February 19, 2015
Rep. Darrell Issa (R-CA)
Chairman, Subcommittee on Courts, Intellectual Property and the Internet
U.S House of Representatives
2269 Rayburn House Office Building
Washington, DC 20515
Dear Mr. Chairman,
Thank you once again for allowing the National Venture Capital Association’s (NVCA)
outside counsel to testify before the Subcommittee on Courts, Intellectual Property and the
Internet to share NVCA’s views on patent litigation reform. We ask that the following
comments be submitted into the hearing record from the hearing on Thursday, February 12, 2015
at which Robert Taylor, Esq. testified on behalf of NVCA.
During the hearing, several members of the subcommittee asked Mr. Taylor a series of
questions related to NVCA’s membership and the positions of individual members on specific
patent reform legislative measures. To be clear, Mr. Taylor was present at the hearing to testify
as NVCA’s outside counsel on behalf of the broader industry, not as a representative of
individual NVCA member firms. I believe it’s important to clarify that point for the record
under the belief that this line of questioning may have led some to mistakenly believe that
NVCA’s membership is not fully aligned with NVCA’s position on patent litigation reform.
As you know, it is not uncommon for large companies to belong to multiple trade
associations, especially those that are active across multiple industries. Trade associations
typically do not operate by unanimous consent but rather a general consensus approach when
determining the appropriate position the organization will present to policymakers on behalf of
its membership and broader industry. As the voice of the venture capital community, NVCA
advocates for public policies that encourage innovation and reward long-term investment. With
a diverse cross-section of nearly 400 member firms, ranging from small traditional venture
capital firms to large corporate venture groups that invest across multiple industries and sectors,
NVCA balances the views of its entire membership when deciding on a policy position.
Because venture capitalists have differing investment focuses—and as a result differing
opinions of the right balance between the protection of plaintiffs and defendants in patent
cases—reaching our position as an organization on the issue of patent reform was a long and
judicious process. Our guiding principle throughout was based on the fact that venture capital

 investing, at its core, is driven by a risk-reward assessment. That is, the greater the perceived
risk of an investment, the greater must be the projected return to justify moving forward.
With that in mind, NVCA’s overarching position on patent litigation reform is that any
changes need to be considered carefully and approached in a measured manner, because almost
any change is likely to alter the risk-reward equation in ways that affect individual companies
and industries differently. That’s been our position since reaching a consensus amongst our
members last year and was the position Mr. Taylor accurately presented to the committee when
he testified on behalf of NVCA last week.
While we may have some members who disagree in some respects with the positions of
the organization, as President and CEO of NVCA, I can assure you that the views expressed by
Mr. Taylor are consistent with NVCA’s position on the issue of patent litigation reform
generally, and more specifically, related to H.R. 9, the Innovation Act.
UC Hastings-NVCA Survey on Patent Assertion
During the hearing, several members of the subcommittee cited a survey conducted by
UC Hastings and NVCA on patent assertion, and attempted to use the survey results to draw an
inaccurate conclusion that NVCA’s position on patent litigation reform is not a reflection of the
views of its membership.
To clarify, on October 28, 2013, NVCA and Robin Feldman, Professor of Law and
Director of the Institute for Innovation Law at University of California Hastings, released the
findings of the survey, “Patent Demands & Startup Companies: The View from the Venture
Capital Community.” Among the many findings, the survey found that patent assertions impact
various industry sectors unevenly, defending against patent assertions is costly, patent demands
often impact business operations significantly and most VCs surveyed do not perceive patent
assertion as a positive influence in the startup community.
In an October 28, 2013 press release announcing the survey results, then NVCA Senior
Vice President of Federal Policy and Political Advocacy Jennifer Dowling said, “This study
confirms what we’ve been hearing anecdotally from our members: the current patent system is
working well for some portfolio companies, but not for others. The trend line, however, is not
heading in the right direction. As more startups are targeted, more resources are devoted to
litigation rather than to innovation. Balancing the need for reform with the need to maintain
strong protection for patent-dependent start-ups will be a critical challenge.”
As was the case then and remains the case now, the survey findings do not indicate a
difference of opinion between NVCA’s position on patent litigation reform and the issue of
patent assertions. NVCA believes that abuses with patent assertions is a problem in need of
attention; however, we also believe that any attempt to reform the system must maintain strong
patent enforcement mechanisms for small startups that depend on them for their survival.

 The Path Forward on Patent Litigation Reform
As was the case with H.R. 3309, which passed the House during the 113th Congress,
NVCA is concerned that H.R. 9, if enacted as written, will have a chilling effect on investment in
patent-intensive companies and it will make it far more difficult, risky and expensive for
emerging companies to enforce their patents, an essential part of the patent right. Further, H.R. 9
will also raise the cost and risk confronting smaller companies trying to defend against patent
litigation brought by their larger competitors.
Any congressional effort to address abusive patent litigation practices that has the effect
of making patent enforcement more risky, difficult, and expensive will have a dramatic impact
on small businesses and startups. Universities, medical device manufacturers, technology
companies, and businesses of all shapes and sizes, from startups to Fortune 500 companies, are
critically dependent on patents to protect investments of time, money, and other resources from
both competition and imitation here and abroad. Especially for the thousands of venture-backed
startup companies across a broad spectrum of industries, preservation of their ability to obtain
and enforce patents is fundamental to survival.
It is critical for Congress to take a measured and targeted approach in determining what
steps need to be taken to curb abusive patent enforcement and improve the patent system for the
innovation ecosystem without undermining the legitimate assertion of the rights of patent
owners. We believe consensus can be achieved on a range of issues, including enhancing
transparency of patent ownership and enforcement, curtailing unfair or deceptive practices in the
indiscriminate sending of patent licensing or settlement demand letters, and proper funding of the
Patent Office to improve the overall quality of patents.
As a result of recent Supreme Court decisions and the Leahy-Smith America Invents Act
passed in 2011, the patent landscape looks far different today than it did five years ago or even
last year. New patent filings in 2014 dropped 18 percent from 2013, as the full impact of judicial
decisions and administrative developments have only began to be felt. We believe it is important
for Congress to consider this changing landscape and target reforms that address issues that are
not already being addressed, including providing the Federal Trade Commission (FTC) the legal
authority to challenge bad faith or deceitful demand letters sent out on a mass scale as well as
providing full protection of user fees paid to the U.S. Patent and Trademark Office.
Conclusion
In spite of our concerns with H.R. 9, we strongly support the intent and stated purpose of
patent litigation reform. We look forward to working with you and your colleagues to improve
H.R. 9 as the process moves forward so that it protects and America’s small startups and
preserves the broader entrepreneurial ecosystem.
Bobby Franklin

President & CEO