What are Legitimate Patent Rights and Who are Legitimate Patent Owners?

By Gene Quinn
March 15, 2016

Legitimate definitionMichelle Lee, Director of the United States Patent and Trademark Office, recently spoke with Politico at SxSW, answering questions about fostering innovation and the various patent reform proposals circulating Capitol Hill. “We should be open to everything that can help curtail abusive patent litigation while also enabling holders of legitimate patent rights to enforce their patent rights as appropriate,” said Lee. One of those things Lee thinks is appropriate to consider is venue reform, which is code for making it more difficult, if not impossible, for patent owners to file patent infringement lawsuits in the Eastern District of Texas.

For me, talk of “legitimate patent rights” is like fingers on the chalkboard.

Use of this phrase strikes me as indefensible because by its very nature it implies picking winners and losers after the Patent Office has already issued a patent and taken money from the inventor. Or worse, it reinforces the two-class patent system that we increasingly see today, between those that “have” the resources to attack or defend patents and the “have nots” (everyone else). Once a patent issues it is a private property right. Period. By definition a patent is legitimate because it exists!

 

Patents are Presumed Legitimate

First, patents that have been issued by the Patent Office are supposed to be presumed valid (see 35 U.S.C. 282), or at least that is what the law says if we are actually going to concern ourselves with legal niceties like statutory reality. Of course, I do realize that the Patent Office refuses to presume that issued patents are valid, which again is like fingers on a chalkboard. What is the point in having a patent examination process, or a Patent Office, if the government agency that is responsible for issuing the patents in the first place won’t stand behind its own work product?

Not to put too fine a point on it, but there is something fundamentally wrong with the administration of a Patent Office that takes many years, sometimes over a decade, to issue a patent at such great cost – both in terms of USPTO fees and attorney fees. All the while during that long wait, that patent application is put through an often unfair process, where poorly reasoned rejections have become the norm in some technical areas. This process, for which there seems to be no accountability, costs the patent applicant many tens of thousands of dollars, and for what? Waiting for the applicant at the end is a refusal to presume the patent issued is valid by the agency that just spent a decade verifying that the claims were valid! On what planet does that make any sense?

What’s worse, once the applicant achieves a patent, if that patent is commercially viable and being infringed by those who took rather than licensed or engineered around, the patent owner will be sucked back into the Patent Office for an extremely costly defense of the rights the Office granted. This mandatory invitation to defend the patent in a post grant proceeding will force the patent owner to now spend many hundreds of thousands of dollars.

Tens of thousands to obtain a patent that the agency granting the patent won’t even presume is valid only to get the right to spend hundreds of thousands of dollars to defend the patent in a horribly one sided proceeding that simply does not provide even the illusion of due process for the patent owner? I understand that Congress mandated that post grant proceedings happen with extraordinary speed, but no where in the statute does the speed required of the Patent Office give them the right to strip a vested property right that is supposed to be presumed valid without any procedural safeguards.

Perhaps the conversation shouldn’t be about “legitimate patent rights,” but rather about the legitimacy of a Patent Office that charges people to get delayed rights and then sells the privilege of challenging those rights to others for a hefty fee. I’ve said it before and I’ll say it again, the post grant proceedings were ill conceived from the beginning, Congress made a grave error of judgment creating post grant challenges, and the Patent Office has been put in a horrible position where they clearly have a conflict of interest.

 

Who is a Legitimate Patent Owner?

As dismissive of the statutory presumption of validity as it is, talk of legitimate patent rights is not nearly as revolting as talk of so-called legitimate patent owners. When those pushing patent reform talk about legitimate patent owners they are by necessary implication saying there are illegitimate patent owners. Of course, they never say that, and they never define who those illegitimate patent owners are, but if certain owners are legitimate that must mean that other owners are illegitimate.

Sadly, this talk of legitimate patent owners is done to continue to vilify those who are deemed unworthy of being entitled to the full rights and privileges of ownership. To say this creates a dangerous slippery slope doesn’t even begin to scratch the surface.

