PTAB, Patent Trolls, Bad Patents, and Data: A Wakeup Call to AIA Apologists

By Josh Malone & Steve Brachmann
October 30, 2017

An inventor burns his patent at the USPTO protest. Photo by Julie Pixler.

Since the PTAB declared two of my Bunch O Balloons patents obvious in an institution decision earlier this year, I have visited with many lawmakers and officials to describe my ordeal: six (6) patents, one (1) notorious infringer, five (5) cases in district court, eight (8) appeals to the CAFC, four (4) preliminary injunctions, eight (8) PTAB petitions, four (4) trials instituted, and $18M in legal costs. This is just the beginning as we have not even gotten to trial yet.

There are two reactions that come from lawmakers and officials. The first reaction is from those that did not actively support the America Invents Act (AIA). They are appalled and incredulous that the PTAB is siding with infringers against the examiners and inventors. And they admit they are powerless because of both current patent legislation and the control of the U.S. Patent and Trademark Office (PTO) by interests much more powerful than inventors and voters.

The other reaction comes from those that created and supported the America Infringes Act. To their credit, they have begun to acknowledge the there have been some unintended consequences. But they quickly slip into the mantra that the PTAB is necessary to prevent trolls from asserting “bad patents” with frivolous lawsuits. Lawmakers and officials are now demanding that we inventors provide the data to prove that the PTAB is broken and that reforms will not result in trolls filing frivolous lawsuits with “bad patents.” Challenge accepted.

I ran a few simple queries in Docket Navigator. Readers can check it themselves by following the links below (account required):

The first thing that informed readers should do is throw out all of the statistics published by the PTO and Lex Machina that report the results of petitions instead of patents. As abused inventors from Zond know, with unlimited serial petitions it is useless to survive one petition if the next one is instituted and takes out the patent. Of the 4,637 patents challenged in the PTAB, 3,055 did not reach final decision and are therefore in limbo. They cannot be counted one way or the other. Of the 1,582 patents with a final written decision, 1,343 were found to have defects by the PTAB. That is an 85% defect rate. Only 239 patents were affirmed to be fully compliant with the statutes by the PTAB. Yet the Office of Patent Quality Assurance (OPQA) claims a 6-8% defect rate. This is consistent with my experience where the examiner cited all the prior art and initialed parallel PTAB trials as references, the OPQA and TC Director are signed off on allowance, the PTO Director signed my patents, and the PTAB is now overruling them – one after another.

Next issue – where are the trolls and the bad patents? Going back to 1987, Docket Navigator shows a mere 66 “bad patents” that were asserted, found invalid, and resulted in an award of attorney fees. Yet the PTAB has killed 1,343 and put another 3,051 into limbo. And what harm did those 66 bad patents do? The prevailing party was made whole. It does not make sense that bad patents could stymie innovation. Any party or attorney stupid enough to assert a bad patent is going to lose a lot of money. This is even more true now that 1) the Federal Trade Commission (FTC) and state legislatures have cracked down on demand letters; 2) federal rules have heightened pleading standards; 3) local rules have evolved to permit summary judgment early in cases; and 4) Octane Fitness gave judges discretion to award fees for exceptional cases. These 66 bad patents were never a threat to our innovation economy, and even if they were, they’ve been fixed without need of any help from the PTAB.

While additional patents have been held invalid by district courts (without incurring sanctions), they are not exceptionally bad and the cases were not frivolous. The economic costs of defending invalid patents are balanced by the costs of asserting valid patents. As for the allegation of nuisance settlements generated by asserting “bad patents,” that is pure speculation as they just as easily might be “great patents” or “okay patents.” If we are going to apply a data-driven approach to policy, we should stick with data, as I have done here, rather than pejorative and unsupported labeling of an uncontested patent as a “bad patent” using fake science.

