America’s Patent System: Mediocre and stabilized in a terrible space

By Gene Quinn
May 9, 2017

Former USPTO Director David Kappos did not paint a rosey picture of the U.S. patent system.

Former USPTO Director David Kappos did not paint a rosy picture of the U.S. patent system.

Yesterday the International IP Commercialization Council (IIPCC) held a one-day symposium at the U.S. Capitol in Washington, D.C. The event titled Promoting Innovation, Investment and Job Growth by Fixing America’s Patent System was well attended by a whose-who of power players within the IP community. The focus of the program was to explore the direct and essential role that strong and enforceable patents play in allowing investors and entrepreneurs to engage in the high-risk business of innovating.

There is much to report from the three excellent panels, all with A+ caliber panelists. We will have much to report in the coming days and weeks, exploring the full gamut of the presentations and numerous points made. For today I will primarily focus on the third and final panel of the day, moderated by Rob Sterne (Sterne Kessler), and which included David Kappos (former USPTO Director), Todd Dickinson (former USPTO Director), Chief Judge Paul Michel (ret.), and Dean John Whealan (former USPTO Solicitor and currently at George Washington University Law School).

Throughout the day the Patent Trial and Appeal Board was a major topic of conversation.

“The results from the Patent Trial and Appeal Board reflect the procedures it applies, and in my judgment the procedures are wildly off base,” Judge Michel explained. “If I had a magic wand I’d make the procedures comply with those from federal court,” Judge Michel said as he ran through a number of things he would change, including the real construction of the claim under the Phillips standard. “Unless you change the PTAB process hook, line and sinker this is what you are going to get… it isn’t that the PTAB is hostile to patents, it is that their processes can’t accomplish anything else.”

Moderator Rob Sterne set up a question for Todd Dickinson relating to the fact that so many people complain of “bad patents” issued dating all the way back to the end of the Clinton Administration. “A lot of people forget patents have a term,” Dickinson explained. “Something like 75% of patent owners don’t pay the third maintenance fee, so most of them expire after 12 years.” In transitioning to discuss what he sees as the real problems facing the patent system today Dickinson said: “We have to stabilize 101, we just have to.”

The stabilization of 101 was another common theme throughout the day, starting with the first panel, which included Manny Schecter (Chief Patent Counsel of IBM), who like Dickinson and so many others believes that something needs to be done about 101. “The courts just don’t have the answer, they’ve proven to us that they are never going to come up with the answer,” Schecter explained during the first panel of the day as he advocated for a legislative fix for patent eligibility.

Returning to the final panel, John Whealan explained that if you look at what has happened with 101 and you look at what has happened with inter partes review (IPR), where the PTO is invalidating roughly two-thirds of all patents, it is sad. “The IPR system is not fair… The PTO doesn’t presume what it does is right,” Whealan explained. “I think you want a front end system that people can rely on at least to a point.” Whealan would go on to say that we need a system that isn’t just a “do over,” a system that gives at least some “credibility” to what was done in the examination process.

Todd Dickinson (left). Chief Judge Paul Michel (right).

As discussion stayed on the PTAB and in particular the IPR process, Judge Michel pointed out that there are only two fixes that he can see that would require Congressional action: requiring standing and chancing the preponderance standard. Everything else could be changed through regulation. “I think it is astonishing it hasn’t been done two years ago,” Michel said. To this Dickinson pointed out that so far only a single Administration has administered the AIA. A new Director could change at least 50% of the process, Dickinson explained. “So who the next Director is really matters.”

Sterne threw out what was probably supposed to be a red meat question, but which did not turn into such a moment seized by the panelists. Sterne asked if the thumb of Silicon Valley were on the scales? Judge Michel said that he didn’t think it was particularly useful to ascribe blame or motivations. The system is broken and needs to be fixed, we know that and we need to get about fixing the system, period.

“Ascribing motives to people is inherently dangerous… because in the final analysis it doesn’t matter,” Michel said. “We’ve had PTAB final results… whatever the intentions were we don’t have to speculate… we have ample evidence of how it worked in practice. We know it doesn’t work satisfactorily.” Michel went on to explain that we know what needs to be done, and that the changes might need to be done in two or three waves, but that it doesn’t help at this point to attach blame.

Michel would also go on to criticize the PTAB procedures on a substantive level explaining that the goal of the PTAB was to be an alternative to district court litigation, which simply has not happened. “PTAB is not the alternative, they are the prelude.” After going through a litany of the problems with litigating in district court – the expense, the length of time it takes, how harassing it can be – Michel concluded: “After the AIA every one of those ills have gotten worse.”

