```

[Senate Hearing 117-898]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 117-898

                   THE PATENT TRIAL AND APPEAL BOARD:
                     EXAMINING PROPOSALS TO ADDRESS
                PREDICTABILITY, CERTAINTY, AND FAIRNESS

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON INTELLECTUAL PROPERTY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 22, 2022

                               __________

                          Serial No. J-117-66

                               __________

         Printed for the use of the Committee on the Judiciary
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]         

                        www.judiciary.senate.gov
                            www.govinfo.gov
                            
                               __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
56-942                       WASHINGTON : 2024                    
          
-----------------------------------------------------------------------------------                             
                           
                       COMMITTEE ON THE JUDICIARY

                   RICHARD J. DURBIN, Illinois, Chair
PATRICK J. LEAHY, Vermont            CHARLES E. GRASSLEY, Iowa, Ranking 
DIANNE FEINSTEIN, California             Member
SHELDON WHITEHOUSE, Rhode Island     LINDSEY O. GRAHAM, South Carolina
AMY KLOBUCHAR, Minnesota             JOHN CORNYN, Texas
CHRISTOPHER A. COONS, Delaware       MICHAEL S. LEE, Utah
RICHARD BLUMENTHAL, Connecticut      TED CRUZ, Texas
MAZIE K. HIRONO, Hawaii              BEN SASSE, Nebraska
CORY A. BOOKER, New Jersey           JOSH HAWLEY, Missouri
ALEX PADILLA, California             TOM COTTON, Arkansas
JON OSSOFF, Georgia                  JOHN KENNEDY, Louisiana
                                     THOM TILLIS, North Carolina
                                     MARSHA BLACKBURN, Tennessee
             Joseph Zogby, Chief Counsel and Staff Director
      Kolan L. Davis, Republican Chief Counsel and Staff Director

                 SUBCOMMITTEE ON INTELLECTUAL PROPERTY

                    PATRICK J. LEAHY, Vermont, Chair
CHRISTOPHER A. COONS, Delaware       THOM TILLIS, North Carolina, 
MAZIE K. HIRONO, Hawaii                  Ranking Member
ALEX PADILLA, California             JOHN CORNYN, Texas
                                     TOM COTTON, Arkansas
                                     MARSHA BLACKBURN, Tennessee

             Rajiv Venkataramanan, Majority Staff Director
                  Brad Watts, Minority Staff Director
                           
                           C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Leahy, Hon. Patrick J............................................     1
Tillis, Hon. Thom................................................     3

                               WITNESSES

Anderson, Jonas..................................................     9
    Prepared statement...........................................    24
    Responses to written questions...............................    61
Cain, David......................................................     5
    Prepared statement...........................................    32
    Responses to written questions...............................    73
Giles, Robert....................................................     8
    Prepared statement...........................................    37
    Responses to written questions...............................    85
Wilson, Tim......................................................     6
    Prepared statement...........................................    56
    Responses to written questions...............................   100

                                APPENDIX

Items submitted for the record...................................    23

 
                   THE PATENT TRIAL AND APPEAL BOARD:
                     EXAMINING PROPOSALS TO ADDRESS
                PREDICTABILITY, CERTAINTY, AND FAIRNESS

                              ----------                              

                        WEDNESDAY, JUNE 22, 2022

                              United States Senate,
             Subcommittee on Intellectual Property,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:42 p.m., in 
Room 226, Dirksen Senate Office Building, Hon. Patrick J. 
Leahy, Chair of the Subcommittee, presiding.
    Present: Senators Leahy [presiding], Coons, Tillis, and 
Blackburn.
    Also present: Senator Cruz.

          OPENING STATEMENT OF HON. PATRICK J. LEAHY,

            A U.S. SENATOR FROM THE STATE OF VERMONT

    Chair Leahy. Okay, we have votes going on, and so Senators 
will be coming in and out. I've talked with Senator Tillis 
about this, and we're going to try to keep the hearing going, 
even if some will have to leave.
    We've worked hard on this issue of patents. They do drive 
our economy. We know that. It allows innovators to do what they 
do best, while knowing they can get the benefits of their hard 
work. Good-quality patents give small businesses and inventors 
certainty they can defend their inventions from others who 
didn't put in the work, and without the rights guaranteed by 
patents, the engine of our economy, American innovation, simply 
would not be as strong.
    Given the power that a patent conveys, a patent issued by 
the U.S. Patent and Trademark Office needs to actually 
represent innovation. There are serious consequences for our 
entire economy when the system permits enforcement of a patent 
that never should've been issued. Vermonters and small 
businesses all across the country have suffered these 
consequences.
    Several years ago, an out-of-state company asserted poor-
quality patents against dozens of Vermont small businesses and 
nonprofits, demanding payments each and every time a business 
scanned a document and then emailed it. It was a scam, an 
egregious abuse of our patent system. That's why I'm proud of 
the work we did in 2011 to pass the Leahy-Smith America Invents 
Act, the bipartisan piece of legislation, bicameral, the first 
real update of our patent laws in 50 years, but it allowed the 
public to take their concerns about a questionable patent back 
to the Patent Office for a more in-depth review.
    Through proceedings created by the Leahy-Smith Act, the 
scams to email patents were brought back to the Patent Office. 
They were invalidated. They allowed Vermont companies and 
nonprofits to continue their work. The Patent Trial and Appeal 
Board, the PTAB, created under the act, resolved those disputes 
in a way that's faster; more importantly, less expensive, more 
accurate than a district judge, because the disputes were 
overseen by trained patent judges under a strict deadline.
    In the past decade of PTAB's existence, the public has 
brought thousands of patents to the Patent Office's attention. 
The Patent Office has expertly addressed validity, reinforcing 
the strength of high-quality patents but then canceling ones 
that never should've been issued. As with any big new 
undertaking, that success has brought new questions on all the 
enacted laws, particularly those dealing with technologies and 
science, especially in an era when that is evolving so fast. 
They need to be revisited. They have to be updated from time to 
time.
    That's why I'm thrilled that Senator Tillis, as the Senior 
Republican on this Committee, along with Senator Cornyn and I, 
just last week introduced the PTAB Reform Act of 2022. We had 
feedback from participants in the patent system, including the 
public broadly and businesses across the country, covering a 
vast array of sectors and technologies. We looked at concerns 
from all comers. The bill is a product of hard work and 
compromise and addresses the biggest concerns of stakeholders 
from across the spectrum. It can update the PTAB.
    It's important for a number of reasons. One question, of 
course: If a petition to the Patent Office to review a patent 
is meritorious on its face, should the Patent Office decline 
review anyway? Many believe all meritorious patents should 
result in a review. Many others believe it's heresy to patent 
owners to have the same members of the public able to request 
review of the same patent repeatedly over time, when the patent 
owner has already defended the patent. We addressed these 
issues, as we often do in the Senate, through compromise.
    While meritorious petitions to review a patent should 
generally be granted, serial petitions, over time, from the 
same or related parties will not be allowed. Another big 
question: Who has the authority to make a final validity 
decision? Civil servant PTAB judges or the politically 
appointed Director of the Patent Office?
    While the Supreme Court last year resolved that the 
Director is the final decision-maker, it left open the question 
of how the Director makes that decision, but we ensure that it 
must be open to the public. The public has a right to know. We 
should not have a patent system where any given PTO Director 
could influence and decree decisions behind the scenes, without 
transparency.
    We also addressed the concern raised by small business 
patent owners. They had to pay to apply for a patent, and they 
may have to pay again to defend at the PTAB. It's expensive. We 
want to help small businesses shoulder the expense. Thus, if a 
small entity has not already decided to take the expense of 
litigation, the Patent Office will cover the expense of a PTAB 
proceeding for that small business. Now, we have an 
extraordinary group of witnesses here. I'm excited to hear 
about their experience, what's worked, what needs to change, 
how PTAB reform will fit into the overall picture.
