PTAB Reform: An Urgent Request on Behalf of Independent Inventors

By Josh Malone
May 7, 2018

What follows is a letter on the topic of PTAB reform that will be sent to USPTO Director Andrei Iancu on Monday, May 14, 2018. The letter seeks urgent action on the Patent Trial and Appeal Board in order to bring balance to a process that has tormented inventors for the last 6 years. We already have over 100 signatures from patent owners, patent attorneys, investors and inventors. If you would like to sign onto this letter please visit http://100patentowners.org.

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The undersigned represent tens of thousands of independent inventors in a variety of capacities. We include inventors of patented products worth billions of dollars, inventors commercializing their inventions and others licensing their inventions, leaders of local and national inventor organizations with thousands of hours of public service encouraging and teaching inventors, widely published analysts, early stage investors, and attorneys who advocate for independent inventors. We are connected as inventors, patent owners, or counsel to ______ PTAB petitions, our harrowing direct observations and experience informing our recommendations herein. We are the startup economy that relies heavily on stable and predictable patent rights.

The implementation of the PTAB under the America Invents Act has severely destabilized our patent rights and that is now paralyzing our innovation culture and businesses. We hope that your increasing attention to this situation will go a long way toward restoring confidence in patent rights – the promised exclusivity in exchange for publicly disclosing our inventions so others can build upon them.  Stable and predictable patent rights provide often the only collateral we have to back investment to commercialize our inventions.

The PTAB is finding 85% of issued patents to be defective, in stark opposition to the Office of Patent Quality Assurance which indicates a defect rate of 6-8%[1]. A recent report shows that of 1,582 patents reaching a final written decision, 1,343 resulted in one or more claims being held invalid[2]. An additional 3,055 patents have been subject to PTAB petitions but have not received a final written decision. These 3,055 patents are in limbo, along with the other 3 million patents in force and at risk of unlimited post grant reconsiderations.

Post Grant Review (“PGR”) trends are indistinguishable. Since the only patents eligible for PGR were examined completely under the America Invents Act, that means patents examined under First-to-File, Enhanced Patent Quality Initiative, and current case law still do not pass PTAB muster. The problem is not the examination but rather it is PTAB procedures[3].

This data is consistent with our personal experience. Few of the inventors we represent can raise the $500K needed to mount a legal defense of our patents in the PTAB and even those that did have lost most or all their patent claims and their money. We implore you to consider the reforms that follow.