In our meetings with representatives on Capitol Hill, we have turned the tables and asked that the lawmakers and apologists for the PTAB show us where the “bad patents” are. Instead, they have hearings in which witnesses from the likes of Mapbox complain about being sued for infringement of U.S. Patent No. 6510383 by inventor Martin Jones. The patent has never been found invalid, not even by the PTAB. It is not a bad patent. Not to mention the case was dismissed before Mapbox even had to file a single motion. At the same hearing, the witness from The Clearing House complained about “bad patents”, presumably referring to Leon Stambler’s U.S. Patent No. 5793302 which was never ruled on by a judge or jury. The PTAB invalidated it, but we have found they disagree with the examiners 100% of the time and courts 76% of the time. The House IP Subcommittee could just as well have my nemesis Telebrands testify that I am impeding their progress in knocking-off water toys by asserting my patents – patents which the PTAB invalidated against several PTO examiners and five Article III judges. As shown above 263 patents were found valid in full and fair trials in a court of law and also tried in the shortcut infringer-biased PTAB. Only 63 of them got the same results in both venues. The other 200 the PTAB came to a different conclusion. If the courts are correct then the PTAB is wrong 76% of the time.

That’s some data which should be pretty eye-opening to any PTAB apologists. How soon can it start driving some policy that restores our patent system? Or will the U.S. Supreme Court take it out of Congress’s hands and eliminate the PTAB in Oil States?

The Author

Josh Malone

Josh Malone quit his corporate job in 2006 to take his shot at the American (Inventor’s) Dream. Eight years later, savings depleted and orthodontics and college unfunded, he took one last swing before trudging back to the corporate world. And hit the homerun with Bunch O Balloons. His solution to the 63 year old problem of filling and tying water balloons instantly became the number one selling spring/summer toy. It was just as quickly knocked off resulting in a patent litigation now totaling 6 patents, 5 patent suits, 5 PTAB petitions/trials, 4 preliminary injunctions, and 8 appeals at the Federal Circuit. He is currently a Fellow with US Inventor working to restore the patent system.

Josh Malone

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.

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 21 Comments comments. Join the discussion.

  1. Valuationguy October 30, 2017 10:06 am

    Excellent synopsis! Bravo to both of you in trying to counter the BS statistical method created and marketed by Lex Machina…..a company founded to muddy the waters in part by the father of efficient infringement himself….Dr. Mark Lemley of Stanford…..whose wife just happened to be the #2 lawyer at Google when Android was under serial attack for its ‘infringement’ before Lemley’s effort helps kill most software patents….and currently benefiting from a weak enforcement environment.

  2. angry dude October 30, 2017 10:24 am

    If they can do this farce to simple mechanical patents on water balloons just imagine what they can do to complex hi-tech patents like mine related to e.g. smart phone functionality, with practically all of those patents involving at least some essential software components ?

    thanks but no thanks

    fool me once – shame on you,
    fool me twice – shame on me

  3. Night Writer October 30, 2017 10:42 am

    I think this is just half the picture. Alice is just as bad. I can’t tell you how much money is wasted fighting ridiculous Alice rejections. And, what I see now is the examiners writing a few sentences to reject an application because they can’t find art or are too lazy to bother. They see this as a great way to make hours. You reject under 101 to start. Then wait until an RCE to look for art.

    (I do think that the justices could be impeached based on Alice and that an argument is there to try them for treason.)

  4. JPM October 30, 2017 1:17 pm

    Josh,

    Excellent article and the data is on point. Let’s hope that the SCOTUS shuts the PTAB down and all inventors are somehow made whole who were victims of the PTAB.

    There are many victims of the PTAB as we can see, the folks whose patents were killed by this kangaroo court, and the folks who were forced to settle and enter into bad “better than nothing license agreements” to avoid getting their patents killed.

  5. Edward Heller October 30, 2017 3:27 pm

    As I said before, if Congress is repeatedly told that the PTO is issuing large numbers of bad patents, why do not they do anything about it so that the PTO stops issuing bad patents?

    The fact that no one is asking Congress to look into fixing the PTO in any manner, shape or form tells us a lot. There is no real problem, apparently, from the PTO end. And given the nature of the solutions proposed to and adopted by Congress, the problem is that the little inventor/startup is actually asserting patents against the big boys. That is why we have reexaminations and other postgrant revocation proceedings, not bad patents.

  6. Benny October 31, 2017 5:18 am

    “…and $18M in legal costs”.
    Some party (other than the infringer) is profiting to the tune of 18 megabucks from the current situation and obviously has an incentive to perpetuate it. That 18 mil probably outstrips both your infringers net profit and your lost profits, Can you enlighten me as to who has been paying visits to the bank at your expense?

