Posts Tagged: "Covered Business"

This experiment in patent validity review an executive agency by the Patent Trial and Appeal Board, an Article I tribunal in the PTO, has been unsuccessful…The chief constraints of the public rights doctrine involve consent and due process by an Article I tribunal and review of tribunal determinations by an Article III court. None of these features are present in the PTAB review of issued patents. In fact, the PTAB has shown a massive number of institutional abuses of IPRs that have undermined its legitimacy and negated its determinations… Ultimately, it will be shown that PTAB has vastly worse patent validity review results than federal district courts because of a blatant disregard for due process. As a consequence of these observations, it should be clear that the PTO is susceptible to political influences by the powerful technology lobby’s false narrative of poor quality patents that resulted in creation of a sanctimonious mechanism for patent validity review to constrain competition from market entrants, with an effect to promote technology incumbent profits.

To fix the current incarnation of the U.S. patent system and reinvigorate the American economy, Judge Michel called upon the House IP subcommittee to adopt seven specific action items. Five of the action items relate to improvements to patent law for the strengthening of patent rights while optimizing PTAB procedures already in place, while two other action items focus on the administration of the USPTO.

I want to believe Congress ultimately sought to strengthen the U.S. patent system with the AIA by providing a mechanism to more easily remove a small percentage of granted patents that were being inappropriately used in litigation. Specifically, patents that were being asserted with claim constructions not contemplated when the patent was examined. After all, Congress had been heavily lobbied with the narrative that NPE’s had been stretching patents well beyond the four corners of the granted patent and hurting the integrity of the patent system.

The PTO has increased the number of Board decisions as being precedential (so as to serve as a binding authority) by 36% within the last two years. With respect to the increase in precedential decisions: while a 36% increase is substantial, that translates into only an additional 10 precedential decisions – 2 ex parte appeals and 8 IPRs. The current total number of precedential decisions is 38, broken down into 27 ex parte appeals, 2 interferences, 8 IPRs and 1 CBM. Compare these numbers to the number of ex parte appeals and AIA petitions received in 2017 alone (10165 ex parte appeals, 1853 IPR petitions, 54 CBM petitions, and 40 post-grant review petitions).

Hiring senior associates to be Administrative Patent Judges was a mistake, hiring so many senior associates from the same firm was an even bigger mistake. Making it clear that their job was to kill patents at all costs was inexcusable. Interpreting the rules at every turn to be disadvantageous to patent owners is un-American, violates fundamental notions of fairness of procedure, and tilts the balance so heavily toward challengers that it has become more feared by patent owners than any government agency or body. In short, the PTAB has destroyed the U.S. patent system and the value of U.S. patents. In my opinion, the only solution for the very serious transgressions of the PTAB is to disband this runaway tribunal.

In a case of first impression, a majority of a Federal Circuit panel held that the U.S. Postal Service and the United States (collectively, “USPS”) were not statutorily barred from filing a petition for review of a covered business method patent (“CBM”). The majority also affirmed the Board’s determination that all challenged claims of the patent are directed to ineligible subject matter… The government qualifies as a “person” who may petition for CBM, and a party suing the government for improper use of a patented business method may be required to litigate issues before the Board in a CBM proceeding, and further the government appears to be exempt from the AIA’s CBM estoppel provision in a parallel litigation.

The U.S. Court of Appeals for the Federal Circuit issued a decision in Return Mail, Inc. v. United States Postal Services (USPS), which affirmed a finding of patent invalidity stemming from a December 2015 decision by the Patent Trial and Appeal Board (PTAB). Although not an issue discussed in the Federal Circuit decision, there is some question as to whether this particular covered business method (CBM) review was properly limited to financial service business method patents in light of at least one previous decision by a different Federal Circuit judicial panel, which overturned an invalidity finding for improper institution of a CBM.

the Federal Circuit also upheld a controversial ruling of the PTAB, which determined that the United States has standing to bring a CBM challenge. Legally speaking, the United States, or in this case the United States Postal Service, is considered a “person” within the meaning of AIA § 18(a)(1)(B). To put this into perspective, despite the fact that the America Invents Act (AIA) does not specifically identify the United States as qualifying to be considered a “person” under AIA § 18(a)(1)(B), and despite the fact that the United States Supreme Court has unequivocally ruled that a sovereign such as the United States government is not a “person” absent an explicit statement of intent by Congress, the Federal Circuit (over a convincing and persuasive dissent from Judge Newman) decided that the United States federal government can challenge patents issued by the United States federal government in a post grant CBM proceeding.

