthold. Thank you very much. And I don't represent 
the Eastern District of Texas. I would rather be----
    Mr. Issa. And I want to thank you for that.
    Mr. Farenthold. All right. I do have a couple of questions.
    Mr. Mossoff, you indicated that the studies showed that, 
actually, the Eastern District of Texas reversal rate was only 
substantially--was only slightly higher than other districts 
over a longer term. Is that correct?
    Mr. Mossoff. It was framed in terms of affirmance rates 
from PricewaterhouseCooper's. It was--the affirmance rate was 
slightly less than other districts, yes.
    Mr. Farenthold. All right. So based on the number of patent 
cases that are heard there, it would seem like that court would 
have developed a level of expertise where they wouldn't be 
being reversed as often. How would you explain that other than, 
perhaps, they are a little more plaintiff-friendly?
    Mr. Mossoff. It is--from what I understand, and I have not 
gone into the details behind the PricewaterhouseCooper's number 
and methodology. It is a statistically relatively insignificant 
difference. So it is not something that you can draw any 
systemic inference about--about a--as an institutional matter 
or practice.
    Mr. Farenthold. And the chairman asked Mr. Anderson about 
the impact on startups. I would like to ask a similar question 
to Ms. Chien.
    What effect does the NPE problem or issue, depending on how 
you look at it, what effect do you see that having on startups?
    Ms. Chien. So there are a number of different ways in which 
it is harder in the system if you are a little guy. If you are 
a defendant and faced with a suit, then that is something that 
ends up taking up a lot of your time, a lot of your management, 
attention. And essentially, when startups are young, they are 
very fragile. So any sort of disruption like this can be very 
devastating. So in a survey that I did in 2012 and 2013, 
several surveys, I was surprised to see that startups said that 
they would make huge changes in response to getting a letter. 
And it is not dissimilar to what Mr. Anderson talked about, 
pivoting the products, changing the course of the business, 
delaying hiring, and making substantial changes in order to pay 
for and deal with litigation.
    And in that light, you can see why settlement is very 
attractive. Using settlements of below 10,000, you know, are 
something that are still happening.
    And so, I want to actually take this opportunity to address 
the questions that were asked earlier about whether or not the 
Eastern District, in fact, is more favorable to plaintiffs. And 
Professor Mossoff is correct that the rates in terms of 
reversals and affirmances may not show a huge spread, but what 
we found--and this is detailed in my paper with Professor 
Risch--is that there is this perception of more friendliness 
based on the favorable ways and procedures that the district 
takes out.
    So the substantive law is not different, but the procedures 
are different. So you won't get your 101 motion heard in a 
timely matter, the relief that Mr. Anderson talked about. You 
won't get your case stayed for the patent office to revisit its 
validity.
    So if you look at the report actually done on a totally 
separate topic, the patent pilot program, last year at its 5-
year mark, they mention all the ways in which litigating in the 
Eastern District is different. Only 1 percent of eastern 
district cases reach a judgment as compared to 7 percent 
nationwide because people are looking for these quick 
settlements. If I am a startup, I am not going to want to go 
ahead and spend my time litigating this case all the way, and 
then get it appealed.
    Mr. Farenthold. Startups work at warped speed. I 
understand. I have got one more question for you, and I am 
running out of time. I don't mean to cut you short. I saw some 
of that data in your written material, so.
    Mr. Farenthold. Over the past several years, the Judiciary 
Committee has examined the rise in venue abuse, not within the 
district courts, but also the rise of the ITC as an alternative 
forum for these types of disputes. I have introduced 
legislation, along with Congressman Cardenas, called the Trade 
Protection Not Troll Protection Act, which basically deals with 
the ITC jurisdiction.
    Do you see TC Heartland increasing or decreasing ITC 
litigation as forum shopping, and what do you see happening 
there?
    Ms. Chien. That is a great question. I think we will have 
to keep our eye on that. But I will say that one development 
that has been interesting is thinking about the different 
options that the committee and Congress have created through 
inter partes review, the ITC, the district court, and the 
different options there, now you see a lot of folks electing 
into using inter partes review at the PTO. So some of the 
competition, I think, that has been created through that new 
procedure has migrated traffic towards there and perhaps away 
from the ITC to some degree.
    Mr. Thorne. May I add a word to that?
    Mr. Farenthold. My time has expired. With the chairman's 
indulgence, I will be happy to let Mr. Thorne answer.
    Mr. Issa. The gentlemen certainly may answer.
    Mr. Thorne. I have seen in the past 3 weeks patent 
plaintiffs looking at the ITC as an alternative to the Eastern 
District of Texas and also Germany. There is a chance that 
Germany may also become one of the next forums of choice.
    Mr. Farenthold. Thank you very much. My time has expired.
    Mr. Issa. We go to the gentlemen from New York, the ranking 
member of the subcommittee, Mr. Nadler.
    Mr. Nadler. Thank you very much, Mr. Chairman.
    Mr. Anderson, press reports immediately after the decision 
labeled it a clear victory over patent trolls and declared that 
it would be a death knell for patent litigation in the Eastern 
District of Texas.
    Your testimony indicates that, for many brick-and-mortar 
businesses with locations in the Eastern District, it may 
continue to be business as usual. Is there a danger that we 
will see two classes of defendants, those of proper venue in 
Texas and those without? Will we see new classes of defendants 
facing litigation merely because venue is proper against them 
in plaintiff-friendly jurisdictions?
    Mr. Anderson. Well, I am not sure I understand the 
question. I am certainly concerned, from our standpoint, in any 
bricks-and-mortar businesses that have any presence in the 
Eastern District of Texas. And I do--the decision may be good 
for Internet businesses and businesses that don't have physical 
presence, but bricks-and-mortar businesses, I don't see any 
change. It all comes down to, from my understanding, the 
regular established place of business and the lack of the 
definition----
    Mr. Nadler. Your answer is essentially yes. And now you 
urge Congress to pass legislation to correct this inequity that 
you identified, whereby only certain types of defendants will 
benefit from TC Heartland, internet and so forth. Do you have a 
specific proposal in mind?
    Mr. Anderson. I don't have a specific proposal, but if we--
one thing is if we defined regular and established place of 
business--we saw a picture of where, what we believe, is our 
regular and established place of business, and that is where I 
go to everyday when I am not here. And if we were to define 
that more narrowly versus any of our 624 restaurants are 
located, which promotes venue shopping, and retailers and 
bricks-and-mortar businesses are all going to be in the same 
situation as we are.
    Mr. Nadler. Thank you.
    Ms. Chien--Professor Chien, your study suggested that a 
substantial number of cases that are currently filed in Texas 
would simply move to Delaware and the Northern District of 
California. I have two questions for you on this.
    One, the second part of this statute, which was quoted by 
Mr. Thorne, I think, finds proper venue where the defendant has 
committed acts of infringement and has a regular and 
established place of business, closed quote. Why will that 
prevent forum shopping into the Eastern District of Texas? Why 
won't--can't they simply rely on that language and keep doing 
business as usual?
    Ms. Chien. So I think the answer that Mr. Anderson gave 
earlier is that some companies--for some companies and 
defendants, the answer is yes, they will still be able to be 
sued in the Eastern District. But for many--under what we 
looked at, when we looked for where they were incorporated, 
where they had established places of business, it was primarily 
in other locations. So, for those defendants, they won't be 
seeing cases in the same place.