    GlobalFoundries is one of Vermont's biggest employers. It 
evolved from IBM, which it had been there. David Cain is a 
Vermont attorney. He's been involved in several PTAB 
proceedings. He's highly respected in the State of Vermont. He 
can tell us about his experiences in the semiconductor chip 
manufacturing industry.
    I know that Senator Tillis and Senator Cornyn share my 
belief that the patent system should work for all Americans, 
all sectors. I want to leave behind an even stronger patent 
system than what we were able to get through in the earlier 
patent bill, which I had the pleasure of working on. Senator 
Tillis, you've spent so much time on this. I'll yield to you.

                 STATEMENT OF HON. THOM TILLIS,

         U.S. SENATOR FROM THE STATE OF NORTH CAROLINA

    Senator Tillis. Thank you, Mr. Chairman. Thank you for 
holding the hearing today on the PTAB. I also want to thank you 
for your leadership and your continued partnership. It's 
allowed us to forge a path forward on this and many other 
important intellectual property related matters. You're a good 
friend, and next Congress I'm going to miss you as a partner.
    Before I pass things over to our witnesses, I would like to 
provide some important context and history to what we'll be 
discussing today. It should come as no surprise that the 
Chairman and I believe in the need for strong, reliable, 
predictable IP rights--something that we've championed for many 
years. When I speak to IP rights, I speak to all forms of IP: 
patents, trademarks, copyrights, and trade secrets. It's 
because of this shared belief--why we're convening this 
important hearing today.
    As anyone who follows my work in the Subcommittee knows, 
I'm a firm believer in strong patent rights, and they're 
paramount to incentivizing American innovation, which fuels the 
growth of our country's prosperity and economy. This growth, in 
turn, allows the U.S. to maintain its global dominance across 
numerous industries and its reputation as the world's leading 
innovator.
    However, in order for patent rights to be truly strong, 
they have to be based on high-quality patents, which have 
undergone thorough review and meet all the requirements of 
patentability. That's why I've made improving patent quality 
and patent examination process one of my key priorities. As we 
all know, no matter how much we improve the front-end 
examination process, low-quality patents, especially in 
business and software fields, often do get issued. That's why 
the PTAB, the subject of today's hearing, exists. It exists as 
an alternative to district court litigation and as a mechanism 
to weed out low-quality patents.
    The PTAB, when properly constructed and administered, can 
play a vital role in our innovation economy. Unfortunately, for 
far too long the PTAB hasn't been fair--hasn't been a fair and 
impartial forum that served its critical purpose. Instead, in 
years past, it's been a literal death squad for patent rights 
and has been weaponized by various companies to potentially 
bankrupt future competitors.
    Thankfully, during the last administration a number of 
policies were put into place by my good friend Director Iancu 
to crack down on this abuse, policies which I strongly support. 
Andrei's reforms ensured that the PTAB was a truly fair and 
impartial forum for all parties and not simply a place where 
patents go to die. That's why I've long supported trying to 
codify some of these reforms, because as good job--as good a 
job as Andrei did, a future PTO Director can undo all of those 
positive changes with the snap of a finger. That kind of 
volatility in how the PTAB functions, the lack of certainty, 
doesn't create the type of innovation ecosystem that we need to 
ensure long-term research, development, and investment.
    My desire to provide long-term stability, certainly, at the 
PTAB and to permanently end some of the abuses that we've seen 
in the past is why I partnered with Senator Leahy to introduce 
compromise legislation, which has required both of us to 
sacrifice some of our priorities. The PTAB Patent Reform Act of 
2022 ensures that inter parties disputes remains an alternative 
to litigation, while affording predictability, certainty, and 
fairness to the process for both the petitioners and the 
respective patent owners.
    The bill statutorily imposes the Phillips claim 
interpretation methods, stops abuse by serial petitioners, ends 
gamesmanship by Big Tech companies, adds greater transparency 
to decisions rendered by the PTAB, and prevents wild swings in 
terms of patent validity determination by providing 
consistently--consistency throughout the inevitable change of 
the USPTO leadership. I'm also particularly proud of the fact 
that this bill will provide financial support for individual 
inventors, small entities, and micro-entities to hold patents 
subject to a petition. This bill is a direct result of 
countless iterations and close collaboration with a diverse 
array of internal and external stakeholders.
    Let me be clear. This bill isn't perfect, and it isn't 
final. I'm pretty sure that when it's final, it won't be 
perfect, but it should be able to address most of the concerns 
that we have across valid opinions at either end of the 
spectrum. This is the beginning of a process. I hope everyone 
will take this opportunity to work with us to provide long-term 
certainty and stability at the PTAB.
    All ideas can and should be on the table. If you don't like 
compromise--the compromise we've come up with, tell us, but 
don't just tell us you hate it. Give us ideas on how to write a 
better bill that will, in your opinion, be a better compromise.
    Again, Mr. Chairman, I thank you for holding this hearing. 
I look forward to the testimony from the witnesses, but if I 
may, as a point of privilege, I'd like to take a brief moment 
to formally welcome and introduce the newest Member of my team, 
Peter-Anthony Pappas, who I have nicknamed ``Juice.'' I won't 
get into the details. Peter's back here behind me.
    Peter joins us on detail from the USPTO, where he's a 
supervisory patent examiner. Peter also previously served as a 
special advisor to my good friend Dr. Iancu, when he was PTO 
Director. He brings a wealth of knowledge to this process, and 
he'll be an integral part of the discussions we'll have after 
this hearing. Welcome to the team, Peter.
    Chair Leahy. Thank you, Senator Tillis. I know how hard 
you've worked on this. Senator Coons has worked on this, 
Senator Cornyn. We look forward now to hearing from David Cain, 
please. I've already mentioned that he serves as patent counsel 
and legal director at GlobalFoundries, the largest 
semiconductor foundry, manufacturer with headquarters in the 
United States. He's based at the Essex Junction, Vermont 
facility. JD from Pepperdine, engineering degree from Clarkson 
University, and highly respected in our State. Go ahead, Mr. 
Cain.

              STATEMENT OF DAVID CAIN, DIRECTOR OF

            INTELLECTUAL PROPERTY, GLOBALFOUNDRIES,

                      BURLINGTON, VERMONT

    Mr. Cain. Thank you. Good afternoon, Chairman Leahy, 
Ranking Member Tillis, and distinguished Members of the 
Subcommittee on Intellectual Property. Thank you for this 
opportunity to speak with you today about the important issue 
of PTAB reform.
    As Senator Leahy said, GlobalFoundries is one of the 
world's leading semiconductor manufacturers, with production in 
the United States, Singapore, and Germany. Our feature-rich 
chips enable nearly every sector of the global economy. Of the 
five at-scale semiconductor foundries in the world, GF is the 
only one headquartered in the United States and is a proud, 
longstanding partner and supplier to the U.S. Department of 
Defense.
    The semiconductor industry today involves producing 
billions of transistors on a single chip and requires the most 
technically complex manufacturing in the world. GF's success in 
this industry is born out of its innovation. GF's U.S. sites 
have produced three of the world's top 100 most prolific 
inventors of all time. Because of the RF technology innovation 
developed at GF's Vermont facility, the smartphone in your 
pockets almost certainly contains a GF-made chip. Due to the 
importance of innovation to GF and the critical nature of the 
chips we manufacture, America's patent system is exceptionally 
important to us.
    As an owner of more than 7,000 U.S. patents and as a U.S.-
based manufacturer, GF seeks a fair and balanced IPR system for 
both patent owners and for petitioners. We count on the patent 
system to protect our investment in innovation and to prevent 
our business from being harassed by poor-quality patents. Every 
year, GF faces infringement claims for patents that had no 
business being issued in the first place, which needlessly 
hurts our ability to supply semiconductors to the world. The 
cost of each semiconductor patent litigation defense can easily 
reach $5 million and beyond. The resources directed toward such 
litigation could otherwise be invested in capital expansion, 
R&D, both creating further jobs.