“One thing that gets forgotten in this discussion is the role of moving the gold posts,” Kappos explained. “It comes back to we need some clarity, consistency and stability for the system. It is also time for the PTO to take time for the next round of improvements.” Kappos explained that the Office knew that they “engineered a system to allow them to get [post grant challenges] done on time…. But now it is time to come back, call it PTAB 2.0.”

“When you have a system that is issuing a thousand patents a day and then you have a system that when it looks at it a second time is invalidating two-thirds of them, and it’s the same system, most industries don’t work that way,” Whealan explained. “This is affecting more than just the [small number of patents reviewed by PTAB], it is affecting the integrity of the system.” Whealan then very succinctly put his finger on the precise problem: “If you take away the presumption [of validity] that is why you are getting the type of results you are getting.”

Judge Michel continued to express astonishment with respect to PTAB statistics. “Since 80% of the IPRs are already in district court, these are patents the owners have already assessed, look strong, whether infringement can be proven, whether the defenses against invalidity can be defended,” Michel explained. “These are presumably the strongest patents… a two-third invalidation rate can’t be right for these pre-vetted patents.”

Dickinson reminded everyone that the idea for post grant review came from the idea of opposition, and the idea for IPRs was to move inter partes reexamination to the Board, but that isn’t what happened when the rules were written.

Toward the end of the panel Kappos gave several rather bleak assessments.

“I don’t think things are really getting much better,” Kappos said. “We are in what I refer to as the leaky life raft.” When you are stranded and a leaky life raft comes along it looks great, but it doesn’t change the fact that it is still a leaky life raft. “The best you can say about 101 is that it has stabilized in a terrible space.”

Then in discussing the 2017 U.S. Chamber report on Global IP, a report where the U.S. is now ranked 10th in the world in terms of patents, Kappos gave the perfect summary: “We need to admit that we have a solidly mediocre patent system… we are in bad shape in relation to our patent system.”

As the panel ended, Judge Michel in his final thoughts pointed out that economists all seem to agree that the U.S. does not have enough productivity gains year over year, the U.S. does not have enough GDP growth year over year, and the U.S. does not have the kind of technological breakthroughs we want and that we used to achieve. This is particularly concerning because most net new jobs come from innovative startups, most productivity gains come from innovative startups and those innovative startups are the companies that the patent system has burdened most.

Judge Michel, referring to the conclusions of a recent Time magazine article, closed the panel by saying that the world is not prepared for the next pandemic. He explained that America is in danger because we have strangled our innovation system. Let’s hope our leaders in Congress and in the White House comprehend what all three branches of government have done to so heavily burden innovators and the U.S. innovation system before it is too late.

 

From L to R: David Kappos, Rob Sterne, John Whealan, Todd Dickinson and Judge Michel.

From L to R: David Kappos, Rob Sterne, John Whealan, Todd Dickinson and Judge Michel.

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 37 Comments comments. Join the discussion.

  1. David May 9, 2017 12:55 pm

    Motive, power, influence – three reasons that the USPTO will not self correct.

  2. Paul Morinville May 9, 2017 1:30 pm

    Again, people argue that it can be fixed and in the same breath claim that a new PTO director can fix 50% of the rules. If a new PTO director can just change 50% of the rules, why would the next one not be able to change them back?

    the PTAB cannot be fixed. It is fundamentally broken. A system where the strength of a patent oscillates with each new PTO director will never produce a stable patent right. This instability will forever hamper investment in early stage startups who rely on strong patents. These are the startups that create most of our new jobs and industries. These are the very companies that keep the US in the technology lead. These are the companies that will never get funded because patents will never be stable.

  3. angry dude May 9, 2017 1:37 pm

    Close that USPTO outfit already !

    American inventors can’t use it anyway

    The doc said ‘to the morgue’, to the morgue it is!

  4. Gene Quinn May 9, 2017 1:53 pm

    Paul-

    You say: ” If a new PTO director can just change 50% of the rules, why would the next one not be able to change them back?”

    That is perfectly valid. I think we need to focus on getting things fixed first and then work on making those fixes long term so they cannot be made based on the political beliefs of whatever Administration occupies the White House. Perhaps a PTO that is an quasi-independent agency/corporation along the lines of how the Smithsonian runs, or perhaps with a Commission akin to the ITC is called for at the USPTO.