    Now, they will still have to travel, if they are not based 
in Delaware, to Delaware, but the Delaware court does not have 
the same plaintiff-friendly procedure, so they can expect to 
get a more fair outcome.
    Mr. Nadler. So what you are really suggesting is that we 
will now have three districts: Eastern District of Texas for 
some, the Delaware for some, and northern California for some. 
Now, if cases being--end up being concentrated in three 
districts rather than just one, will this decision be 
considered a success in curbing abusive litigation? Or are the 
judges in two of those jurisdictions likely to approach patent 
cases in a--well, you have already stated that they are likely 
to approach cases in a meaningfully different way than in 
Texas. But are we likely to end up being in three districts 
rather than just one, with some of them getting the advantage 
of being in the other two districts?
    Ms. Chien. Well, that is one thing to consider, which is 
dynamic effects. Certain cases are not going to survive the 
transfer. They only made sense when they were filed in Texas 
and you could get a certain amount of settlement just from the 
threat of being there.
    Second of all, though, you will see then the sort of 
dispersion--yes, still a high concentration within the three 
districts, but what you will see is cases that are based more 
on the merits and less on where you were able to get venue. And 
so I think that is a healthy outcome, even if there still is 
concentration in the top three.
    Mr. Nadler. Thank you.
    Mr. Thorne, your testimony describes many of the reasons 
that plaintiffs favor the Eastern District of Texas and the 
reasons defendants may find it unfair.
    Setting aside this particular jurisdiction, however, is 
there a value in concentrating patent cases in one or a limited 
number of jurisdictions? Given the complex and technical nature 
of these cases, should Congress consider selecting certain 
courts to hear all patent cases or consider encouraging more 
cases to be filed with courts participating in the Patent-Pilot 
program?
    Mr. Thorne. So I am a big fan of the Patent-Pilot program. 
I think that is a great idea. That is in 13 different district 
courts. As a general rule, not just for patent cases but for 
all sorts of cases, you have got a concentration of power to 
make the laws; that happens here. The application, if possible, 
ought to be dispersed. Dispersal is better; it is healthier.
    Mr. Nadler. Why?
    Mr. Thorne. Because different judges will have different 
experiences. And in the case of patents where--I really do 
think it is where the evidence is that makes the case most 
efficient. The evidence is going to be where the companies 
decide to build their products. So that will be dispersed. By 
the way, I don't agree that all the cases are going to the 
Northern District of California and Delaware. The most prolific 
patent filer--I cited this in my testimony--in the last couple 
weeks filed five cases in Illinois.
    Mr. Nadler. Four districts. Thank you very much. My time 
has expired.
    Mr. Issa. I thank the gentleman.
    We now go to the gentleman from Arizona, Mr. Biggs.
    Mr. Biggs. Thanks, Mr. Chairman.
    Mr. Thorne, in your testimony, you conclude by saying that 
maybe Congress should not do anything at this time, and yet you 
talked about 1400(b), and it needs to be accurately interpreted 
and particularly with the clause regular and established. Tell 
me if Congress maybe should weigh in on that and expand the 
definition for some kind of predictability.
    Mr. Thorne. My advice is to give it a little bit of time. 
Even Professor Mossoff, in his letter to Congress a year ago, 
suggested on the topic of venue, give it a little bit of time. 
I think if Congress has to weigh in, you will be able to better 
tailor whatever is needed.
    Mr. Biggs. Thanks.
    Mr. Anderson, back to you. This gets to what the gentleman 
from New York, Mr. Nadler, was talking about, I think when he 
said two types of plaintiffs really or defendants; you have a 
two-tier system basically where you have those who have brick-
and-mortar and places of business where you can identify, like 
in your instance, three actual Culver's in the Eastern District 
of Texas versus cyberspace. Do you have any language or what do 
you think is the sweet spot there? How do you resolve the 
difference in those two types of litigants?
    Mr. Anderson. Professor Thorne talked about it a little in 
his paper as well. The venue statute for patents is different 
than venue in the nonpatent arena. And in the nonpatent arena, 
you are looking for efficiency and convenience and fairness, 
because the patent statute talks about the regular and 
established place of business.
    I would like to see the patent statute for venue read more 
like other cases. And, again, Mr. Thorne has summed it up 
pretty well. So you will be where the evidence--where the 
witnesses are and be more like a regular case.
    Mr. Biggs. And, Professor Chien, when you--in your 
statement, you were talking about this is a return to business 
as usual over the long arc of patent history, and you explained 
that. What do you say to businesses like Culver's or defendants 
like Culver's?
    Ms. Chien. I personally don't believe that they should be 
dealing with patent litigation assertions. They are a retail 
business. They are selling products. They are supporting their 
franchisees. They are adopting technology, but they are not on 
the cutting edge of developing it. So I don't think they should 
be dealing with suits in the Eastern District or in Wisconsin.
    And the question is, how do we get the market and the law 
to get us to that result, and part of it is the question of 
making sure that people that they work with are providing the 
protections, that suits are properly against the maker of the 
technology, and that there are customer stays. So, even though 
we have gotten back to the old established rule, I think 
adapting to the business model and making sure that we are 
aligned with--making sure that businesses like theirs can focus 
on what they are good at, pushing out a product, developing and 
pleasing customers, and not involving patent litigation, that 
is where we need to be moving.
    Mr. Biggs. So what is your remedy for--what is Congress' 
role in that remedy, because you propose something remedial, so 
what would Congress' role be in that?
    Ms. Chien. Well, I think we need to take a look at what is 
going to be happening now as the case law has carried itself 
out and the decisions the companies are making and stay in 
close touch with these businesses to figure out, again, how to 
come up with a solution.
    So I really commend the committee for paying attention--and 
continue to pay attention to these issues. I think we need to 
still see how things are going to settle after this case 
develops and then see if intervention perhaps laser focused on 
customer stays or other interventions will still be 
appropriate.
    Mr. Biggs. And then, Professor Mossoff, I am just curious 
about your testimony. And where do we find the sweet spot in 
protecting patent holders and also protecting against frivolous 
lawsuits?
    Mr. Mossoff. Thank you for that question, Congressman, 
because that allows me to get to I think a really important 
point, which is that you don't have any actual rigorous studies 
that follow standardized norms and statistical analysis that 
have concluded anything about widespread systemic abusive 
patent litigation. So no studies on that.
    Moreover, the debate and the discussion, even about the 
Eastern District of Texas, is just as much about patent 
litigation more generally, is really infected with a lot of 
just rhetorical epithets, like the term troll. Everyone thinks 
of troll as a bad person, but when you look at the definitions 
of what people include under those terms, such as the 
definition used by Unified Patents used in Professor Chien and 
Risch's paper and used by Professor Chien in other papers, it 
includes individual inventors, it includes startups who have 
patents, it includes small businesses, it includes 
manufacturers actually who sometimes license, it includes 
licensing companies: long established drivers of innovation in 
this country. And this is exactly licensing, not manufacturing, 
is a key component of what has been the success of the U.S. 
patent system in driving our innovation economy for well over 
200 years. This has repeatedly been shown by economists and 
historians, that the licensing activity in secondary markets 
and patents was fundamental in the 19th century and the 20th 
century. It was used by Thomas Edison and Nikola Tesla and 
others. So these are the people that we are condemning as 
trolls.