    By passing the Leahy-Smith America Invents Act over a 
decade ago, Congress made huge progress in curtailing the 
abusive patent practices hurting American industry. Allowing 
for efficient patent review by the technically trained and 
patent-savvy judges of the PTAB provides an efficient and 
effective tool to defend against poor-quality patents. Bad 
patents can be dealt with for a fraction of the cost of 
litigation, while good patents can quickly be validated. 
Therefore, GF strongly supports efforts to improve the IPR 
system.
    The recent Fintiv-factor discretionary denial practice has 
limited the availability of IPR review and inserted unfairness 
into the system. For example, defendants can be--can be 
prevented from challenging a poor-quality patent at the PTAB 
merely because the district court sets an unrealistically early 
trial date that will rarely, if ever, be met. Faced with 
potential denial, defendants must rush to prepare a petition 
and may not have sufficient time to search for prior art and 
may be estopped from relying on other prior art later.
    These early petitions filed within a few months of a 
district court complaint can create extra work for the PTAB 
itself. Such petitions generally occur before the patent owner 
has identified which patent claims it will be asserting, as 
well as how broadly it will be construing those claims. 
Consequently, the PTAB will need to spend time reviewing claims 
that may never be asserted and may construe them for purposes 
of validity more narrowly than the patent owner will in their 
infringement case.
    The proposed PTAB Reform Act resolves these issues by 
solidifying the 1-year window for bringing IPR petitions, while 
also ensuring that petitioners are not allowed to bring serial 
challenges. These common-sense proposals provide fairness to 
both patent owners and petitioners. GF appreciates Congress's 
commitment to fostering American innovation and strengthening 
the greatest patent system in the world. Thank you very much 
for allowing me to testify and share GF's perspective today.
    [The prepared statement of Mr. Cain appears as a submission 
for the record.]
    Chair Leahy. Thank you very much. Mr. Wilson. I would 
actually note that Mr. Wilson is Director of Patents in the 
legal division at SAS Institute, Inc., the data analytic 
software company. He began his legal career as a patent and 
intellectual property litigator with the firm of Jones Day, has 
a juris doctor's from Syracuse University College of Law, 
bachelor's degree from Pennsylvania State University. Mr. 
Wilson, please go ahead, sir.

            STATEMENT OF TIM WILSON, HEAD OF PATENTS

             AND INTELLECTUAL PROPERTY LITIGATION,

           SAS INSTITUTE, INC., CARY, NORTH CAROLINA

    Mr. Wilson. Thank you, Mr. Chairman. My name is Tim Wilson. 
I am patent counsel at SAS Institute. I also am an adjunct 
Professor at the Southern University College of Law, a great 
historically Black college and university law school, as well 
as I'm president of the Patent Quality Education and Training 
Foundation, where we try to help improve diversity in patent 
law through working with the Thurgood Marshall College Fund to 
help support HBCU graduates to getting into patent law.
    I'd like to thank Chairman Leahy, Ranking Member Tillis, 
and the Members of this Subcommittee for holding this hearing 
to explore potential reforms to the AIA. I'd specifically like 
to thank Chairman Leahy and Senator Cornyn for their leadership 
during the original negotiations with respect to the AIA. 
Because of their leadership, there was a great spirit of 
compromise. Even though it was often a difficult negotiation, 
it led to the most significant reform of the patent system 
since 1952.
    The American Invents Act has largely done its job by 
leading to a large decrease in the number of patent 
litigations. In 2011, we had almost 8,000 patent litigations, 
and that has been brought back to between 3 to 4,000 annual 
patent litigations, and I think that's a great thing. In a pre-
AIA case that SAS faced, a company called Juxtacomm--they were 
a failed company that was left with a single patent who got 
funding from external sources to sue dozens and dozens and 
dozens of companies that actually made things, costing all of 
those companies millions of dollars and costing SAS between $5 
and $8 million dollars just to get that patent thrown out by a 
judge on summary judgment--a huge waste of resources.
    As a holder of over 600 U.S. patents, SAS has always been 
interested in improved patent quality. We have a wide variety 
of inventors at SAS who work on the cutting edge of software 
technology. The two significant elements of the AIA discussions 
earlier were patent litigation reform and the creation of the 
PTAB. At some point during the negotiations, it became obvious 
that no meaningful con--no meaningful reform or compromise 
could be made related to patent litigation. It was a little 
disheartening to lose that element, but we continued to work 
together under the Chairman's leadership, and the result, many 
stakeholders working together, was the PTAB.
    Recently, the PTAB decided the Fintiv case, which allowed 
the PTAB not to institute a petition that would otherwise meet 
the threshold for institution. That would be based on a complex 
set of balancing additional factors. This decision undermines 
the simple test that Congress set forth in the AIA and leads to 
potentially substantial uncertainty to the parties because good 
petitions may be denied. It also negatively impacts the public 
because invalid patent claims are arbitrarily allowed to 
survive review. As a patent owner, SAS appreciates that there 
may be abuses of the system by so-called serial petitions. We 
don't believe that this is a pervasive problem, but we're happy 
to participate in finding a solution to that problem, as well.
    It seems that we are once again looking to Chairman Leahy, 
Ranking Member Tillis, and Senator Cornyn for leadership on 
another PTAB reform act. I think it's great to use the PTAB 
Reform Act as a framework to find a good compromise. Thank you, 
and I look forward to your questions.
    [The prepared statement of Mr. Wilson appears as a 
submission for the record.]
    Chair Leahy. Thank you very much. I should note that 
Senator Tillis left to vote, and I don't know what----
    Chair Leahy. Okay. We'll be going back and forth. We'll 
keep the--when somebody comes back, and then I can go and vote.
    Robert Giles is Senior Vice President and Chief IP Counsel 
at Qualcomm, Incorporated, where he's responsible for designing 
and developing their Google IP portfolio. Received his JD from 
the George Washington University, bachelor's from the 
University of Illinois, Urbana. Mr. Giles, it's good to have 
you here. Please go ahead.

               STATEMENT OF ROBERT GILES, SENIOR

             VICE PRESIDENT AND CHIEF INTELLECTUAL

            PROPERTY COUNSEL, QUALCOMM INCORPORATED,

           INNOVATION ALLIANCE, SAN DIEGO, CALIFORNIA

    Mr. Giles. Thank you very much. Chairman Leahy, Ranking 
Member Tillis, and Members of the Subcommittee, my name is Bob 
Giles, and I'm Senior Vice President and Chief Intellectual 
Property Counsel at Qualcomm. I appreciate this opportunity to 
testify on behalf of Innovation Alliance, a coalition of 
research and development based technology companies that 
believe a robust patent system is critical to U.S. 
technological leadership and our economic and national 
security.
    For decades, the constitutionally protected U.S. patent 
system has secured our global leadership position in 
incentivizing the research and development needed to invent 
groundbreaking technologies; however, in recent decades, our 
position has been threatened by judicial and legislative 
actions that weaken patent rights. To maintain the United 
States' strategic interest, the PTAB must be reformed to 
achieve its statutory purpose as an efficient alternative to 
district court litigation. The STRONGER Patents Act would 
promote balance and fairness at the PTAB and would advance 
American innovation leadership. The PTAB Reform Act would do 
the opposite by weakening the U.S. innovation ecosystem.
    Robust patent protections are foundational to the U.S. 
economy and national security for two reasons. First, they 
serve to appropriately incentivize companies to invest in 
costly and risky long-term R&D needed for leadership in 
emerging technologies such as AI, IoT, 5G, and 6G. Second, 
patent rights facilitate commercialization, collaboration, and 
follow-on innovation by granting exclusionary rights in an 
invention for a limited time in exchange for public disclosure.
