Cuozzo, Phony IPR Statistics and the Death of the American Inventor

By Paul Morinville
June 26, 2016

RIP InnovationMany articles on the Supreme Court’s decision on Cuozzo Speed Technologies, LLC v. Lee suggest that the tech industry won and the pharmaceutical industry lost. I think positioning it in this context is a lie.

I won’t go into the bizarre nature of how two distinct and opposite legal procedures of invalidating the same property right have been created in the America Invents Act, and now upheld by the Supreme Court, except to provide a backdrop. Inter partes review (IPR) is the wagging tail of a political dog. It is performed in an administrative court where judges are beholden to the political whims of whoever happens to be President.

Currently, it radically favors large multinational infringers by shifting the burden to the party least able to withstand that burden. Initially, IPR’s left fewer than 5% of claims unscathed and those in the industry are openly talking about the duplicitous nature of the PTO selling patent rights and also selling the rights to take out patents. To see an example of the destructive nature of an IPR in action, see Popular Mechanic’s recent article explaining how the patent system became so screwed up.

While the Patent Office likes to tout statistics that claim most patent claims challenged in IPR are not invalidated, those statistics are viewed as bogus within the industry. They do not take into account claims patent owners simply give up on because it is too expensive to fight, and they ignore the reality that once an IPR is actually instituted virtually no claims are actually adjudicated to be patentable.

From USPTO Power Point showing IPR statistics. Data as of May 31, 2016.

From USPTO Power Point showing IPR statistics. Data as of May 31, 2016.

For example, the USPTO and those who say IPR isn’t bad seem to like to use this graphic shown to the right (see slide 13). The red shows the number of claims found unpatentable in a final written IPR decision, the orange shows the number of claims canceled or disclaimed by the patent owner and the green, which is overwhelmingly the smallest number of claims, are the claims actually adjudicated to be patentable by the Patent Trial and Appeal Board (PTAB). The Office conveniently includes the purple chunk of claims and refers to them as “claims remaining patentable and not subject to a final written decision.” The Office can do this because the PTAB doesn’t have to issue decisions that address all claims they agree to consider. Technically those claims remain patentable, but those claims have NOT been determined to be patentable by the PTAB in an IPR. The PTAB simply ignored those claims when they wrote their final IPR decision. Hardly a ringing endorsement of the continued viability of those claims moving forward, and rather disingenuous to rely on those ignored claims to suggest IPR outcomes are not devastating to patent owners.

Any way you cut it, IPR kill rates are devastating and the cost is high. That means most contingent fee attorneys have left the patent business altogether leaving a huge swath of unenforceable patents. In effect, IPR’s transfer the property rights of the small inventors to large international corporations free of charge. There are few things more anti-American than taking the toils of the poor and giving it to rich international corporations.

If you think I’m exaggerating, here is an actual email sent this week from an independent inventor to his marketing consultant:

I would like to cease any further contact & prospecting regarding my XXXXX design.

After careful consideration, review and thought, my current belief is that the USPTO has become a shopping mall for big business to take, without penalty, private inventors intellectual property. The Patent Office has so weakened protective laws that getting a patent may no longer make sense for people like me. That’s my conclusion, anyway. The last thing I want to do is hand my idea to someone who could out spend me in a rigged court process for the next 10 years where I would probably lose – it’s just not a reasonable plan anymore. Not trying to be negative, just realistic. It is what it is.  

He is pulling his invention off the market. He is cutting his losses. This anti-American, anti-innovation America Invents Act is killing small inventors. That is just a fact. Congress and the Supreme Court believe that a cartoon character is killing innovation. They cannot be more wrong. They themselves are killing innovation.

But back to my point. The battle of Cuozzo, and patent reform in general, is not between the tech industry and the pharmaceutical industry. The battle was started by wealthy multinational tech companies led by Google who, by using their huge market and deep pockets, massively commercialize technology they did not invent to take control of emerging multi-billion dollar markets. Once a tech market is taken, it is nearly impossible to unseat the incumbent, unless, of course, you have a patent and that patent can be defended. So these huge companies bought Congress to create law that destroyed hundreds of years of patent law repositioning it against the very people who invent most of the new technologies we all use, small tech startups and inventors. Congress and the Supreme Court have now ensured that the big stay big and the small do not disrupt their highly profitable cabal with the nuisance of patent rights.