    Mr. Biggs. I hate to cut you off, but we are out of time. 
But I am still looking for that answer of where the sweet spot 
really is between the two ends of the spectrum there.
    Mr. Issa. I thank the gentleman. I lived a long time; I 
never thought I would hear Edison called a troll in a hearing 
before Congress.
    With that, we go to the gentleman from Georgia, Mr. 
Johnson.
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Thorne, you state in your testimony that you have, over 
your 30-year-plus legal career, represented parties in more 
than 100 patent disputes, both on the side of the patent holder 
and on the side of the accused infringer. Is it fair to 
conclude that most of your cases have involved your 
representation of accused infringers?
    Mr. Thorne. I actually have not counted. Some of my 
favorite cases were on the plaintiff's side. We brought a 
case----
    Mr. Johnson. I am just----
    Mr. Thorne. In Virginia. And then we got an injunction to 
shut down Vonage.
    Mr. Johnson. I know that there have been cases on both 
sides, but my question is whether or not most of your cases 
have involved representing accused infringers. Isn't that 
correct?
    Mr. Thorne. As I said, I have not counted the number. 
Again, I think I was the first to bring a large commercial 
lawsuit in the Eastern District of Texas.
    Mr. Johnson. I don't think you want to answer that 
question.
    Let me move on to Professor Mossoff. But before I go to 
Professor Mossoff, he states in his testimony, Mr. Thorne, that 
TC Heartland is just one case in a--what he calls, quote, 
pattern of incremental erosion of patent rights by the U.S. 
Supreme Court and the Congress which imperils our innovation 
economy and contributes to the decline of what was once a gold 
standard or gold-standard-plated system in the United States, 
end quote.
    Do you take issue with that?
    Mr. Thorne. Mr. Johnson, I do. Two examples. One is in the 
Eye for Eye Microsoft case, the Supreme Court decided that 
unlike all other property rights cases, which are decided based 
on a preponderance of the evidence, in the patent system, there 
would be a higher burden of proof to invalidate a patent, in 
Eye for Eye. And that was not withstanding something like $3 
trillion of companies urging that the normal burden of proof--
and more recently in the Halo case----
    Mr. Johnson. Well, I don't want you to give me a 
background. I just want to you answer my question.
    Let me ask Professor Mossoff--and I am sorry for 
interrupting, but my time is limited.
    Professor Mossoff, what do you mean when you say that the 
TC Heartland case is just one step in an incremental erosion of 
patent rights and the impact that that has on our patent system 
in this country and our ability to be competitive as a country?
    Mr. Mossoff. Thank you, Congressman, for the question. And 
the United States Supreme Court has been engaging with the 
patent system in terms of hearing cases at a rate that we have 
not seen for well over a century. And a substantial majority of 
those decisions, contrary to a couple of cases identified by 
Mr. Thorne, have come out in terms of weakening, eliminating, 
or narrowing patent rights, whether you are talking about 
making it harder to get injunctions on eBay, harder to license 
and engage with commercialization through MedImmune, through 
Quanta, and the recent decision in Impression Products, whether 
you are talking about the four cases that have substantially 
restricted the ability to obtain actual patents on innovation, 
and the statistics continually are showing more and more that 
this is a rising concern for the innovators who are driving 
this country, the inventors and the heavy R&D-intensive 
companies that produce patented innovation. Just to take a 
quick moment as an example to show, if I may, that we--I have a 
paper coming out this month of--where we talk about 1,700 
patent applications on the same invention.
    Patent applications were filed in China, in the European 
Union, and the United States. All 1,700 patent applications 
were granted in China and the European Union, and they were 
denied in the United States for being unpatentable inventions 
under the new Supreme Court rulings, the four cases that 
address the 101 issue, patent eligibility. These are inventions 
on radical diagnostic methods for treating cancer, diabetes, 
and whatnot.
    So we repeatedly have seen this, that inventors are going 
overseas now and obtaining patents in other countries, such as 
China and Europe. And if that is the case, that is where their 
venture capital funding will go; that is where businesses will 
be set up, and manufacturing and licensing will occur, and they 
will benefit from that with their economic growth and their 
innovation economies, just like the United States did with 
stable and effective property rights and innovation for a very 
long--for the first 200 years of this country.
    Mr. Johnson. Thank you.
    I yield back.
    Mr. Issa. Thank you.
    I will now note that I have now heard that China is the 
country where we are going to base the high mark of patent 
tolerance on.
    Mr. Thorne, you had something that you wanted to complete, 
and I will give you time to complete it if you can be brief.
    Mr. Thorne. I will be very brief. The other case recently 
that I wanted to mention that came out in favor of stronger 
patent enforcement is the Halo case, which gave district courts 
more discretion to award enhanced damages than the Federal 
circuit had previously allowed. So it is not correct, as 
Professor Mossoff says, that the Supreme Court has been biased 
in favor of infringers. I think they are biased in favor of 
reading the statutes that Congress has passed. And to the 
extent there is any leeway in the statutes, they are biased, 
just like we are, in favor of innovation.
    Mr. Issa. Thank you.
    The gentleman from Texas, Mr. Poe.
    Mr. Poe. I thank the chairman.
    Thank you all for being here.
    In my other life, I was a judge in Texas for 22 years, and 
I tried felony cases--only felony cases, everything from 
stealing to killing and everything in between. So I understand 
the concept of having a specialized court, for example.
    When I first got elected, I represented Jefferson County, 
Texas, where the Eastern District of Texas holds court from 
time to time. You go through Jefferson County, Port Arthur-
Beaumont, and you see everywhere billboards for attorneys, for 
patent attorneys, for plaintiffs' attorneys, torts attorneys. 
Any type of lawyer, there are billboards there. And there are 
storefronts with, in my opinion, very little activity, but it 
is a storefront for lawyers.
    After redistricting took place, the powers that be 
redistricted me out of Jefferson County and sent me to the 
Houston area. I don't think that is because of the plaintiffs' 
lawyers in the county, but anyway.
    Mr. Anderson, you represent Culver's. There is a Culver's 
down the street from me. And listening to y'all's testimony 
just makes me wonder whether the Reuben sandwich, which is 
great, happens to pass just through my county and goes on to 
some other county, does that give jurisdiction or venue, 
rather, because the sandwich happened to pass through the 
county that I am in? It is a difficult question. And it 
concerns me that--this whole issue concerns me.
    We have a lot of issues, but the bottom line is Congress 
many times passes legislation and makes the matter worse, not 
better. I think we have done that. I am not saying we have done 
it here, but we have the courts that have ruled, and we follow 
the courts' rulings. And the question is, should we just not do 
anything and let the courts figure it all out down the road, or 
should we set a standard and try to make the issue better and 
resolve the problems that have been mentioned here by all of 
you all, or stay out of it?
    So I will ask the two professors that question. Should 
Congress get involved and make a standard on this issue?