    Patent protections assure that rights to practice an 
invention can be readily bought, sold, or licensed, allowing 
patent owners to reinvest those revenues in further R&D. 
Despite the critical role that patents play in the U.S. 
economy, patents have been under attack in recent years by 
actions that impose substantial obstacles on inventors. Chief 
among these is how the PTAB has evolved.
    By permitting any party to challenge and invalidate a duly 
granted patent by a mere preponderance of the evidence, the 
PTAB has led to gamesmanship and the invalidation of patents at 
an alarmingly high rate. USPTO data show that the PTAB 
institutes IPR in nearly two-thirds of petitions filed. The 
data show--the data further show that once IPRs are instituted, 
they result in cancellations of at least 1 claim in 80 percent 
of the time and cancellation of every claim 60 percent of the 
time. These are high invalidation rates led--these high 
invalidation rates have led one former judge on the Federal 
circuit to call the PTAB a patent death squad, responsible for 
killing patent rights.
    Infringers have used the PTAB to harass and intimidate 
small companies. One example is Centripetal, an inventor of 
cybersecurity technology. Centripetal initially attempted to 
partner with Cisco and disclosed its patented technologies. In 
the end, the relationship broke down, but Cisco implemented 
Centripetal's technology anyway. Centripetal had to resort to 
sue Cisco to defend its patents in court. The court found that 
Cisco willfully infringed, ordering Cisco to pay $1.9 billion 
in damages.
    At the PTAB, Cisco sought to strengthen its negotiation 
position against Centripetal by challenging 9 patents, using 14 
IPR petitions. The PTAB invalidated all of the claims of six of 
the patents and some of the claims of another patent--a much 
higher invalidity rate, as would be expected in district court.
    The Innovation Alliance urges Congress to pass the STRONGER 
Patents Act to strengthen U.S. competitiveness and global 
leadership. STRONGER would, one, empower U.S. inventors to 
protect their patent rights against infringers by implementing 
a common-sense framework for granting injunctions and overhaul 
the PTAB to ensure its proceedings are conducted in a fair and 
consistent manner, in line with Federal courts. Importantly, 
for example, STRONGER would prevent petitioners from filing a 
subsequent IPR petition on the same patent claim if the 
petitioner failed to show a reasonable likelihood of success in 
its first IPR.
    In contrast, the Innovation Alliance urges Senators to 
oppose the PTAB Reform Act because it would further tilt the 
playing field toward infringers. Specifically, the PTAB Reform 
Act eliminates the Fintiv doctrine, which allows the PTAB to 
apply discretion to deny institution of a petition in order to 
prevent abuse, promote efficiency, and conserve resources of 
the USPTO and individual parties. Further, it permits 
challengers to file an unlimited number of petitions against a 
single patent. It would also create a legally questionable back 
door, giving standing to parties who would not otherwise have 
it. These changes harm inventors and move the patent system in 
the wrong direction.
    Thank you again for inviting me to testify today. The 
Innovation Alliance stands ready to work with you to ensure 
that U.S. patent law promotes economic and national security.
    [The prepared statement of Mr. Giles appears as a 
submission for the record.]
    Chair Leahy. Why, thank you, Mr. Giles. Professor Anderson 
is a professor of law at American University. His academic 
articles have been cited by the Supreme Court, the U.S. Court 
of Appeals for the Federal Circuit, and The New York Times. 
Professor Anderson clerked on the Court of Appeals at the 
Federal Circuit, practiced patent litigation at Latham & 
Watkins. I've spent a lot of time, not as an appellant but as a 
friend of many of the members of the Federal Circuit Court of 
Appeals, as the Professor probably knows. He received a JD from 
Harvard Law School, bachelor's degree in physics from the 
University of Utah. Professor, please go ahead, sir.

             STATEMENT OF JONAS ANDERSON, PROFESSOR

               OF LAW, WASHINGTON COLLEGE OF LAW,

              AMERICAN UNIVERSITY, WASHINGTON, DC

    Professor Anderson. Good afternoon, Senators. Thank you, 
Chairman Leahy, Ranking Member Tillis, and the other Members of 
the Subcommittee for the invitation to testify. It's an honor 
to testify on the predictability and fairness of proceedings at 
the Patent Trial and Appeal Board.
    I'm a professor at American University, Washington College 
of Law, and my areas of expertise are in patent law, Federal 
courts, and intellectual property. A specific focus of my 
scholarship has been directed toward Federal courts, Federal 
district courts who seek to attract patent cases to their 
courtrooms. This court competition for patent cases I believe 
is a threat to the judiciary's legitimacy, not just in patent 
law but across other areas of Federal law, as well. It is with 
this concern in mind that I will focus my testimony today.
    I will begin my testimony by briefly describing how the 
PTAB's Fintiv ruling has been used by Federal district court 
judges who seek out patent cases and how that active 
solicitation of patent cases threatens to erode public 
confidence in the judiciary. In 2021, roughly 25 percent of all 
patent cases were heard by a single Federal district court 
judge. As Chairman Leahy and Senator Tillis reference in their 
November 2021 letter to Chief Justice Roberts, this extreme 
concentration of patent cases is troubling for the judiciary. I 
agree with Chairman Leahy and Senator Tillis's views on the 
current problematic state of patent litigation. This extreme 
concentration of patent cases and judges actively encouraging 
plaintiffs to file in their courtrooms undermines the public 
perception of fairness in judicial proceedings.
    This hearing is about the PTAB. I believe the PTAB has been 
a great benefit for the U.S. patent system by providing a cost-
effective means of challenging the validity of patents. This 
leads to a strengthening of the competitive landscape and is a 
positive for the American public. I also believe that the 
Fintiv decision of the PTAB has led to increased uncertainty. 
As Senator Tillis said in his November 2021 letter to the 
Director of the PTO, it has led to harmful incentives for forum 
shopping and inappropriate judicial behavior. Furthermore, just 
this morning, the PTO issued guidance on the application of 
Fintiv that limit Fintiv's applicability. Today's PTO 
guidelines are welcome, on the whole, but I would suggest that 
the PTO ought to rescind the Fintiv rule entirely.
    The PTAB's Fintiv rule is based on the laudable notion that 
the PTAB ought not institute review of a patent if a district 
court or the ITC is going to issue a ruling on the patent's 
validity at an earlier time. The current six-factor test 
provides virtually no certainty of outcome and, worse, is 
influenced by plaintiffs who can strategically, in an effort, 
file their cases in an effort to avoid PTAB review. Plaintiffs 
who want the PTAB--to avoid PTAB review can choose to file 
their case in a district court that has a reputation for not 
issuing stays and setting very early trial dates. These dates 
are not good indicators of when a district court will issue a 
decision.
    A recent study found that 94 percent of those trial dates 
relied on by the PTAB in Fintiv turn out to be inaccurate. The 
Fintiv ruling forces the PTAB to analyze the trial dates of 
district courts and to grapple with comparing the duplicative 
effort between the district court and the PTAB. Furthermore, it 
forces parties to waste attorney hours arguing about the six 
cumulative factors. A much better and easier solution would be 
to eliminate Fintiv entirely and limit the PTAB's institution 
decision to those factors that are enumerated by Congress, 
including the 1-year ban.
    Eliminating Fintiv would also have the benefit of 
eliminating the possibility that district courts that--set 
aggressive trial dates in an effort to preclude PTAB review. 
The PTAB would be freed from the labor-intensive analysis 
involved in Fintiv, and district courts would not be able to 
use trial dates in an effort to avoid PTAB review and thereby 
attract patent plaintiffs. Thank you for your time, and I look 
forward to your questions.
