The Small Practicing Entity Bears the Brunt of USPTO IPR Challenge Procedures
|Written by Steve Moore
Posted: December 19, 2013 @ 8:00 am
NOTE: This article is written by Steven J. Moore and with the assistance of Alan Gardner and Marvin Wachs, also of the Kelley Drye & Warren Patent Department.
One of our prior studies, set forth in America Invents Act: A Boon for David or Goliath?, found an over whelming majority of patents that were being challenged in inter partes reviews around enactment of the procedure were patents that originated from small entities. We suggested in this paper that the number of challenges against large entity patents might rise in the future as small entities overcame their sticker shock to USPTO fees for filing an IPR and prosecuting the same.
Our newest data suggests that in fact a larger percentage of patents now being challenged through the IPR procedure are large entity patents, with nearly 44% of all patents on which petitions were filed against are patents being held by large entities. While this is a significant increase from the earliest days of IPR where nearly 90% of all patent challenges were waged against patent owned by small entities, small entities are still carrying a massively disproportionate load of the challenges particularly when one takes into account that at any time they comprise only 20% of all the patents in force, meaning that a small entity can still expect to have one of its patent challenged far more often than a large entity via the IPR procedure. Interestingly, we were wrong in expecting more IPR challenges to be coming from the small entity patent filers as they overcame the sticker shock of the USPTO fees. Indeed, the increase in IPR’s against patents held by large entities appears to be almost entirely due to large entities challenging other large entities, with little increased participation by small entities in the IPR process being noted.
The analysis of IPRs which we set forth herein, comports with our prior study, in adding to growing data that the patent system now appears significantly stacked against small entity participation:
(1) Large entities continue to file far more petitions (69 % of total petitions filed) for IPR than small entities (31 % of total petitions filed).
(2) Small entity patents bear the greatest brunt of IPR petitions waged against patents, holding nearly 56% of all the patents challenged in via IPR petition, while petition challenges directed against large entity patents accounts for only 44 % of all IPR petitions filed, even though large entities hold 4 out of every 5 patents in force at any time.
(3) Petitions filed by small entities against large entity patents account for only 13.9% of all IPR petitions filed, while small entities file 17.3% of all IPR petitions against patents of other small entities. The increase in filing against large entity patent holders observed since inception of the IPR proceedings is almost entirely due to large entity petitioners who are filing more petitions against other large entities petitioners. Such large entity v. large entity petitions now account for 30.2% of all IPR petitions filed.
(4) Global 2000+ companies (The Fortune 2000 largest public companies plus the Forbes 250 largest private companies) account for nearly 73% of all large entity IPR petitions being filed.
(5) Small entity petitioners do not fare as well in the IPR process as their large entity petitioner cohorts, in that while they comprise 31% of all IPR petitions, they comprise only 18.0% of all petitions reaching the institution phase.
(6) Small entity petitioners who challenge Global 2000+ entity patents may not fare as well in the IPR process as their large entity cohorts. Small entity challenges of Global 2000+ patents reaching the institution phase is only 2.88%, while small entity IPR challenges against Global 2000+ held patents account for 5.94% of all IPR petitions filed.
(7) The Global 2000+ companies are responsible for nearly 55% of all IPR petitions reaching the institution phase.
(8) Patent Owners challenged by IPR are predominately practicing entities (PEs), with 74% of all the patents challenged by IPR being assigned to practicing entities.
(9) Large non-practicing entities are the assignees of only 13% of the patents challenged via IPR, while small non-practicing entities comprise 12% of all patents challenged via IPR. The patents of small non-practicing entities challenged are predominantly patents held by independent inventors and their alter ego companies. Small practicing entities are the assignees of 43% of all patents challenged via IPR, while large practicing entities are the assignees of 31% of all the patents challenged via IPR.
(10) Patents of non-practicing entities challenged by IPR are nearly equally divided between patents held by large entities and small entities, as set forth below. However, as adjudicated by the percent of all petitions filed against practicing entities, the total number of petitions filed against large practicing entities is smaller (42%) than the total number of petitions being filed against small practicing entities (58%).
(11) When the original patent owner is taken into consideration, the numbers of practicing entities rises, since nearly 50% of the challenged patents held by non-practicing entities where originally owned by practicing entities, such as Sony Corporation and Rockwell International, to name just two.
(12) Of the small entity non-practicing patent owners challenged by IPR’s, 36% of the patents challenged where obtained from practicing entities.
(13) Overwhelmingly though, most of the patents challenged by IPR against large non-practicing entity patent owners, where obtained from practicing entities.
(14) The true representation of challenges to patents in IPRs is biased in not looking at whether the patent was developed by a practicing entity when one looks the practicing entity patents being challenged vs. the non-practicing entity patents being challenged. The figures are much different when looking at the patent itself. IPR challenges involving a patent originally assigned to an NPE (including independent inventors and their alter ego companies) are relatively few (12%) of all IPR challenges, while patents that are presently or originally assigned to a practicing entity comprise the subject matter of the vast majority of IPR challenges (87%).
There is no doubt some in Congress will push through further changes to the patent law, this year or by early next year, while wrapping themselves in an anti-troll banner. Our papers in toto show that the last round of changes to the patent law (the AIA) greatly benefited large practicing entities, particularly the Global 2000+ companies, at the expense of small practicing entities, such as, emerging companies, universities, small and medium sized companies, and research based entities even though such changes were said to be made for their benefit. Given the difficulty that we, and other groups, have found in corroborating the story of the large “tribe of trolls” who are said to assert garbage patents against the innocent, using publicly available unbiased databases that have recently become available, we believe any immediate changes to the patent law without further detailed investigation simply is not wise. We fear that further changes will turn the patent law further against small entities participating in the patent system. The question may soon be whether small and medium size companies, research based entities, emerging companies and the small independent inventor shall soon find the patent system so costly, and so unfriendly to them, that they will find the grant of a patent to be commensurate with placing an albatross about their necks.
About the Author
Steve J. Moore is a prominent litigator having been involved in numerous high-profile cases involving Hatch-Waxman challenges, and patent infringement actions in the software, electrical, chemical, biotechnology, and medical device arenas. He is probably best known as lead counsel in the representation of Dr. Tafas in the suit of Tafas v. Dudas, for which he won the 2009 award for Patent Case of the Year (Managing Intellectual Property), and his client won the prestigious Jefferson Medal for exceptional contribution to the intellectual property field (NJIPLA 2010). He also has participated in numerous amicus briefs including one filed in the Supreme Court in the Microsoft v. I4I case, arguing for the prevailing side.