    Mr. Mossoff. Thank you for the question, Congressman. I 
believe it is always dangerous to ask professors what should--
--
    Mr. Poe. I know, because you all are always asking the 
questions. When I was in law school, I wasn't prepared enough; 
I admit that. So I am just asking you the question now.
    Mr. Mossoff. I mean--Congress should set and has set 
historically the standards in enacting the legislation. And in 
your example that you gave, I don't believe it would fall even 
under the second prong of section 1400(b), because it says, 
where the acts of infringement occurred and where you have a 
regular and established place of business. So a single sandwich 
passing through a district could not be the basis.
    Mr. Poe. Would a single burger--would a single Culver's in 
the district be enough?
    Mr. Mossoff. You know, this is one of the issues, I 
believe, why, in VE Holding, the Federal circuit went with the 
standards set forth in 1391 was precisely because of the 
competing definitions in the case law and the lack of certainty 
in the case law at the time about what counted as regular and 
established place of business.
    But the ongoing introduction of bills over the past 5 or 6 
years, combined with the impact--the substantial majority of 
the Supreme Court decisions that I have highlighted in my past 
answers has created a lot of uncertainty for patent owners who 
do not have stable and effective property rights in innovation 
right now.
    Mr. Poe. So you think we should get involved and make it 
clearer?
    Mr. Mossoff. Well, if Congress gets involved, it should 
also address the pressing areas concerned in 101, and it should 
address other areas or pressing concerns, such as remedies and 
damages, among others, yes.
    Mr. Poe. Okay.
    Ms. Chien. I would say, in this case, we should still 
continue talking to constituents and seeing how this is 
affecting their business. That is the bottom line. And so what 
professors say from the view--the high up and can kind of see 
the cases, that is one perspective, but really talking to 
constituents and figuring out what impact they are seeing on 
the ground, again, as I had mentioned before, adaptations, as 
trolls change their business models, or some patent holders not 
being able to bring their suits anymore; these are the folks 
that we are going to have to be consulting with.
    So I think there is certainly a service in having the 
hearings because this helps the judiciary understand what is 
actually happening as well on the ground and then adapting 
their case law. I think in terms of the back and forth, you see 
a lot of issues that have been surfaced here taken on by the 
courts, and so I think that is a healthy dynamic.
    Mr. Poe. Thank you all for being here.
    Thank you, Mr. Chairman. I will yield back the rest of my 
time.
    Mr. Issa. The gentleman is very generous with the rest of 
his time.
    We now go to the gentleman from Brooklyn, New York, Mr. 
Jeffries.
    Mr. Jeffries. Thank you, Mr. Chairman.
    And I thank the witnesses for your presence here today.
    Mr. Anderson, in your testimony, you mentioned that you are 
at a disadvantage in being able to, I think, anticipate, plan, 
and react to the demands of patent trolls. Is that right?
    Mr. Anderson. That is correct.
    Mr. Jeffries. And would the disadvantage be anchored in the 
fact, in your view, that you represent a brick-and-mortar 
business?
    Mr. Anderson. The disadvantage is that we are not 
intentionally playing in an intellectual property and patent 
troll arena. We have been hit with patent troll demands for 
things such as using hyperlinks in emails, something everybody 
does. And we have been told that is a violation of the patent. 
We also have been hit with a patent troll demand that says 
having time content in something we send out, ``Get your 
ButterBurger today,'' violates a patent because we used the 
word ``today,'' or we say, ``The deal is good until 3 
o'clock.'' We have no idea how to compete with that.
    So I mentioned earlier, our marketing department, we are up 
in arms because we know we are going to be sued no matter what 
we do. So that is a real disadvantage to us.
    Mr. Jeffries. Now, you testified that addressing the patent 
troll problem will, in your view, require shifting the economic 
incentives away from advancing baseless claims. Is that right?
    Mr. Anderson. That is correct.
    Mr. Jeffries. And are you familiar with the Supreme Court 
decision in Octane Fitness that lowered the bar for attorneys' 
fees to prevailing parties in patent litigation?
    Mr. Anderson. I am not.
    Mr. Jeffries. Okay. Well, in Octane Fitness, pursuant to, I 
believe, section 285, the Supreme Court indicated that the 
standard for awarding attorneys' fees that had been applied 
actually was too rigorous in terms of prevailing defendants in 
patent litigations and, as a result, I believe has opened up 
the opportunity for additional attorneys' fees to be awarded in 
patent litigation cases.
    I don't know. Professor Chien, can you speak to that issue?
    Ms. Chien. Yes. I think this is a promising development 
that, in a case where you feel like the patent assertion was 
brought against you baselessly, then you could try to recover 
your fees. But, in practice, it is a lot more difficult to 
actually count on that reimbursement at the bottom line at the 
end of the suit, first, because the Supreme Court can only go 
as far as the statute does. It doesn't enforce or make shifting 
automatic; it is still in the discretion of the Court for the 
more egregious cases.
    Second of all, to actually withstand a whole litigation, go 
all the way, and then finally try to get a motion for fees 
together is still a lot of stress and distraction for 
companies. They would rather just settle in most cases. I don't 
think that that set of Court decisions has necessarily shifted 
the balance substantially.
    Mr. Jeffries. To the extent that you think there is room 
for reform, would you say that it would be anchored in the 
discovery area and the high cost of discovery in patent 
litigations, which seems to be uniquely prohibitive in some 
instances?
    Ms. Chien. I think, in a lot of cases, that is very 
daunting. So a company will get involved--a defendant in a case 
and say, ``We are pretty sure we don't infringe this, or ``The 
patent isn't valid,'' but once they get to the discovery phase 
and get a six or seven figure estimate for how much it is going 
to cost, it is clearly a settlement discussion.
    So I have seen the congressional proposals around 
streamlined discovery and have seen those as being very 
productive. What I think, though, has also given relief to 
parties aside from discovery reform is sort of having these--if 
the patent is clearly not valid under Alice, now being able to 
bring these one on one motions that we have talked about, and 
now the Eastern District of Texas not being as popular, more 
courts, given that, there will be relief as well.
    Mr. Jeffries. Professor Mossoff, do you think that there is 
room to do anything to make sure that we strike the right 
balance between a robust patent litigation system that is not 
abused but that does allow small inventors and tech 
entrepreneurs and startups to vindicate any rights that may be 
infringed?
    Mr. Mossoff. Thank you for that question, Congressman, 
because I think the best thing that Congress can do is to 
stabilize and sit back and, in fact, either try to have 
balanced legislation, not the entirely one-sided legislation 
that continually looks at so-called abuses by patent owners, 
but recognizes abuses and costs on both sides of the equation.
    But I would also like to just, if I may, answer your 
question about the attorneys' fees because, actually, we do 
have the data after the Octane Fitness decision, and motions 
for attorneys' fees dramatically went up and so did the awards. 
And rightly so. Because this is traditionally and historically 
exactly what the court should be allowed to do, they control 
their own docket. This is classic Article III power. And so 
that is what--and that is what they have been doing now.
    Mr. Jeffries. Thank you. If the chairman would indulge one 
final question. You made the point that this venue decision may 
simply just result in continued concentration of cases, perhaps 
from the Eastern District of Texas, where currently you see a 
high concentration of these actions brought to the Northern 
District of California and the District of Delaware, and you 
expressed concern with that. But I am just wondering, do you 
have any empirical evidence--I didn't see any in your 
testimony--that a shift to those two jurisdictions would 
actually result in changes in substantive decisions that are 
made as opposed to your concern with Delaware, for instance, 
that the docket may simply be overwhelmed?