If you have any questions about who is fighting who, just look at the who’s who of Big Tech and large multinational corporations signed up on this amicus brief against Cuozzo. The list includes Google, LinkedIn, eBay, Dell, Cisco, Cannon, Toyota, JC Penny, and many other multibillion-dollar international corporations. It also includes lobbying organizations like the Internet Association, the Alliance of Automobile Manufacturers, and the National Retail Federation whose combined members make up most of the Fortune 500. There are many others, mostly international tech companies. I challenge you to identify one that is not a large corporation with an international scope.

Compare that list to the small startups and inventors who signed this amicus brief supporting Cuozzo, himself a bright young 19 year old when he invented the patent in question. These amici are inventors, inventor clubs and startups. They are the people out in their garages toiling, tooling and transforming their big idea into the next big invention. They do this in hope of achieving their version of the American Dream to invent something new that people can enjoy and so they can profit for their efforts. They are your local auto mechanic, schoolteacher, mother, entrepreneur, geek and just about any other regular American you might see on Main Street in any normal American town. They are the little people.

This battle is not tech against pharma. It is big and powerful multinational corporations led by Google against small inventors and startups. Pharma is the odd man out and stuck in the fight for other reasons made possible by IPRs, like an emerging hedge fund industry making millions from short selling their stock and then challenging their patents to an IPR in an effort to crash the stock price and collect on the short sale.

The battle of Cuozzo and the war of patent reform is big against small. Corporate oligarchs in bed with politicians against Joe the mechanic. Cronyism against our Republic. International corporatism against the American Dream and the American story. Unfortunately, this Cuozzo battle is lost, but the larger war must be won lest we lose our innovation economy and the American Dream.

UPDATED Sunday, June 26, 2016, at 4:56pm ET to clarify that the PTAB initially was leaving fewer than 5% of claims unscathed in IPR.

The Author

Paul Morinville

Paul Morinville is Founder and former President of US Inventor, Inc., which is an inventor organization working in Washington DC and around the US to advocate for strong patent protection for inventors and startups. US Inventor has been walking the halls of Congress knocking on doors and sitting down with hundreds of offices to explain the damage suffered by inventors due to patent reforms. Paul is President of SemiComm HK, a Hong Kong company licensing patents in China, and an independent inventor with dozens of U.S. patents and pending patents in enterprise middleware.

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 59 Comments comments.

  1. Anon June 26, 2016 11:08 am

    A good example of “follow the money” to which I would add that that money has been changed through the likes of Citizens United to create the “voice” that has drowned out the smaller corporations and the (prior) advantage of disruptive innovation.

  2. Night Writer June 26, 2016 11:31 am

    You know, believe it or not, part of the problem is the Federal Reserve and their monetary policy. The reality is that companies have ready access to cash and are overflowing with money. (At the expense of about 90 percent of the rest of us.) But, this imbalance is related to patents as companies like Google say we don’t need patents to get capital anymore.

    This really is part of what is happening. (One other thing–corporations are notorious for believing they can innovate and in reality simply not being able to and ending up stealing small companies’ work.)

  3. Night Writer June 26, 2016 11:35 am

    The sad thing is too that Clinton is likely to become the president which may be better for the country as a whole, but for patents is it going to be terrible. My guess is that she will appoint another person like Sotomayer who is completely ignorant regarding science and cannot be counted on for even an elementary understanding of the physical world. Just ridiculous. But, this new justice (or three) are likely to very negative towards patents because of the corporate lobby, although we are lucky in that patents is only one of many issues on their agenda for the SCOTUS whereas they can really target new Fed. Cir. judges.

    Anyway, Kagen doesn’t seem to be as naive and frankly as arrogant as Sotomayer. So, will we get a Kagen where there is some hope as opposed to the Sotomayer’s. Ginsburg is another complete joke.

  4. Kip June 26, 2016 11:36 am

    The fiery rhetoric in this post doesn’t seem quite justified, after you factor in how many petitions are not granted by the PTO.

    I agree that IPR is problematic for various public policy reasons (no jury right, no standing requirement, no presumption of validity, no Article III judge protections, etc.). But critics who hammer on IPR statistics without factoring in rejected petitions are not being fair.

  5. Paul Morinville June 26, 2016 1:21 pm

    Kip, Enforcing a patent is a game of risk. If you have the money to pay the ante, you get to play it. If you don’t, you have to find others who will ante up for you.