In his prepared remarks at a Senate Judiciary hearing on patent reform on March 18, 2015, Senator Patrick Leahy (D-VT) recognized that balance is needed to ensure that innovators are able to enforce legitimate patent rights. In part Senator Leahy said:

Many have raised concerns that, if taken too far, litigation reforms like those in the House-passed Innovation Act would harm legitimate patent holders when they enforce their rights in court.

Obviously, Senator Leahy or whoever wrote his prepared remarks must believe there are illegitimate patent holders who presumably should not be entitled to enforce their rights in court. But exactly how do you decide who is legitimate and who is illegitimate? Exactly who are the illegitimate patent holders that should be appropriately harmed by new patent legislation? If patents are a property right (see 35 U.S.C. 261), which they are, who owns the right should be completely irrelevant. The question ought to be whether the property rights are being trampled, not whether the patent owner is somehow worthy, or more worthy compared to others.

The problem with this language is it become infectious. Even those who are advocates for a strong patent system start to use this language, which gives up the linguistic high ground and often loses the debate then and there. For example, in How the Unintended Consequences of the Innovation Act Could Undermine Patent Protection, PhRMA repeatedly talks about “legitimate patent owners’” and “legitimate patent holders.” In one place they write:

[T]he proposed legislation is so broad that legitimate patent holders, including those in the biopharmaceutical R&D ecosystem like large companies, startups, and universities, could find themselves in the crosshairs.

Certainly large research and development companies, startups, and universities, are legitimate patent owners. But what about independent inventors, small businesses, or even small or mid-sized research and development companies, aren’t they legitimate patent owners too?

Would anyone ever talk about “legitimate real estate owners” versus “illegitimate real estate owners”? If investors in real estate were deemed illegitimate because they weren’t the one’s who built the house and were denied access to the courts so they couldn’t enforce their rights the very fabric of ownership would come under attack in the United States.

It would be ridiculous to say, suggest or even think that real estate investors or landlords shouldn’t have legitimate ownership rights, yet those who own and finance patents, or those who engage in patent licensing, are somehow illegitimate abusers of the patent system that must be punished? Talk about absurdity meeting the preposterous!

 

The Problem is Judicial Inefficiency, Not Patents

We need to stop talking about legitimate patent rights and legitimate patent owners. Patents are presumed valid, period. Whether patent owners are nice people or good corporate citizens doesn’t matter, period. Litigation abuse is the problem and the solutions need to focus on litigation and pre-litigation abuses, period. The abuse that needs to be stopped, and which can be stopped tomorrow, relates to those who seek to exploit judicial inefficiencies to shake down defendants, or those they threaten with lawsuits. This is not a patent problem, period. Reforming the patent system won’t’ make the problem of litigation abuse go away, it will only kill the patent system for everyone and push the abusers into another area where they can exploit judicial inefficiencies in order to shake down defendants.

Talk of legitimate patent rights and legitimate patent owners does nothing other than needlessly polarize the industry on an issue that everyone should agree on. Shakedowns are bad, which should be self-evident to practically everyone. But to solve the problem of shakedowns you don’t need patent reform, and you most certainly don’t need to vilify patent owners or ignore the statutory presumption of validity.

UPDATED: 1:05pm ET on March 15, 2016

The Author

Gene Quinn

Gene Quinn is a patent attorney and the founder and Editor of IPWatchdog.com. He is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene has worked with independent inventors and start-up businesses in a variety of different technology fields, but specializes in software, systems and electronics. is admitted to practice law in New Hampshire, is a Registered Patent Attorney licensed to practice before the United States Patent Office and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 25 Comments comments. Join the discussion.

  1. Michael March 15, 2016 8:21 am

    Hello Gene,

    Great article.

    Lee’s comments confirm the following as the current state of the US patent system.

    My patent rights are legitimate. Your patent rights are not. And the party with the larger bank account and/or more powerful political connections wins.

    Truly, a patent system by and for the patent reformers.

    The most disturbing part of all this is that the reformers believe the system needs more rigging in their favor.

    Michael

  2. Anastasia Peshmerga March 15, 2016 9:45 am

    It is particularly galling for the Goddess of the Patent Office to use the phrase “legitimate patent rights,” necessarily implying that her minions are spewing illegitimate patent rights.