    [The prepared statement of Professor Anderson appears as a 
submission for the record.]
    Chair Leahy. Thank you very much. I'll begin with Mr. Cain. 
I think everybody knows there's currently a chip shortage 
that's affecting all Americans, as even car manufacturers of 
popular vehicles have them sitting in a--their lot just because 
they are missing a few chips. Chip manufacturers like 
GlobalFoundries was, I believe, the exceptional facility in our 
home State--components, phones, cars, computers.
    Patents are an important part of your business. I 
understand GlobalFoundries has over 7,000 U.S. patents. When we 
passed the Leahy-Smith America Invents Act 11 years ago, we 
wanted to make sure the Patent Office could take a second look 
at patents that are of particular relevance to the public and 
review them and so on. In your experience, Mr. Cain, has the 
PTAB been a fair adjudicator of patent validity? Make sure 
you----
    Mr. Cain. Thank you, Senator. Certainly. We've very much 
been happy with the PTAB, both as a patent owner and as a 
petitioner. As you said, there's an extreme amount of 
innovation going on at our facilities. Every chip we put out 
must have hundreds, if not thousands, of pieces of innovation 
inside of it, and we do count on the system to protect that 
innovation. We've seen very fair and very reasoned decisions 
coming out of the PTAB as to the validity of those patents.
    Chair Leahy. Do you consider the PTAB judges preferable to 
an ordinary court and jury?
    Mr. Cain. PTAB judges are specially positioned with their 
technical background and the fact that they live and breathe 
patent law every day. It is their bread and butter, novelty and 
non-obviousness. They have a better look at such issues than 
almost anyone in the world.
    Chair Leahy. I had a dear friend of mine, Judge Linn, who 
now has senior status within the Federal circuit, and I 
remember talking to him about some of these patent cases and 
realized this is a specialized area. Let me ask Professor 
Anderson: I've always thought that the PTAB can be a forum 
predictable and fair, but a previous Patent Office Director 
began using the discretion that's in the Patent Act to deny 
review of patents based on the status of ongoing litigation in 
district courts, without regard to the merits. That kind of 
discretionary denial injected uncertainty, I believe, into the 
patent system.
    I understand that just today Director Vidal--and we 
mentioned this--released new guidance cutting back on the 
impact of that policy. I believe the statute should be as 
predictable as possible. Professor, my understanding is 
projected trial dates are inaccurate 94 percent of the time. A 
discretionary denial policy built around this, I feel, would 
cause uncertainty and unpredictability in the patent system. Do 
you agree?
    Professor Anderson. Yes, Chairman, I definitely agree. Even 
worse than that, I think there's some gamesmanship involved in 
where you file your case in order to avoid the PTAB. I 
mentioned there is one district court that has 25 percent of 
patent cases, and one of the appeal to plaintiffs, I gather, is 
that filing in that courtroom makes it less likely that PTAB 
will review your patent, under the Fintiv case. That's why I 
think this act goes a long ways--and the PTO's actions this 
morning go a long ways--toward limiting that discretion.
    Chair Leahy. In fact, going on that, Senator Tillis and I 
wrote to the judicial conference about the ability of patent 
owner plaintiffs not only to pick the venue but to pick the 
precise judges. I think what you're referring to is a district 
court judge's promise to patent owner plaintiffs the trial date 
will be soon enough that they can deny them--discretionary 
denial at the PTAB. Twenty-five percent of the district court 
patent litigation in this whole country is being handled by 
that single judge. Does that skew the patent litigation in this 
country?
    Professor Anderson. Yes. I think having 25 percent of the 
patent cases or any type of case before one judge is not the 
system that the Constitution or Congress designed. I have been 
given that--think having that many cases, that much power in 
one judge's hands is not something we want to encourage, for 
sure.
    Chair Leahy. Thank you. I'm going to go and vote. I want to 
turn it over to Senator Tillis, who knows this Committee inside 
and out. Thank you.
    Senator Tillis [presiding]. Thank you all, again, for being 
here. I worked in research and--oh, and it's especially good to 
see somebody representing SAS here. Jim Goodnight is truly an 
American success story, and SAS is actually a product that I 
had some involvement in the implementation of, back in my days 
at Pricewaterhouse. Speaking of my days at Pricewaterhouse, 
anytime I have a thorny subject that I'm trying to sort out 
with my business clients, I try to get people into the room, 
all of whom I respect and all of whom I want to produce a good 
outcome for the company and now for this bill. I ask them a 
simple question: ``Give me a red, yellow, green.''
    Just going down the line, we'll start with Mr. Cain. Tell 
me what you think is good, that is, green; yellow, needs work; 
red, a problem. Then we'll go down the line. That gives y'all 
time to prepare.
    Mr. Cain. Are you asking what's good in the proposed bill?
    Senator Tillis. Yes. Red, yellow, green. What's good? You 
don't even have to talk about the good. Give me the yellow and 
the red.
    Mr. Cain. The worst case is yellow. This is a move in the 
right direction, across the board. Much more green.
    Senator Tillis. Good. Mr. Wilson.
    Mr. Wilson. Yes, I would say that, you know, the bill has 
not everything we want. You know, if it was our choice, we 
would remove the discretion from the Director and from the PTAB 
not to institute good petitions, but I think there's a fair 
compromise here amongst all of the interests and, like you 
said, putting everyone in the room is probably the best thing 
to do. We support this process. We think, you know, all of the 
compromises that have occurred so far have been positive, and, 
you know, I think yellow is probably where we are across the 
board.
    Senator Tillis. Mr. Giles.
    Mr. Giles. Thank you very much. First, I'd like to express 
our appreciation for being involved in this discussion. It's a 
very worthwhile topic, and we are very dedicated to making sure 
that the patent system is as strong as it possibly can be. It 
is--as you mentioned in your opening remarks, it is 
foundational to the American economy and to innovation 
throughout this country.
    There are--I do believe there has been some compromise in 
this bill. The adoption of the Phillips standard for claim 
construction, to unify that across the district courts and the 
PTAB, I think is a step in the right direction. Overall, we 
look to the provisions that are set out in the STRONGER Patents 
Act that would be a little bit more fair and balanced with the 
patentee in mind. I would say, you know, if you're going to 
force me to say red, yellow, green, I would say it's yellow, 
because I do believe the process is moving, but we still stay 
in line with the STRONGER Patent side.
    Senator Tillis. Mr. Anderson.
    Professor Anderson. Thank you. I would say this is mostly a 
green bill. I am in favor of much of what's in here. I would 
like--Mr. Wilson said--would like to see certain other things 
in the bill that aren't there, but this is a compromise, and I 
recognize that, and this is a good bill, overall.
    Senator Tillis. I just want to restate what I said in the 
opening statement. Before I joined Pricewaterhouse, I worked in 
research and development at Wang Laboratories up in Boston, so 
we were constantly iterating through ideas and refining the 
product. We used a simple--similar methodology for engaging 
stakeholders. Anyone out there who's saying, ``Boy, I wish 
they'd mention that red item,'' I'm telling you, ``Come to the 
table and let us examine a way that we can make this a win-win, 
but we have to make progress.''
    I think with that, I'm particularly interested, after the 
hearing, if you could give some more meat around the bones, on 
the yellows, to get them to green or blue-green. Help us do 
that.
    Give us feedstock for future discussions that we'll have. 
I'm committed to engaging as many people as possible. Hopefully 
we can satisfy some. We won't be able to satisfy all, but 
that's the nature of the work that we do up here. Senator 
Coons.
    Senator Coons. Thank you, Senator Tillis. I'd like to thank 
you and Chairman Leahy for the chance to work with you. I 
appreciate your opening comment that this bill isn't perfect or 
final but the beginning of a process, and I look forward to 
working with you on that.