  7. Gene Quinn November 1, 2017 12:25 pm

    Benny @6-

    We’ve documented here on IPWatchdog the ongoing battle between Josh Malone and Telebrands.

    Not sure where you come up with the idea that Josh would spend $18 million if his invention was worth substantially less than that. Josh’s invention is a true blockbuster in his sector. His invention is sold in places like Costco, where it is frequently located right at the front entrance and can’t be kept on the shelves. The Telebrand knockoff is sold at Walmart.

    See: http://www.ipwatchdog.com/tag/tinnus-enterprises-v-telebrands/

  8. Benny November 1, 2017 2:29 pm

    Gene,
    It was just a guess. In my little town I would have advocated investing in new product design rather than legal costs. A wise man once said, “choose your battles”.

  9. Gene Quinn November 1, 2017 2:53 pm

    Benny-

    That is good advise. Telebrands, however, has a well established reputation for making knock offs. In this case they just so happened to knock off a product that is wildly successful and the inventor and his partners have the means to fight and they are fighting. The patents have already been sustained by the Federal Circuit at least once, and multiple injunctions have been granted in district courts. When this case is all said and done it seems likely that Telebrands is going to have to write a very, very large check (or so it seems to me).

    -Gene

  10. Anon November 1, 2017 3:15 pm

    Benny,

    Your “wiseman” saying becomes more than just a bit a wiseacre saying when nearly every post that you advance on this site is anti-patent holder post.

    Are you that unware of how you come across?

  11. Benny November 1, 2017 3:22 pm

    Anon,
    Yes I am aware. I’m not here to preach to the choir. Unlike the toy industry, our field is not riddled with knock off artists, and the players use the patent system to stymie the competition, not to advance innovation. Leaves a bad taste in the mouth.

  12. Josh Malone November 1, 2017 4:18 pm

    It is not just toys. It is plasma thin film deposition, plasma etching technology, centrifugally cast utility poles, infrared leak detectors, blenders, fracking wellhead seals, eyewear retainers, surveillance systems, self-driving automotive sensors systems, hybrid vehicle control systems, biometric sensors, hybrid digital/power networking technology, pico-projector optical systems, injection molding technologies, surgical tools and implants, and smart utility meters to name a few.

    Inventors in all fields are being knocked-off with impunity. Where will America get its innovation now?

  13. Benny November 1, 2017 5:14 pm

    Josh,
    to give an honest answer to your question, some corporations are outsourcing their innovation to China. It’s cost effective.

  14. Anon November 1, 2017 6:50 pm

    Benny,

    and the players use the patent system to stymie the competition, not to advance innovation. Leaves a bad taste in the mouth.

    I have (more than) a feeling that YOUR feeling on this matter is colored by a lack of understanding just what the patent system is – and does.

  15. staff November 1, 2017 7:16 pm

    ‘PTAB is necessary to prevent trolls from asserting “bad patents” with frivolous lawsuits’

    Let’s deconstruct the large infringer propaganda in this statement. First, since large infringers refuse to define the phrase, we do so for them.

    patent troll=small competitor

    That by itself will help Congress put all the remaining Chinese style propaganda of large multinational infringers (thieves) in perspective.

    Next, when large infringers say ‘bad patents’, what they mean is those owned by others. Similarly, by ‘frivolous lawsuits’ they mean ‘any time we are sued’.

    It really is that simple.

    Most importantly, the PTAB is a pseudo judicial process which ‘tries’ cases involving property disputes -specifically inventions. We believe any such process which denies any American the right to a trial by jury is wholly in tension with any reasonable reading of American history and the Constitution. Since the founding of America and indeed into the middle ages in England as codified in Magna Carta all citizens have had a right to a trial by jury. America’s founders regarded that right to be ‘inalienable’. Large infringers somehow defrauded Congress into passing a bill which violates that right. The only reasonable course is to either repeal the law or replace it with one that respects and guards that right. We stand ready to work closely with our friends in Congress and elsewhere to craft a bill which does so while in general restoring America’s patent system which has been so debased by large multinationals so as to make obtaining, keeping and enforcing our patents practically impossible. To that end we have drafted a set of measures we believe will do just that.