Patlex, which dealt with reexamination of applications by an examiner — not by an Article I tribunal — could be considered a next step beyond McCormick. MCM, however, simply cannot be viewed as consistent with either Patlex or McCormick on any level. Indeed, the Supreme Court was abundantly clear in McCormick, which remains good law. The courts of the United States (i.e., Article III courts), not the department that issued the patent, is the only entity vested with the authority to set aside or annul a patent right. Since the PTAB is not a court of the United States, it has no authority to invalidate patent rights. It is just that simple.

Had APJ Clements not been a member of the PTAB and one of the patent owners – let’s say Smartflash for example – had come to him and asked him to represent them in a PTAB proceeding against Apple, the conflict of interest question would have been a much easier question. Having represented Apple previously as defense counsel it would seem that the duty to a former client under 37 CFR 11.109 would prevent Clements from representing the patent owner adverse to Apple and now charging Apple with patent infringement, which is a prerequisite to the filing of a CBM petition. Had Clements represented Smartflash in any of the CBM proceedings brought by Apple on which he sat as a judge there would seem to be a direct and irreconcilable violation of the ethics rules applicable to patent attorneys and patent agents. How truly ironic, and pathetically sad, it would be if the ethical bar set for practitioners is so much higher than the ethical bar the USPTO sets for its own Administrative Patent Judges. How could that possible? In what universe would it make any sense to have a lower ethical bar for judges deciding cases than for patent practitioners?

If an APJ making decisions in a case within 18 months of having represented a former client complies with whatever USPTO conflict rules or guidelines apply to PTAB judges, the USPTO conflict rules or guidelines are too lenient and must be changed. PTAB just should not be deciding cases involving post grant petitions filed by former defense clients, and under no circumstances is 18 months long enough to alleviate any concerns of bias or take away the appearance of impropriety… If identification of the real party-in-interest is so important perhaps that transparency should be a two-way street. Perhaps there should be a public Code of Conduct for PTAB judges, and perhaps the USPTO should give stakeholders the opportunity to be heard on whether 2 years is an appropriate length of time to wash away a conflict of interest, or the appearance of impropriety that exists when deciding cases dealing with former clients. My guess is most patent owners would be adamantly opposed to PTAB judges deciding petitions challenging patents brought by their former clients.

For more than two centuries, the U.S. Constitution, black letter law and precedent construed a patent as a property right. This is important because it is the nature of property rights that enables investment in early stage startup companies, especially those with cutting edge technologies in highly competitive fields like pharmaceuticals, biotech, smart phones, enterprise software, internet, semiconductors and other technologies critical to our infrastructure, military and much more… The same agency that takes inventor money to grant patents takes infringer money to destroy them. This creates an appearance of double dealing, and inventor belief that the USPTO is breaching the “grand bargain” of the patent system. Inventor confidence is at an all-time low because inventors are lured away from using trade secrecy protection, but then given nothing in return for disclosure. The effect of PTAB on inventors is devastating. Since institution of PTAB, over 50% of inventors simply quit rather than suffer the financial and stressful indignation of post grant invalidation.

The lead APJ serving on the panel of multiple CBM reviews petitioned by Apple, who also wrote the final written decision on at least one CBM review petitioned by Apple and invalidated claims of the ‘772 patent, was Administrative Patent Judge Matt Clements. According to Clements’ LinkedIn profile, he has served as an administrative patent judge at PTAB since March 2013; up until that time he served as a patent attorney at international law firm Ropes & Gray going as far back to September 2006. While at Ropes & Gray, Clements was part of a legal team that represented Apple in patent infringement cases. According to legal party data made available by Law360, Clements served as counsel for Apple up to December 2012 and served on a team with fellow Ropes & Gray lawyer James Batchelder as well as Eric Albritton of the Albritton Law Firm. Both Batchelder and Albritton were counsel of record representing Apple in the Smartflash infringement case where the ‘772 patent was asserted against Apple. Batchelder and Clements both worked at Ropes & Gray’s East Palo Alto offices, where Batchelder served as managing partner, so there’s a distinct likelihood that Clements reported directly to Batchelder in his work with Ropes & Gray. The November 2014 petition by Apple for CBM review of the ‘772 patent was also filed by counsel from Ropes & Gray including Ching-Lee Fukuda, another one of the lawyers representing Apple in the Smartflash action. These types of relationships would have led to the recusal of a federal judge on a manner and yet APJs at the PTAB are not subject to rules that are supposed to prevent this kind of conflict of interest that comes with deciding a matter that includes a former employer.

Concerns over software and biotechnological innovations being patent eligible, the omnipresent threat of patent reform that could make it even more difficult to enforce the patent property right, and no clear path to a philosophical or ideological turning point make for little to celebrate this World IP Day in America… If Congress wants to resurrect the U.S. patent system these three decisions would be overturned. As long as these decisions remain in force the U.S. patent system will continue to suffer and will undoubtedly be looking up in the rankings to the likes of Hungary when the Chamber releases its 2018 world IP rankings.