Patent Quality: Is PTAB up to the Challenge?

By Pedram Sameni
March 9, 2015

The new Innovation Act is making the rounds in Congress, and the news is full of heated debate on patent trolls and litigation. However, while these are clearly important issues, they can, and do, draw attention away from the core issue facing the US patent system: patent quality.

Uncertainty surrounding patent validity is at the heart of high litigation rates and the constant calls for reform. This level of turmoil and uncertainty would be harmful to any market. If the US patent system can reach a state where there is a reasonable assurance that any newly granted patent is valid, then the motivation to test everything in court rather than engaging in a normal transaction market will fall away. As a result other issues facing the market would also be mitigated.

 

Patexia Figure 1

Figure 1: Monthly Comparison of IPRs filed; Source: Patexia Litigation Database

We are seeing some steps in the right direction. One area of positive progress is the addition of the Patent Trial and Appeal Board overseeing IPRs and other post grant review proceedings. The rapid growth in filings for these new procedures is an indication that the system was ready to start addressing its long standing problems. The USPTO originally estimated that there would be 420 IPRs filed in 2013, 450 in 2014. Based on our database, the reality has far exceeded those expectations, with 514 cases in 2013 and 1,310 in 2014.  Looking at the first two months of 2015 growth rates in IPR filings show no signs of abating

The US is not alone in trying to improve the post grant review process. Japan reformed its own patent law in May 2014 to set up a new post-grant review process allowing any party to file a patent opposition within 6 months of patent issuance. We would not be surprised to see other countries fall into line.

Post-grant review proceedings can do a lot of good in terms of removing bad patents from the system, narrowing patents to the appropriate scope, and firmly assuring the validity of any patent that makes it through intact. However, there remain some concerns that should be taken into account when analyzing the benefits of the PTAB and its trial proceedings.

Figure 1 clearly indicates the tremendous growth in the post-grant review system. But that growth is perhaps disproportionately driven by top filers. In both 2013 and 2014 almost a quarter of all IPRs were filed by the top ten petitioners that year.

 

Patexia Figure 2

Figure 2 Percentage of IPRs filed by the top 10 petitioners as a percentage of total 2013 vs. 2014; Source: Patexia Litigation Database

Among those top petitioners are many names you would expect to see including Apple, Samsung, Google, and Microsoft.  However, having the system driven by a few major players is not necessarily beneficial, as it can leave behind smaller but still important actors.

While IPRs are much faster and less expensive than litigation in district court, they are by no means cheap. On average an IPR costs less than $350,000 without appeal, while litigation can cost on average $1.7 million through the end of discovery or $2.8 million through a trial. However, for a small startup or an operating company $350,000 can still be a major portion of their budget, or even significantly beyond their means, even if it is more affordable than the alternative.

There are a number of systemic issues for small inventors inherent in the post grant review process. For a major patent holder, whether an operating company or otherwise, losing a single patent or even ten to post grant review is a setback, but generally not an insurmountable one. However, for an individual inventor or small company holding perhaps a single or small number of patents key to their business model, a single invalidation or even a narrowing of the scope for a key patent can be crippling.  Even if their patent holds up after PTAB review, the costs of the review process could sink a new organization.

The patent system is designed to make sure that all IP owners, from the Apples of the world all the way down to startup founders and solo inventors, can reap the rewards of their innovations. Currently, companies both small and large have concerns about asserting patents for their rightful licensing fees due to the constant risk of invalidation. Litigation flies back and forth as patent holders try to assert their rights, creating a burden on the system and innovation.

The solution? It’s not about post-grant review. IPRs are one solution to the issues we already have. A better future depends on improved pre issuance procedures so that current issues do not persist. A newly granted patent should be a trustworthy, low risk asset like any other, not a magnet for validity challenges.

The USPTO is taking positive steps towards addressing issues with the pre issuance window. They held two roundtables in April and December 2014 on the use of crowdsourcing and third-party preissuance submissions to identify prior art.  The White House appointed Christopher Wong as a Presidential Innovation Fellow working on Crowdsourcing at the USPTO. Solutions like crowdsourcing can provide the information that examiners need to assess patentability, but without the time consuming individual search process. It also can help find difficult to locate art tucked away in specific technical journals, old product manuals, or foreign languages. To supplement these exploratory approaches Michelle Lee also launched a major USPTO patent quality initiative with Valencia Martin-Wallace as Deputy Commissioner for Patent Quality.

