For most of the nearly 250 years of the existence of the United States of America, our nation’s patent office has worked to issue patents that are defensible in federal courts and could be enforced to ensure that innovators profited from the disclosure of their invention to the U.S. federal government. However, a brief recently filed by the U.S. Patent and Trademark Office in a case before the U.S. Court of Appeals for the Federal Circuit is further proof that the current incarnation of the USPTO is more interested in protecting its own interests to the detriment of inventors.
The appeal in question has been brought before the Federal Circuit by Tinnus Enterprises, the entity holding the patent covering the award-winning Bunch O Balloons water balloon toy invented by independent inventor Josh Malone. The appeal follows a post-grant review (PGR) trial petitioned by Telebrands Corporation, a direct response television advertising firm previously been found to be likely infringing upon the Bunch O Balloons patent in U.S. district court. That finding of likely infringement and a grant of preliminary injunction because the patent is likely valid ordered at the district court level was then affirmed by the Federal Circuit this January. That January decision by the federal circuit, however, came a few weeks after the Patent Trial and Appeal Board (PTAB) issued a final written decision concluding the PGR trial in which claims challenged by Telebrands were deemed invalid under the same argument of indefiniteness under 35 U.S.C. § 112 which was dismissed as unpersuasive by the Federal Circuit.
Already, there is plenty about this case that should give all patent owners a great deal of concern. Given the previous strength of the validity of Tinnus’ patent in Article III federal courts, the PTAB’s finding of invalidity lends further credence to the narrative that the Article I tribunal is a patent killing field which renders more than 90 percent of challenged patents defective. Decisions from an Article I tribunal are appealable to Article III courts but the Federal Circuit has shown itself to be less than consistent on PTAB appeals in recent months, to put it mildly. The court’s recent decision in Return Mail, Inc. v. United States Postal Service provides evidence that the Federal Circuit’s determination of the proper scope of PTAB review varies widely among the court’s judges. District court findings of infringement and no invalidity are no match for PTAB findings of invalidity, as is proven by the Federal Circuit’s early August decision in Personal Audio, LLC v. Electronic Frontier Foundation. Days before the Personal Audio decision, the Federal Circuit showed itself willing to double down on the PTAB’s high rate of patent invalidation by invalidating patent claims which were upheld in a PTAB final written decision in Homeland Housewares, LLC v. Whirlpool Corporation.
Amazingly, the USPTO has decided to file a brief in Tinnus’ recent appeal to the Federal Circuit which supports the respondent Telebrands, the entity which has been found as infringing the Tinnus patent issued by the USPTO. The USPTO, currently under the supervision of interim Director Joe Matal, urged the Federal Circuit to affirm the PTAB’s decision to apply the Federal Circuit’s standard on indefiniteness stemming from that court’s May 2014 decision in In re Packard. The next month, the U.S. Supreme Court amended the Federal Circuit’s indefiniteness standard in Nautilus Inc. v. Biosig Instruments, Inc., finding that the previous standard didn’t satisfy the Section 112 definiteness statute. However, because the PTAB applies the broadest reasonable interpretation standard during PGR trials, the USPTO argued that the Packard standard is more appropriate than the Nautilus standard because “it demands at least as much, and sometimes more, clarity than the Nautilus standard.”
The USPTO’s defense of Telebrands’ argument is more than a little awkward given the fact that USPTO Director Matal likely has personal knowledge of Josh Malone. At least one picture from the US Inventor protest of the PTAB staged this August shows that Matal met with Paul Morinville and others attending the protest, an event at which Malone’s presence was prominent as a main organizer. At the very least, the initial returns seem to be clear that the pleas of U.S. patent owners demanding an end to the disastrous eminent domain-style tactics of the PTAB have fallen on deaf ears.
Then there are the procedural issues at the PTAB that Tinnus notes in its appeal, an issue which is glossed over in the USPTO’s brief. “The Packard approach followed by the Board here is only applicable to post-grant reviews and would have no application against a patented claim subject to an inter partes review,” the brief reads. Yet Tinnus argues in its appeal that the PTAB panel applied standards for inter partes review (IPR) proceedings to a trial that was instituted as a PGR. “In its institution decision, the Board incorrectly applied the lower ‘reasonable likelihood’ standard used for IPRs, rather than the higher ‘more likely than not’ standard governing PGRs,” Tinnus’ appeal reads, adding that the PTAB panel didn’t recognize this error in its final written decision.
The high stakes game being played by the USPTO in supporting patent invalidity findings at the PTAB is well outlined in an brief filed by the Cato Instituteamici with the Supreme Court in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC:
“The operation of the PTAB and the security of patent rights therefore depends not on stable and neutral adjudication as is the case in Article III courts, but on the prevailing political winds… It is certainly true that each incoming administration seeks to harmonize the administrative state with its own political and policy goals. The PTO is no different. What is different is that in no other agency does such harmonization affect vested property rights.”
Changes to the leadership at the USPTO can alter U.S. property rights based not on rulemaking but rather the prevailing policy on patents which are favored or disfavored, the Cato Institute contends. The recent brief filed by the USPTO in favor of Telebrands comes during the tenure of interim Director Matal but President Donald Trump recently nominated Irell & Manella managing partner Andrei Iancu, an intellectual property lawyer with engineering experience, to serve as the next Director of the USPTO. Given the Trump Administration’s recent activities in IP policy, which appear to be following in the same disastrous footsteps as the Obama Administration, close scrutiny will need to be paid to the early days of Iancu’s tenure as USPTO Director if he is confirmed to see if patent owners like Josh Malone have any reason to trust that the U.S. patent system will properly protect the rights of inventors.