In September 2013, Bernie Knight left the United States Patent and Trademark Office, where he was General Counsel. Knight took the job of General Counsel at the invitation of David Kappos, and he became one of the core members of the Kappos team, which means he was intimately involved with the rule making and management of the USPTO during the Kappos era.
Knight now calls the Washington, DC, offices of McDermott, Will & Emory home, where he focuses his practice on complex patent litigation matters. I met up with Knight on December 16, 2013, at his office for an interview. In part 1 of the interview we discussed why he choose McDermott, what it was like working for David Kappos and working with Federal Circuit Judge Ray Chen when he was Solicitor at the USPTO, and the appointment of Michelle Lee to be Deputy Director of the USPTO. In part 2 of the interview, which appears below, we discuss the new ethics rules adopted by the USPTO, the future of the USPTO, patent reform legislation, abusive patent litigation, and what the AIA was attempting to achieve relative to post grant patent challenges.
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QUINN: Now correct me if I’m wrong, but when the Patent Office rewrote the ethical rules there wasn’t any real substantive changes in the rules, right? It was just to bring it more into line with the ABA model rules?
KNIGHT: That’s not entirely correct. There were substantive changes from the old USPTO ethics rules. If you look at them, there are substantive changes from what the old rules required. However, most lawyers should be familiar with most of the new USPTO ethics rules since most states have adopted the ABA model rules. I’m glad that we were able to get the new rules issued. Hopefully, it makes practicing before the USPTO less complicated for practitioners.
QUINN: You were scaring me there for a minute because when I looked at the new ethical rules it didn’t strike me as anything that’s different from what I’ve largely been required to do previously. Maybe the verbiage is a little bit different, and there are a few patent nuances in there, just because of the ex parte nature of what we do. So there are substantive changes compared to the old patent rules but not necessarily different than what the vast majority of most attorneys are already ethically responsible to be doing?
KNIGHT: That’s right, Gene. And that’s why we made the change so that our registered practitioners would not have to be following two different sets of rules. I’m glad that you pointed out the fact that even though the USPTO tracked the model rules practitioners still need to look at the PTO rules because there are a few rules in there which apply specifically to parties practicing before the USPTO.
QUINN: And that should be I think fairly obvious because as I recall they’re in the areas where it’s peculiar because you have to show all your cards to the examiner. Whereas in court when you’re in an adversarial position you can’t hide stuff the other party’s asking for that they’re entitled to receive but you don’t have to help them make their case.
KNIGHT: Right. And that’s a great example the duty of disclosure.
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QUINN: So let’s talk about your view of the future of the PTO. Where do you think things are heading? An open ended question, so you can take it where you like.
KNIGHT: Well, I think that the new Director is going to have a lot of challenges to face. And I think one of the challenges is the overwhelming popularity of the new post grant proceedings that we put in place. Right now, the USPTO has the third busiest patent docket in the country after the Eastern District of Texas and the District of Delaware. So whoever comes onboard is going to have to make certain that the Patent Trial and Appeal Board can handle all of the work and handle it well, and complete the proceedings within one year of institution as the law requires. I think that’s a huge challenge, requires a lot of resources, and great leadership. It would be unfortunate if the USPTO failed to manage this well so that the number of petitions needed to be capped. The second challenge is the Innovation Act legislation on the Hill. The new Director must ensure that the USPTO and the patent and trademark communities have a voice.
QUINN: Well, we haven’t so far.
KNIGHT: Right. There hasn’t been a voice.
QUINN: We haven’t had time to have a voice, really. I mean I threw up my hands once I saw how fast the House markup was happening. It just seemed to me that it was a forgone conclusion what was going to happen. Although I will say that Congressman Goodlatte surprised me. And he did take criticism and took it into account to some extent. Not with some of the major provisions, but he did make some changes, but I think there could have been a little more listening with the larger provisions, such as fee-shifting and effectively eliminating estoppel with respect to post grant challenges.
KNIGHT: Many provisions in the legislation are not well thought out. The legislation addresses a lot of abuses, but there’s not a lot of data to support the fact that these abuses are as profound and as pervasive as the legislation assumes.
QUINN: Right. And my problem with it, too, is even if you assume the abuses are as systemic as we’re led to believe this is not going to address the abuses. We don’t have a patent problem, we have a litigation problem. We have an abusive litigation problem to be more specific. There are a handful of bad actors using judicial inefficiencies as a way to force settlements, sometimes very, very cheap settlements, which is why the Federal Circuit and other Courts have characterized it at times as “extortion-like.” Let me run this by you. I’ve got a friend who I just talked to the other day who is a patent broker and he told me this legislation, if passed, is going to create a super troll problem. He said this isn’t going to do away with patent trolls, this is going to create super patent trolls if it passes the value of patents will significantly erode because now there is more risk. He said, “Could you imagine if you had Intellectual Venture’s budget starting out and you could buy patents for 20 cents on the dollar? What you’re going to do is you’re going to get super patent trolls that are five times the size of IV and Acacia.” I don’t know that either IV or Acacia are patent trolls really, but they’re certainly monetizers. So if the patent monetization is the problem the pending legislation is going to be exactly the wrong solution. Do you have any thoughts on that?
KNIGHT: Well, I certainly think that the legislation is not targeted at just the abuses of certain patent assertion entities. The legislation applies to everybody whether you’re an abusive patent assertion entity or not. And so it’s not really structured in a way to just stop the abusive litigation practices. It my opinion, many of the provisions make the cost of enforcing your patent more expensive for all entities. I’m not certain that it’s good for American business and the innovation community.