    I think reforms that position IPRs as an efficient 
alternative to district court litigation, which was really the 
original core intent of the AIA, are needed, but looking over 
this bill, I'm concerned that eliminating the PTO's ability to 
consider co-pending litigation in deciding whether to institute 
is a step in the wrong direction, because I think hard-wiring 
parallel proceedings into the AIA increases costs by 
encouraging duplicative proceedings. In my view, that doesn't 
benefit the public or the patent system. Any statutory 
provision to address serial petitions also has to adequately 
protect versus repeated attacks on potentially valid patents.
    As you know, I'm committed to the STRONGER Patents Act, 
which I've worked on for a number of years, and it would limit 
the ability to obtain multiple and repeated AIA review 
proceedings. I appreciate the efforts of my colleagues and 
friends, Senators Leahy and Cornyn and Tillis, to bring 
together stakeholders and explore these thorny issues and try 
and come to a workable compromise, and I look forward to 
continuing to work with you to strengthen patent quality, the 
patent system, and to come up with a workable solution. Mr. 
Giles, if I could, just at the outset, what are the benefits to 
the public and the patent system of evaluating concerns about 
redundant and duplicative proceedings in deciding whether or 
not to institute an AIA trial?
    Mr. Giles. Thanks very much. The Fintiv doctrine allows the 
PTAB to review whether or not its resources are beneficial to 
the process of resolving the dispute, and if you were to remove 
that--that discretion from the PTAB, you're much more likely to 
have parallel proceedings going on at the same time: one in 
district court and one in the PTAB. The way that the system is 
set out right now, especially if you remove the Fintiv 
discretion on behalf of the PTAB, that will astronomically 
increase costs for small businesses to be able to assert their 
patent rights.
    It's not easy to assert a patent in district court, it's 
not easy to defend a patent at the PTAB, and it's incredibly 
costly to do both. To layer on a burden of having to do that in 
two jurisdictions at the same time is very detrimental, to--
especially to small companies that are trying to assert their 
patent rights.
    Senator Coons. Thank you. Mr. Cain, why don't we pursue 
that line? In terms of the interests of small inventors, in 
particular, what's the benefit to them if accused infringers 
can pursue patentability issues in both an IPR and district 
court proceeding at the same time?
    Mr. Cain. Thank you. Specifically for small inventors? One 
of the really thoughtful sections of this proposed bill calls 
for the IPR defense for such small entities to be handled, to 
be paid for by the PTO itself, which I think is an exceptional 
benefit.
    Senator Coons. How viable do you think that is, and what 
kind of cost do you think that might add up to?
    Mr. Cain. I don't know the statistics, but in my 
experience, it's very--very infrequent that a small or 
individual inventor is not only asserting their patent but is 
brought into the IPR system.
    Senator Coons. If I could, Mr. Wilson, there was a recent 
article in Bloomberg that said Fintiv denials are falling. It 
concluded that review was denied this year in less than 10 
percent of cases in which the board evaluated the Fintiv 
factors, and it cites petitioner stipulations not to raise the 
same patentability issues in litigation if the PTAB institutes. 
Would requiring the so-called Sotera stipulations make IPRs a 
genuine, a valid alternative to litigation?
    Mr. Wilson. I think that one has to remember where we are 
when a PTAB petition has been filed--that we're not just, out 
of the blue, filing a petition; that it's a company, generally, 
who has been sued in district court first. And, so, when you 
say it's a small company, a small inventor, you know--I think, 
you know, you ignore, perhaps, the financing that those 
entities have, either through a, you know, opportunity through 
a law firm or financing through what has been happening more 
and more--are kind of hedge fund money. When you say it's a 
small inventor, you see--I think that's a little bit misstating 
who----
    Senator Coons. This question wasn't, in fact----
    Mr. Wilson [continuing]. It's----
    Senator Coons. My question to you wasn't limited to small 
inventors. It was just about whether or not the Sotera 
stipulations are narrowing the number of Fintiv denials. If 
you'll forgive me, I'm near the end of my time. Mr. Giles, just 
one last question, if I might. What's the largest concern 
you've heard from patent owners that they want to see addressed 
in a PTAB reform bill?
    Mr. Giles. I'd say the largest (audio malfunction) that's 
applied by the PTAB. At the PTAB proceedings, the evidentiary 
level is--or the burden of proof is preponderance of the 
evidence, which is much lower than it is in district court, 
which is clearly convincing evidence. This burden of proof has 
led to the significantly higher rates of invalidation at the 
PTAB than in the district court. The two venues are not on an 
even playing field, and if the PTAB is acting as a alternative, 
faster forum for the district courts, it should also align with 
the burden of proof--should also align there.
    Senator Coons. Thank you. Thank you to all the witnesses. 
Mr. Chairman, Mr. Acting Chairman, thank you.
    Senator Tillis [presiding]. On behalf of the Chair, Senator 
Blackburn.
    Senator Blackburn. Thank you. Thank you to each of you for 
being here today. Mr. Giles, let me come to you. Over the last 
several years, a lot of our innovators in Tennessee, people who 
are smaller innovators or maybe they work for a large 
corporation--what they've seen is Big Tech companies end up 
coming at them on patent infringement. How can we ensure that 
PTAB is not enabling the larger tech companies to steal patents 
from small businesses and innovators?
    Mr. Giles. The analysis that I've seen, the data that I've 
seen, is that the Big Tech companies are actually the biggest 
users of the PTAB process. It was a process that was put in 
place with smaller inventors in mind, but as the use of the 
PTAB has progressed, it's become more and more used by larger 
corporations to actually put pressure on smaller companies to 
try to force them to lower their negotiating position and to 
possibly so that they could acquire them. I think it was Chief 
Judge Michel that said--Judge Michel that called out the fact 
that these large corporations are using the PTAB in order to 
pressure smaller companies with patents to--to not pursue their 
rights, to relinquish their rights to these large corporations 
that then usurp them and not have to pay the royalties.
    Senator Blackburn. Then, the some estimates that have seen 
PTAB invalidates partially or fully, I think, 84 percent of the 
patents it fully adjudicates--so, talk to me a little bit about 
the trend. Does it indicate a problem with the PTO when it is 
originally granting the patents, or why is it that there is a 
change of heart in that process? What could be causing that 
invalidation rate?
    Mr. Giles. The invalidation rate by the PTAB is much higher 
than one would expect, and part of that is because of the 
burden of proof that the PTAB uses. They actually use the same 
burden of proof that's used during the prosecution process, 
when the Patent Office is examining an original application, 
but they use that in a much--the patentee is in a much more 
limited position during the PTAB proceedings and is unable to--
very likely unable to amend the claims. I know that there's one 
amendment allowed, but those are granted very, very rarely. By 
having this much lower burden of proof during the PTAB 
proceedings, it leads to these higher invalidation rates.
    Senator Blackburn. Okay. Then how should that be fixed? 
What are the steps we should take? Because when I'm talking to 
people that are innovating for the auto industry; innovating 
for, you know, electric engines; innovating in the music 
industry for delivery systems; innovating in health IT--they're 
frustrated.
    Mr. Giles. Yes. You know, Qualcomm is a large innovator, as 
well, and we are innovating in many of those same areas. What 
we can do to try to fix that is to--is to equate the burden of 
proof in the PTAB proceedings with that in district court. It 
should be using a clear and convincing evidence standard 
instead of a preponderance of the evidence standard, to more 
align----
    Senator Blackburn. Okay, so then----
    Mr. Giles [continuing]. With----
    Senator Blackburn [continuing]. How does that invalidation 
rate at PTAB compare to the district court?
    Mr. Giles. In the district court--these are rough numbers. 
In district court proceedings, you can expect about 30 percent 
of the claims are invalidated. In the PTAB proceedings, it's at 
least twice that high, if not more.
    Senator Blackburn. Yes. It's higher. Thank you, Mr. 
Chairman.