    Mr. Mossoff. Congressman, that is a great question, because 
it gets at the exact issue, because when you are talking about 
these issues about, is it bad, the question is always, as 
compared to what? And we don't have any indications 
substantively that the decisions in the Eastern District of 
Texas are bad as compared to what or good as compared to what.
    All we know through Professor Chien and Professor Risch's 
study is that if continued litigation practices remain the 
same, that you will see the shift. But the assertion is always 
concentration is bad for the system, as Chien and Risch said in 
an op-ed about a year ago. But why is concentration bad for the 
system, especially when you are talking about 94 districts 
shifting from 1 to 2 districts, it isn't a change in 
concentration; that is a shift from 1 percent to 2 percent. And 
there hasn't been an argument yet as to, what difference does 
that make? And so then you have to ask, what is the elephant in 
the room? Why go to the District of Delaware and the Northern 
District of California? And those are just--as I mentioned, 
those are districts widely viewed, as Professor Chien said, the 
Eastern District of Texas was widely perceived to be favorable 
to plaintiffs. The District of Delaware and the Northern 
District of California are widely recognized as being more 
favorable to defendants.
    Mr. Jeffries. I thank the witness. I thank the chair. And I 
would just point out that it will be useful if there is any 
empirical evidence suggesting that the decisions in those two 
venues are substantively different, because I haven't seen any. 
Thank you.
    Mr. Issa. I thank the gentleman. I might note that, in TC 
Heartland, it is leaving Delaware and going to Indiana, if I am 
correct.
    With that we go to the other gentleman from Georgia, Mr. 
Collins.
    Mr. Collins. Thank you, Mr. Chairman.
    I think one of the issues--and I think this--I am glad we 
are discussing this today, but I think it is in a different 
context after the Heartland decision now, I think, you know, we 
sort of leave it to where the courts have now said we are going 
to go. Whether it is, in the good professor's determination, 
that you are just bringing it to a smaller--you know, maybe 
just a percentage higher, or is it going to actually, you know, 
make a difference in some other areas, I think we will deal 
with that.
    But I want to get back to, ultimately, I believe that 
legitimate litigants benefit from lower costs. Whether it is a 
big, you know, a large company, a small company, the startup 
inventor, the tech company, the content--this is an issue that 
we have got to deal with because I firmly believe, and if you 
have ever -- if you have listened to some of my concerns here, 
is that you got to protect content. You got to protect the 
patentability. You got to protect those issues. Subject matter 
is going to be an issue here; how do we determine that?
    But, also, how do we make sure that the protection of that 
is also good for the process as a whole? So my concern is 
dealing with things as we look beyond venue and forum shopping 
to the real things that I have talked to, whether they be tech 
companies, traditional companies, or the smaller companies that 
end up on the lower end of some of these cases and being 
dragged into them.
    My question has become more of, why can't we begin to look 
at what many general counsels offline will begin to talk about. 
They want to talk about expedited Markman hearings. They want 
to talk about discovery reform. They want to talk about 
subject-matter issues. They want to talk about motion practices 
in general. Let's look at customers today. Let's look at those 
kinds of things. Because, at the end of the day, we are going 
around the edges of something that is, frankly--and whether it 
be--and I appreciate my friend, and I do believe that there is 
a punitive nature to attorney fees, and that is fine. But at 
the end of the day, most companies--and if you took--and there 
are a lot of representing companies of tech and everybody else; 
I can see you in the room--which would you rather do, worry 
about getting your attorneys' fees and slapping at the end of 
the thing, or getting this thing stopped early? Getting a 
frivolous lawsuit out of the system early so that we can get to 
legitimate cases that do need to be solved and do need to be 
settled, litigants benefit from that.
    So, Ms. Chien, take that--I am sort of opening up--you had 
a lot of specifics today. I am sort of opening this up a little 
bit more, and I would like you, Professor, to start--talk about 
some of those--actually, if you talk to GCs, if you talk to 
general counsels in many of these companies, this is where they 
would rather us focus. What are your thoughts?
    Ms. Chien. So it is a great question, and I think, again, 
what companies want is certainty, and they want to be able to 
report up to their CEOs that this is what we are looking at in 
terms of exposure. And they don't want to say that this case is 
hinging on, again, this luck of having been--this bad luck of 
being sued in this one district. It is really not about the 
concentration issue that is the issue. The issue is that, once 
you know you are stuck in the Eastern District, that is going 
to be a certain amount of money you pay; no matter how bad the 
suit is, you are just going to be stuck with that bill.
    And it is outrageous for a lot of firms that feel like they 
would rather fight the suit, but they can't because it makes a 
lot more sense to settle it. So that is what creates the, I 
guess, incentive for companies to continue coming up with 
business creative approaches, having the least cost, you know, 
operations, and still be able to bring their suits there.
    So I think that, you know, what I can see, though, in terms 
of all the different interventions Congress has come up with, 
again, going back to IPR, thinking about joinder, thinking 
about what the courts have done, what companies gravitate 
towards is certainty and efficiency. So whether it is a Alice 
101 motion for a patent that clearly should not have been 
issued and is no longer patentable and be able to get in there 
and get out in 50- to 100,000 dollars early. Or it is being 
able to say: Well, I know I am going to be in inter partes 
review, and it is going to be an 18-month period, that is 
certain; I know that. Or even the ITC provides that certainty 
in terms of timeframe. I think that is what firms are looking 
for. They want to be able to get on with the business of what 
they are doing, innovating, rather than trying to figure out 
how to manage this lawsuit----
    Mr. Collins. Mr. Anderson, I want you to jump in and just 
answer this.
    But I want to take something you just talked about. Just 
briefly touch this, because I have touched on this and you 
would believe the sort of the hair that went up on the back of 
some folks; when you just simply talked about subject matter 
101, Alice, you start looking at this and saying--but the 
question is--I think that we are getting into a conflation here 
of 101, 102, 103, 112. We're getting to, how do determine that 
patentability issue?
    And, look, I am not wanting just to throw this out, but I 
think that is a discussion to be had. So I appreciate you 
bringing that concern up.
    Mr. Anderson, you had a----
    Mr. Anderson. Well, you are asking what general counsels 
are thinking. I am one, a general counsel of a small company. I 
will tell you what: My biggest concern is we cannot afford to 
try one of these cases. I am told they are 3-, 4-, 5 million 
dollars. We cannot afford it. So we need a way to get out 
early. And the 101 Alice is one of those.
    But when someone says, ``You can't put the day or a time in 
a text message that goes out, you are violating our patent,'' 
and I say, ``That can't be true,'' and they say, ``Well, let's 
go to trial,'' I need this to be able to challenge that. And if 
we can't get rid of that case early, we can't afford to 
challenge it. In that particular case, we paid them--I can't 
tell you how much--a large amount of money for that silly 
patent claim. We had no choice.