    This notion that big companies and big money are legitimate and others are not is exactly why we are seeing so much anger in the political world. If citizens had reliable patent rights to use to take on Google, or GE or 3M or whatever, they wouldn’t need Bernie Sanders have the government tax the money away from them to give out as freebies.

  3. Simon Elliott March 15, 2016 11:05 am

    Agreed that there is a strange irony having the head of the PTO complain about “illegitimate” patents that her agency issued.

  4. Anon2 March 15, 2016 11:18 am

    Good observations and well said.

  5. valuationguy March 15, 2016 11:31 am

    Amen!!

  6. David March 15, 2016 12:27 pm

    Gene – why didn’t your clients submit an amicus brief in support of Cooper?

  7. JNG March 15, 2016 1:11 pm

    As you aptly point out Gene, its already a two-tiered system that favors big companies. The little guy spends a decade and a tidy sum getting the patent, then the PTO lets the big guy kill it off in a year in a kangaroo forum in exchange for a bigger sum. Its a huge scam. The suggestion a few weeks ago from M Lee that the “success” of IPRs was a “surprise” is completely disingenuous as the PTO ramped up capacity by more than a hundred new judges anticipating the popularity of these death squads.

  8. BR March 15, 2016 2:07 pm

    Gene:

    Nice article and spot on. One point to add: As you have emphasized previously, the improper statement, “. . .holder of legitimate patent rights” also appears to negatively include those patent owners bringing suit for less than the cost of litigation, even if the patent is valid and infringed. Even if the royalty owed is $112.37, they are still entitled to it. Many large companies bank on the cost of litigation outweighing damages to dissuade enforcement while refusing to negotiate in good faith.

  9. Curious March 15, 2016 2:19 pm

    My patent rights are legitimate. Your patent rights are not. And the party with the larger bank account and/or more powerful political connections wins.
    That pretty much sums things up. The golden rule — those who have the gold get to make the rules.

  10. Edward Heller March 15, 2016 2:56 pm

    Gene, you might consider that the old English system of granting trade monopoly patents would be the kind of patents that might be considered illegitimate. They were outlawed by the Statute of Monopolies within the borders of England. The Colonies revolted largely because of the monopoly of the British East Indies Company.

    Legitimate patent are patents on inventions. They are the property of their owners not by act of Congress, but because the inventor has paid for exclusive rights by disclosing his invention to the public.

    It is the attitude expressed by Lee, Leahy, and the anti-patent lobby composed of companies who largely do not need and do not want a patent system at all, that grates. I wholeheartedly agree with you.

  11. angry dude March 15, 2016 4:15 pm

    It’s even worse for some of us: I applied for my US patent back in 2002 and it was published in 2004 for everyone in the world to see, and finally granted in 2006 … shortly after EBay was decided (and at that point I immediately knew that we were screwed…)

    Had I known better I would avoid patent route altogether – it would save me tons of effort, time, money and I could still keep this “thing” a trade secret and wouldn’t be so angry today

  12. Anon March 15, 2016 9:27 pm

    Mr. Heller,

    One again you are over doing your importation of English law.

    Business method patents have nothing to do with trade monopoly rights, as those were trades on existing items – existing methods.

    Your tendency to misunderstand and mis-portray the statutory category of method is well known. TO put it to you bluntly and directly, the statutory category of method is NOT limited to methods of arriving at the items in the “hard goods” categories.

    Your words will fall short until you recognize this limitation of yours.

  13. aldo March 16, 2016 9:11 am

    thanks gene – i believe you are correct, the current system works as a proxy for those with the deepest pockets & this is very bad – like a cancer on the social fabric that created the usa.

    i believe part of the problem is that we have entered into a reality that makes it too hard for the pto as it currently operates to determine the boundaries of discovery & this is feeding bad market behavior.

    as we have arrived at a place where patent value is greatly diminished, i believe we should consider a registry system where all parties can have claimed rights – much like jefferson did many years ago. but for this to work we must have a quick (several week) process at the pto that allows parties in disagreement to present arguments for a pto resolution in a process that does not favor deep pocketed parties – think jury. doing this uses market feedback to properly allocate pto resources when needed and could restore integrity to patents & the marketplace…

    in 1793 when information traveled at the speed of foot, hoof & sail it took several weeks and the equivalent of $100 to issue a patent. today in a world of instant global communication it takes years and tens of thousands of dollars. this disparity itself is creating problems and undermining marketplace integrity.

    we are at a social decision point – more of the same deception or simplify & clean up the lack of integrity to continue on a path of growth to a more perfect future… we decide.