    Senator Tillis. On behalf of the Chair, Senator Cruz.
    Senator Cruz. Thank you, Mr. Chairman, and welcome to each 
of the witnesses. Our Founders included in the United States 
Constitution the protection not just of property rights but 
also specifically of intellectual property rights. Article I, 
Section 8 makes clear Congress's duty to ensure the exclusive 
right of inventors. In fact, the word ``right'' only appears in 
the Constitution in two places--first, and forgettably, in a 
subject heading describing the rights of Members of Congress. 
The second place it appears is in the context of patents, 
specifically that the Constitution guarantees the rights of 
authors and inventors to secure the benefits of their writings 
and inventions.
    I have some concerns when those rights, which often amount 
to a person's livelihood, can be stripped away by unaccountable 
bureaucrats, not elected nor appointed by the President nor 
confirmed by Congress. I know that my colleagues have been 
working hard on the PTAB Reform Act, and I applaud them for 
their efforts. I'm sure they would agree that their bill is an 
important one.
    As such, I would hope they would likewise agree that any 
bill that would significantly alter the patent landscape, 
affecting billions and billions of dollars a year and 
implicating America's national competitiveness and maybe even 
our national security, should be entitled to a full and fair 
markup hearing, not a truncated, lightly attended hearing, but 
a full markup hearing by the Full Committee.
    When the stakes are so high as they are in the context of 
billion-dollar patents, the cost of unintended consequences 
could be disastrous, not just for inventors and companies, but 
for America. I would urge my colleagues on the Judiciary 
Committee, particular Chairman Durbin and Ranking Member 
Grassley, to schedule a markup hearing on this bill for the 
Full Committee.
    I do have significant concerns with PTAB itself. Its 
origins are somewhat suspect. Google, which enjoyed an 
amazingly cozy relationship with the Obama White House, sent 
their deputy counsel and their head of patent strategy, 
Michelle Lee, to head the PTO and establish PTAB. 
Interestingly, PTAB became a very friendly forum for Google and 
other Big Tech firms to challenge the rights of inventors. For 
example, in 2020, PTAB found 84 percent of the patents it fully 
reviewed to be invalid, and many patent owners that 
successfully defend their patents against Big Tech in district 
court are immediately dragged before PTAB, where they have to 
defend it anew.
    Big Tech obviously loves PTAB. Eighteen of the top 20 
filers in PTAB are Big Tech. Out of the PTAB petitions filed by 
the top 10 petitioners during 2021, Samsung, Apple, Google, 
Intel, and Microsoft collectively accounted for 81 percent of 
all such petitions. It isn't just Big Tech that loves PTAB. 
China has also found PTAB is a useful tool toward invalidating 
American patents. Chinese companies such as ZTE and Huawei are 
prolific petitioners at PTAB.
    Again, the risks of getting this wrong are severe. If this 
bill should move forward, let's do so under the full light of 
day, subject to a full and fair markup hearing. The American 
people deserve no less.
    Mr. Giles, I want to ask you a couple of specific 
questions. Number one, do you agree with what I just said, 
which is the consequences of changing this system are 
significant and should be considered carefully for unintended 
consequences?
    Mr. Giles. Yes, I fully agree with that. The consequences 
concerning that system are real, and they could have a 
tremendous effect on the United States economy and national 
security.
    Senator Cruz. You also urge the passage of the STRONGER 
Patents Act. In your judgment, how would this act ensure fair 
proceedings?
    Mr. Giles. There are many ways that are listed in the----
    Senator Cruz. Apparently the patent on the microphone is 
expired.
    [Laughter.]
    Mr. Giles. We can work on the communication technology, 
here. Okay. There are a number of things laid out in the 
STRONGER Patents Act. One is increasing the burden of proof for 
PTAB proceedings. Another is limiting the number of proceedings 
that a petitioner could bring. You can't bring subsequent 
proceedings. You can't bring multiple proceedings at the PTAB 
to attack--serially attack, and to continue to attack, patent 
rights and put smaller companies at a disadvantage. There are a 
whole number of other protections laid out in the STRONGER 
Patents Act.
    Senator Cruz. Thank you.
    Chair Leahy [presiding]. Mr. Tillis.
    Senator Tillis. Thank you all. I just had a few things. I 
did ask you to go back and give me some more substance behind 
things that you would consider to be areas where you have 
concern: my yellow. Really quickly, rapid-fire, what are your 
thoughts regarding the introduced bill's ban on institution of 
serial petitions? We'll start with Mr. Anderson.
    Professor Anderson. That, for me, is a yellow. I'm not a 
big fan of reducing the opportunities to challenge patents, 
just like you--in district court, there's no limitation on how 
often a patent can be defended. I don't think you should have 
the same--I think the same thing should apply to the PTAB.
    Senator Tillis. Mr. Giles.
    Mr. Giles. I think that provision goes part of the way but 
doesn't go the whole way. I actually do think that petitioners 
should be required to limit the number of petitions that they 
are able to file altogether, not only serially, but in 
parallel. Right now, the bill seems to open up the door to 
parallel petitions, which I will say is actually very similar 
to the process that is undertaken in district courts. District 
courts always require the parties to limit the amount of claims 
that they bring, limit the amount of references that they use, 
limit the scope of the invalidity proceedings in district 
court. It should be more align--along those lines in the PTAB, 
as well.
    Senator Tillis. Mr. Wilson.
    Mr. Wilson. Yes. We're yellow on that. I think the thing 
that it forgets is that the reason that we're at the PTAB is 
that cases--patent infringement cases have been filed against 
us. If we are, you know, honest about it, we want to be able to 
file our petitions. You know, the public is benefited by having 
the petitions filed because, you know, they're often 
successful, and the patents that shouldn't have been issued in 
the first place are not going to be the subject of litigation 
any longer.
    Senator Tillis. Mr. Cain.
    Mr. Cain. Thank you. As a patent owner and as a petitioner, 
we find that it strikes a good balance as a reasonable 
compromise for the patent system.
    Senator Tillis. Okay. In the interest of time, I'm not 
going to take you--I wanted to get to some of the ones that 
hopefully we can get more feedback on. Things that I'd be 
interested in, if you could provide us with feedback after the 
Committee: the codification of the Phillips standard, the 
funding of small and micro-entities who face challenges at the 
PTAB, and I've got a couple of other ones in there. If you 
could drill down, I just really want your candid assessment of 
where we are, so that we can work together to make the bill 
better. Thank you, Mr. Chair.
    Chair Leahy. Thank you, Senator Tillis. I'm looking at 
PTAB, and some of the biggest beneficiaries, of course, we know 
are small businesses, entrepreneurs. I worry about the specious 
patent assertions. A patent, if you have one, is not something 
that constitutionally can never be touched or looked at. I 
think of some of the baseless patents: sunglasses strap, a 
crustless peanut-butter-and-jelly sandwich, or the method of 
swinging in a swing. You know, they're ludicrous.
    PTAB proceedings are a lot less expensive than litigation. 
I'm trying to figure out how to get the cost paid in full, 
including attorney's fees, for small business patent owners. 
PTAB's designed for small businesses and entrepreneurs, and I 
want to make sure it works for them. Let me ask a couple 
questions.
    Mr. Wilson, we've heard that discretionary denials of PTAB 
proceedings create uncertainty and unpredictability. I'm told 
that under a policy that requires filing PTAB proceedings long 
before the 1-year time bar, PTAB review becomes less useful 
from a business perspective. An accused infringer doesn't know 
what patent claims will be asserted and has to file an 
overbroad petition to the PTAB. The accused infringer does not 
have time to do a thorough prior art search. The accused 
infringer has no way to know whether the Patent Office will 
deem the petition too late because of their amorphous public 
guidelines saying when it's too late.
