Tyranny of the patent microcosm continues to slip away

Nice try, patent zealots, but patent quality matters more than your 'protection' money

Summary: The Leahy-Smith America Invents Act (AIA), which gave powers to the Patent Trial and Appeal Board (PTAB) through inter partes reviews (IPRs), has no imminent threats, not potent ones anyway

THE Patent Trial and Appeal Board (PTAB) is a subject we get to revisit every weekend. A lot is happening there. Technology companies like PTAB, whereas law firms are trying to destroy PTAB, which really says a lot about whose interests are served by improved patent quality.

A few days ago the patent trolls' lobby expressed its interest in an old proposal for slicing USPTO. By "independent" USPTO they just mean a private USPTO, i.e. a for-profit monopoly whose goal would be to maximise profit, potentially by lowering patent quality (a la EPO).

Quoting IAM:

The USPTO is one of the few federal agencies that actually makes a profit from its operations, versus the majority of other US federal agencies which require taxpayer dollars to carry out their delegated functions. At present, the USPTO collects filing fees from applicants for patents and trademarks, as well as additional fees for many other services. These fees cover the USPTO's operations, including the Trademark Trial and Appeal Board (TTAB) and the Patent Trial and Appeal Board (PTAB). Historically, however, the federal government has diverted excess fees collected by the USPTO away from that office and into unrelated government programmes – some estimates put the figure at more than $1 billion diverted from the USPTO since the early 1990s alone. With the enactment of the America Invents Act in 2011, the Patent and Trademark Fee Reserve Fund was created to hold all patent and trademark fees collected by the USPTO, with all allocations from the reserve fund to be determined by Congress under the USPTO's annual appropriation amount.

Things as they stand at the moment aren't pleasing to those who became accustomed to a venue-shifting, litigant-friendly system (favouring plaintiffs with patents that lack merit). Loopholes are being closed, patent scope is being tightened, trolls are turned away, and thousands of patents are being formally invalidated by PTAB.

Recently, some patent extremists went to the USPTO to literally burn patents there. They also attacked -- viciously and repeatedly -- the Director of the USPTO until she resigned. How low will they sink? How poor-quality a bunch of patents are they striving to protect? A couple of days ago Ian McCarthy wrote about "consumer generated intellectual property" -- a bizarre term which is 4 offensive words (and lies) in a row. Incredible what these people can come up with! Some of them actually want computer-generated patents to be examined and accepted by computer algorithms alone. Maybe they want billions if not trillions of patents, rendering the entire purpose (and manageability) of the Office moot. A patent system without restrictions on quality would be ignored; quantity should barely even be a parameter to strive for. At all!

PTAB's job is, quite generally, to ensure patent quality is preserved if not improved. So who would oppose it? The answer is obvious: those whose patents are of no value (and know their patents lack any value). They don't want any legal scrutiny. By avoiding actual litigation (initiated by themselves) they can dodge such scrutiny, but PTAB is different. Their patents are constantly under threat even if they initiate no legal action but only threaten vulnerable companies.

A Web site of patent extremists has just spoken to a firm favoured among patent trolls. It's about bashing PTAB. That's their goal. On another day that site showed that PTAB rules/procedures got altered, albeit only after repeated pressure. To quote:

The Patent Trial and Appeal Board has revised the “Standard Operating Procedure 9 (SOP9)” for cases remanded from the Federal Circuit, including requiring panels to meet with the PTAB chief, deputy chief or a delegate to discuss remanded cases

The Patent Trial and Appeal Board (PTAB) has revised the "Standard Operating Procedure 9 (SOP9)" directed to procedures for cases remanded from the Federal Circuit.

That does not seem to have changed anything so substantial; patent extremists are trying hard to sabotage PTAB and help trolls with shoddy patents. Will they succeed? We doubt it. Have they made any progress? Not so far. PTAB is still going strong, but that should not be taken for granted.

United for Patent Reform wrote the other day some words from the pro-PTAB group, High Tech Inventors Alliance. Its head, John Thorne, told the panel: “For those who are not aware of what #IPR is, it’s an opportunity for @uspto to correct its own mistakes.”

Yes, exactly.

Nothing wrong with that, right?

If the USPTO does its job (examination) properly, PTAB will not be necessary.