    -Gene

  5. Curious May 9, 2017 4:26 pm

    If a new PTO director can just change 50% of the rules, why would the next one not be able to change them back?
    Uncertainty increases risk, and increased risk means less investment (or greater returns are needed to justify a particular investment) — either way, having the system dependent upon the whims of the Director is a detriment to innovation.

    This problem is compounded by a current Director that is as hostile to the patent system as any Director has been.

    Honestly, if I had the money to invest in technology, I would put little value on patents. They are essentially useless except to all but the largest companies — this sentiment is shared by many investors. Eventually, this mentality will eventually impact entrepreneurs who will look to find other ways to make money instead of developing new technology.

    Technology is too easily stolen these days. As such, it doesn’t make sense to develop it if the patent system won’t protect it.

  6. step back May 9, 2017 5:28 pm

    What Curious said at @5.

    If a random District Court judge can arbitrarily and capriciously rule your invention to be “abstract” without even doing a claim construction, but instead based on his or her prejudicial bias against inventors, what’s the point in fighting (and paying) for a patent? It becomes an illusory property right.

  7. Night Writer May 9, 2017 7:14 pm

    @5: Curious and step back: or they will develop it only if they feel they can protect it as a trade secret. I hear that from inventors.

  8. Night Writer May 9, 2017 7:27 pm

    Wow, and you guys say I am too pessimistic. I think the patent system is just going to get worse and worse. It is like anti-trust law and employment law. The money is going to keep pushing to weaken patents and they will win bit by bit.

  9. step back May 9, 2017 9:04 pm

    “bit by bit”

    That has been happening over the past 20-30 years. Death by a thousand spaced apart cuts. Each one goes unnoticed. Until you wake up one day and realize the whole thing has been cut away.

    The question still remains though.
    Who would want such an outcome for the American patent system?
    Is that you Vladimir? Or you KJU? Or some other world class player?
    Either way, we’re the losers.

  10. Anon May 9, 2017 9:27 pm

    I am still trying to figure out where this “and stabilized” comes from that is reflected in the article title.

    Even if “bad law” were stable, businesses may plan – but what we have now is anything but stable.

  11. Night Writer May 9, 2017 9:30 pm

    @10 Anon: the patent system is not stabilized. Every week the Google stacked CAFC issues decisions that further limit the patent rights.

    @9: I think the “winners” are Google and such. They are monopolies and want to keep it that way. One thing that continues to bother me is how ill-informed people are about what is going on. Monopolies don’t care about the rate of innovation only that they remain on top.

  12. Night Writer May 9, 2017 9:33 pm

    @9 step back: I think it is part of the greater zeitgeist of the .01 percent owning the country. They don’t care if we slip into a third-world country (or at least not enough to give up some power). They are focused on keeping their billions. Setting up level playing fields isn’t part of the agenda.

    I think what has me so pessimistic lately is reading some of the recent CAFC cases. The judges are like common criminals. They don’t care about applying the law. They just trash any patent they don’t like. And why not. Alice basically says there is no law. You may do as you please with no consequences.

  13. angry dude May 9, 2017 10:36 pm

    step back @9

    I can assure you that it’s not Vladimir or Kim Jong-un 🙂

    Those dudes probably don’t even know what “patent” stands for…
    at least in Russia “getting a patent” means (for most people) paying government for official permission to run your own small business .. like selling pirozhki at a street corner

    Still better than good old USA where “getting a patent” is nowadays synonymous to “becoming a sucker for life”… for 99% of independent inventors and small entrepreneurs

  14. David May 9, 2017 11:13 pm

    @12 The CAFC’s recent ruling approving PTAB sua sponte claim construction determinations has the potential to become noxious long term.

    I’ve said it before, and I’ll say it again: the CAFC is showing the signs of a failed experiment. The appellate power is better distributed among the regional circuits. The countervailing circuit politics tend to stabilize judgments. With all the patent power consolidated in the CAFC, political motivation seeps in. The CAFC judges aren’t vetted like the SCOTUS justices.

  15. Curious May 9, 2017 11:53 pm

    they will develop it only if they feel they can protect it as a trade secret
    Good luck with that. One need only look at how Anonymous, Wikileaks, and Russian/Chinese hackers are known to even the average person to know that no secret will remain one for long — particularly one that has a financial value associated with it.

