Patently Surreal: The Obama Strategic Plan on IP Enforcement

By Gene Quinn
December 15, 2016

Political double speakEarlier this week the Obama Administration released a joint strategic plan on intellectual property enforcement for fiscal years 2017 through 2019. The title of the report is Supporting Innovation, Creativity & Enterprise.

It is almost impossible to believe this report is the work product of the Obama Administration. The section on patents, which begins on page 134, reads like a cross between a Monty Python skit and a Soviet era, propaganda laden news report. Perhaps the Obama Administration is trying to rewrite history and brainwash the entire industry into believing that President Obama has been a tremendous defender of the U.S. patent system.

Simply stated, the Obama Administration can write all they want about the importance of the patent system and how patents are critically important for innovation, but the reality is that the future of American innovation has been forfeited (or at least heavily mortgaged) by a calculated, intentional, and willful dismantling of the U.S. patent system for the benefit a handful of politically well connected companies that helped President Obama get elected and then re-elected.

The beginning of the section on patents reads:

Patent-intensive industries are a driving force in the U.S. economy. According to a recent Department of Commerce report, the value added by patent-intensive industries in 2014 was $881 billion, which was 5.1 percent of U.S. gross domestic product. Supporting efficient and predictable patent protection policies that promote investments in research and development is key to the continued growth of innovative economies.

Yes, patent-intensive industries are responsible for a great deal of economic activity in the United States that is certainly true. It is also absolutely true that efficient and predictable patent protection policies promote investment and are responsible for the growth of innovative economies. Why then did President Obama spend so much of his time in office interjecting uncertainty into the patent system? Why was the destruction of the U.S. patent system an agenda item for the Obama Administration?

Let’s walk through some of the patent highlights of the Obama years. This is by no means an exhaustive summary, but a report that touts the importance of efficient and predictable patent protection demands serious question when the Obama Administration spent most of the past 8 years intentionally seeking to change U.S. patent law, weaken patent rights and ultimately destroy the U.S. patent system to the point where China is now a far more favorable jurisdiction for patent protection than is the United States.

Recalcitrant Examiners

The only thing that is certain in the U.S. patent system is that the law is hopelessly uncertain! There are numerous patent examiners working for the U.S. Patent and Trademark Office that refuse to issue patents and openly tell patent practitioners and innovators that they will never issue a patent, haven’t issued a patent in years and nothing they say will matter. These recalcitrant patent examiners proudly proclaim that they ignore the rulings from the United States Court of Appeals for the Federal Circuit, and when they are reversed on appeal by the Patent Trial and Appeal Board rather than issuing a patent they reopen prosecution (see here and here) to continue to harass applicants. This is not made up, this is actually happening.

On top of this, the Patent Office is unable to control patent examiners, who are engaging in widespread time and abuse fraud according to the Commerce Department Inspector General. And one particular examiner who was caught submitting over 700 hours of fraudulent time wasn’t fired or reprimanded, but instead left the Office so that he didn’t receive a negative performance review. These stories about examiner abuses and the inability of the Office to do anything about it sound like fake news, but sadly they are true.

To call the American patent protection process arbitrary and capricious is insulting to those things in our society that are merely arbitrary and capricious. Recalcitrant patent examiners are not arbitrary and capricious; they are willful actors that intentionally seek to harm innovators by denying patent rights regardless of merit. The only thing predictable about this is that innovators get screwed! It isn’t even done efficiently, with innovators having to fight a war of attrition against their government for many years, or even a decade or more before they are finally forced to give up because their meritorious invention that has been protected in other countries can’t get protection in the U.S.

Patent Trial and Appeal Board

The Patent Trial and Appeal Board (PTAB) has become the single most important and influential entity in the patent industry. This group of appointed Article II administrative law judges makes decisions that cannot be reviewed by any Article III court, not even the Supreme Court. The PTAB has increasingly come under fire from the Federal Circuit for acting in arbitrary and capricious ways, which is almost impossible to do given the extraordinary burden required to demonstrate an agency has acted arbitrarily and capriciously. The PTAB ignores the statute they are charged with implementing, and the legislative history too. For example, they institute Covered Business Method (CBM) challenges against patents that are clearly and unambiguously not business method patents. In one case instituting a challenge against a graphical user interface that has been covered by multiple patents in Europe because it is a technological advance and not a business method at all, and in another case instituting a challenge against a security related innovation that restricted access to a wireless device. In that second case the Federal Circuit finally said enough, finding the PTAB was using a definition of CBM patent that would render every patent a CBM patent.