  1. The decision to institute a PTAB proceeding must be performed by an objective independent panel, which includes members unassociated with the PTAB. The decision to institute PTAB review cannot be made by the same PTAB judges who conduct the trial. The current system encourages institution because PTAB judges must review a sufficient number of patents to remain employed (i.e., satisfy their production quota). This also biases the decision to invalidate the patent because it is not likely for a person to institute a PTAB review by declaring the patent is more likely than not to be invalid, and then find the patent valid. This is a well-known psychological bias called “anchoring.”
  1. Provide for attorney fees for small entities. The PTO should either create a fund or should provide counsel for small entities to defend their patents from post grant review. Small entities cannot afford $300-500K to defend their patent rights. Access to the patent system and promotion of progress in the useful arts via the contributions of start-ups and independent inventors requires this. Alternatively, procedures should be established to provide for recovery of fees from the petitioner when a small entity patent owner prevails.
  1. For institution, PTAB must require identification of a substantial new question (SNQ) of patentability. If the prior art of the petition is cumulative to or the same as the art considered in examination, then the petition must demonstrate a clear error in the examination. Absent a clear error, challenges must give deference to the original determination of patentability by the examiner and deny the petition. While acknowledging Congressional intent to elevate the standard for review above SNQ[4], the PTAB regularly institutes review where there is not even a hint of SNQ.
  1. Apply the Phillips standard of claim construction used in Article III courts. Applying BRI (“broadest reasonable interpretation”), as is now the case, to an issued patent is incorrect and harmful because that is same standard used during examination. Inspection prior to issuance necessarily must be stricter than inspection after issuance. This is a basic premise of quality control (6 sigma, TQM, lean, etc.). If the original examination is not done to a tighter standard than what is desired for the final product, then the final product is doomed to a high failure rate. More importantly, a patent claim can only be permitted to have a single scope, regardless of the adjudication venue. The patent owner, the public, and any accused infringer must all have notice and be able to rely on fixed metes and bounds in order for the patent to serve any useful purpose.
  1. Defer to prior constructions, absent clear error. Often an accused infringer will seek a broad construction for purposes of invalidating a patent and a narrow construction for purposes of arguing non-infringement. This is not fair. If a court or the PTAB has previously adopted a construction of the same term in the context of the same or essentially the same specification, this construction must be adopted by the PTAB.
  1. Seek to confirm the invention. “A patent shall be presumed valid.[5] PTAB must draw all inferences in favor of preserving the patent. Claims should be construed to uphold the patent, not to invalidate it. If the patent owner proposes a reasonable construction in light of the specification, the PTAB should adopt this construction. A construction that reads on the prior art should not be favored when a more reasonable construction is available. This serves the purpose of preserving the exclusive right to the invention while giving notice to the public that the patent owner disclaims any alternate constructions.
  1. Limit petitioners to a single petition per patent. Filing multiple petitions is a way of circumventing word limits imposed on petitioners when filing against the same patent. This practice significantly increases the cost of defending against a PTAB review and pushes that increased cost on the party least able to afford it. Petitioners must narrow their arguments to their best grounds in a single petition.
  1. Limit Petitions to a Single Ground per Claim. Throwing hundreds of combinations of prior art at a patent to see what sticks is grossly unfair to patent owners who must allocate their word limits legal resources to guess which grounds are of concern to the PTAB. Petitioners must be required to choose their best prior art and statutory ground for challenging each claim. PTAB is intended to address poor quality patents, not a weapon to destroy properly examined patents by procedural gamesmanship.
  1. Require detailed declaration of real party of interest, including disclosure of all business relationships, memberships, and discussions with third parties that may benefit from the filing of the petition.
  1. Deny seemingly organized petitions by multiple parties, whether filed simultaneously in concert or filed serially. The patent owner must be protected from multiple petitions which drive up the cost and difficulty of mounting a successful defense. The PTAB must facilitate consolidating all interests in challenging the validity of a single patent into a single petition.
  1. Deny petitions duplicative of district court proceedings. Post grant reviews are intended to be an alternative to district court proceedings, not a second bite at the apple. If a district court action is pending and not stayed involving the same parties and claims, the petition should be denied to conserve resources. If a district court stays such an action, that is a signal to the PTO that the agency expertise is desired, and the Director should proceed to consider the petition.
  1. Allow live testimony and broad discovery similar to Federal Rules of Civil Procedure to aid in identification of the real parties of interest, and to allow patent owners to put on comprehensive evidence of objective indicia of non-obviousness, which assists the PTAB in correcting for hindsight bias. Requiring the patent owner to have or develop knowledge a priori of the evidence that will exonerate his patent rights and to obtain it within 90 days under current rules is a grossly unfair and raises serious questions of due process. Obviousness is not a cut and dry question and a full evidentiary record must be developed and weighed in order to determine that an issued patent claim “would have been obvious” at the time of filing.

A patent cannot secure investment and encourage the risk-taking necessary for startup up companies with technologies that can only be protected by patents if that patent is not reliable. An unreliable patent system therefore cannot promote progress in the useful arts and science as required by the U.S. Constitution. It cannot create new jobs nor propel economic growth.

Current PTAB processes are laying waste to investment in patents and early-stage startups which is undermining confidence in the patent system overall. We submit the proposed reforms herein would help the agency to do its part to increase the reliability of the patent grant.