  14. Mark Hrozenchik March 16, 2016 10:34 am

    Forum shopping into the Eastern District of Texas has led to ridiculous lawsuits and outcomes. Parties should not be dragged into a money making forum simply on the basis of where they sold something, when there are so many legitimate reasons to have the cases heard elsewhere. Making a court system to overwhelmingly favorable to one party (patentees) over defendants has led to this inequity. It’s more than time for a change. Fairness demands it.

  15. Gene Quinn March 16, 2016 11:47 am

    Mark-

    You say: “Making a court system to overwhelmingly favorable to one party (patentees) over defendants has led to this inequity.”

    Are you as concerned about a court system that everywhere else is overwhelmingly favorable to defendants and unfair to patent owners? Talk about inequity!

    I’m not saying that having a single Judge in charge of 15-20% of the patent litigations filed is what the system should be, but complaining about the EDTX being overwhelmingly favorable to patent owners and not similarly complaining about practically every other district court being overwhelmingly favorable to infringers suggests a certain amount of blindness to the issues.

  16. Edward Heller March 16, 2016 12:32 pm

    Mark, let us be clear here. The ED Tex. is on to the games litigation counsel play, especially defense counsel. They limit law and motion and drive cases to trial. That, IMHO, is what courts should do.

  17. David March 16, 2016 3:28 pm

    Gene,

    As you note, what the PTO is doing is sort of like selling stock to investors one day and then the next day shorting it.

    But from the point of view of the average citizen who has lost confidence in the patent system — due to PTO inefficiency and delays, MPHJ demand letters, litigation abuse, and of course Google & Cisco propaganda — maybe it’s not entirely illegitimate to talk of “legitimate” patent owners.

    As I’ve said before, if you ask any 10 people on the street for the first word that comes to mind when they hear the word “patents,” 9 of them nowadays will say “litigation,” not “invention.”

    That’s just the reality right now, and we need to fix it. We need to restore faith in the patent system.

  18. Inventor0875 March 16, 2016 9:36 pm

    Does “presumed to be valid” mean:

    To the extent possible, interpret the claim wording (in light of the specification/drawings) such that the claims are valid.

    Do not use a broadest reasonable interpretation (BRI), to later invent a broader interpretation of issued claims so that the claims will be invalid.

  19. Anon March 17, 2016 6:34 am

    Inventor0875,

    Presumed to be valid also impacts the quantum of proof in determining whether the item can be found to be not valid – see Microsoft v i4i.

  20. step back March 17, 2016 8:36 am

    “Presumed to be illegitimate” applies to SCOTUS and the CAFC since they consistently violate the US Constitution. (Promote the progress of science and the useful arts by securing …)

    Why start the conversation in a frame where the inventor is presumed to be “illegitimate”? Why not presume that the leaf-plucking, abstract vision seeing, corporate personhood worshiping black robes are “illegitimate”? That’s the truethier truth.

  21. Joachim Martillo March 17, 2016 10:25 am

    Claiming that certain patent holders are in some way illegitimate is a way of undermining economic inclusiveness.

    In Why Nations FailDaron Acemo?lu and James A. Robinson describe how Venice destroyed itself by eliminating the commenda limited liability partnership, which was the basis of Venetian economic inclusiveness and the economic creative destruction that made Venice rich and powerful.

    HOW VENICE BECAME A MUSEUM

    These [Venetian] political reforms led to a further series of institutional innovations: in law, the creation of independent magistrates, courts, a court of appeals, and new private contract and bankruptcy laws. These new Venetian economic institutions allowed the creation of new legal business forms and new types of contracts. There was rapid financial innovation, and we see the beginnings of modern banking around this time in Venice. The dynamic moving Venice toward fully inclusive institutions looked unstoppable.

