PTAB Errors Fatal to Hundreds of Legitimate Patents

Apologists for the Patent Trial and Appeal Board (PTAB), including Greene’s Energy Group and the Department of Justice continue to proffer the fallacy that the PTAB is merely “correcting” errors committed by the USPTO in issuing “bad” patents through the use of America Invents Act (AIA) post-grant proceedings to adjudicate a patent’s validity. The actual data indicates that the PTAB is instead helping infringers by overturning the examining corps and the real courts to nullify inventors’ hard earned rights. Allyson Ho, counsel for Oil States correctly argued that the PTAB is improperly intervening in property rights disputes between private parties – not “correcting errors.”

Curiously, the Trump Administration did not assign recently confirmed Solicitor General Noel Francisco or Trump-appointed Assistant Solicitor Chad Readler to make these arguments. Instead, Obama-era holdover Malcolm Stewart (who explained to Justice Alito in Citizens United that the Constitution also permits the government to ban books!) was saddled with the task of arguing for the radical theory that patents are “public rights,” like food stamps, and that the PTAB passes Constitutional muster under the mulligan theory of property rights.

Setting aside the Trojan Horse transmogrification of patent rights into entitlements – the key presumption the anti-patent crowd makes is that the PTAB is correcting errors. This is clearly not the case when comparing data on patent invalidity in both real courts and the PTAB. The PTAB is itself making the errors and stripping inventors of their hard-earned rights. We have continued to review the actual data (because everyone supports evidence-based and science-based policies). Some critics have taken issue with a minor error in our previous article on the impact of PTAB proceedings to patents which have been deemed valid in district courts, namely the 220 patents upheld as valid in the real courts and challenged at PTAB; our previous report had said that there were 263 of such patents, but a few of those proceedings actually ended in mixed validity results in the district courts. We have updated our analysis accordingly, and find that the PTAB error rate remains 76% when compared to results in real courts.

We compiled the complete list of these 220 patents that were held valid in real courts and also reviewed by the PTAB. IPWatchdog readers will recognize several of the patents in this list from previous articles:

• Federal Circuit affirms PTAB invalidation of Uniloc patent which wasn’t invalid in 65 district court cases – U.S. 5,490,216 issued on 2/6/1996 to Richardson, III for “System for software registration”
• Federal Circuit OKs PTAB invalidating patent claims prior litigation confirmed as valid – U.S. 6316023 issued on 11/13/2001 to Asmussen for “TTS containing an antioxidant”
• PTAB overturns two Cisco patents, clearing way for Arista to overturn ITC exclusion order – U.S. 6,377,577 issued on 4/23/2002 to Bechtolsheim for “Access control list processing in hardware”
• Three rounds of IPR petitions invalidates VirnetX patent after Apple gets around statute of limitations – U.S. 6,502,135 issued on 12/31/2002 to Munger for “Agile network protocol for secure communications with assured system availability”
• Broadband iTV files amicus brief supporting Versata petition for certiorari – U.S. 6,553,350 issued on 4/22/2003 to Carter for “Method and apparatus for pricing products in multi-level product and organizational groups”
• Federal Circuit Review – Issue 56 – June 26, 2015 – U.S. 6,757,717 issued on 6/29/2004 to Goldstein for “System and method for data access”
• EDTX triples damages award against Samsung due to false testimony, discovery violations – U.S. 7,092,029 issued on 8/15/2006 to Medwick for “Strobe lighting system for digital images”
• En Banc Federal Circuit Dodges PTAB Constitutionality – U.S. 7,162,549 issued on 1/9/2007 to Mambakkam for “Multimode controller for intelligent and “dumb” flash cards”
• Has the PTAB compromised the integrity of the patent system? – U.S. 7,188,180 issued on 3/6/2007 to Larson for “Method for establishing secure communication link between computers of virtual private network”
• US government sued for infringing surveillance system patents – U.S. 7,323,980 issued on 1/29/2008 to Faulkner for “Security system and method with realtime imagery”
• Ars Technica reports confuse “patent troll” with legitimate patent owners enforcing property rights – U.S. 7,418,504 issued on 8/26/2008 to Larson for “Agile network protocol for secure communications using secure domain names”
• The PTAB Killing Fields: VirnetX patents worth more than $1 billion in district court lost at PTAB – U.S. 7,490,151 issued on 2/10/2009 to Munger for “Establishment of a secure communication link based on a domain name service (DNS) request”
• Federal Circuit upholds PTAB invalidation of podcasting patent despite district court infringement finding – U.S. 8,112,504 issued on 2/7/2012 to Logan for “System for disseminating media content representing episodes in a serialized sequence”
• Lawsuit Charges Infringement of Digital Cinema System Patents – U.S. 8,220,934 issued on 7/17/2012 to Schuck for “Polarization conversion systems for stereoscopic projection”
• Finjan files patent infringement suit against Bitdefender as part of campaign to protect online security IP – U.S. 8,677,494 issued on 3/18/2014 to Edery for “Malicious mobile code runtime monitoring system and methods”
• U.S. ITC recommends exclusion order for radiotherapy and cancer treatment technologies – U.S. 8,867,703 issued on 10/21/2014 to Shapiro for “Multi-mode cone beam CT radiotherapy simulator and treatment machine with a flat panel imager”
• Telebrands loses $12.3 million verdict for willful patent infringement of Bunch O Balloons – U.S. 9,051,066 issued on 6/9/2015 to Malone for “System and method for filling containers with fluids”

