Yesterday we published an article explaining that over 90 percent of patents subject to an inter partes review challenge at the Patent Trial and Appeal Board (PTAB) are in one way or another defective or result in an unfavorable outcome to the patent owner. See Are more than 90 percent of patents challenged at the PTAB defective?
As the article explains, the data shows that at least 84 percent of patents reaching a final written decision in a PTAB validity challenge are adjudicated to have at least one invalid claim (usually many more than one claim), with 69 percent having all claims invalid. Add settlements, which are virtually certain to be unfavorable to patent owners (especially post-institution, when the petitioner has much more leverage), and at least 92 percent of patents challenged are defective. The data also shows that only 4 percent of all PTAB petitions for review proceedings end with a final written decision in which all claims are upheld as patentable.
Shawn Ambwani, Co-Founder and Chief Operating Officer of Unified Patents, joined the comments in the aforementioned article in an attempt to cast doubt on the article and the statistics. His chief complaint seems to be that Lex Machina characterizes a settlement of an inter partes review (IPR) proceeding as a win for the patent owner. While it is true that Lex Machina does seem to characterize settlements as a win for the patent owner, a settlement in an IPR proceeding is no win for a patent. The petitioner holds all leverage in an IPR proceeding, with the patent owner playing the role of a target without any leverage whatsoever. Patent owners settle on unfavorable terms – that is the reality of IPR practice.
Ambwani’s comments eventually lead to him saying that he doesn’t personally view settlements as a win or a loss for patent owners, but are presumably somehow neutral. The interesting thing about Ambwani’s claims, however, is that they are entirely inconsistent with what the Unified Patents website says.
Unified Patents challenges patents by filing inter partes review proceedings. They tout on their website that they are “the only entity that challenges bad patents and never pays.” They also explain that they do settle post grant challenges provided the settlement will remain confidential and further provided the patent owner agrees to provide a no-cost license.
The Unified Patents website explains:
Should Unified determine that its goals can be better served by settling a post-grant challenge (or agreeing to never file any challenges), Unified will consider settling in exchange for an NPE license, though never for money. As with all aspects of its challenges, Unified acts independently when settling, and never provides members with advance notice of negotiations, draft settlement agreements, or actual settlement. For this reason, Unified will not negotiate unless a nondisclosure agreement is in place. Unified’s practice of settling disputes springs from its long-term NPE deterrence goals, as it saves legal fees, which can be reallocated for other future deterrence activities.
How is a no-cost license given to an IPR petitioner anything other than complete and total capitulation? Complete and total capitulation in the real world is not a victory for the patent owner; it is an unequivocal loss.
It is difficult to understand how Ambwani can say that the capitulation settlements Unified Patents describes on its website are anything other than unfavorable to the patent owner. And clearly, based on Unified Patent’s own explanation, they enter into settlements as part of its deterrence efforts. Based on this it seems to me that Ambwani is not only directly contradicting the reality of IPR practice, but he is contradicting what Unified Patents says on its own website.
If we are to take Ambwani’s comments here at IPWatchdog.com at face value that seems to mean we must believe that Unified is settling IPRs on terms that are not unfavorable to patent owners. But how exactly is that consistent with what is said on the Unified Patents website? Is Unified Patents misrepresenting what they are doing in explanations on their website, or does Ambwani really believe that a capitulation settlement is something other than a loss by the patent owner? And how can a capitulation settlement be anything other than a loss?
Ambwani’s shifting positions may be understandable when you realize the business Unified Patents has created seems completely dependent upon the continued existence of a horribly one-sided and fundamentally unfair post grant process implemented by a PTAB that refuses to consider evidence timely submitted, that refuses to allow amendments despite the statute saying there is a right to amend, that refuses to issue final decisions on all the claims challenged, a PTAB that makes up their own standards rather than follow statutory tests, a PTAB governed by no judicial rules of ethical conduct for PTAB judges, and a PTAB with certain judges who decide issues where there are serious conflicts of interest. Nevertheless, in my opinion, you need to take what Ambwani says with a healthy grain of salt.