    But there was a tension in all this. Economic growth supported by the inclusive Venetian institutions was accompanied by creative destruction. Each new wave of enterprising young men who became rich via the commenda or other similar economic institutions tended to reduce the profits and economic success of established elites. And they did not just reduce their profits; they also challenged their political power. Thus there was always a temptation, if they could get away with it, for the existing elites sitting in the Great Council to close down the system to these new people.

    At the Great Council’s inception, membership was determined each year. As we saw, at the end of the year, four electors were randomly chosen to nominate a hundred members for the next year, who were automatically selected. On October 3, 1286, a proposal was made to the Great Council that the rules be amended so that nominations had to be confirmed by a majority in the Council of Forty, which was tightly controlled by elite families. This would have given this elite veto power over new nominations to the council, something they previously had not had. The proposal was defeated. On October 5, 1286, another proposal was put forth; this time it passed. From then on there was to be automatic confirmation of a person if his fathers and grandfathers had served on the council. Otherwise, confirmation was required by the Ducal Council. On October 17 another change in the rules was passed stipulating that an appointment to the Great Council must be approved by the Council of Forty, the doge, and the Ducal Council.

    The debates and constitutional amendments of 1286 presaged La Serrata (“The Closure”) of Venice. In February 1297, it was decided that if you had been a member of the Great Council in the previous four years, you received automatic nomination and approval. New nominations now had to be approved by the Council of Forty, but with only twelve votes. After September 11, 1298, current members and their families no longer needed confirmation. The Great Council was now effectively sealed to outsiders, and the initial incumbents had become a hereditary aristocracy. The seal on this came in 1315, with the Libro d’Oro, or “Gold Book,” which was an official registry of the Venetian nobility.

    Those outside this nascent nobility did not let their powers erode without a struggle. Political tensions mounted steadily in Venice between 1297 and 1315.

    The Great Council partially responded by making itself bigger. In an attempt to co-opt its most vocal opponents, it grew from 450 to 1,500. This expansion was complemented by repression. A police force was introduced for the first time in 1310, and there was a steady growth in domestic coercion, undoubtedly as a way of solidifying the new political order.

    Having implemented a political Serrata, the Great Council then moved to adopt an economic Serrata. The switch toward extractive political institutions was now being followed by a move toward extractive economic institutions. Most important, they banned the use of commenda contracts, one of the great institutional innovations that had made Venice rich. This shouldn’t be a surprise: the commenda benefited new merchants, and now the established elite was trying to exclude them. This was just one step toward more extractive economic institutions. Another step came when, starting in 1314, the Venetian state began to take over and nationalize trade. It organized state galleys to engage in trade and, from 1324 on, began to charge individuals high levels of taxes if they wanted to engage in trade. Long-distance trade became the preserve of the nobility. This was the beginning of the end of Venetian prosperity. With the main lines of business monopolized by the increasingly narrow elite, the decline was under way. Venice appeared to have been on the brink of becoming the world’s first inclusive society, but it fell to a coup. Political and economic institutions became more extractive, and Venice began to experience economic decline. By 1500 the population had shrunk to one hundred thousand. Between 1550 and 1300, when the population of Europe rapidly expanded, that of Venice contracted.

    Today the only economy Venice has, apart from a bit of fishing, is tourism.

    Instead of pioneering trade routes and economic institutions, Venetians make pizza and ice cream and blow colored glass for hordes of foreigners. The tourists come to see the pre-Serrata wonders of Venice, such as the Doge’s Palace and the lions of St. Mark’s Cathedral, which were looted from Byzantium when Venice ruled the Mediterranean. Venice went from economic powerhouse to museum.

    [Why Nations Fail, pp. 147-149.]

  22. Edward Heller March 17, 2016 3:51 pm

    Joachim, re: Venice. Just payback for 1204.

