A typical General Counsel will see a variety of patent demand letters, at least some of which are legitimate and some of which are the type of bogus demands that are so vilified in the media and on Capitol Hill. A problem for many in house attorneys, particularly those who are themselves not technology companies but are technology users, is shifting through to determine which patents pose a real risk and which letters need to be taken seriously because the patents strong, high quality and likely to be litigated.
The terms patent strength and patent quality get used frequently within the industry, but what do they really mean? To a large extent the meaning of the terms depends on your viewpoint. The United States Patent and Trademark Office has historically employed a variety of quality metrics, but is a patent that is considered high quality from the perspective of the USPTO a strong patent, or a patent that the industry would view as a high quality patent, or one that would be viewed to be a valuable patent?
Whether we like it or not, the value of a patent is related to the likelihood that it could be successfully enforced in litigation. The value of the patent is also a function of the likely damages that could be obtained in litigation, which is related to the contributions made by the innovation underlying the invention disclosed in the patent. But the overwhelming number of patents are not litigated or licensed. In fact, by some estimates less than 5% of patents will ever be licensed or litigated. Indeed, even in a portfolio that is licensed there will be a handful of anchor patents that are of primary importance, with the remainder of the portfolio there to create volume, or safety in numbers.
While patents are legally presumed valid, the fact that a patent has issued does not guarantee that upon later challenge that the patent claims will remain valid. The issuance of a patent also doesn’t guarantee that the underlying innovation is of any kind of foundational importance, or that the patent and claims are written in a way that suggest the patented innovation is valuable. One of the unfortunate realities of the patent system is that the Patent Office is inundated with patent applications and patent examiners have a finite amount of time to examine applications. With a persistent unexamined patent backlog of over 600,000 patent applications patent examiners simply do not have the luxury of spending all the time they could to render a determination.
“Examiners are expected to complete examination of an application in an average of between sixteen and seventeen hours,” according to Stephen Kunin, a partner at Oblon Spivak and a former Deputy Commissioner for Patent Examination Policy at the USPTO. “Patent examination is an imperfect process that results in the issuance of patents that should have not issued. This is evidenced by the fact that in concluded IPR proceedings, only 10% of challenged patents had all original patent claims confirmed, and empirical studies have reported that 43% to 50% of all litigated patents are held invalid.”
Whether we like these statistics or not, the reality is that since the signing of the America Invents Act in 2011 there are a number of new ways to challenge issued patent claims. There has also been a significant shift in public sentiment as well, away from innovators and toward those who infringe patents. Much of this has to do with the vilification of so-called “patent trolls,” but determining who is and who is not a patent troll can be far more difficult than most people think. Regardless, the public sentiment has significantly turned against patent owners over the last several years. At least some of that has to do with the reality that patent examiners are afforded very little time to examine applications, which means that mistakes will be made. These mistakes become high-profile news and further the downward spiral of public confidence in the patent system.
“Examiners complete examination of an application in an average of between sixteen and seventeen hours is made more challenging each year by the fact that the average number of relevant references found by the examiner and/or disclosed by the applicant is constantly increasing,” Kunin explains. “For example, it is my understanding that the average number of references cited per patent for those issued in 2005 was around 22, in 2010 it was around 37, and in 2014 to date it is around 48. It is unrealistic to expect an examiner to thoroughly review an average of nearly 50 references per patent in the 16 to 17 hours an examiner can spend per patent while processing the necessary number of patent applications.”
What this means is simple really. Given the patent prosecution system in place, the high demand for U.S. patents and the backlog of patent applications awaiting examiner action, the mere fact that a patent has issued cannot be taken as any definitive statement that the patent claims are strong, that the patent is a quality patent, or that the patent claims will likely withstand any subsequent challenge. Therefore, it behoves patent practitioners and patent applicants alike to do more than try and get patent claims issued. The industry really needs to begin to adopt a self-policing strategy that realizes the goal is not to simply get a patent, but rather to get a patent worth owning. That means a patent that has solid claims, is written to meaningfully disclose the technology, and with a variety of claiming techniques employed.
But is it possible to determine patent strength? The answer is yes. Tyron Stading, the President and Founder of Innography, has created a patent strength algorithm to determine whether any particular patent exhibits the characteristics of a strong patent. The algorithm that Stading has created can also be customized to tailor the assumptions to the preferences of the user. According to Stading, 97% of all patents that are litigated are captured in the top 30% of patents scored, with 85% of all litigated patents in the top 10% of patents scored using the algorithm.
Returning to where we began, with the realization that the ultimate value of a patent is tied to whether it can stand up during a litigation, it seems that patent strength and ultimately value can be identified in an automated way to at least some extent, thereby making decision making on patent valuation a far less daunting task.