The US patent system still has a long way to go until it reaches genuine maturity. While the value of patents and other intangible assets in the modern global economy is widely recognized, we are still far away from a fully developed transaction market for IP. As the global economy becomes increasingly knowledge and services based, these assets are more critical than ever. In the knowledge economy, solid licensable patents are what guarantee that economic contributors such as inventors are rewarded for their work, and more importantly encouraged to keep contributing.

Ideally in the long term there should be a high level of confidence that any patent issued by the USPTO is valid and will stand up to review. When that is the case then the system can truly develop. The purchase, sale, and licensing of assets can become routine and patent holders can profit from the inventions they own without constant threat of litigation.

To get there, the solution is twofold. Despite the handful of concerns pointed out in this article, post grant review is a crucial piece of the puzzle. Even with top quality new patents being granted cleaning up the assets already in the system is essential. But a true long term solution rests with pre issuance reform. Examiners need to be able to thoroughly search global prior art covering cutting edge technologies in an efficient manner. Through crowdsourcing and other solutions we are moving in the right direction, but at the end of the day, the key is to make sure future patents do not face current validity issues.

The Author

Pedram Sameni

Pedram Sameni is the CEO and founder of Patexia, an online platform launched in 2010 to connect IP professionals from corporations, law firms and universities all around the world. Pedram’s goal in founding Patexia is to bring transparency and efficiency to the IP system and as a result, help companies better assess, manage and utilize their IP assets. Pedram received his PhD in Electrical Engineering from the University of British Columbia in Vancouver, Canada and worked for several high-tech companies including International Rectifier, PMC-Sierra and Foveon in different capacities before founding Patexia.

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 19 Comments comments.

  1. angry dude March 9, 2015 5:03 pm

    “Even with top quality new patents being granted cleaning up the assets already in the system is essential”

    Yeah, right, dude…

    How about top quality old patents in the hands of small patent owners, gradually approaching their 20 year lifetime ?
    Who will compensate us for the current mess they created making it absolutely impossible to license or sell a patent for more than its prosecution costs ?

  2. curmudgeon March 10, 2015 10:55 pm

    Re: ..”the tremendous growth in the post-grant review system .. is perhaps disproportionately driven by top filers. In both 2013 and 2014 almost a quarter of all IPRs were filed by the top ten petitioners that year.”
    The main reason for that is that about 80% of all IPRs are being filed in response to being sued. The big fat companies you have listed are big fat patent suit targets [with large exposures], hence quite logically big users of the IPR and CBM systems. Furthermore some of this is undoubtedly fallout from their “smart phone patent wars.”

  3. Richard Esty Peterson March 10, 2015 11:29 pm

    With the Patent Office complicity, Congress is killing the patent system. How do we now reward the meritorious inventor and compensate for his or her patented inventions? No longer can an honest patent practitioner recommend filing a patent on even the best of inventions. We have fallen back to the guild system, controlled by a few large corporations that collude. David has fallen to Goliath.

  4. Benny March 11, 2015 4:04 am

    I am in agreement with the article.
    I’m not clear on who the “we” in Richards’ comment at 3 is. If you want to reward the patent holder for his effort, Richard, buy a license for his IP. If there are no takers, there is no reward.

  5. Anon March 11, 2015 9:20 am

    Benny,

    You are quite missing the lament that Richard is discussing. I am not surprised in the least that you cannot see the Large Corporation influence that the AIA has injected into US patent law. Your advice then of :buy a license” simply rings hollow as the game of kings has been more fully enabled – why buy a license when you can infringe with greater impunity?

  6. Benny March 11, 2015 9:28 am

    Anon,
    As you may have guessed by now, a) I do not work for a large corporation and b) I cannot infringe with impunity any IP whose owner who does not have the resources to enforce their rights. (More often than not, the IP owner lacks the technical resources to discover whether or not I am infringing)

    In business terms, our reward in obtaining IP rights is not so much our own success as it is the restriction of our competitors.