    While the patent system offers some protection (again, if you are big company), I would trust anything to trade secrets.

  16. Curious May 9, 2017 11:55 pm

    Even if “bad law” were stable, businesses may plan – but what we have now is anything but stable.
    We have stable uncertainty — i.e., guaranteed uncertainty. Certainly not a help to anybody (except the infringers of the world).

  17. Night Writer May 10, 2017 6:09 am

    I think Michel has it right. If you remove the presumption of validity, and allow multiple attempts at invalidating a patent, then it creates a great chance of the patent being invalidated. All of this because 103 is basically a judgement call and more so with TSM being removed.

    I agree with David that the claim construction case this week could cause massive problems. And, I read the case briefly. I think it does not apply the law and I don’t think they even used the right standard of review. And, it appeared they made a finding of fact about evidence. Common criminals.

  18. Night Writer May 10, 2017 6:12 am

    @15 some truth to that Curious, but I think the trade secrets will most benefit the Googles. Wait 10 years. The tech workers in Silicon Valley are going to find out what patents did for them. Their wages are going to come down by 40%. Their mobility will near zero. They will have to learn proprietary systems for each tech firm. Etc.

    Does Elon share the IP for the batteries? (Or just the IP for things that you need a giant factor for?)

  19. Anon May 10, 2017 7:30 am

    David @ 14,

    I must take issue with part of your statement: “With all the patent power consolidated in the CAFC, political motivation seeps in. The CAFC judges aren’t vetted like the SCOTUS justices.

    If you want to use the yardstick of the SCOTUS justices for what you want “vetting” to be, then your future CAFC will be no better than what it is now. I refer you to another thread wherein I list the three main reasons why the patent system is in the mess it is today (spoiler alert: SCOTUS is the epitome of that number one reason):

    http://www.ipwatchdog.com/2017/04/26/top-3-reasons-u-s-patent-system-decline/

  20. Anon May 10, 2017 7:31 am

    Curious @ 16,

    stable instability….

    Oh, how 1984 of you. 😉

  21. Night Writer May 10, 2017 9:14 am

    @19 Anon, I agree with your point. But, there is a point that the CAFC allows companies like Google to focus their efforts on single issues.

    Also, not as to the bit by bit that almost all of the legislators that are anti-patent have as one of the top three donors Google.

  22. angry dude May 10, 2017 9:32 am

    Can Trump fire Google ?
    He doesn’t like google anyway, he likes twitter…

  23. Anon May 10, 2017 10:38 am

    Only a fool would press a patent today. Its barely worth the trouble. Well done!

  24. angry dude May 10, 2017 11:26 am

    only a fool would press a patent today … unless that “fool” is google – in that case patents are real ip respected by our government
    somehow it would be nice to cancel all patents owned by google
    most of them are complete junk anyway

  25. Gene Quinn May 10, 2017 12:09 pm

    Anon-

    Thanks for your comment. We have a long time commenter here who has gone by the name “Anon” for many years. Based on what I can see I don’t think you are our long time friend “Anon.” Glad to have you here, but if you could pick a slightly different moniker moving forward that would be most appreciated. Thanks.

    -Gene

  26. Anon May 10, 2017 12:21 pm

    Thanks Gene – I think there will be minimal confusion, given as my posts will typically (but not always) be more than one-liners, and more typically (and almost always) be more “Pro-patent.”

    While abstaining completely from the patent system has (rather unfortunately) become an item that does require an attorney to seriously contemplate when charting out a “best path” for the client, I am still very much of the view that such a choice remains for more limited than the exhortation of “my namesake” and others whose emotions from bad experiences color their every view.

  27. Anon May 10, 2017 12:37 pm

    “for more limited” should read:
    far more limited”

  28. CW5 May 10, 2017 12:41 pm

    The US patent system has, sadly, been turned into a giant Ponzi scheme.

    You pay money to the PTO to get patents. You pay more money to the PTO to maintain patents. THEN the money you paid is used to subsidize the PTO “death squads” that kill two thirds of the patents they get their hands on.

    And if your patent is somehow fortunate enough to survive the PTO “death squad,” a federal judge is likely to kill your patent on a whim and without a hearing because he/she thinks it is “directed to” (whatever that means) an abstract idea (whatever that means).

    No wonder the USA now has only the 10th best patent system in the world. Good job, Google. You accomplished your goal. You should be ashamed to call yourself an American company.

