IPR Settlements: A pyrrhic victory for patent practitioners, a loss for patent owners

Quite understandably, the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) causes strong emotional responses among many stakeholders in the U.S. patent systems. Among patent owners, a trip to PTAB often involves them relinquishing claims from a Constitutionally-protected property right, an unfortunate fate that befalls more than 90 percent of patents challenged at PTAB.

On the other end, there are those who zealously defend the workings of the PTAB as a way for alleged infringers to legally challenge the validity of the patent asserted against them. So-called “patent litigation insurance provider” Unified Patents is one such participant in the patent system. Unified COO and co-founder Shawn Ambwani rushes to the defense of the PTAB whenever we publish statistics about many patents the PTAB finds defective, or true stories about the patents and patent owners that are harassed by challengers on what is an increasingly routine basis.  Indeed, Ambwani has appeared in the comments section of multiple articles published on this site in failed attempts to refute data we provide on PTAB activity.

One point of recent contention surrounds our use of Lex Machina data to question whether 90 percent of patents are having claims invalidated at PTAB. Ambwani has specifically attempted to poke a hole in our decision to include data on settlements. Of course, many knowledgeable participants in the system will readily understand that IPR settlements are not wins for the patent owner. Even Unified’s own website explains that IPR settlements are not a win for patent owners because the only IPR settlements they will enter into, for example, are no-cost licenses that the patent owner agrees to provide to all Unified clients. Still, despite the obvious reality and admissions on Unified’s website, Ambwani argues that the data graphic used shows the same blue color for both settlements and final written decisions with all claims upheld, which is says means that according to Lex Machina an IPR settlement is a win for the patent owners.

Simply stated, Ambwani is wrong.

A recent conversation with Lex Machina data scientist Brian Howard on Lex Machina’s 2017 PTAB Report resulted in some interesting observations on the data we’ve used to arrive at our conclusions. For example, Howard noted that Lex Machina presents its data from the viewpoint not of patent owners themselves but from the viewpoint of legal practitioners that might represent either patent owners or petitioners. “The question or test that our site uses is, at the conclusion of PTAB, is the patent still valid?” Howard said, noting that if a lawyer helps a patent owner reach a settlement that doesn’t completely invalidate the patent, Lex Machina counts that as a win for the practitioner, not a win from the view of the patent owner.

Howard explained that the reason they color code IPR settlements so that they appear as a “win” is simply due to the fact that they chose years ago to characterize their PTAB stats so they could be used quickly by users to determine whether a patent remains in force with valid claims. Howard further explained, however, that it is a mistake to think that characterizing IPR settlements as a “win” is the only way to look at it. “Don’t think it’s the only reasonable way of looking at it,” Howard explained. “The coloring we show isn’t binding on anybody, you can count [settlements] however you would like.”

Getting useful information on whether a patent has claims that remain in force is no doubt useful information, as Howard explains, but the Lex Machina characterization of an IPR settlement as a win because the patent remains valid is meaningless insofar as the patent owner is concerned. In many of these settlements there will already be a finding by the PTAB that the claims are likely invalid, and even with a settlement that finding will linger long past the life of the proceeding. Furthermore, a patent remaining valid and therefore the case being won from the patent practitioner perspective is very different than how it would be perceived from the patent owner perspective. A patent owner who must give a no-cost license to infringers to keep a wounded patent which has been found to have claims that are likely infringed is not a win. Therefore, any objective thinking, sane, rational person should appreciate that IPR settlements are not a win from the patent owner perspective, which is exactly what we’ve said all along.

Anyone with a true knowledge of how the PTAB works will realize that extreme pressure is placed on the patent owner to settle on terms favorable to the petitioner. The petitioner holds all the leverage, there is no risk of estoppel ever attaching because the PTAB refuses to include non-instituted claims in their final written decision, so petitioners have nothing to lose and everything to gain. And while an IPR settlement that temporarily staves off a finding of invalidity at the hand of the death squad known at the PTAB may be considered a victory for the attorney representing the patent owner, it is nothing more than a pyrrhic victory.

When an entity like Unified demands a no-cost license to be given to its clients in order to settle an IPR proceeding that is a loss for the patent owner, and anyone who says otherwise is just lying to themselves.

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.

Gene Quinn

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

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Discuss this

There are currently 10 Comments comments.

  1. The Time Is Now To Act June 18, 2017 11:37 am

    Gene- and, farther up the river where patents are born, the disease you reference poisons incentive to seek IP across the board.

    IOW, the diseased, pyrrhic win also applies to the grant of the patent itself in today’s environment. With all respect to all counsel, a win win is not making money on the grant and the IPR with negative returns to the client. Soon, if the system does not correct itself, the house of cards will fall.

    The above is an intended consequence of the AIA and especially its Lee driven implementation. Patent quality as a driver for IPR is a red herring as is the troll narrative.