    After the PTAB's discretionary denial policy was announced 
in the Fintiv case, what challenges has your business faced in 
the PTAB process, either in deciding to go to PTAB or the 
process of the proceedings? How's that for an open question?
    Mr. Wilson. Thank you, Mr. Chairman. I think we are--have 
to be cognizant always that the way that you get to the PTAB is 
because someone has filed a lawsuit against you, and that's, in 
my experience, never a good place to be. You have to analyze 
whether or not to spend the money to prepare a petition very 
quickly, with a lot of effort, and you have to go through that 
process while evaluating, ``Well, maybe going to court is 
better,'' or, ``Maybe we ought to settle the case.'' There's a 
lot of factors up in the air while you're trying to determine 
whether or not to go to the PTAB. It's a very expensive 
process, either way, but I have to say, the PTAB is a much more 
cost-effective way to get to a decision, in my experience, than 
patent litigation.
    If we're going to go outside of the statute that we all 
agreed to, the American Invents Act, and come up with 
additional considerations that the Patent Office is going to 
kind of unilaterally create and determine that, you know, we 
may now kind of randomly not accept a patent petition, a PTAB 
petition, that would've otherwise been acceptable, I think that 
is not doing us a service. I think that we should go back to 
the system that the American Invents Act was there--was created 
to do.
    Let me just remind my colleagues about a couple of things. 
One is, during the AIA negotiations we had small business--
retailers, banking, auto makers, restaurateur--all here 
participating in the process. They're not here this time, and I 
think it's because the PTAB--the American Invents Act did its 
job. We shouldn't necessarily change that by the Patent Office 
alone.
    Chair Leahy. As a patent owner, you'd rather have your 
patent's validity adjudicated by the PTAB with analysis?
    Mr. Wilson. Yes, Mr. Chairman, absolutely. I know when I'm 
thinking of asserting one of my patents against another company 
that I am likely to have that patent reviewed at the Patent 
Office through the PTAB process. It is part of the analysis 
that goes into determining whether or not to bring a case in 
the first place, what patents to bring, what claims to assert. 
All of those things are things that we can adequately, you 
know, take into consideration before we determine to file suit.
    Chair Leahy. Sort of following on this, Mr. Giles, I know 
the Innovation Alliance has had some concerns, but you've also 
provided a lot of feedback during the drafting of the PTAB. I 
know that I can speak for Senator Tillis and Senator Cornyn and 
myself: We've appreciated it, and we've addressed many, if not 
all, the grounds of your input, and so we've tried in earnest 
to address them. We recognize concerns about inventors being 
harassed with serial petitions. Isn't it helpful that our bill 
ensures that inventors are immune from successive petitions by 
the same and closely related parties?
    Mr. Giles. Yes, it is helpful that the bill moves in that 
direction. It would be better if it went a few steps further, 
as outlined in the STRONGER Patents Act, which limits the 
number of petitions that can be filed altogether.
    Chair Leahy. I appreciate that. We retain the Patent 
Office's discretion to decline most proceedings. Do you support 
the Patent Office having discretion to deny institution?
    Mr. Giles. Yes. I do think--others have commented on the 
Fintiv situation, and I do think that the Patent Office should 
still be afforded the ability to deny institution based on the 
proceedings in a district court proceeding. Many of the--many 
of the issues that people have raised have been worked out by 
the Patent Office over the past few years. People are citing 
to--trial dates moving, and the data that underlies that is 
actually trial dates under the--under the COVID restrictions 
that were happening at the same time, so I don't think it gives 
a very accurate depiction of when a trial date actually stays. 
The Director actually also came out today and cleared up the 
guidance--even though it was actually in the--in some of the 
orders by the PTAB judges already, but cleared up the guidance 
that----
    Chair Leahy. Do you agree with what the Director came out 
with today?
    Mr. Giles. I haven't had a chance to completely analyze it. 
It just came out.
    Chair Leahy. Okay. Let me make that as a question for the 
record. If you could respond, let us know whether you agree or 
disagree. If you disagree, why? Okay?
    Mr. Giles. Sure.
    Chair Leahy. You'll have plenty of time.
    Mr. Giles. Oh, yes. Yes.
    Chair Leahy. We made PTAB affordable for small business 
owners. We covered their expenses, including attorney's fees. 
Isn't it helpful that our legislation makes the process 
completely free for small business inventors?
    Mr. Giles. Is that to me, sir?
    Chair Leahy. Sure.
    Mr. Giles. Okay. I've looked over the provisions of the 
small business support portion of it. I would actually welcome 
a much more full dialog on that portion of it, because I do 
think there are some nuances to it, where it may not get to the 
point--to the point where it's actually supporting a lot of the 
small businesses.
    Chair Leahy. Thank you. My last question is, Mr. Cain, I'm 
committed--and I know Senator Tillis is--to transparency 
throughout Government. At PTAB, the judge issues decisions, as 
you know, but we don't know if behind the scenes the Patent 
Office Director or others acting on the Director's behalf are 
influencing PTAB judges to decide certain cases in certain 
ways. Would it be beneficial to our patent system if the public 
knows when decisions are made by the Director rather than the 
independent PTAB judges and what the Director's reasoning might 
be?
    Mr. Cain. Thank you, Senator. It certainly would be very 
valuable to the public, patent owners, and petitioners. You 
want--in any area of the law, you want certainty and 
predictability, and the more transparent you can be, the less 
appearance of impropriety is likely.
    Chair Leahy. Thank you. I have a number of letters of 
support from different groups, and if we have no objection, 
I'll enter them into the record.
    [The information appears as a submission for the record.]
    Chair Leahy. Shall we keep the record open for 7 days? 
We'll keep the record open for 7 days, and if people have 
things either from your answers that you want to add to or 
change, feel free. Do you have anything further?
    Senator Tillis. Yes. Mr. Chair, the record will be open for 
7 days. The dialog's going to continue beyond that.
    Chair Leahy. Oh, my, that's for sure.
    Senator Tillis. I just want to be absolutely certain----
    Chair Leahy. That's called a New England understatement, 
even though it's North Carolina.
    Senator Tillis. You know, I just want to make it clear that 
we're in the business of debate and compromise. That's what we 
do. Senator Leahy and I do that every day. You can't address a 
concern that you don't know. I appreciate people coming 
forward, stating their opinions. My office is committed to 
listening to them. The only thing I don't tolerate are guerilla 
tactics to try and undermine what we're trying to do here. I 
don't expect any of you to be in that category because you're 
here testifying before us, but I would encourage anyone else 
who's watching what we're doing here to engage. Thank you, Mr. 
Chair.
    Chair Leahy. Thank you, and we stand in recess.
    [Whereupon, at 3:59 p.m., the hearing was adjourned.]
    [Additional material submitted for the record follows.]

                            A P P E N D I X

Miscellaneous submissions:

 Armitage, Robert A., Letter, June 20, 2022.......................   181

 Association for Accessible Medicines (AAM) Statement.............   142

 Centripetal Networks, Inc., v. Cisco Systems, Inc................   109

 Conservatives for Property Rights, June 22, 2022.................   151

 Eagle Forum Education & Legal Defense Fund, June 22, 2022........   157

 Ehrlich, Marc and Underweiser, Marian, Statement, June 22, 2022..   167

 Engine, Act/The App Association, Consumer Technology Association 
    and Developers Alliance Letter, June 22, 2022.................   136

 Medtronic Letter in Support for S. 4417, June 22, 2022...........   160

 Mossoff, Adam, Statement, June 22, 2022..........................   143

 Public Interest Patent Law Institute Letter, June 29, 2022.......   162

 Quality Patents Coalition (QPC) Joint Trades Letter, June 27, 
    2022..........................................................   177

 Sauer, Charlie, Statement, June 22, 2022.........................   139

 United for Patent Reform (UFPR), June 21, 2022...................   216
 
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