  7. Anon March 11, 2015 1:55 pm

    Benny,

    Your point b) is without foundation, is simply (largely) incorrect as a practical manner, and is directly implicated in any number of situations which promote an “efficient breach” mentality towards patents.

    Put plainly, the fact of the matter is that those who are hard-pressed to enforce lose out on a large scale when the matter is left to a state of knowing who has the patent right. To think otherwise is not only pollyanna, but simply unwise.

  8. Benny March 12, 2015 3:13 am

    Anon,
    Of course I agree with you that if the IP owner does not have the resources to enforce his rights, to all intents and purposes his patent protection is valueless.
    I often wonder at the wisdom of individuals filing patent applications – I cannot deny that our management look at such patents and mutter “they won’t come chasing after us”. Sad but true.

  9. Anon March 15, 2015 9:14 am

    Benny,

    Then perhaps you can see through the rhetoric in the current “Troll” hysteria and see that a focus on “who owns” adds nothing to what is really important as to a patent system (vis a vis “what is published”), and instead is merely a ruse in order to facilitate more of the “efficient breach” model that spawned the rise of the so-called Troll in the first instance.

    Hmmm. An idea occurred to me regarding a quaint notion of accountability. A lot of “band-aids” to so-called “bad patents” has been an emphasis on post-grant review, which conveniently avoids what I consider to be the tough job.

    That tough job is getting the examination right in the first instance.

    I am ultimately puzzled by those who want to spend so much time, energy, and money on systems of “quality” after the fact. To me, that’s like addressing manufacturing quality by creating great warranty systems – none of which address actual quality in the first instance. Combine that thought with the reality that the Office is forbidden to make substantive rules on patent law (we do have to respect that that function belongs to Congress), and what everyone should realize is that any Quality initiative from the Office should be addressing one single thing: the quality of the examiners’ work.

    Here’s my thought: Accountability inures when consequences follow from the job one does. Currently, there are no real consequences to the examiners (or to the Executive agency) for this body of work out there that people like to complain about. Instead, we have finger pointing at the owners, or the applicants. But it is neither the owners nor the applicants that acted to actually grant the patent. What if we switch the cost of enforcement from patent holders to the Executive agency? Would not the agency be more inclined to do their job right the first time if they were on the hook for footing the additional bill of enforcement for these “bad patents?” Would not a drive to make the agency more accountable for what they should be accountable for in the first place make a stronger and better patent system? Would not strengthening patents instead of tearing them down with relentless rhetoric advance the reasons for having a patent system in the first place?

    I do recognize the laments that would follow such a strengthening of the patent system., and perhaps the change could be made so as to not be retroactive, but like certain portions of the AIA, such onus could be placed on patents granted after a certain set date after the “quality-while-manufacturing” initiatives were put in place.

  10. Benny March 15, 2015 9:43 am

    Anon,
    Many years ago I had a sign on my office wall which read “quality is in the work, not in the inspections” (attributed to the CEO of Hewlett Packard).

    Not only are USPTO examiners not held accountable for their errors, neither are patent attorneys accountable for the outright dishonest tripe they do, occasionally, put to paper in response to a valid office action pointing out why their client is not deserving of rights.

    Although I consider your points valid and sensible, I do not see any government agency – in your country or mine – in a hurry to take on more responsibility for their actions.

  11. Anon March 15, 2015 10:33 am

    Sadly, we are in agreement on the problem (I think).

    Now, how to address that problem….

    Do we aid and abet the “band-aid” solution? Do we denigrate the patent system and make it weaker (in a medical analogy, cure the disease by killing the patient)?

    Or do we take a stand and strive to make patents stronger, even though there may be some adverse effects (using another medical analogy, using chemotherapy to eradicate cancer)?

  12. Benny March 15, 2015 10:43 am

    Well, if you ask for my opinion – I think the USPTO should be harsher on patent applications that border on the screamingly obvious (for example, US894360) and concentrate greater effort on applications (or claims) which represent more serious research.

  13. Anon March 15, 2015 4:42 pm

    Benny,

    There is no sense of “harshness” in applying the law as they should be applied. Reading in “harshness” smacks of a personal feeling that may or may not even be appropriate (especially as you only give the feeling without the reasoning).