The PTAB also refuses to allow patent owners to amend claims challenged in post grant proceedings despite a statute that says amendments are allowed and a legislative history that is enormously clear and on point. The Patent Office has defended the PTAB refusal to allow amendments and the asinine argument that the law allows patent owners to file a motion to amend but doesn’t require the PTAB to grant that motion to amend. But this blissful statutory ignorance is not confined to motions to amend. The PTAB has also said that they do not need to consider timely filed evidence if they don’t want to, which is breathtaking and almost seems as if it has to be fake news; sadly it is not. The PTAB also has a perverse incentive to initiate proceedings when multiple challenges are made against the same patent or patent family because those deciding whether to institute will decide the case on the merits, and if they have multiple challenges on the same patent they find it much easier to achieve their work production goals.

The PTAB rules and procedures have fundamentally and systematically deprived patent owners of even the most basic due process in what is a thoroughly one-sided proceeding. I suppose this qualifies as efficient and predictable only because the patent owner loses all sense of procedural fairness in order for the PTAB to reach a decision within 12 months (although they statutorily have 18 months to decide). The outcome is almost always the patent is lost, but that kind of predictability in a system based on property rights isn’t at all useful to encourage or incentivize anything.

The Courts

Finally over the last six months the Federal Circuit has started to find at least some software patent claims to be patent eligible. There are, however, several judges on the Federal Circuit that have never and will never find software patent eligible. At best the test for patent eligibility is a subjective test, as admitted by the Federal Circuit in Enfish v. Microsoft earlier this year. That means the test is no reproducible and will absolutely be panel dependent. If you get the right panel of judges you have a chance. If you get the wrong panel of judges you have absolutely no chance as a patent owner or innovator. The only predictability comes after you know who is on the panel, which doesn’t happen until you walk into the courtroom to argue the case. But even then you can’t be sure. The Federal Circuit is so horribly overworked the Court seems to be giving very little thoughtful consideration to most of the cases. Indeed 70-80% of decisions are either 1-sentence affirmances or nonprecedential opinions, and the dirty little secret is that nonprecedential opinions are frequently written by staff attorneys, not the judges.

As for the Supreme Court, we are back to the days where the only valid patent is one that the Supreme Court hasn’t considered. This Supreme Court is openly hostile to patents. They do not understand patent law, they do not understand innovation, they ask questions that would embarrass any self-respecting technologist (i.e., can’t a second year engineering student code that financial software over a weekend?) and they are arrogant in their ignorance. Short of removing patents from the Supreme Court jurisdiction the only thing that could help is legislation that thoroughly overrules all of their recent patent eligibility cases and does away with the judicial exceptions to patent eligibility, which are just the Supreme Court’s way of having created a tool out of hole cloth that allows them with a straight face to ignore the statute they are supposed to interpret.

Congress

The brilliant idea of creating the PTAB came from legislation supported by the Obama Administration and enacted by Congress. The PTAB is run amok; they have destroyed patent value and crippled investment in innovative start-up companies. Patent valuation has been more than cut in half since the enactment of the America Invents Act (AIA). If Congress was trying to slap a ball and chain around the ankle of American innovation they have succeeded beyond their wildest dreams! Indeed, the AIA — particularly the sections creating the post grant procedures — might be among the most successful pieces of legislation ever created. Congress obviously wanted to kill patents and the death of patents (and patent value) has been the result. Mission accomplished!