    Avoiding paying fair value is the driver here. The oligarchy would love nothing more than to burn the bridge they used to cross the chasm behind them.

  2. Anon June 18, 2017 12:12 pm

    I will (again) point out that statements such as “and especially its Lee driven implementation are unhelpful.

    Several challenges now have been aimed at the wrong party. Aiming at implementation by the PTAB when the PTAB is following its allotted discretion is a guaranteed failure.

    Not only is such a failure in and of itself, it is further unhelpful because it wastes the opportunity to put the focus where the focus belongs: on what Congress itself has done in the AIA.

  3. Gene Quinn June 18, 2017 1:45 pm

    Anon-

    No one is diverting focus from Congress. But the PTAB is run amok. Your repeated comments that attempts to focus on the PTAB and reform the PTAB with be unhelpful are simply wrong. Similarly, your interpretations of the statute that are perfectly consistent with the ridiculous PTAB interpretations are wrong. I realize you are entrenched, but soon enough you’ll start to see.

    As for focusing on Congress, go for it. Of course, getting change at the PTO and in the courts is far easier. So good luck with your all or nothing approach, which is of course an extremely low percentage play that won’t accomplish anything at the moment. But I guess that’s politics today, right? Be obstinate and pursue only 100% of what you want or nothing.

  4. Anon June 18, 2017 7:26 pm

    Asking if the PTAB is acting outside of the authority as given to it by Congress is the 0% play.

    You want to make that play?

    Go ahead – but don’t whine when I amn100% correct.

  5. Pro Se June 18, 2017 8:16 pm

    If the SCOTUS declare AIA/IPR unconstitutional, I have a team ready to petition the court to have every deal I did under the cloud of IPRs as done under economic duress – undue influence. All deals will be renegotiated to the value as to what the value would have been without the unfair process of IPR.

    I am doing no more deals for my patents until the SCOTUS speak.

  6. Tiburon June 19, 2017 2:34 pm

    Anon @ 4:

    You cannot affect Congress. Google has $94.5Billion cash in the bank. Darrell Issa and Patrick Leahy are smaller than a drop in the bucket.

  7. Eric Berend June 19, 2017 5:35 pm

    @1, ‘The Time Is Now To Act’:

    At least, you are one person commenting on this blog, that seems to get it.

    And, there is an analogy to the current malaise burning down the house concerning U.S. patents: the institution of heterosexual marriage in the U.S.A.

    The U.S. government has an arrangement with the States, where each State gets a cut of what it can extract from a man’s life in the divorce proceedings it controls. The contractual obligations of marriage have been ‘progressively’ updated for U.S. women – but not for U.S. men, who are considered as bearing their traditional burden of unlimited labor; despite removal of assurances of any benefits for the husband, as well as any obligations on the part of the wife.

    The ramifications of these misguided policies enforced as law, are predictable: the incidence of marriage has fallen consistently, if irregularly, for the past 50 years. This, despite whatever weight of social opprobrium and outright attempted shaming*, is levied against individual men, and all men and boys in general; as is the so-fashionable, current wanton canard.

    The U.S. will burn through the ‘suckers’ been exploited by this IP theft racket, far more quickly than the much larger ‘Federal’ divorce racket against U.S. men in heterosexual marriage.

    * “Peter Pan syndrome”, manchild”, “commitmentphobe”, are but some of the more popular admonitions routinely hurled at men. Furthermore, slut shaming is for men and boys, only: “if you don’t want the child support obligations, keep it in your pants” …however, one BETTER NOT DARE assert anything similar, towards women. The communist mob rules the day, in the U.S., today.

  8. Eric Berend June 19, 2017 5:38 pm

    ^ ^ ^ correction of ‘typo’: that’s “…’suckers’ being exploited…” in line 19 of the above comment.

  9. Tiburon June 19, 2017 5:54 pm

    Eric Berend @ 7:

    Regarding everybody taking a cut – here’s some good news for you – innovators do not need patents to innovate and prosper. There are many many startups doing without and avoiding all the lawyer fees and Congress taking a cut. It ain’t easy, but it is doable and is clearly happening everywhere.

  10. Patrick July 18, 2017 2:18 pm

    Unified’s petitions are a joke, so it is unsurprising that they would manipulate data in order to make themselves look better. The PTAB as a whole institutes approximately 2.5 petitions for every one that is denied. Unified’s ratio is a laughable 0.75. (Yes, they have more petitions denied than instituted). Their business model is one I compare to blockbusting, using weak (read: cheap) petitions to intimidate patent owners into giving up free licenses.

    Discussion here: http://ipwire.com/stories/challenge-bad-sic-patents-unified-patents-rhetoric-vs-flimsy-results/

    Data here: http://ipwire.com/stories/inter-partes-review-statistics-unified-patents-stack/)