___________

[1] https://www.uspto.gov/sites/default/files/documents/20170504_PPAC_Quality_Update.pdf

[2] http://www.ipwatchdog.com/2017/10/30/ptab-patent-trolls-bad-patents-wakeup-aia-apologists

[3] “The results from the Patent Trial and Appeal Board reflect the procedures it applies, and in my judgment the procedures are wildly off base. If I had a magic wand I’d make the procedures comply with those from federal court…Unless you change the PTAB process hook, line and sinker this is what you are going to get… it isn’t that the PTAB is hostile to patents, it is that their processes can’t accomplish anything else.” Retired Chief Judge Paul Michel in remarks at the IIPCC Symposium May 8, 2017

[4] ‘‘The threshold for initiating an inter partes review is elevated from ‘significant new question of patentability’—a standard that currently allows 95% of all requests to be granted—to a standard requiring petitioners to present information showing that their challenge has a reasonable likelihood of success.’’ H.R. Rep. No. 112–98 (Part 1), at 47. Revision of Standard for Granting an Inter Partes Reexamination Request, 76 Fed. Reg. 185, (September 23, 2011).

[5] 35 U.S.C. § 282 – Presumption of validity; “A patent shall be presumed valid. Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim. The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.”

 

[1] https://www.uspto.gov/sites/default/files/documents/20170504_PPAC_Quality_Update.pdf

[1] http://www.ipwatchdog.com/2017/10/30/ptab-patent-trolls-bad-patents-wakeup-aia-apologists

[1] “The results from the Patent Trial and Appeal Board reflect the procedures it applies, and in my judgment the procedures are wildly off base. If I had a magic wand I’d make the procedures comply with those from federal court…Unless you change the PTAB process hook, line and sinker this is what you are going to get… it isn’t that the PTAB is hostile to patents, it is that their processes can’t accomplish anything else.” Retired Chief Judge Paul Michel in remarks at the IIPCC Symposium May 8, 2017

[1] ‘‘The threshold for initiating an inter partes review is elevated from ‘significant new question of patentability’—a standard that currently allows 95% of all requests to be granted—to a standard requiring petitioners to present information showing that their challenge has a reasonable likelihood of success.’’ H.R. Rep. No. 112–98 (Part 1), at 47. Revision of Standard for Granting an Inter Partes Reexamination Request, 76 Fed. Reg. 185, (September 23, 2011).

[1] 35 U.S. Code § 282 – Presumption of validity; “A patent shall be presumed valid. Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim. The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.”

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.

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 26 Comments comments. Join the discussion.

  1. Silicon Valley Inventor May 7, 2018 12:42 pm

    Thank you, Josh, for being such a strong advocate for us inventors and going through the ordeal of PTAB. I have signed the letter. I previously connected to Director Iancu on LinkedIn and let him know I was encouraged that he was named USPTO Director. However, it’s questionable how much power and influence he can have in reversing the damage done by all three branches of government over the past decade or more.

  2. Ken May 7, 2018 3:15 pm

    How about a *standing* requirement in order to be able to challenge a patent? Folks like to point out that most IPRs are brought by actual defendants anyway, but that ignores the practical leverage that the mere “possibility” of IPR gives to prospective licensees (or possible infringers).

  3. Night Writer May 7, 2018 3:57 pm

    One thing that I would add has to do with KSR. I would say to deny petitions that use duplicative or similar prior art that was used to examine the application.

    So put the burden on the petitioner to make a clear distinction between the art used to examine the application and the art that is used for the petition. Maybe add some test so that the art must clearly show an element that was used for the allowance.

    The problem is that there is so much duplicative art out there that it is easy for petitioners to merely use about the same art that was used in examination but to get the claims invalidated because KSR gives the fact finder so much lea way.

  4. Night Writer May 7, 2018 6:51 pm

    http://www.717madisonplace.com/?p=9768

    Total gibberish. Worse than a witch trial.

  5. Night Writer May 7, 2018 7:23 pm

    No person with a science background could listen to this oral argument and not think that all the judges should be replaced. The whole framework of a word, “abstract idea” being substituted for “invention” and everyone pretending that isn’t what happened. As an example, can anyone tell me in anyway that has anything to do with the English language up until Alice how something being old and convention has to do with it being abstract?

    Anyway, after listening to that my new goal is to get out of patent law.