Yesterday (yes, a Saturday!) Watchtroll went on another PTAB rant, stating the obvious in an attempt to demonise those who dispute validity of patents, e.g./notably PTAB. Alluding a lot to i4i vs Microsoft, Watchtroll said this:

Microsoft argued that the standard for proving a patent invalid should be by a preponderance of the evidence because the PTO did not consider the software in question when it issued the patent. According to Microsoft, the patent on which i4i relies is invalid because of prior art using the technology before the application was filed with the Patent and Trademark Office (PTO). Microsoft questioned why the “clear and convincing evidence” standard should apply even for issues that the Patent and Trademark Office (PTO) did consider. Furthermore, Microsoft argued that the “clear and convincing evidence” standard is an unjust creation of the Federal Circuit.

i4i Limited Partnership maintained that Microsoft had infringed on a patent i4i received in 1998, US Patent No. 5,787,449. This patent makes clear that i4i claimed a particular “method and system for querying a structured document stored in its native format in a database, where the structured document includes a plurality of nodes that form a hierarchical node tree…” While the language may appear inscrutable to a layman, essentially i4i maintained that the XML-editing features in Microsoft Word infringed on i4i’s patent. In response to Microsoft’s argument, i4i argued that it did not sell a product which served as prior art and that only the product’s source code could meet the “clear and convincing evidence” standard. Since the source code was no longer available, this was a convenient interpretation for i4i. In addition, i4i strongly argued that the Court should use the “clear and convincing evidence” standard instead of the “by a preponderance of the evidence” standard supported by Microsoft.

We wrote several dozens of posts about this case. For Watchtroll it's just another cheap excuse to claim that when it comes to patents the "Burden is on the Challenger" (to quote the headline). This wasn't the only Watchtroll attack on PTAB lately. Watchtroll also spoke to patent maximalists in an effort to tilt a sense of expectation in Oil States, basically bashing PTAB ahead of a Supreme Court decision that can determine its fate. Such is the nature of that lobbying site.

For those who rely on the Supreme Court to stop PTAB, forget about it... it won't happen. We have already explained the whys many times before. Some have attempted other tricks/shams/scams for bypassing PTAB, but loopholes like these will be no more (pretty soon). As one legal blog put it the other day, "Legislation to Curtail Sovereign Immunity in IPR May Be On the Way" (as reported elsewhere as well). To quote the background and the latest outcome:

A Native American tribe’s recent deal to obtain several pharmaceutical patents and seek dismissal of pending IPRs on the basis of sovereign immunity has piqued the public’s interest in sovereign immunity to IPR. The same tribe also recently asserted several other patents against Microsoft and Amazon, and may assert sovereign immunity from IPR there too. Prompted by the tribe’s actions, a subcommittee of the House Judiciary Committee held a hearing on what Congress can and should do about it. Although much of the hearing focused on what many perceive as the problem of tribal sovereign immunity in IPR—not the use of sovereign immunity to IPR by state universities—many of the proposed reforms would also target state universities. Whether any of these reforms will be enacted remains to be seen, but there are reasons to doubt their constitutionality.

[...]

The hearing also explored whether statutory changes could be made to permit IPR to go forward without participation of sovereign patent owners that refuse to waive their immunity. The hearing offered few details about how such changes would be implemented, or whether, for example, such a proceeding would resemble ex parte reexamination—a proceeding already available to challengers. Further, the hearing did not address how such a proceeding would address the Supreme Court’s ruling that sovereign immunity bars an agency from adjudicating a private party’s complaint against a sovereign, even where participation by the sovereign is optional.[3]

This hearing suggested that some in Congress are interested in curtailing the use of sovereign immunity in IPR, but whether state universities will be targeted in ways that raise constitutional concerns remains unclear. While state immunity from IPR provides a privilege that private citizens do not enjoy, that is not new, as states enjoy immunity from numerous types of actions.[4] As the Supreme Court has explained, states’ unique constitutional role “sets them apart” for special treatment.[5] Thus, a one-size-fits-all reform to IPR that addresses the concerns of some about tribal sovereign immunity, but also seeks to limit states’ rights, may not be constitutionally possible.

The above spoke about ex parte reexamination -- a subject also explored earlier this month in another legal blog.

Overall, what we are seeing here is a clear trend in favour of PTAB, which is growing each year and becoming more effective at tackling a broader range of patents, setting precedents in the process. Don't expect PTAB to vanish any time soon. The "USPTO Finalizes Rule for Privileged Communications in Trials Before the PTAB," said another blog earlier this month, showing that the USPTO too recognises the long-term operation of the board. To quote:

The Leahy-Smith America Invents Act (“AIA”) provided for trials before the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office (“USPTO”) in inter partes reviews, post-grant reviews, the transitional program for covered business method patents, and derivation proceedings. While patent agents are registered to practice before the USPTO, they are not attorneys. Therefore, it has been unclear whether attorney-client privilege prevents discovery in PTAB proceedings of communications between these non-attorney agents and their clients. Addressing this ambiguity, the USPTO just issued a final rule for trial practice before the PTAB that explicitly protects communications between patent agents or foreign patent practitioners and their clients. The amended rule becomes effective December 7, 2017.

That's just three weeks from now.