    There just flat are no contingency attorneys. There are no investors to pay for attorneys. If you are small, the courthouse doors are barred due to your financial position. For most inventors, that’s a good thing because they will lose if they try.

    Fiery rhetoric? It’s just a plain fact that the patent system no longer works unless you are a large corporation. It is dead to inventors. That is not hypothesis or exaggeration. That is the death of innovation in America. Today, there are more companies going out of business than starting up since at least the Great Depression, but possibly since our founding and congressional and judicial messing with the patent system is a primary reason. PTABs are at the top of the list of those mistakes.

    While it may be a fun intellectual exercise to ponder PTABs, in the meantime back in the real world of funding companies based on patented inventions, people are not pondering. They are walking away.

  6. Kip June 26, 2016 1:52 pm

    Paul, I’m not disputing your story about the death of the american business. I’m disputing your summary of statistics that portray the PTAB as killing all but “3%” of challenged claims. Last year, the PTAB did not grant petitions in 35% of petitions. That’s a huge chunk, especially considering that petitions are filed by people who have chosen weak patents that they think they can invalidate (leaving undisturbed stronger patents that they can’t build a case for). All of those claims are unscathed, but the reader wouldn’t get that impression from your article.

  7. Night Writer June 26, 2016 2:46 pm

    One thing: some of the NPEs that were targeted by all this legislation are doing fine while small inventors are not. There are good academic studies to show this. (Not law professors gone wild to try to get tenure with no ethical oversight or even review of their work.)

  8. Night Writer June 26, 2016 3:07 pm

    Also, I don’t think the rhetoric of this article is too strong. Indeed the evidence is that the rhetoric is too weak. It may be that the number of claims invalidated is over stated, but the power and money pouring into the anti-patent movement is understated. Google is number in lobbying behind only Goldman Sachs.

    Also, what is so bizarre is that what is happening is a lot like what happened in the financial industry. The old rules did a great job for 40-50 years and then suddenly they were evil. The software industry grew-up with patents and is 10 times better than any other software industry in the world. Yet now somehow it is evil and needs to be dismantled.

  9. step back June 26, 2016 3:07 pm

    Inventor lives matter.

    Repeat after me.

    Inventor lives matter.
    Invent ….

  10. Paul Morinville June 26, 2016 4:27 pm

    Kip, The numbers put out by the anti-inventor cabal, including the USPTO, set us the percentages in the way you are indicating. First they take the full claim count of all patents challenged. Then they take the claim count of the accepted IPR’s as a percentage of the first claim count. Then they take the percentages of claims invalidated and compare them against the same starting claim count.
    This is just lying via statistics because it does not take into consideration the real world.

    In the real world, the vast majority of IPR challenged patents are in litigation first. This plays against your argument that only weak patents are IPR’d. Someone with deep knowledge and experience looked closely at the claims and made a reasonable decision about the likelihood of surviving a validity challenge both in a court and in an IPR. They have to consider the cost of litigating the patent and the risk of losing everything the put into it if even one claim dies in an IPR. This goes strongly against the argument that people are asserting weak patents.

    Also in the real world, patent infringement can rest on ONE claim, and most infringement cases are made on just a few independent claims. Naturally, defendants do not select claims that would do nothing to stop an infringement case. No, they select only those that would neuter the infringement case against their specific product. This means that challenged claims are the most important claims for the patent holder and the case of infringement. A better argument is that the challenged claims are the heart of the invention and changing just one word in a just one claim can doom the infringement case. Certainly invalidating one claim can effectively invalidate the entire patent even though some claims are left standing.

    Back to the numbers. Perhaps I worded the 3% number incorrectly. I should have said only 3% of patents where at least one claim is evaluated by the PTAB survive unscathed.

    But the difference does not matter whether your analysis is correct or mine. The risk is so enormously high. No small inventor can enforce their patent rights. No investor who takes control of a patent because the invested company fails due to big tech massively commercializing the invention can reasonably defend those patent rights either.

    A patent is now a very expensive line on a resume or plaque on a wall. There is no longer an real meaning to a patent for normal everyday Americas – the ones who gave the government the power to create patents for them for the purpose of starting their businesses. This is the greatest of American tragedies.

  11. Bemused June 26, 2016 4:38 pm

    Paul,

    While I support (in spirit and with donations to Save The Inventor) the push back on the hijacking of the US patent system by Big Tech, it just not true that there are no longer contingency fee counsel willing to take on patent infringement cases.