    “The Latin soldiery subjected the greatest city in Europe to an indescribable sack. For three days they murdered, raped, looted and destroyed on a scale which even the ancient Vandals and Goths would have found unbelievable. Constantinople had become a veritable museum of ancient and Byzantine art, an emporium of such incredible wealth that the Latins were astounded at the riches they found. Though the Venetians had an appreciation for the art which they discovered (they were themselves semi-Byzantines) and saved much of it, the French and others destroyed indiscriminately, halting to refresh themselves with wine, violation of nuns, and murder of Orthodox clerics. The Crusaders vented their hatred for the Greeks most spectacularly in the desecration of the greatest Church in Christendom. They smashed the silver iconostasis, the icons and the holy books of Hagia Sophia, and seated upon the patriarchal throne a whore who sang coarse songs as they drank wine from the Church’s holy vessels. The estrangement of East and West, which had proceeded over the centuries, culminated in the horrible massacre that accompanied the conquest of Constantinople. The Greeks were convinced that even the Turks, had they taken the city, would not have been as cruel as the Latin Christians. The defeat of Byzantium, already in a state of decline, accelerated political degeneration so that the Byzantines eventually became an easy prey to the Turks. The Fourth Crusade and the crusading movement generally thus resulted, ultimately, in the victory of Islam, a result which was of course the exact opposite of its original intention.”

    https://en.wikipedia.org/wiki/Fourth_Crusade

  23. Anon March 18, 2016 9:41 am

    I must wholeheartedly and passionately disagree with a possible conclusion from David’s post at 9:

    As I’ve said before, if you ask any 10 people on the street for the first word that comes to mind when they hear the word “patents,” 9 of them nowadays will say “litigation,” not “invention.”

    That’s just the reality right now, and we need to fix it. We need to restore faith in the patent system.

    By this I mean that the “reality” accepted is NOT the reality as painted by those who may be “winning” the sound byte war. We (the royal we) must not accept the propaganda and the view that the propaganda is “reality,” even if the current perception aligns with that propaganda.

    What we must accept is that there is a war for the mindset and that currently the anti-patent propaganda side is in fact winning that war.

    This does not mean by any stretch of the imagination that we merely accept “as reality” the narratives that the anti-patent side are pushing must be taken as a given. Those narratives must be challenged. This does mean that we (again, the Royal we) must be cognizant of the forms, avenues, players (friends, enemies, and even frenemies), tactics, and the efficiencies of such in the battle for the minds (of politicians, judges, juries, and of the populace at large).

    It is indeed “telling” that litigation is what is purported to come to mind when one realizes that in the bigger picture, when incidence of litigation is normed against the universe of possible claims for which litigation can be brought (and noting even that litigation is a provided for path for conflict resolution and should not be viewed negatively in its own right), that the normed amount of “litigation” is less than 1/2 % of all possible patent claims and that the rate of this normed litigation has been dropping for years (any “increase” in pure un-normed litigation numbers has not kept pace with the increase in patent claims).

    Narratives that seek desired ends based on philosophy and not reflecting the underlying reality must be challenged.

  24. step back March 18, 2016 1:30 pm

    Anon @23 writes: “there is a war for the mindset”

    That is true in every realm of the kingdom, not just in the patent patch.

    There are people who study and practice the dark arts of mind manipulation (framing, mixed messages, rhetoric, appealing logical fallacies, etc.) and there are people –often the techie types– who are blind to its presence.

    The reason that the bushy haired bullies and the patent pirateers win is because they understand the mob and the weak minded appeals that work to the crowd.

    Rationality? Facts? Details? Don’t bore us with those.

  25. Anon March 18, 2016 5:13 pm

    step back,

    The reason for my post (and I dare say that you agree with the fundamentals – and I with you with your shared fundamentals – as to the fact that there are those who do practice those dark arts) is that we (both the we that are techie types, and those who may not be) simply cannot let those who would wage war do so with impunity.

    I would be further so bold as to state that to a certain degree, reliance on rationality, facts and details will NOT win us that war. It is (and can be) a difficult lesson to learn and understand, being creatures of rationality, facts and details. But the ration of my boldness is that human nature is more than just the rational. The fact is that human nature, being what it is does not always rely on facts. The details that bear paying attention to are those that you yourself share: there are those that study and practice the dark arts, and in a sound byte war, we need to engage as well with sound bytes, emotion, and appeal to more than just the rational.

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