So successful have the post grant procedures of the AIA been at killing patents it is even being used to challenge, and kill, biotech and pharmaceutical patents. Much ink has been spilled about the challenges funded by hedge fund billionaire Kyle Bass, but the biotech and pharmaceutical industry also find themselves being challenged, and losing patents, after being challenged by generic manufacturers (see here and here, for example). The biotech and pharmaceutical industries supported the AIA and didn’t believe the post grant procedures would ever be used against their patents. The only certainty and predictability here is that this grave miscalculation is going to cost the biotech and pharmaceutical industry many billions of dollars.

____________

The strategic plan also says:

Without effective mechanisms to protect intellectual property rights, including patents and trade secrets, competitors could simply sit back and copy, rather than invest the time and resources required to invent and innovate. Research and development would be even riskier investments, with little to no assurance that such investments would or could be commercially put into use. Simply put, facilitating efficient and predictable patent protection policies harnesses the drive and ingenuity of our innovators and helps ensure that our economy remains innovative and competitive.

True, and that is exactly what is happening. Large corporations are openly engaging in efficient infringement, which is just a sanitary way of saying they are stealing. With a patent system that has been so thoroughly crushed during the Obama Administration patent owners see large corporations simply take their patented innovations, incorporate them into their products or services, and never have to pay a dime. Given how easy it has become to kill patents at the PTAB and how the Courts have fundamentally changed the law of what is patent eligible, efficient infringement is a wise business strategy. Why pay for what you can steal without consequence? The problem is that this wise business strategy is destroying the U.S. innovation economy because it is the individual, the small business, the start-up that innovates because innovation requires risk taking and dreams. Large entities do not take risks; they worry about shareholders and increasing stock prices. So as patent laws have continued to weaken in the United States we see less and less innovation and little or no paradigm shifting innovation.

All the while, China is becoming a better place for innovators. It is easier to obtain patent protection in China, and patent owners succeed 80-100% of the time when they bring patent infringement cases in China. When patent owner succeed they have a 99% likelihood of obtaining a permanent injunction, which is the way is used to be in the United States. Thus, what we are seeing over the last several years is that without question China is becoming a more favorable jurisdiction for innovators, and venture capital is leaving the U.S. for China. That being the case, how long before start-up companies start moving out of the United States and to China?

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney 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 29 Comments comments.

  1. Paul Morinville December 15, 2016 11:55 am

    If you look at the VC money moving to China because of weak patents here, startups (other than perhaps phone apps) already have moved to China.

    http://watchdog.org/283886/venture-capital-chases-patents-friendlier-climes/

  2. EG December 15, 2016 12:09 pm

    Hey Gene,

    Why does it not surprise me that the Obama administration’s joint strategic plan on IP enforcement is “factually-challenged” as you point out in this post. Why should the IP area be any different from all the other “spin” we see from the Obama administration? To us in the know in the IP area, it’s just more hurtful to see such “spin” on IP enforcement in view the AIA (Abominable Inane Act), especially the ghastly IPR aspect of the AIA, as well as disastrous appointment of Lee to be Director of the USPTO which is equivalent to appointing the “fox” to “guard the chicken coop.”

  3. Tyler Durden December 15, 2016 2:06 pm

    “willful dismantling of the U.S. patent system for the benefit a handful of politically well connected companies that helped President Obama get elected and then re-elected”

    This feels extreme Gene. Obama appointed Kappos, perhaps the best USPTO head we’ve ever seen. His allowance rates continue to this day.

    The problems you focus on in the article are really PTAB IPRs and Alice/Mayo. Those came from Congress and the Supreme Court, respectively. The Obama administration even specifically argued before SCOTUS that 103 should not come into 101 in Mayo. The Court didn’t listen.

    Maybe Obama’s administration did support some AIA reforms that are now looking problematic and appointed his second director from an anti-software-patent company. But to say that Obama has consistently or solely gotten us to where we are – and for political gain, no less – is ignoring the reality of what has come out of (the GOP) Congress and the (5-4 GOP) Court.

  4. step back December 15, 2016 2:07 pm

    Congratulations Gene.

    Another great piece of expository journalism.
    You’ve exposed the TPTB for the frauds they are when it comes innovation and science.

    The collective “we” does not invent, develop and market to the masses.
    Only a small entrepreneurial few do.