    Mr. Collins. So, at the end of day, it doesn't--and we can 
talk about a lot of issues and attorneys' fees and all these 
that are always talked about, but at the end of day, for you, 
that is an irrelevant issue for you. And in some ways, if you 
could punish--because you can't go through the process to get--
--
    Mr. Anderson. We can't go through the process. We can't go 
through the process. The attorneys--the attorney we hired right 
now, $900 an hour.
    Mr. Collins. I appreciate the chairman and the subcommittee 
chairman and also both members of the aisle--sides of this 
aisle, this is an issue that we want to address in a proper 
way. And I think, frankly, the issue here is we can deal in the 
pieces, but at the end of the day, we got to start on what 
actually--it is like almost another issue we have around the 
healthcare: What are you doing to bend the cost curve? What are 
we actually doing to get litigants protected, the small vendor 
protected from the big, and the big protected from just 
frivolous suits? And I think we got to go to some issues. Venue 
was definitely an issue. The Supreme Court has addressed it. 
Now, I think some of these, discovery, motions, practice, 
customer stay, Markman hearings, all get to what you are 
looking at, and I appreciate it.
    Mr. Anderson. Extremely important, yes.
    Mr. Collins. I appreciate it.
    Mr. Chairman, I yield.
    Mr. Issa. I thank the gentleman.
    And, Mr. Anderson, if we could just have had you here 
pursuant to subpoena, then you could be compelled to answer 
that question, and we would be delighted to hear it. But my 
parliamentarian reminds me that you are here voluntarily. Next 
time.
    Mr. Anderson. Thank you.
    Mr. Issa. And now the gentlelady from Texas, who has been 
patiently waiting. Ms. Jackson Lee.
    Ms. Jackson Lee. Let me thank the chairman and the ranking 
member for their courtesies and courtesies of the full 
committee chairman and ranking member. I have served on this 
committee in sessions back and continue to have, coming from 
the 18th Congressional District in Houston, where there are any 
number of patent holders through the Texas Medical Center, 
research, and, of course, energy.
    I think I am going to be limited to the context in which we 
as Members of Congress function, and that is, we hold a 
hearing. And as we hold that hearing, we project how we can, as 
legislators, ultimately be helpful. And I think, as I have 
listened to my colleagues, a number of them have weaved through 
the question of how we can be effective in responding to this.
    What I see is the conflicting--and a confliction on a 
number of court of appeals decisions and Supreme Court 
decisions on the question of venue, which can, I believe, some 
of the witnesses might suggest make or break a case. I have 
also made an assessment as a litigator, a time or two in the 
courtroom myself, that a court having knowledge and expertise 
may help my presentation of the facts because the court 
understands it, particularly in cases of complexity that we see 
in a lot of district courts.
    So I am just going to ask each person, what is the direct 
action you want from the United States Congress? What would be 
helpful? I think, Professor, you indicated that is a wrong 
direction for a professor, but I am going to ask you to do so. 
And the other is to not counter, but to sort of answer my point 
that expertise in the court is helpful to both plaintiff and 
defendant. As I looked at some numbers, I saw that the 
percentages weren't that extreme. It was suggesting a numbers 
difference in the Eastern District, for example, that seems to 
be in the midst of the storm of a difference between 34 
percent--let me read it correctly: 94 Federal district courts 
in the United States; 34 percent of all patent suits were filed 
in the Eastern District. It is not 50 percent, but it is 
certainly a decent number. And I think I saw a number of 70 and 
89 percent.
    But, in any event--here it is. In 2015 to 2016, 89 percent 
of the cases in the Eastern District settled compared to 70 
percent in all other courts. So, if you would answer those two 
questions: How we can be best effective as we deliberate; and, 
number two, the issue of expertise does not help in the overall 
scheme of patent law.
    Mr. Anderson.
    Mr. Anderson. Well, I will answer the expertise first. I 
certainly agree that it is complicated. These are all IP 
attorneys; I am not. It is incredibly complicated. If it was a 
fair playing field, aside from convenience, I would agree. But 
I also hear that summary judgment is very difficult to get to. 
There are all kinds of procedural things that happen in the 
Eastern District of Texas that make it a disadvantage to 
litigate as a defendant.
    Let me state: We would never intentionally violate a 
patent. We have people that violate our trademarks. What I do 
when somebody does that, I pick up the phone and I call them 
and we work out a solution. We don't sue them for millions of 
dollars. That is just the way we do things.
    Ms. Jackson Lee. What would you want us to do?
    Mr. Anderson. What I would like you to do is--first off, as 
far as the not do, the 101 or Alice motion, please don't change 
that. That gives us somewhat of a chance. I am told in our 
current case, the attorney, this abstract idea of sending a 
promotional item to a mobile device, that we might prevail on 
that. Please don't take that away from us. It is our only 
chance to fight these things. If we lose that, we have to 
settle. That is what we hope you don't do.
    As far as doing, anything that stays the discovery so 
that--we are the end user of any of this technology--so that 
the provider of this technology can litigate and determine 
prior--and we can stay out of the case until that is resolved 
would be wonderful.
    Ms. Jackson Lee. If the chairman would indulge me, my time 
is running out.
    If you could quickly go through, Professor Chien.
    Ms. Chien. I believe that the system should be designed to 
be more fit towards specific business models. And so what I 
mean by that is proportionality. One problem is that we have a 
one-size-fits-all patent system that has to work for all 
different industries, but, more importantly, it has to work for 
all different business models. If we could try to introduce 
more proportionality in the system so that companies that don't 
infringe intentionally are not put in the same boat as those 
who infringe unintentionally, that those who are small 
defendants versus large defendants are treated differently, 
then I think this would go far to resolving the issues at hand.
    Ms. Jackson Lee. Thank you, Professor.
    Mr. Mossoff. Thank you, Congresswoman.
    I think the most important thing that Congress can keep in 
mind is that legislation with respect to the patent system 
affects dynamic innovation, what is coming tomorrow. And you 
are, instead, framing based upon what has happened in the past 
and what we know today. So the laws often have unintended 
consequences, like what the America Invents Act did by creating 
the Patent Trial and Appeal Board, and by the prohibition on 
joinder defendants.
    And so, in talking with high-tech--representatives from 
high-tech industry and biotech industry who invest billions of 
dollars to create innovation that they need to secure through 
the patent system through licensing and manufacturing and 
through all different business models, they say that they need 
security and stability. They need to be able to license freely. 
They need to be able to get the injunction against trespassers, 
regardless of what those trespassers might be on their rights. 
And they need to go back to the very strong and stable patent 
rights that drove innovation in this country for 150 years. We 
have, I mean, smartphones came from the system that we are now 
moving away out of, and I think that we should always keep that 
in mind.
    Ms. Jackson Lee. Mr. Thorne.
    Mr. Issa. The gentleman can answer briefly.
    Ms. Jackson Lee. Thank you, Mr. Chairman.
    Mr. Thorne. My experience has been very similar to what you 
described. I think expertise on the part of the judge is a 
benefit to both sides, plaintiffs and defendants. The Patent-
Pilot program in 13 district courts is an example of where that 
is working now. So my experience is the same, that expertise is 
important.
    I did not come prepared to recommend any legislative 
action. But I would like to note that, yesterday morning, the 
Supreme Court granted certiorari review in a case called Oil 
States Energy Services against Greene's Energy Group. One of 
the most significant things Congress has done in the 2011 
America Invents Act was create a more efficient way to 
challenge bad patents at the patent office.