    While I believe (solely from my discussions with patent lawyers) that the number of lawyers taking on cases on a contingency fee basis has decreased due to the risks brought on by the AIA, the fact of the matter is that if you have a reasonably strong patent(s) (no glaring prior art issues and eight-figure damages), you can/will find contingency fee lawyers to represent you (e.g. McKool Smith, Susman Godfrey, among many others).

    The AIA has wrought change to the contingency fee market by causing an increase in the rates charged by contingency fee counsel and significantly increasing the expenses associated with bringing a patent infringement lawsuit (read IPR expenses). The result of increased contingency fee rates and expenses is that the returns to inventors has been severely and negatively impacted.

    That is the largely unseen and insidious problem brought about by the AIA: not only is it more likely your patent will get invalidated in an IPR but if you do get past those killing fields and finally secure a settlement/judgment, you’ll get significantly less for your invention.

    And isn’t that just another way for Big Tech to further discourage inventors from protecting their inventions?

  12. Patent Investor June 26, 2016 11:02 pm

    Kip and Paul,

    One thing not mentioned involving all statistics on claims that survive PTAB scrutiny are a very large number of patents in the first several years that had IPRs filed against them even though the statute seemed to make it clear the IPRs would not be instituted. Apple, for example, filed petition after petition with the tenor of “WE ARE APPLE!!! and therefore the plain language of the statute does not apply to us”. It did. Time barred requests, unlisted RPIs, improper joinders, etc. were all petitioned for and to a lesser extent still are. These “wing and a prayer” IPR petitions all count as IPRs that were not instituted as if they were denied on the merits. They were not, but they do make the stats look better for the PTO.

  13. EG June 27, 2016 8:20 am

    Hey Paul,

    Your “rhetoric” wasn’t too “fiery” to me but on point. The large multinational Goliaths have turned our patent system with the AIA (Abominable Inane Act) into a PR game that won’t benefit innovation by the Davids. Our Judicial Mount Olympus is not simply clueless, but utterly anti-patent in the extreme, Breyer being the worst.

  14. Edward Heller June 27, 2016 8:25 am

    Paul, all one has to do is point to the reduced standard of proof and the use of broadest reasonable interpretation to know that IPRs are intended to be patent unfriendly. QED.

  15. EG June 27, 2016 8:25 am

    Hey Paul,

    Another anti-patent organization that I didn’t see you mention is the Electronic Freedom Foundation (EFF). You should see what bilge the EFF posts on IP Frontline which has unfortunately become a mouthpiece for them. The EFF wants everything electronic and digital to be available for free, especially software.

  16. Night Writer June 27, 2016 8:35 am

    The other part of the equation on this is trade secret protection. I have inventors tell me that if there is anyway to work it so they can keep their invention secret that that is what they want. They say they would rather not disclose how to do their invention. We are getting close to a great screeching halt…

  17. Night Writer June 27, 2016 8:49 am

    Still seems to me is that we need to keep our eyes on the canary and publicize its death.

  18. Paul F. Morgan June 27, 2016 11:11 am

    Somebodies statistics must be misleading, because the other article nicely juxtaposed on this same blog claims that” “However, as of March 31, 2016, the PTO reports that in IPR proceedings—the most popular of the PTAB patent challenge proceedings—only 9,559 of 43,762 claims actually challenged (22%) were ultimately found unpatentable.” They cannot be be right, which one is?
    {Also, both articles seem to ignore that fact that the total number of IPR petitions filed per year is still much less than the total number of patent infringement suits filed per year. How come? }

  19. Night Writer June 27, 2016 1:07 pm

    Good questions Paul @18. Sounds like if you take 1/3 of the 43,762 out (not instituted), take out the claims where the parties settled, take out the claims where they didn’t reach a final judgement, and you get like 11,000 claims of which 9,559 were invalidated.

  20. Robert June 27, 2016 1:10 pm

    The Cuozzo patent was overturned for one reason. No one actually looked for prior art to substantiate the invention until the patent was asserted.

    Mr. Cuozzo’s representative did some kind of search, and judging from the art submitted with the application, only to convince the the hopeful inventor that there was no reason to not file an application. Stating that differently, the representative had a strong financial interest in not finding prior art so that they could charge young Mr. Cuozzo the cost of prosecuting an application.