    If “we” make it difficult for them to do so while having expectation of fair compensation for their efforts (e.g. by way of strong patents), then “we” encourage them to stop or to go elsewhere (China).

    Political propaganda does not undo the damage.
    The finger of blame points straight to top and also to them in the bottom trenches (au 3600) who have the audacity to dash the hopes of inventors in certain fields of endeavor.

  5. John White December 15, 2016 3:44 pm

    Obama admin “transparency” it seems is to simply release another, in an endless line, self-serving report or press release wholly divorced from fact based reality. Words apparently have no discernable meaning. It is the equivalent of “Baghdad Bob” on pretty much every topic.

  6. David December 15, 2016 4:02 pm

    The true curiosity here is that the SCOTUS has essentially give the legislative and executive branches carte blanche to take over (altogether) patent validity determinations via the PTAB.

    Will Trump continue the Obama / Lee plan for the sustained and rapid expansion of the PTAB and its constituent power? The obvious answer seems to be yes, but perhaps he will surprise us.

    The ability to control the validity of an issued patent for IP is now likely the single most powerful cause of action in the legal sphere. The judiciary is losing / has lost significant power; it’s not clear what the SCOTUS is thinking.

  7. Gene Quinn December 15, 2016 4:05 pm

    Tyler-

    Yes, Obama did appoint David Kappos and then after Director Kappos gave a strong pro-patent speech he was no longer the Director of the Office.

    You say that Director Kappos’ allowance rates continue, but that is not entirely correct. It is virtually impossible to get patents issued when they have been assigned to TC 3600, and that includes many applications that are inappropriately assigned to TC 3600 because the Art Units in TC 3600 don’t have enough work. See:

    http://www.ipwatchdog.com/2016/07/14/where-patent-applications-go-die/id=70913/

    President Obama has vilified patent owners as patent trolls from the White House, and his Director of the USPTO (Michelle Lee) talks about there being a class of illegitimate patents.

    PTAB issues were created by the AIA, which was aggressively supported by the Obama Administration. Every rule and interpretation created during the Obama Administration created a one-sided administrative proceeding completely and unfairly stacked against patent owners. I’ll just point out what you should know, but the Patent Office is a part of the Department of Commerce and President Obama is ultimately responsible for the unfair PTAB process that lacks even the pretense of fairness for patent owners.

    Obama’s DOJ filed briefs and advocated anti-patent positions in each of the important patent cases to reach the Supreme Court. Throughout history the Supreme Court is known to side with the views of the Solicitor General when the government is not a party in close to 80% of all cases. In fact, Obama’s Solicitor aggressively argued to overrule Diamond v. Chakrabarty, which occurred in AMP v. Myriad. That wiped away 30+ years of settled biotech patent eligibility law.

    You can ignore the facts if you want, but don’t expect the rest of us who have been paying attention and know what has happened to believe your sugar coated version.

  8. Edward Heller December 15, 2016 4:12 pm

    Gene, could not have said it better.

    Just a couple of points: The AIA, first to file, was a culmination of a decades long effort to move to the European system — something we agreed to do decades ago in exchange for some quid-pro-quo from the Europeans in a treaty negotiation. Since this was before my active involvement in the politics of patent law, I do not know what this deal was. But I think we sold the US patent system down the river in exchange for some benefits for certain big international companies.

    But first-to-file alone, while bad for America, was just a Trojan horse for IPRs and CBMs. These too were projects of these big companies that backed the AIA.

    We need to fix the flaws of the AIA first-to-file provisions that undo any advantages for conducting R&D in the US. We need to abolish post grant reviews, reexaminations, and every procedure whereby a patent owner can be hailed back into the PTO against his will. It is the mere idea of this which is the fundamental problem. A patent is the property of its owner and only a court of law can revoke (cancel) issued patents.

  9. Curious December 15, 2016 4:20 pm

    Recalcitrant Examiners
    Started during Dudas. Remember, the reject-reject-reject mindset that Kappos had to reform?

    Patent Trial and Appeal Board
    Came about by the AIA, which was enacted by a Republican Congress.