    The Supreme Court is now going to review in this next term 
whether Congress had power to do that, whether the Congress had 
power, or is canceling a bad patent an example of deprivation 
of property rights that can't be done by an Article III court--
--
    Mr. Issa. Can only be done by an Article III court.
    Mr. Thorne. Right. I point that out as a concern, a 
potential loss of something important that Congress has done.
    Ms. Jackson Lee. Thank you very much.
    Thank you, Mr. Chairman. I yield back.
    Mr. Issa. Thank you.
    Every once in a while, I pull this off the wall and bring 
it. And I know that you all can read from here. This is patent 
No. 1, bearing the signature of both George Washington and 
Thomas Jefferson, then, I guess, Secretary of State. And any 
time somebody wants to talk about 101 and Alice, I am always 
reminded that it is a 227-year-old standing of what Thomas 
Jefferson believed it should be.
    And I always ask a question, and maybe I will ask each of 
you that question as my opening salvo. After 227 years of 101 
being what Thomas Jefferson thought it should be, have we had 
too little innovation as a result of that standard?
    Mr. Anderson, in your nonpatent lawyer opinion.
    Mr. Anderson. I think the United States is doing pretty 
well in that category.
    Mr. Issa. Professor Chien?
    Ms. Chien. I would have to agree.
    Mr. Issa. We are on a roll. How about it?
    Mr. Mossoff. Mr. Chairman, our patent system has been 
fantastic. Unfortunately, that very first patent, which is for 
a method of making potash is probably now not patentable under 
the patentable jurisprudence decisions that the Supreme Court 
has handed down.
    Mr. Issa. You know, with the knowledge of the time and the 
innovation of the time, I think even the patent No. 5, the 
improvement of rye whiskey distillation probably would still be 
patentable. One would have to go back and look at those of 
ordinary skill in the art at the time, including George 
Washington as a distiller.
    Mr. Thorne.
    Mr. Thorne. Our patent system is second to none, and 
innovation is what is going to drive our economy.
    Mr. Issa. Well, thank you. I opened up with that because, 
you know, when everyone is asked the questions and all 
questions have been answered, one has to be a little innovative 
to try to close out the hearing, and I am going to try and do 
that.
    I am going to ask you--first of all, I am going to ask you 
to all revise and extend with your thoughts, because as Mr. 
Thorne said, you didn't come here expecting to tell us how to 
legislate to deal with TC Heartland and other issues. But let 
me just go through a couple of words for a moment that might 
help you in both in a short answer today and then extending on 
it.
    If we do look--and, by the way, Mr. Thorne, you are now my 
favorite witness because I think you said Patent-Pilot was 
great about 20 times. As the author of Patent-Pilot, I am very 
proud that it is being used. We have extended it. And the 
vision always was to have every judge who regularly takes cases 
and chooses to take them have the expertise he needs.
    And I might note that Justice Breyer, who considers himself 
the author of the Fed circuit during his time in the Senate as 
a staffer, also has a similar opinion, which is we must 
maintain a robust ability to decide cases closest to the 
defendant, or there is no reason to have cases decided in 
District Court. And Justice Breyer always muses that he 
considered, instead of the Fed circuit, he considered just 
simply moving it to D.C. and having a single court here. And if 
we had a single court here, it would be a court, an Article III 
court of jurisdiction. And for some reason, just as a school 
kid in me, Marshall, Texas, 23,000 people--God bless God for 
putting it there; there is a special reason--or Washington, 
D.C., which one seems to be more logical considering the 
expertise?
    But leaving that aside. If we were to revise the test--
recognizing that small businesses are the majority of 
businesses and they do not reside in Tyler, Texas; Washington, 
D.C.; or, for that matter, the Northern District of 
California--if our test was, first of all, based on the 
corporate headquarters as a consideration, the number of 
employees, the likelihood of who was going to be discovered or 
deposed in the process, based on elements such as the decision 
to infringe--and I bring up the decision to infringe, having 
been sued both corporately and personally in the past, and not 
released all the way through the Fed circuit, I might mention, 
on an individual capacity, the decision to infringe is 
certainly an element. And then the comparative balance between 
the harm to the plaintiff, the harm to the defendant of a 
particular jurisdiction. If we were to take all of those--and, 
Mr. Anderson, you brought this out earlier--it would 
effectively eliminate the double standard. You would be taking 
the standards, and maybe enhancing them, that we have for 
nonpatent cases.
    What do you think if those and other tests were to be part 
of it? Would that give us the diversity, taking places to the 
appropriate venue, which would likely not be in Delaware, 
simply as a matter of incorporation, not be in Marshall, simply 
as a result of three of your franchises there, and I might say, 
not always in the Northern District of California--being in the 
Southern District of California, the second most prolific 
biocenter in the country, I kind of think some of it might come 
to us. By the way, we are one of those 13 districts that are in 
Patent-Pilot, but go ahead.
    Mr. Anderson. Well, in trying to be your favorite witness, 
I would agree with everything you just said. I certainly agree 
with that. No question about it. And, by the way, we don't do 
business and we aren't in California and we aren't in Delaware, 
so I don't think all the cases are going to be in California or 
Delaware.
    I certainly agree, where the headquarters are and where the 
witnesses are and where the decisions are made, those 
decisions--and, again, we never intentionally would violate a 
patent or anybody else's intellectual property--but those 
decisions, those marketing decisions, are made in Prairie du 
Sac, Wisconsin. They are not made by our franchisees. They are 
not made at the restaurant level. They are made where I work. 
And, again, we are not trying to violate, but if there is an 
action brought, it should be brought where we are and where the 
witnesses are and where the decisions are made and not in the 
Eastern District of Texas.
    Mr. Issa. Following up on that. In the case in suit that 
you were referring to, I would assume that they subpoenaed a 
number of people for depositions. Is that correct?
    Mr. Anderson. They will. It was just filed 2 months ago. We 
just filed our answer. So we are early in the process. Again, 
we will try the 101----
    Mr. Issa. Do you have anyone in Marshall or Tyler, Texas, 
that would be deposed there?
    Mr. Anderson. No. No. They are all in Wisconsin.
    Mr. Issa. Professor Chien.
    Ms. Chien. I would agree with the commonsense venue reform 
that you have outlined, that it should be based on where it 
makes sense. That said, I think that it is important to try to 
make sure that parties have the certainty of knowing that ahead 
of time and not get involved in a mini litigation each time 
just on the subject of venue. And so that is, I think, 
something to also consider.
    Mr. Issa. Now, normally, of course, let's say it was 
copyright or trademark, and you have been involved in that, 
first to file is pretty common. You know, you start off 
wherever you file. If I am filing a DJ because I believe you 
threatened me versus you filing because you believe I 
infringed, the presumption is, it starts where it was filed 
based on the first to file, and then you must overcome that. 
Would that standard give you the level of certainty, assuming 
that there is a series of tests that would allow you to 
overcome that?
    Ms. Chien. I think the convenience of the parties, both on 
the plaintiffs' side and defendant, it will depend on the 
nature of the suit a bit. So I think it shouldn't necessarily 
be about who is rushing to forum quickly, although in the 
patent case it's the patentee who will do that, unless there is 
grounds for declaratory judgment, but----
    Mr. Issa. If you are foolish enough to send me a letter, 
there is.