    The examiner found good art quickly in eight minutes (it’s in the file history) and after the back and forth between the parties the patent issued. Examiners are not given the time to find art to a full body of art,and a fact.

    The prior art submitted with the IPR was easily found.

    So Mr. Cuozzo’s presumption of validity stood on an eight minute search effort. Since the lack of a focused search early in the process is the reason the patent was overturned, I would like to know if the same dynamic is evident in the rest the patents with cancelled claims. I bet it is.

    Patent searching needs to be reformed. The presumption of validity demands it.

  21. staff June 27, 2016 1:19 pm

    ‘While the Patent Office likes to tout statistics that claim most patent claims challenged in IPR are not invalidated, those statistics are viewed as bogus within the industry. They do not take into account claims patent owners simply give up on because it is too expensive to fight, and they ignore the reality that once an IPR is actually instituted virtually no claims are actually adjudicated to be patentable.’

    We agree. All data provided by PTO management should be readily questioned and subjected to great scrutiny. Patent applications and issued patents for small entities have plummeted, especially in the last decade. That the PTO does not allow querying of their database and underlying data by the public to substantiate their claims should sound the alarm. Inventors simply no longer trust PTO management which has substantial ties to the large multinational repeat infringers that have hoaxed America and robbed us blind. China and other nations have been enriched at America’s expense.

    For our position and the changes we advocate to truly reform 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

  22. John White June 27, 2016 1:38 pm

    Excellent article! Truthful. Sad. The patent system has been rendered by large tech companies who can pay the prices charged by a corrupt political system. It is disgusting. Unless small entities band together and collaborate with resources, the battle is lost. We no longer have a functioning patent system. To obtain a patent, one must clear a preponderance standard, to institute the destruction thereof, you need only clear the idiotically low reasonable likelihood standard. Hence, you never escape “patent pending” status. Ever.

  23. Paul F. Morgan June 27, 2016 1:47 pm

    NW, denied IPR petitions [lately higher] might account for nearly a third of the differences between the two “statistics,” but the % of timely settled IPRs is not very high, and what other instituted IPRs do not have a final decision? Even if a party just gives up and stops participating in an IPR that does not prevent a final judgment. So I do not think that even nearly accounts for these alleged statistics differences between these two articles?

  24. Benny June 27, 2016 1:54 pm

    Paul, the statistic concerning PTAB invalidations doesn’t take into account the fact that no sensible person would initiate such an expensive procedure without solid evidence that the claims should not have been granted. The alternative conclusion would be that USPTO examiners are infallible and perform very thorough prior art searches. We all know that just ain’t so.

  25. Patent Investor June 27, 2016 2:21 pm

    @20, Robert, here is a patent application number for which the claims are currently found unpatentable by the PTAB, 13/339,257. Feel free to look at its image file wrapper and find that it does not match your conclusion. Just a simple word search for “prior” on the image file wrapper page results in 1,329 hits.

  26. Curious June 27, 2016 2:23 pm

    Paul, the statistic concerning PTAB invalidations doesn’t take into account the fact that no sensible person would initiate such an expensive procedure without solid evidence that the claims should not have been granted.
    Any sensible person who has dealt with unreasonable rejections affirmed by the Board over the years would realize that all one needs (in today’s anti-patent environment at the USPTO) is a couple of references that could be mushed together to disclose all of the claimed elements. As for a reason to combine, just rely on hindsight — the USPTO examining corp has done so for decades and that is usually good enough at the Board.

    Also, when big is fighting little, big has every incentive in the world to initiate an expensive procedure. I know of small-time inventors that just cannot enforce their patents because everybody assumes that the patents will be thrown into IPR and nobody wants to (or is capable of) paying for it. Also, who wants to even fight that battle when the deck is stacked against you?

    Even if you can find a contingency fee litigator that will step up to do the IPR, because of the leverage they possess (i.e., the only game in town), they are going to ask for (and get) the lion’s share of any proceeds generated from the patent. The whole IPR process is a lose-lose-lose situation for small-time inventors (and that includes small business as well).

    The alternative conclusion would be that USPTO examiners are infallible and perform very thorough prior art searches. We all know that just ain’t so.
    The USPTO examiners are not infallible. However, that is a problem that should be dealt with directly — not by putting every issued patent at risk with a flawed procedure biased against patentees and those without several hundred thousand spare dollars burning a hole in their pockets.