  6. Steve Morsa May 7, 2018 8:22 pm

    Thanks Josh. Signed up earlier today.

    Since we couldn’t sink it (yet); it’s time to right this ship.

    Director Iancu is just the leader to do it.

  7. Benny May 8, 2018 5:19 am

    Ken @2,
    No, that would be wrong. Since a patent gives the right to exclude the public in general, and not just the right to exclude a potential licensee or an active infringer, then the public in general should not be excluded from the right to challenge the patent. No other country I know of imposes limitations on the identity of third parties who may oppose grant of a patent.

  8. Night Writer May 8, 2018 7:31 am

    @6 Benny

    You can challenge the patent by practicing the patent. That is actually how our laws work.

  9. EG May 8, 2018 7:33 am

    Hey Josh,

    If we’re to continued to be plagued with IPRs in view of Oil States, the least that can be done is to make it act more like an Article III tribunal, including using the same claim construction standard, the same presumption of validity (“clear and convincing”), all issues in the IPR subject to appellate review, and most importantly, APJs governed by an ethics code equivalent to that federal district court judges. Anything less makes PTAB operate in violation of the APA.

  10. Anon May 8, 2018 7:41 am

    Benny,

    No other country may have our particular separation of powers and requirement of standing to use the courts. Or, the mere “want” to oppose does not suffice, and that “general” must become specific (and thus standing obtained).

    See our Lujan case, as it may help you understand the difference between “the general”, “the specific” and our system.

    That being said, the reform list here will FAIL precisely because the lack of protections of the court system were what those driving the AIA wanted. The IPR scheme is designed to NOT be in that branch of our system exactly so that those protections would not be there.

  11. Anon May 8, 2018 7:46 am

    EG @ 8,

    I disagree with your theory. As I just noted, the changes in the AIA were driven by the differences in the branches. Further, I do not see that even if the APA were to be strictly adhered to, how that would transform the executive branch (and the “adjudicatory” function there) into a proper Article III functioning item.

    I “get” what you (and Josh) want. I understand that. But wanting that on such a “naked” basis flies in the face of what has been done in the move from one branch to another and why that move really is a disastrous and dangerous one (for ALL personal property).

  12. EG May 8, 2018 8:23 am

    Hey Anon,

    Fair point. Like you, I wish IPRs and PTAB would simply go away, and that Gorsuch’s view in Oil States had prevailed, instead of that of the Imperious Seven. In some ways, what I suggested should happen in IPRs is simply not what happens and why PTAB is a “rogue” tribunal, if you can call it that.

  13. Night Writer May 8, 2018 9:47 am

    Things could get better if the patent judges were made ALJs so that they were independent from the PTAB. That would be a huge help.

  14. Anon May 8, 2018 10:32 am

    The PTAB is – and remains – a non-Article III entity.

    With Oil States being the law, “rogue” is a term that may no longer apply.

    (with sadness).

  15. Anon May 8, 2018 10:36 am

    Night Writer @ 12,

    I would place your suggestion in the same category that I would place many of the other suggestions in the article: these are NOT reforms.

    These are writing a different law.

    Removal of an agencies adjudicatory functions is a re-writing of a large scale in admin law circles.

    As I have provided many times now, administrative agencies run the spectrum in how “separate” their adjudicatory functions are from the political functions. The administrative agency of the USPTO has one of the most non-existent “separations.”

    What you are suggesting is nothing short than a re-write of the charter of the administrative agency itself.

  16. Josh Malone May 8, 2018 11:07 am

    Two down ten to go – https://www.uspto.gov/about-us/news-updates/uspto-announces-notice-proposed-rulemaking-claim-construction-standard-used

    Also, we have many poignant comments coming in from signatories. You can read them here – http://www.usinventor.org/2018/05/08/ptab-reform-an-urgent-request-on-behalf-of-independent-inventors/

  17. Anon May 8, 2018 12:26 pm

    I think as a desirable alternative to Josh’s second point, petitioner should be required to put into escrow at the USPTO an amount equal to the estimated costs of the defense of the patent holder. If the petitioner loses at the PTAB costs to be awarded to the defense which should be covered in large part by the escrow deposit.