    Ms. Chien. I think the issue for the parties I have talked 
to is that they don't necessarily know all the details about 
who is on the other side even of who is bringing the suit. So 
they don't know where those parties' witnesses might be ahead 
of time. So an early disclosure might obviate the need for mini 
satellite litigation on this. So I think getting that--those 
details correct is very important.
    Mr. Issa. And, Professor, since the University of 
California files a lot of cases through their proxies in 
Marshall, Texas, you mentioned the little guy and so on. And, 
you know, they--and you mentioned universities, and I found 
that interesting, because why is it that the University of 
California doesn't file, or cause their licensees to file in 
California?
    Mr. Mossoff. I don't know.
    Mr. Issa. Could it be that, in fact, Marshall, Texas just 
seems like a great place to win?
    Mr. Mossoff. You would need to ask someone from the 
University of California. But as a professor, I don't have any 
particular insights or expertise about how patent litigation 
and venue choices should work. What I would think the Congress 
should particularly do in considering these issues is speak 
with the people who are the primary users and creators of 
patent innovation and commercialization in this country.
    As I mentioned, the individual inventors, the startups, the 
small businesses, and the research intensive companies in the 
bio-pharmaceutical sectors, and even in the high-tech sectors 
and speak with them about what is efficient and best secures 
their property rights.
    Mr. Issa. Thank you.
    Mr. Thorne, I gave a whole litany of hypotheticals, you 
know, where you are headquartered, where you are incorporated, 
where witnesses would likely come from both for deposition and 
trial. I wasn't doing that to be an exhaustive list, but the 
approach of three or more balancings to overcome the location 
in which it is filed, does that work for you as a litigant, 
particularly if we order that that--that there be a stay until 
that is discovered and there be expedited discovery? Because I 
think without bifurcation, we could end up exactly back where 
we are in Marshall, right?
    Mr. Thorne. So I would like to think just a little more 
about the factors you articulated. But on first hearing, I 
thought they sounded great. And my second thought was, why 
don't we have that already? Because I think 1400(b), the second 
half of it that is--still, that is now prominent, I think that 
can be interpreted to encompass those factors. I will cite as 
an example, Fortress Investment Group, a pretty very large 
hedge fund, filed a case against Apple in the District of New 
Jersey following TC Heartland describing factors similar to 
that. Where--their allegation of venue now says that they have 
sued where the field engineers, the managers, the other 
employees directly involved in the direct infringement are 
located, that is why they said New Jersey was the right place 
for that new case.
    Mr. Issa. Because, although there may--there is almost 
infinite cases in which Apple has substantial and regular with 
their stores, that isn't necessarily where expertise is, right?
    Mr. Thorne. That is correct. And then, of course, the 
other--the other safety valve that can achieve the factors that 
you described is the discretionary transfer under 1404. If 
there are several places the defendant could have been sued, 
there may be one of them that is clearly more convenient and 
more efficient, and it should be transferred there.
    Mr. Issa. Okay. I am going to--and I appreciate that.
    I am going to close with a question for probably all three 
of you, but Mr. Thorne, you will probably be the one most aware 
of it, since you mentioned it.
    With the TC Heartland decision, I am going to predict that 
we do have some devolving of the concentration that there will 
not be 40 percent in Delaware, for example, that we will tend 
to have--we will have more in Marshall, I predict, 2 years from 
now than its fair share based on corporate presence.
    But when we look at patent pilot that is in 13 locations 
right now, it had some provisions to stop concentration, 
essentially, referral to only one judge, should we consider 
expanding it to where it is anywhere that there is likely to be 
a judge whose expertise needs to have clerical assistance, 
which is one of the keep elements in patent pilot?
    Mr. Thorne. I would be strongly in favor of expanding the 
patent pilot program any place that made sense, whether a judge 
is interested or where the cases tend to gravitate towards 
that. That is something--again, I actually didn't realize you 
were the author of it, but I think----
    Mr. Issa. It was a long time ago.
    Mr. Thorne [continuing]. That is a program that deserves 
expansion.
    Mr. Issa. Professor?
    Mr. Mossoff. I--certainly, I mean, if it is something that 
is shown to bring additional expertise to patent litigation and 
to the--and to the adjudication of cases, then certainly, we 
should expand it.
    Mr. Issa. Well, they use it a lot in Marshall. You said 
that is working out good.
    Professor Chien?
    Ms. Chien. The patent pilot project offers litigants, 
judges who want their cases and offers some specializations. 
That has been attractive, but it has been hard to compete with 
plaintiff-friendly jurisdiction in Texas. With that removed as 
a factor, I think the next 5 years can be very different than 
the first. We really have a chance to see whether 
specialization can reach its potential.
    What I think would be extremely important as the program I 
do support it being expanded and growing, is to really try to 
think about the factors that are being introduced, like 
technical advisers, like other procedures, and try to test how 
those are doing. I think right now we are--the sample size is 
too small. There is one paper that says there isn't necessarily 
a higher rate of success, necessarily, in these cases. But I 
think with expansion of program, we can really see this and 
test this.
    What I do think we also are seeing is that there are many 
studies of judges having more expertise, but still not 
necessarily getting better success rates. But we do know that 
technical expertise, for example, in the PTAB has been viewed 
favorably.
    So I think there is a lot of innovation that can happen in 
this program, and I look forward to seeing it reach that 
potential.
    Mr. Issa. Thank you.
    Mr. Anderson, any thoughts?
    Mr. Anderson. I will defer to my fellow witnesses on this 
one.
    Mr. Issa. Well, thank you.
    You know, it is--I remember when there was a 40 percent 
reversal rate at the Fed circuit, and then the Supreme Court 
reminded us the Fed circuit got it wrong in some of those 
reversals. So we never had patent pilot for the Supreme Court, 
but it has been suggested.
    I want to thank my witnesses today. I will ask you, both as 
intellectuals, as somewhat of a victim, and as a practicing 
attorney in the field, if you would submit to the greatest 
extent you can, some of those elements to 1400 that you think 
would go into part B. Because I think, as we look, and the 
chairman--the chairman is here again, and he will speak for 
himself better than I shall, but I think as we look at making 
sure that what is left in venue has a meaning that is 
definable, consistent, and if there is an argument, can be 
adjudicated fairly by an Article III judge.
    Lastly, I am very interested in the case they just took up. 
I am a strong believer that for decades, we have had ex parte 
PTO re-examination that invalidated all or some of the claims. 
So I will be submitting an amicus in that case, without a 
doubt, based on the question of is--are these administrative 
law judges under the PTO doing something different than was 
done for decades, and if the interparty re-examination is 
invalid, then is the ex parte re-examination invalid, and if 
that is the case, then is the Article III judge to continue to 
use a deferral standard to an entity that is not allowed to 
correct what might be their own mistake based on less knowledge 
than they would have presented to them at a later date. That 
may just be my entire amicus.
    Mr. Chairman, do you have any further comments?
    With that, I thank you. We stand adjourned.
    [Whereupon, at 12:06 p.m., the subcommittee was adjourned.]

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