Board’s ‘Death Squad’ approach aided by legislation that hurts inventors.
The America Invents Act is a horribly misnamed piece of legislation that leads the masses to believe it has been good for innovation, perhaps even supported by inventors. But when the AIA was being debated in Congress, independent inventors were not even given a seat at the table or invited to testify at any hearings.
Perhaps the most insidious piece of the AIA was the creation of three new post-grant procedures capable of stripping patent rights from patent owners. These lost patent rights are statutorily recognized to be property rights. Nevertheless, these property rights are being stripped by an arm of the Executive Branch of government instead of an Article III federal court. Worse, these property rights are being stripped by the same agency that examined the patents in the first place—the United States Patent and Trademark Office. The patent office has become a bit like an
arms dealer: It sells patent rights to innovators who struggle for many years and pay tens of thousands of dollars to get patents, only to turn around and for tens of thousands of dollars more
sell the right to challengers to take out those patent rights.
These post-grant procedures radically favor large multinational infringers by shifting the burden to the party least able to withstand that burden. For example, the most common of these procedures, inter partes review (IPR), initially left fewer than 5 percent of claims unscathed.
Though the patent office likes to tout statistics that assert most patent claims challenged in IPR are not invalidated, those statistics are not credible. When reporting its statistics, the office ignores the reality that once an IPR is actually instituted, few claims are actually adjudicated to be patentable. The office is also grossly misleading when it characterizes claims not subject to a final written decision as “remaining patentable.”
The USPTO and those who say IPR isn’t all that bad seem to like to use the accompanying graphic. The red shows the number of claims found unpatentable in a final written IPR decision; the orange shows the number of claims canceled or disclaimed by the patent owner; and the green, a tiny fraction of the overall number of claims, shows those patent claims that were actually adjudicated to be patentable by the Patent Trial and Appeal Board.
The patent office conveniently includes the large purple chunk of claims and refers to them as “claims remaining patentable and not subject to a final written decision.” The office can do this because the PTAB doesn’t have to issue decisions that address all claims it agrees to consider. Technically those claims remain patentable, but those claims have not been determined to be patentable by the PTAB in an IPR. The PTAB simply ignored those claims when writing its final IPR decision—astonishingly, something it is allowed to do, and quite frequently. It is hardly a ringing endorsement of the continued viability of those claims moving forward, particularly given that the PTAB leaves standing an initiation decision that determined that those claims are likely invalid. Thus, it is rather disingenuous to rely on those ignored claims to suggest IPR outcomes are not devastating to patent owners.
It is obviously impossible to license or enforce claims declared invalid by the PTAB, but it should be equally obvious that it is impossible to license or enforce a patent claim that was initially declared to be likely invalid and then later ignored by the PTAB in a final written decision. If those creating the patent office statistics don’t understand how thoroughly compromised those initiated and ignored claims are, they should spend half a minute in the real-world shoes of patent owners.
Another problem with the office’s statistics is that they do not keep stats patent by patent, but rather claim by claim. If the office collected data based on the patents affected, it would be close to the 90 percent range or higher. At issue here is the fact that every patent has multiple claims, some with 20-plus claims being challenged in each IPR. So if only one key claim were knocked out and declared invalid by the PTAB, that would be counted as an overwhelming patent owner success—when in fact, it could be a disastrous loss
The old shell game
Let’s use an example to illustrate the ridiculous nature of USPTO statistics. Let’s say the patent in question has 20 claims, three independent and 17 dependent. An IPR is filed, challenging all
20 claims. The PTAB decides to institute on 17 of those claims and declines institution on the three narrowest claims, which are not particularly useful anyway for licensing or enforcement.
Let’s further say that the PTAB ruled only the three independent claims to be unpatentable. Finally, let’s say the PTAB didn’t even address the other 14 dependent claims that were instituted.
The patent office would score this as a massive victory for the patent owner. Losing only three claims means that only 15 percent of the claims were declared unpatentable, while 85 percent
of the patent claims remained patentable. The story that isn’t told, however, is that 15 percent of the claims are deemed commercially non-viable, and 70 percent of the claims were initially
determined to be likely unpatentable. That doesn’t sound like a victory of any kind for the patent owner, does it?
In effect, what the office makes seem like a resounding victory for the patent owner becomes a complete loss when the lens of the real world is applied. The useful claims have been lost and 70 percent of the claims have a negative patentability initiation decision hanging over their head that remains unresolved. This patent is now dead. It has been defeated regardless of the parlor
tricks and phony statistics reported by the patent office.
And things are worse than they initially seem. Although technically, those 17 claims remain patentable (i.e., the 14 claims ignored by the PTAB in its final written decision plus the three not instituted), they remain patentable as being subject to challenge without any estoppel. That means those claims, even if one or more of them were commercially useful, could be challenged again and again and again until there is a final written decision. Only with a final written decision would there be any estoppel that could be applied to prevent harassment of the patent owner, and then it would only apply to the party that lost and those in privy with the party that lost. In other words, patent owners are subjected to repeated post-grant challenges on the same prior art against the same patents and claims within those patents.
IPR kill rates are devastating. Calling the PTAB a “death squad” is today as appropriate as it was when that moniker was first given by then-Chief Judge Randall Rader of the United States Court of Appeals for the Federal Circuit and warmly embraced by then-PTAB Chief Judge Smith, who admitted that if the PTAB were not acting as a death squad it would not be doing its job. It’s astonishing he would say that, given PTAB judges are administrative patent judges—the patent office equivalent of an administrative law judge.
Judges are supposed to be neutral, but that has never seemed to be the PTAB approach. Recently I heard a story told by a former PTAB judge who explained that institution of IPR challenges is far more likely when there are multiple petitions filed against the same patent, because it makes it easier for PTAB judges to meet their production quota.
I don’t know the proper name for the legislation, but it certainly isn’t the America Invents Act. All the AIA does is make it harder for innovators, weakens the patent system and pushes inventors
to keep their inventions as trade secrets hidden from society. The AIA has been and will continue to be a disaster of our own making until it is either repealed or significantly revised to the point
where it bears little resemblance to the bill that was signed into law by President Obama five years ago this September.