QUINN: Well, that’s right. And those are the people who I think are going to be most affected by this are universities, startup companies, real innovative companies. The monetizers are probably going to flourish because people are going to be selling their patent portfolios to get what they can. I think it’s exactly the wrong thing. And it’s funny, you know, sometimes I get cynical. You see industry keep coming back for more and they say, “oh, we’ve got this problem, fix it.” Then in a couple years they say, “well, that didn’t fix it, you need to do this.” Then in another couple years they say “that didn’t fix it, you need to…” and so forth. None of the proposals ever seem calculated to address the problem they define, which causes me to get very cynical. I wonder whether this part of an overall strategy to just continuously weaken the patent system?
KNIGHT: It is really unfortunate because Congress did not wait to see if the new AIA post grant proceedings are going to clean up a lot of these patents that are of dubious quality and that a lot of patent assertion entities were asserting against small companies to try to squeeze settlements out of them. These new AIA proceedings may take care of it because if you look at the post grant proceedings, one of the things that we did was to put large entities and small entities on a more equal footing. A small entity just like a large entity can bring an inter partes review for a small dollar amount in the low 20,000s and litigate the case and have an answer within 18 months of filing the petition. And so that is a low cost and expeditious way to strike back at an abusive patent assertion entity and invalidate their patents. It’s a “game changer.”
QUINN: What do you think that the changing of the estoppel standard is going to do?
KNIGHT: For post grant review?
KNIGHT: I think that is a great change because without that change, Gene, I don’t think a lot of companies and individuals would take advantage of the post grant proceedings.
QUINN: I guess I see that but the fear I have is that will lead to serial patent challenges. I also really worry about how patent litigation seems to punish real innovators. For example, you have a good patent on a solid innovation and there are infringers you have to sue, but then you are going to be tied up for ten or 12 years. Whereas you’ve got a crappy patent, likely no infringement, probably invalid, but you only want $25,000, they are going to write you a check.
KNIGHT: I guess the way I look at it is that you only get nine months from the grant of a patent to file a post grant review. The current regime really puts a huge burden on a petitioner to research every possible ground upon which you can challenge that patent within a nine month period after grant since you can challenge a patent in post grant review on any grounds of patentability. Estoppel applies to all of those grounds. If the law is changed to delete the “reasonably could have raised” estoppel, all challenges other than 102 or 103 still must be brought within the nine months because they cannot be challenged in an inter partes review. This assumes that a covered business method proceeding could not be brought.
KNIGHT: And clearly that was a good goal. But here I think it’s a great compromise–for post grant review that has to be brought very quickly–to basically allow the petitioner to file an IPR later if they want to hold back those issues.
QUINN: I guess. What I would rather see is a streamlining of the whole system. I guess that’s what part of the post grant review was intended to do, but we still have the ITC, we still have the district courts, we still have what’s going on at the Patent Office. The appeals go up at different speeds and now we’re starting to see in some cases where the Federal Circuit will say, from one forum the patent claims are okay and when they’re challenged from another form, well the patent claims are now not okay and they’re the same claims. It makes it confusing.
KNIGHT: Well, you bring up a couple of good issues. The original version of the Goodlatte Bill did away with 145 appeals to the district court. And that was put in there really because the USPTO wanted it. The way that the law is currently structured you don’t have to give all your evidence to the Patent Trial and Appeal Board– you can hold it back and then have a 145 appeal in district court and for the first time present evidence that you never presented to the Board.
KNIGHT: And that’s a waste of government resources.
QUINN: I know, but almost nobody uses it.
KNIGHT: Yes. So obviously I don’t think the patent bar wants a streamlined approach because they were against that.
QUINN: Well, no, they don’t. There are a lot of people making a lot of money with this chaotic system.
KNIGHT: Yes. And then the other point that you raised, which is great, is where you get conflicting decisions on validity between the PTO and the district court because of the different claim construction standards.
KNIGHT: When we were writing the regulations at the USPTO we decided to use the broadest reasonable interpretation claim construction standard because the patent owner has a statutory right to file one motion to amend their claims. We thought when we were drafting the rules that we should look at the claims very broadly because if the patent owner can amend their claims it’s better for the patent system and for other companies in that technology if the patent claims are amended such that the claims are written with more specificity so that other companies in the same technological space know the scope of the invention. This allows for better follow on innovation. Both the House Bill and the Leahy Senate proposed bill now change that standard to utilize the district court standard. I’m not certain that’s good for the patent system. I also wish that the Board would revise the rules to give the patent owner more pages to amend claims and not require such an expansive showing to support an amendment. Under the Board’s recent decisions, it’s very hard for a patent owner to amend claims.
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QUINN: Last question. What’s in store for you? Now this has got to be an exciting time. Your offices are absolutely gorgeous here, but are you liking it? Do you think you made a good decision? And what’s the next chapter for Bernie?
KNIGHT: Thanks a lot, Gene. I’ve been here at McDermott Will and Emery about four months. I have enjoyed the work that I’ve been doing. It’s been really a lot of fun. I’m helping clients with their patent law issues and specifically focusing on the new post grant proceedings at the USPTO and also the other issues that come up under the new America Invents Act. It’s been a great change for me. It’s also going to be great once my one year ethics recusal is over to go back to the PTO and appear before the judges that I helped bring onboard at the PTO to handle these new proceedings.
QUINN: Yes. Are you going to be doing any expert witnessing? I would imagine down the road as some of the processes that go on at the Board might become an issue in court you’d be a great person to have as an expert.
KNIGHT: Well, thanks a lot, Gene, for that endorsement. And I look forward to doing that work as well if it comes my way.
QUINN: Okay. All right. Well, I really appreciate you taking the time, Bernie. Thanks so much.
KNIGHT: Thanks, Gene.