  18. Anon May 8, 2018 1:17 pm

    Sister Anon @ 17, an interesting suggestion, but would you mirror this with a “fair” “if successful” someone pays the challenger’s legal expenses?

    After all, why have a “loser pays” system if that system is not something that cuts both ways?

    As to exactly whom the loser is if the challenge is successful (and who would be stuck with the bill upon a successful challenge), we can talk about different parties “chipping in.”

    Absent anything egregious, the patent holder would chip in $0.00.
    The Office, whom allowed the patent in the first place, would chip in the remainder.

    We may also want the Office to evaluate any other cost (expectation or realized) that accompanied the good faith actions of the patent holder. After all, absent anything egregious, the patent holder is blameless for any such post grant activity that may have occurred, and would not equity try to make at least that party whole as well?

  19. Silicon Valley Inventor May 8, 2018 1:38 pm

    @Anon #17 …or if not requiring petitioner to put that amount into escrow, have the petition fee commensurate with the cost of two-years royalty on paying the patent licensing fee (presumption of validity). That will make infringers think twice before filing for an IPR. They can either pay the patent holder the annual fee to license the technology or they can double down, pay the USPTO twice that (better have a darn good reason to think the patent is invalid), and then face the possibility of paying the patent holder anyway if the patent is upheld. It’s all about financial incentive. Right now there is every incentive to invalidate.

  20. Anon May 8, 2018 3:34 pm

    SVI @ 19,

    You have alighted upon a key consideration: the entire thrust of the IPR regime under the AIA was expressly to incentivize invalidation.

    NONE of the suggestions made seem to recognize that cornerstone.

    It is the cornerstone itself that is part and parcel of the problem. Until THAT is recognized, all of the gestures towards reforms will be window dressing at best.

  21. SoftwareForTheWin May 8, 2018 5:03 pm

    In my opinion, this will not get you what you want. Congress purposely wrote the AIA the way they wanted. Focus on what may be possible: helping small innovators in the open source community. Despite being attacked with parasitic patents, they have managed not just to survive – but even thrive. American ingenuity is shining bright but can be further strengthened. Provide a means that open source innovators can openly collaborate AND prosper. That will get Congress ear better than undoing recent AIA.

  22. Anon May 8, 2018 5:43 pm

    SFTW – what did you have in mind as far as “helping small innovators in the open source community“…?

    Help them do what, exactly? To keep on giving “freebie, low hanging fruit” to the Big Corps?

  23. Anon May 8, 2018 5:56 pm

    Anon@18 The point is, as it stands now, the petitioner gets their institution costs back if the IPR goes ahead. Those costs are in any event minimal compared to those of the patent holder in defending the patent (successfully or not) during the IPR process.

    So we’re really talking about asymmetrical incentives for the petitioner and defense: once instituted most of the costs are on the side of the defense, the PTAB doing the rest. This is without even addressing the issue of loss of useful patent life during the IPR. At the very least then, if successfully defended, the patent holder should be entitled to a term extension equal to the time lost, starting from the point of inception, because the patent in question is essentially on hold, since the third party perception during the IPR is that the patent will likely be invalidated.

  24. Anon May 9, 2018 10:39 am

    Sister Anon @ 23,

    You raise some good points – thanks.

  25. Pro Se May 10, 2018 2:38 pm

    @23. I’ve lost at least 4 full years off my patent enforcement life due to IPR related district court stays.

  26. staff May 15, 2018 11:02 am

    But as Obama would say, “you can put lipstick on a pig, but it’s still a pig”. Post issue reviews are fatally flawed and must be abolished.

    See also…

    https://aminventorsforjustice.wordpress.com/2016/12/09/uspto-innerworkings/

    https://aminventorsforjustice.wordpress.com/2016/07/28/abuse-of-that-process-began-shortly-after/

    https://aminventorsforjustice.wordpress.com/2017/11/28/but-justice-ruth-bader-ginsburg/

    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

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