    (by the way, your listed patent has only six digits)

  14. Benny March 16, 2015 2:57 am

    Sorry Anon, I meant US8943640.
    In patent applications such as these, a little extra diligence on the part of the examiner would surely have brought forth valid reasons to deny grant.

  15. Anon March 16, 2015 10:14 am

    Benny,

    Before I wade in and look a the details of the patent for a swimming pool brush that had several back and forths between the applicant and the Office, would you care to point out what non-diligence you think is evident?

    Is this a case of general “non-diligence,” a case that shows that we need examiners to have passed some type of “art-field knowledge” requirement?

    It might be worthy to note that not only currently does such seemingly not exist, but such “expertise” is often disregarded by the Office when that Office knowingly moves examiners around from art to art in order to do things like artificially “better” one aspect of the backlog, often at the expense of other aspects. To wit, to address the “public perception” angle of obtaining better “timing” of FOAM and relegating RCE’s to immensely longer wait times.

  16. Benny March 16, 2015 10:42 am

    Anon,
    I didn’t expect you to do any more than look at claim 1 of this (very recent) patent. It’s just a simple broom. Its’ only defining feature (some of the bristles are cut back) should be obvious to anyone who has ever swept a floor (I’m no expert on brooms myself). It should not be hard, in applications such as these, to provide a convincing argument as to lack of inventive step. It’s almost as though the examiner just wanted to be rid of this harmless IP – I can’t imagine anyone licensing this “technology” – and get on with more serious work.

  17. Anon March 16, 2015 11:08 am

    Again Benny – please do more than simply “sniff” and exclaim that this “must have been obvious.” (in case it is not clear, I reject your protocol of “sniffing” at claims).

    My read of claim one would indicate a likelihood of obviousness. Yes, the invention as claimed is amazingly simple. And like you, I am not a person having ordinary skill in this art, but unlike you, I recognize that to make the actual legal determination of “obvious/nonobvious” I do not “sniff” and say, well, that claim is simply too simple to be an actual invention, and just “must be” obvious.

    Instead, what I might be inclined to do would be to characterize the invention as pertaining to the art field of brushes for cleaning (not just pool cleaning) and include a review of toothbrushes with bristles of varying radial heights. It took less than two seconds to find US Letters Patent 5,459,899 granted October 24, 1995, which likely makes obvious the claimed invention.

    It is worth noting here that the Office Actions are signed by both the examiner and the examiner’s SPE.

    Like you, I cannot imagine anyone licensing this granted patent, nor being threatened in any way shape or form by this patent (I see absolutely no scary “Troll” possibility here). This is hardly an example then of a “bad patent” that can bring down the patent system and is more likely an example of patent that should indicate that we should be taking a closer look at examiner – and SPE – qualifications.

  18. Benny March 16, 2015 11:31 am

    Anon,
    I definitely agree with the last sentence of your comment. Engineers, unlike lawyers, like to sniff, and this (hardly isolated) example makes them sniff not just at the patent, but at the system which grants it. In other words, the USPTO loses credibility in the eyes of the inventors.

  19. Anon March 16, 2015 12:11 pm

    Benny,

    Your post misses the mark with your attempt to differentiate engineers from lawyers (you already should be very well aware that lawyers involved with patent law ALSO have that engineering pedigree – and those registered with the Office are required to have that pedigree).

    It is NOT that lawyers “don’t like to sniff.” Rather, it is that your mere sniffing is not the proper protocol.

    Try to not bolster what you do when I am pointing out that what you do is not appropriate. This is one reason why you never seem able to learn and grasp patent law, and why I continually seem to but heads with your posts.

    Even here, as we tend to agree on some of the larger picture, your “slant” being one of being “anti-patent,” is the wrong take-away, as you want to take a sample of the system working poorly and lambast all patents implicitly, while I attempt to show you that even while the system is not perfect (and I would add that attempting to make the system perfect is a fool’s errand), that this type of error here is in fact exceedingly harmless in the immediate case.

    So instead of appearing to relish in your sense of “hah, the system loses credibility,” let’s hear some ideas of changing that “credibility” that do not cost innovators or weaken patents.