    The Courts
    Different branch of the government but the conservatives are the majority in the Supreme Court

    Congress
    Congress wrote the laws — Obama just signed them into law. The responsibility for the details lay with Congress

    As I stated before, there is plenty of blame to go around for the mess we are in.

  10. David December 15, 2016 4:39 pm

    Ned, you say: “A patent is the property of its owner and only a court of law can revoke (cancel) issued patents.”

    However, you should know better than anyone that this statement is not true.

    Though while I agree with your sentiment, your sentence must be re-written in light of the CAFC’s precedential MCM v HP opinion:

    “A patent is [a public right] and [not] only [can] a court of law can revoke (cancel) issued patents [,but so too can Article I administrators. In fact, patent validity can now be removed from the Article III courts altogether].”

    Now, where this gets really odd (as you know), is that the CAFC’s holding directly contradicts SCOTUS holdings in McCormick, American Bell, and all of the (many) land patent cases that were directly cited to and quoted from in those opinions.

    The “statutory authorization” argument was really just a no-hope hail mary tossed up by the DOJ because they knew J. Newman’s Patlex “government mistake” reasoning was an automatic loser.

    I’ll never fully understand why you / Cooper didn’t get cert. Denial there was a huge blow to the credibility of the Court, which is now very much looking like a political institution, as opposed to a legal one.

    I believer it was J. Kozinski who recently said that the Justices had become nothing more than politicians in black robes.

  11. Bemused December 15, 2016 5:07 pm

    I blame the CAFC for allowing the PTAB to run amok. If the judges on that court did their job instead of hiding behind deaf, dumb and blind deference to an administrative agency, etc the inter partes and CBM reviews would not be the patent killers they are today.

    Could you imagine the CAFC with former Chief Judges Michel or Rader in charge allowing the PTAB to get away with the anti-patent rulings that the PTAB judges have rained down on patent owners/inventors for the past few years?

    Shame on Prost and most of the other judges on the CAFC for their ineffectual (at best) or non-existent (at worst) leadership in overseeing the US patent system.

  12. Gene Quinn December 15, 2016 5:15 pm

    Bemused-

    I agree with you for the most part. What I will say, however, is that I think the PTAB was a tale of two years in 2016. You’ll be reading about this next week. I went through everything we wrote on the PTAB yesterday and there was one CAFC approach to the PTAB during the first half of the year and a very different approach to the PTAB after the Supreme Court issued the Cuozzo ruling in June 2016. Stay tuned.

    -Gene

  13. Investor December 15, 2016 5:29 pm

    Gene, Could you please comment on VHC’s chances as APPL continues to bat them around re: VHC Intellectual Property?

  14. Edward Heller December 15, 2016 8:36 pm

    David, we did get the courts attention, but not enough votes. Probably 4-4, so they decided to pass.

    We lost when Scalia died.

  15. David December 15, 2016 8:44 pm

    Well if it was truly 4-4 (and who really knows), someone will have to try again once Trump’s new Justice joins the bench.

  16. Night Writer December 15, 2016 10:21 pm

    Now for the tough question: Does Obama believe this? I think he might.

  17. Bob December 15, 2016 11:45 pm

    “many applications that are inappropriately assigned to TC3600 because the Art Units don’t have enough work”

    Do you have evidence for this assertion?

  18. DaveR December 16, 2016 3:05 pm

    Consider this MD psychiatrist’s article regarding Obama’s characterization of other matters during his presidential administration and you [Gene] may have a better understanding of how and why he views the patent system as he does.

    Source: http://freedomoutpost.com/obama-confesses-illegal-presidency-cost-dems-election/

  19. Anon December 16, 2016 4:28 pm

    DaveR,

    That is some truly bizarre material. Trying to paint Obama as such a fiend is simply trying too hard. The articles clearly lacks balance and cannot be taken seriously.

  20. jbavis December 17, 2016 12:12 pm

    Gene said:

    > “Why then did President Obama spend so much of his time in office interjecting uncertainty into the patent system?”