  27. Curious June 27, 2016 2:26 pm

    To follow up on my last post, and a suggestion for an academic type (or somebody with a lot of time on their hand), I would love to see what types of companies are employing IPRs (i.e., those that petition for an IPR). Are IPRs helping the little guys against trolls? or are IPRs mainly being instituted by large corporations? I think this information would be very telling as to who is benefiting (or not) from IPRs.

  28. Pharmer June 27, 2016 2:58 pm

    Re the idea that Cuozzo is bad for pharma. There already are two patent systems, one for pharma that involves the give-always under the Hatch-Waxman Act, and the system for the rest of the inventing world. Pharma also gets unbelievably huge benefits from the exclusivity conferred through regulatory affairs (FDA) activities, which is probably more important than the exclusivity gained through a patent. You got to hand it to them. Pharma has done an amazing job at protecting their interests over the years. Too amazing, in fact, which is why we are seeing widespread blow-back including in the form of potential legislation IRT the ridiculous pricing that’s come around over the past several years.

  29. Robert June 27, 2016 3:31 pm

    Answering #24 patent investor, this patent 8504697 reflects a different prior art search problem.

    The art used to overturn the patent was buried in the 1300 or so references the applicant submitted to support the application. Do I think the applicant went through all those references and pointed out to the attorney which ones lent themselves to the subject matter. I doubt it. I also don’t think a professional search level search turned up all that art. The examiner did here own search and relied on references she found before rejecting the application 3 times.

    18 pages of prior art is an indicator of a weak patent in my view. I suppose no one one actually reviewed all those references before Apple filed the IPR or the two references used by the Board would have been discussed during prosecution.

  30. Patent Investor June 27, 2016 4:13 pm

    @29, Robert, you paint a pretty picture, “Do I think the applicant went through all those references and pointed out to the attorney which ones lent themselves to the subject matter. I doubt it.” ” I also don’t think a professional search level search turned up all that art.” “I suppose no one one actually reviewed all those references”. You are arguing the negative without a shred of researching the subject. Defending against your argument requires doing the tons of research you pre-suppose out of the equation.

    You seemed to have done a modicum of homework on Cuozzo, but you’re generic, overly broad argument cannot stand without basis in fact.

  31. Robert June 27, 2016 4:27 pm

    To patent investor @30 I agree with curious @27 IPR’s are a source of data that should be studied. There are a variety of questions that could be asked and data gathered.

  32. Paul Morinville June 27, 2016 5:47 pm

    Benny, the vast majority of patents petitioned for an IPR are in litigation. You don’t think that an infringer would pay $20K to immediately invalidate the patent for 3 to 5 years with virtually all of the cost during that period heaved on the inventor and an astronomical chance that the patent will be invalidated in the end?

  33. Anon June 27, 2016 7:56 pm

    Repeated her for convenience, Mr. Heller @ 14 states:

    Paul, all one has to do is point to the reduced standard of proof and the use of broadest reasonable interpretation to know that IPRs are intended to be patent unfriendly. QED.

    Tell me Mr. Heller, what exactly is wrong (if you can see anything wrong at all) with these aspects that you wish to “champion.”

    Are you finally willing to compare the aspects that make up the property that is a patent between two distinct points in a particular legal proceeding?

    Since you have avoided – and strenuously so – any seeming understanding of basic property law, I have a very strong hunch that you will once again decline to make the simple observation – even as you lament certain (same) aspects that have been put to you.

    I am very curious though as to why you so steadfastly refuse to engage this intellectual endeavor.

  34. Edward Heller June 27, 2016 8:46 pm

    Anon, I simply do not agree that the institution of the proceeding is a taking. I think it taking involves the use by the government of the patented invention, not the revocation of the patent itself. I also think that use of the eminent domain power to require the patentee to license his patent at a fee that is not fair and just is not authorized by the takings clause (unless there has been some prior abuse by the patentee for which the reduced compensation is a remedy).

  35. Jeff Sheldon June 28, 2016 12:04 am

    The article is unbalanced.

    The discussion ignores the cause of this. The trolls. My Clients have had to defend in Texas against clearly non-infringed patents. The contingency attorneys not taking cases have brought this upon themselves. Particularly those demanding little settlements from small Mom and Pop enterprises.