  29. step back May 10, 2017 3:19 pm

    I’m not sure why everyone keeps picking just on Google when clearly there is a vast network of co-conspirators involved in the take down of not only the American patent system but of scientific, rational thinking in America as a whole.

    I never thought I’d see the day that America embraces demagoguery and the Medieval mindset. But nevertheless here we are.

    “They” have won. (For now.) The long road back to sanity is going to be a treacherous and arduous one. Thankfully there are still a few who wish to fight the good fight. Long live the rebellion.

  30. angry dude May 10, 2017 3:50 pm

    step back @29

    What else did you expect in a society where kids don’t want to become scientists or engineers (except in a very few lucrative fields) … and for all the right reasons – because kids are not stupid and don’t want to be suckers for life, but instead they all want to be lawyers, politicians and “successful entrepreneurs”

    Who was the last major political figure with scientific/engineering background ???
    I can only remember Ben Franklin, but that was quite a while ago
    They are all lawyers, community activists and demagogues

  31. Anon May 10, 2017 6:42 pm

    step back – bravo (from a fellow rebellion fighter)

  32. Edward Heller May 10, 2017 6:42 pm

    Judge Michel makes a great point with his observation that 80% of patents in IPRs are also in District Court and therefore patents where the patent owners have already vetted validity. And yet, two thirds of IPRs result in patent invalidity. This speaks volumes of the differences between IPRs and litigation.

    If IPRs truly were intended to provide low-cost alternative to litigation, they should be available to patent owners as well as to accused infringers. Patent owners should want to litigate validity in the patent office if the procedures did in fact provide a low cost alternative. But as we know, no patent owner in their right mind would invoke the IPR procedures the way they are currently structured with the procedural rules, no presumption of validity, and BRI.

    There is an alternative narrative that is well known and that the true purpose of IPRs was to deal with trolls. Thus, we have with IPRs the lowering of standard of proof, the unfair procedures, broadest reasonable interpretation and the identity of the true party in interest. The original PTAB judges brag that they were intended to be a death squad in killing fields – where the targets were NPE’s.

    Again, the alternative narrative more closely fits the facts then the false flag of low-cost alternative to litigation. Had IPRs been intended to be low-cost alternatives, they would have would provided fair procedures, a presumption of validity, no BRI and the opportunity for the patent owner to bring petitions for IPRs against infringers who assert invalidity in court.

  33. Night Writer May 11, 2017 8:08 am

    @32 great points Ed the Ned. If you disown Benson, I might take you seriously.

  34. Night Writer May 11, 2017 8:09 am

    @32 I got the definite feeling in interviewing for a patent judge job that they wanted people that were anti-patent. And didn’t want a pro patent person like me.

  35. Anon May 11, 2017 8:37 am

    This is a great post. Thanks. The following article provides some very useful insight on the state of the problem with “innovation uncertainty” caused by patent law and antitrust law: https://www.competitionpolicyinternational.com/the-need-for-innovation-certainty-at-the-crossroads-of-patent-and-antitrust-law/

  36. CP in DC May 11, 2017 12:20 pm

    I am always surprised that during these conferences, no one speaks of improving examination. If examination improved, then fewer IPRs would be instituted. Examination would present the best art, the best arguments, and the applicant would draft claims that withstand IPR institution. That’s the theory, the practice, as we all know, is very different.
    It’s simple, bad patents come from bad examination, and bad examination comes from bad examiners (and yes bad applicants). Applicants that get whatever they can out of the PTO will take the patents. Once asserted the patents crumble and we all act surprised and blame the invalidating process.
    Why not draft better applications? Easy, it costs money to do so and fewer are willing to do it. Whealan spoke about this:
    “When you have a system that is issuing a thousand patents a day and then you have a system that when it looks at it a second time is invalidating two-thirds of them, and it’s the same system, most industries don’t work that way,” Whealan explained.
    Yes, they don’t and the PTO (or applicants) should not accept this high error rate.
    I don’t have the answers, but I would like to hear more dialogue. This site has presented articles on the topic, and I’m glad for that, but I would like for more to embrace the dialogue. We need solutions and I don’t believe they will be easy.
    Once we stop the spigot, it will be easier to fix IPR, but at this output rate, no one can swim against this current.

  37. Night Writer May 16, 2017 8:04 am

    > it will be easier to fix IPR,

    You don’t get it. The issue is that 10x is spent on IPRs. 103 is discretionary so if you run the same thing by different people one of them can say it is still obvious.

    Etc.

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