    This is wrong – only one side received more uncertainty – the small guy. However, large corporations only gained certainty – more ways to manage the risks of patent infringement. The game has changed in favor of the large corporations who can manage and navigate their way – with highly predictable costs. However, it has become exactly the opposite for small entities – whether being blocked by unknowns like SAWS (yes it’s still alive likely just under a different name) or patent invalidation when time to enforce – small entities have lost all certainty and predictability.

    Remember, a motivation behind SAWS was to manage the “concern that granting any of these patents might disrupt the settled expectations of manufacturers and innovators working in the patent’s related field of technology.”

  21. Trump Fan December 19, 2016 11:53 am

    So much salt in this article. It’s saltier than the Dead Sea.

  22. Gene Quinn December 19, 2016 12:14 pm

    Trump Fan-

    Your comment is nebulous and does not convey information or further the discussion. If you wish to participate here on IPWatchdog.com more is expected.

    -Gene

  23. Trump Fan December 19, 2016 1:12 pm

    Gene,

    To clarify what I said, “salty” means salt from tears. The statement meant that this whole article is one giant river of tears. There was once a time when “property holders” were clamoring that a change in the system would ruin the economy and the world as they knew it. Those “property holders” were the slaveholders of the south. All the IP justifications reek of the same nonsense that the slaveholders use to reiterate when defending their unjustifiable position. How’s that for nebulous?

  24. Gene Quinn December 19, 2016 1:21 pm

    Trump Fan-

    OK, not nebulous any more. Just stupid. Equating patents to slaves is asinine.

    Thanks for reading, but you need to go elsewhere if that is the only level of commentary you are capable of contributing.

    -Gene

  25. step back December 19, 2016 3:13 pm

    Once we do away with all patents (and kill all the patent lawyers per Shakespeare’s advice) then inventors become the slaves; toiling away day and night but getting nothing in return for their labors.

    The efficient infringers become our modern day slave owners.

    And Alice/Mayo are the modern equivalent of SCOTUS’s infamous Dred Scott decision.

    https://patentu.blogspot.com/2016/12/the-fake-law-fake-science-and-fake.html

  26. A. Person December 19, 2016 5:27 pm

    “the dirty little secret is that nonprecedential opinions are frequently written by staff attorneys, not the judges”

    Source? Oh why, bother. Let’s invent facts to fit our reality. That seems to be the trend nowadays anyway.

  27. Gene Quinn December 19, 2016 6:39 pm

    A. Person-

    Yes, I know many people like you would like each and every word followed with a citation or you don’t believe it. Easy answer is for you not to believe it and move on. I’m not going to lose sleep over your lack of belief, and I’m certainly not going to change anything about the way I write. If I had a source that would allow me to quote them publicly I would have. So you can either believe what I said is true or not, but your belief or lack of belief doesn’t change the truth. I know I am right, as do those who have been staff attorneys at various Courts of Appeals across the country.

    -Gene

  28. Greg DeLassus January 13, 2017 12:54 pm

    “[T]here was one CAFC approach to the PTAB during the first half of the year and a very different approach to the PTAB after the Supreme Court issued the Cuozzo ruling in June 2016.”

    I definitely agree with this. Judge Taranto in particular has been authoring a series of opinions that leveraging the APA to demand much more procedural rigor from the PTAB, to the benefit of patent owners. It is a good trend, and begets a virtuous cycle, because each new decision becomes precedent to constrain some of the more deference-inclined judges from rubber stamping PTAB decisions.

  29. PeteMoss January 14, 2017 11:42 am

    Component manufacturers have to file in CN because there is no effective way to enforce component patents in the US. Infringing electrical components are assembled into a box by a contract equipment manufacturer (CEM) in CN, and then the box is imported into the US by an original equipment manufacturer (OEM). The only legal remedy available to the component patent holder under US law is to sue the OEM once the box reaches the US. The OEM is typically a customer or potential customer of other components used in boxes. You can only sue a customer once. Therefore, US patents have little to no value to component suppliers because goods, particularly electronic goods, are not made in US. OEMs know that they have an advantage in the US when sourcing components in CN. No component supplier patent in CN = no OEM problems in the US.
    On the patent review side, I agree with the article. I am 2-0 before the CN Reexamination Board. My PTAB record is more of a mixed bag.