In an effort to perhaps find something negative, patent maximalists are now measuring rates of rather irrelevant things. Instead of measuring the number of IPRs or successful invalidation they look at number of "stays" (in the legal sense). "Overall success rates of motions to stay district court litigation pending review at the Patent Trial and Appeal Board have dropped noticeably in the past fiscal year," it says.

Well, district court litigation is relatively low profile and the number or proportion of "stays" does not say anything so interesting. It's almost irrelevant. It's like the 'other' "IPR" (the propaganda term that is meant to mislead, which these same patent maximalists use in relation to India). The interesting figures show that PTAB activity is growing or is at least stable (after year-to-year growth for half a decade).

“The flood of bad patents fueled an explosion of wasteful litigation in the tech industry," United for Patent Reform quoted the other day, "brought by patent trolls that exist for no reason other than to make money filing lawsuits. #IPR has been a step toward reining in that problem...”

It has been happening more and more over time. Demand for PTAB has grown.

As we noted last week, the USPTO succumbed to bullying/pressure from patent extremists and the patent trolls' lobby, at least judging by the fact that it made PTAB less affordable. The patent maximalists wrote about that a few days later. dubbing it a "72% IPR request fee change". To quote:

The USPTO has released a final rule detailing fee increases to go into effect in January. The combined cost of an inter partes review request and institution at the Patent Trial and Appeal Board will go up to $30,500

See how they're trying to make PTAB less accessible, especially for small and vulnerable companies? Not good. If they cannot stop PTAB using Native American tribes and Justices, then maybe they can just price PTAB out of reach. There's also the STRONGER [sic] Patents Act, which is an abomination that is going nowhere (so far). Rachel Wolbers mentioned it the other day. "This radical piece of legislation would leave startups without any of the tools they currently have to protect themselves from patent trolls," she said.

Here's more:

The real reason clever patent trolls are moving their patents to Indian tribes is to avoid the USPTO’s Inter Partes Review process, which provides startups with a quick and effective way to invalidate bad patents. Weakening the IPR process would cause the most damage to America’s startup ecosystem and we should not upend the good work done by the USPTO to improve patent quality.

Another potential threat to the current patent system would be the “STRONGER Patents Act” introduced by Sens. Chris Coons (D-Del.) and Tom Cotton (R-Ark.) in June. The bill would completely gut the IPR system and would overturn decades of Supreme Court precedent on patents. This radical piece of legislation would leave startups without any of the tools they currently have to protect themselves from patent trolls. Furthermore, it would make investing in a technology startup much riskier, deterring investment in a sector of the economy that has been steadily growing for a decade.

IAM does a rather poor job hiding the fact that it's a think tank for patent radicals and trolls. Watch who it gave a platform to (in its own event): "One of our keynote speakers was Senator Chris Coons, a member of the Senate Judiciary Committee, the author of the STRONGER Patents Act and one of the relatively few US legislators who demonstrates a keen understanding of the importance of strong IP rights to an innovation economy. In an engaging speech he called for Congress to take action to strengthen patent rights in the US. Here’s a part of what he had to say:"

Where were the engineers? Totally absent from these stacked panels and lobbying events, as usual.

Various 'Conservative' sites have also been lying about the STRONGER [sic] Patents Act, by which they attempt to destroy patent reform. The National Center's Jeff Stier came up with this misleading headline under a month ago and here is what Heartland wrote some days ago. Notice who wrote it: "Seton Motley is the president of Less Government, a DC-based non-profit organization dedicated to reducing the power of government and protecting the First Amendment from governmental assault."

So they basically stand for reckless markets in which patent extortion would be 'normalised' and not subjected to government intervention.

Going back to IAM, watch what it wrote when PTAB was invoked and ITC then got involved:

Interestingly, the separator technology on the line in this case, which LG Chem calls Safety Reinforced Separator (SRS), has previously been an IP moneymaker for LG Chem. It was able to license the technology to UBE Maxell, a Japanese joint venture, back in 2014 (not before UBE Maxell tried and failed to IPR one of the patents now being asserted against Amperex).

LG Chem is not the only company seeking to license-out battery-related technology. UBE itself assigned two US patents for a “Cell electrode sheet with displaced electrode depolarizing mixes” to a Japanese licensing firm called Ryujin Patent & Licensing in 2014. One of them is now facing an IPR filed by Dell, HP, Asus and LG Chem, indicating the range of companies it may be approaching as potential licensees.

This is an example where PTAB impedes actions not just by patent trolls with software patents but also large companies which try to tax everything. This kind of case is the reason we see growing support for PTAB even from large technology companies. As Washington is generally dominated by those companies and their lobbyists, expect PTAB to remain in tact (albeit, perhaps, more accessible to large and wealthy corporations). ⬆