    https://aminventorsforjustice.wordpress.com/proposedmeasures/

    For our position and the changes we advocate (the rest of the truth) to restore the patent system, or to join our effort, please visit us at https://aminventorsforjustice.wordpress.com/category/our-position/
    or, contact us at aifj@mail.com

  16. Benny November 2, 2017 3:03 am

    Anon,
    I take it from your comment that you invent and file applications with the intent to advance innovation and reap your deserved returns from society. I suppose it would never occur to you to file an application for technology which you have no intention of developing, marketing, or licensing simply to keep competitors off that particular chessboard square. On our planet we do things differently.
    I have more than a feeling that YOUR feeling on this matter is colored by a lack of understanding just how corporations leverage their patents outside of litigation and invalidation and away from the public eye.

  17. Anon November 2, 2017 10:21 am

    I suppose it would never occur to you to file an application for technology which you have no intention of developing, marketing, or licensing simply to keep competitors off that particular chessboard square.

    Why would you think that?

    Further, why would you think that to be improper?

    You are aware (or should be aware) that someone may patent something – and keep ALL from using it for the entire length of the patent right – and such would be a fully legitimate exercise.

    I understand full well how corporations leverage their patents – and how they do so legitimately.

    There is NO “must use” aspect to the US Sovereign version of patent law.

    I am not the one lacking understanding here.

    Once again, it is YOUR philosophy that comes up short when looking at reality.

  18. Benny November 2, 2017 10:59 am

    Anon,
    Of course I understand that this behaviour is legitimate. Give me some credit for intelligence. From outside of a purely legal perspective, what is happening is that companies are gaming the legal system to get a leg up on the competition. Our company does it too, Good business ethics would dictate that you assert your position in the market by building a better product, rather than using the patent system as a tool to trip up your competitors. It is this business philosophy which goes to my blood pressure, not whether or not the patent is actually reduced to practice.

  19. Anon November 2, 2017 12:16 pm

    “”From outside of a purely legal perspective, what is happening is that companies are gaming

    LOL – you want me to give you credit for intelligence when you directly contradict that “intelligence” by ignoring what “legitimate” means and play some type of “feelings” game?

    THAT is the only “gaming” here.

    Good business ethics would dictate that you assert your position in the market by building a better product, rather than using the patent system as a tool to trip up your competitors

    YOU do not get to write the rules of what “good ethics” means.

    Let me repeat this again – just in case you want to apply some of that “intelligence” that you want me to give you credit for: There is NO “must use” requirement in the US patent law system.

    YOU need to increase your basic understanding, and THEN – and only then – attempt to claim some intelligence. As it is, you want to stick to your lack of basic understanding AND claim intelligence in doing so, and then “back this up” with some emotional claim to what YOU view as “business ethics.”

    Reality does not work like that.

  20. Nona November 3, 2017 4:41 pm

    Anon seriously needs to chill. You dismiss a perfectly valid policy argument with insult after insult. Why not focus instead on why you believe a market use requirement is a bad idea? I can think of many reasons for and against. If you have nothing to add to the discussion other than saying essentially “that’s the way it is, so you’re an idiot,” then move on with your life and bill some hours.

  21. Anon November 5, 2017 1:18 pm

    Nona,

    You think that I need to chill when my posts are directly on point?

    Perhaps instead of accusations (“insult after insult”) you instead try to counter the points that I have presented.

    The point is explicitly that we DO NOT HAVE a market use requirement. The point is NOT whether we should or not have one. Yes – you are welcome to do as you yourself ask of me and advance the discussions by supplying some actual arguments and advance a change in the existing conditions – but you really do not do that, now do you?

    So try to read what is actually written, absorb the points on the table of discussion and put your “feelings” aside as to the strength of the position that I have put forth (and the relative weakness of Benny’s position).

    (If I were to take a guess, given the attempted put-down with “bill some hours,” I would guess that you are NOT an attorney, and that you side with Benny on some philosophical grounds – of which you merely hint at with your “ I can think of many reasons for and against.”)

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