PTAB apologists say a 76% discrepancy rate between the PTAB and the real courts is perfectly fine – different standards, procedures, and burdens allow for different results. In other words, it is okay for a patent to be both valid and invalid at the same time. This is nonsense. These are the words of people who profit from an unstable patent system – certain attorneys, academics, bureaucrats and infringers.

A patent is either valid or invalid, it can’t be both. The PTAB was expressly intended to reach a faster and cheaper result on validity challenges than can be obtained through real courts. So how do they do that? They skimp on due process. Project managers recognize the axiom of the project triangle – fast, good, or cheap – pick two, because you can’t have all three. Congress chose fast and cheap in creating the PTAB. Therefore, they sacrificed good. How do we get good and accurate adjudication of patent validity? In the real courts with non-party judges, presumption of validity, clear and convincing standard of proof, correct claim construction, liberal discovery, live testimony, life-tenured apolitical judges, and juries.

There have been 220 patents upheld as valid in real courts and also subject to a final written decision in the PTAB. The PTAB only agreed with the real courts on 52 patents, while disagreeing with them on 168 patents. If the U.S. legal system is the gold-standard, that means the PTAB is erroneously invalidating patents 76% of the time.

Not only that, the PTAB will likely go on to kill several of the 52 surviving patents because they are still under review or at risk of follow-on petitions – such as happened to Zond.

The real courts (Article III courts) are considered the gold standard because they permit a complete and thorough adjudication, without sacrificing accuracy for speed or expense. The PTAB is not so calibrated. The PTAB is killing patents that survive challenge in district courts. This means the PTAB is killing good patents, wiping out billions of dollars worth of assets, and destroying confidence in patent rights.

This is just a sample of 220 patents that had the benefit of confirmation via trial in a real court. Yet, the PTAB has reached a final decision on over 1,500 patents with an additional 3,000 threatened by petitions, and 3 million more that are threatened by a wrongful verdict at the PTAB and therefore cannot serve their purpose of securing exclusive rights to their inventors.

The hazard and risk is drastic. An inventor must calculate this. There is a 76% chance that perfectly valid inventions will be taken away from an inventor – after the inventor hands over a half million dollars or more to the USPTO and patent attorneys. Furthermore, the entire system seems rigged. Flip a coin. If it comes up tails, the patent owner loses his rights. If it comes up heads, flip the coin again. If the second flip comes up tails, the patent owner loses his rights. Only if the patent owner flips heads twice in row is the patent on the invention kept. It has nothing to do with the law – utility, novelty, non-obviousness, specification compliance – it’s just a completely random chance. If his invention is truly valuable, like the Zond, Paice, or SmartFlash patents, the patent owner needs to win 5 or 6 times in a row or patent rights are taken away.

One more argument has been raised with regard to our earlier analysis of the incongruity between the PTAB and the real courts. PTAB apologists argue that each of the 220 patents were tested on different grounds in the two venues. This is an argument that actually works against those apologists. In the PTAB, generally only two grounds of attack are available – 35 U.S.C. §102 for novelty and 35 U.S.C. §103 for non-obviousness. But in the real court four grounds are available as a defense – along with §102, §103, accused infringers are also afforded validity challenges under 35 U.S.C. §101 for basic patentability and 35 U.S.C. §112 for specification. So how is it that the PTAB invalidates three times as many patents with only half as many grounds available? The only answer is because it is designed to help infringers by bypassing due process protections afforded to inventors in real courts. Apologists will go on to argue that the PTAB had better evidence, better prior art, better experts, better judges – nonsense! The real courts have rules and procedures which are tremendously more thorough, developed, proven, and fair. The PTAB has not and cannot measure up.