    The article also ignores how an IPR allows a little company to take on a big company asserting an invalid patent. A strategy I have successfully used

  36. Curious June 28, 2016 8:12 am

    Anon, I simply do not agree that the institution of the proceeding is a taking.
    1st year property law taught me that property can be reduced to a bundle of rights. The difference between Anon’s position and Ned’s position can be boiled down to the following question (and answers thereto): “How many of those sticks (i.e., rights) must be removed from that bundle before it can be called a taking?” Anon’s answer is that any removal with a substantive impact is a taking. Ned’s answer is that the taking must involve the right of “exclusive use” of the property.

    I am inclined to agree with Anon’s answer. I think the “value” of property is highly correlated with the strength of the sticks in the bundle. If the value of the property is relatively unchanged because of the government action, then I think a taking has not occurred. Conversely, if the value of property is substantively changed as a result of a government action, then I think a taking has occurred.

    In this instance, the institution of the IPR has stripped away the presumption of validity and instituted a more favorable claim construction for invalidity (that same claim construction being good for an infringement analysis but the IPR doesn’t look at infringement). Basically, this puts the patent on par with an unissued patent application. Actually, it is worse because an applicant has the unfettered right to amend during prosecution — not the case in an IPR. Ask anybody who deals with patent valuation, and most will tell you that patents are worth considerably more than patent applications. As such, the mere institution of the IPR constitutes a substantial loss in valuation of the patent — hence, IMHO, a taking.

  37. Anon June 28, 2016 9:32 am

    Mr. Heller,

    I will again suggest that you review the law concerning takings.

    Actual “use by” the government is simply not what the law is constrained to.

    While takings can very well include eminent domain and “actual use,” there is such a thing called legislative taking.

    For someone who places such a great deal of importance on the “property” aspect of patents, your insistence on views that do not fully accompany the protections of such property is a bit mystifying.

  38. Paul Morinville June 28, 2016 10:35 am

    Just the very existence of IPRs has made a large number of patents unenforceable. That in itself is a taking.

    If a property right cannot be enforced, it is taken by whoever wants it. Behind every property right is the backing of the government and the reasonable expectation that the right will be upheld. That no longer exists for any patent. Nobody can have a reasonable expectation that any particular patent will survive an IPR.

    The taking happened when Obama signed the America Invents Act.

  39. Edward Heller June 28, 2016 12:02 pm

    anon, I agree that laws and regulations can restrict use or provide for use by others so as to amount to a taking. But the simple filing of an IPR is not a taking. It is the law itself that permits it that might be. And why? Because of the lowered standard of proof, BRI and a PTAB that is hostile to patents.

  40. Anon June 28, 2016 12:12 pm

    Curious,

    You nailed it.

    Mr. Heller, if as you seem to want to do, you are going to discount the very things that I requoted you saying as not things affecting the aspects (sticks) of a granted property, on what basis then are you even complaining about these things in the first place?

    The point here of my quoting you was to show that you are being disingenuous by attempting to both complain about something and then refusing to follow through on that “complaint,” and recognize some very basic concepts in property and takings law.

    You seem do not have the ability as an attorney to merely and only take those aspects of law that you “like,” and ignore the rest as somehow (?) inconvenient for the position that you wish to advocate.

    I mean, you sure can try to do that, but when others (such as myself) call you out for this less than complete treatment of the very necessary aspects of the law that you want to advocate upon, your unwillingness to engage and acknowledge, accept, and integrate these items into your ongoing advocacy efforts, you are acting in an irresponsible and quite likely unethical manner.

  41. Robert June 28, 2016 1:30 pm

    Responding to Patent Investor @30. I have now thought this though and can provide a better answer.

    My contention is that prior at/searching is in general downplayed by the patent system. The problems with prior art manifests in both Cuozzo and the ‘697 (Larson, et al.) patent you brought up but in different ways.

    Regarding ‘697 It is unreasonable to expect the examiner to search through 1300+ documents. If that were in paper it would constitute dozens of boxes. The examiner did her own search. It is not exactly clear to me what she did though. The record shows she search three times but there is only one “Examiner Search Strategy and Results” present in the file. She also claims to have searched class/subclass 709/223-227 which at the time had 56k documents but the one “Strategy and Results”present in the file does not evidence a classification based text search.

    About the 1300+ documents supplied by the applicant, these were not provided by a professional searcher because that is contrary to what a searcher does. A searcher would look through the 1300+ documents looking for the handful that provide teachings that lend themselves to the invention.

    The fact that the invalidating references used in the IPR were supplied by the applicant, strongly suggest (e.g. reading between the lines) that the applicant wasn’t fully cognizant of the material they were supplying.

    Since Apple filed the IPR based on art from the file it appears that they did pay someone to actually look through the art.

    I am not pointing the finger at any one but only stating an observation. IPR’s can only be brought based on prior art. Since IPR’s are overturning a high number of patents, does that not at least suggest that there is a problem somewhere in the process. Prior art is in need of reform and the the IPR procedure is exposing this problem. There is no policy directed to prior art.

    A search in Cuozzo would have cost maybe $750.00 and to review the 1300+ documents perhaps $2000.00. Not a big disbursement to justify the presumption of validity in either case.

  42. Paul Morinville June 28, 2016 1:47 pm

    Jeff Sheldon “The discussion ignores the cause of this. The trolls.” Please define what a “troll” is. To rational observers, it is a cartoon character created by Intel for the express purpose of villianizing inventors. It has become the central cartoon character in the Google led lobby’s fictional story used to pass legislation that killed American inventors, which also has been effective at keeping the members of the Google lobby on top of the market by eliminating all competition from new upstarts. Currently, the term is commonly used by those who wish to avoid any real analysis of the facts. Please help me understand what your definition of this term is.

    “My Clients have had to defend in Texas against clearly non-infringed patents.” Asserting a clearly non-infringed patent is called frivolous litigation. Frivolous litigation is certainly a problem in the patent space like it is in all areas of law. I have personally been subjected to frivolous litigation by a potential investor who made up from the clear blue sky that I had entered into a partnership with him based on one phone call and he effectively owned 30% of my patents. That frivolous case cost me hundreds of thousands of dollars and three years on litigation in CT. I won, but not without a severe cost to me, my family and my company. I am all for ending frivolous litigation, but not at the expense of wiping out the patent system for those who invent the vast majority of our new technologies.

    “The contingency attorneys not taking cases have brought this upon themselves.” Attorney conduct is not a good reason to wipe out patent rights for small inventors. It is a reason to sanction attorneys.

    “Particularly those demanding little settlements from small Mom and Pop enterprises.” Many times the only way to show infringement is at the end user. From my experience, multinational corporations who sell technology that only infringes the full claim when it is in use by an end customer, refuse to license it from the inventor. As a result, the inventor is left with no options but to sue end users. In a case like this, is it wrong to defend patent rights?

    “The article also ignores how an IPR allows a little company to take on a big company asserting an invalid patent. A strategy I have successfully used” First a patent is presumed valid in black letter law, so it is impossible to assert an invalid patent. That said, is your argument that the cost of litigation is too high for small companies to defend against a patent suit, so it is therefore justifiable to thrust all of the cost and risk onto the inventor, himself a small entity?

    I agree that it is too high for a small company to defend against a patent suit. I also submit that it is too expensive for an inventor to defend a patent against an infringer. An IPR certainly helps that small company defend against a suit of infringement. But, it does much more than that. It makes it all but impossible for the inventor to defend his hard earned patent rights and is causing many inventors to bail from the patent system altogether. Which, is shown throughout history to have a very bad effect on economic growth and will harm your small clients in the end along with the rest of us.

    You discount the importance of the people who invent the things upon which your small clients may or may not infringe. This one-sided thinking and the people who propel this argument have destroyed our economic job creation engine.

  43. Benny June 28, 2016 2:09 pm

    Paul, you seem to disegard one important reason inventors file for patent protection. Rational managers, like good generals, choose their battles carefully, and will skirt around a market niche protected by a patent. The benefit to the inventor is real, though it doesn’t appear in the accounts. Not every fool chooses to run headfirst into litigation.
    If novelty destroying prior art is presented in an IPR, then by the definition the patent should not have been granted. In this case it is the PTO at fault, not the IPR.

  44. Edward Heller June 28, 2016 2:51 pm

    Robert, filing an IDS with 1300 references is like not filing anything at all. But, since Rule 56 requires disclosure, and because for a long time, the Federal Circuit enforced Rule 56, applicant disclosed every reference that could possibly be related to the invention without more.

    In my view, the PTO revise Rule 56 to clarify it does not require disclosure of any reference unless the applicant knows that the reference discloses the claimed invention or that is inconsistent with any argument or statement made in the specification or prosecution history.

  45. Edward Heller June 28, 2016 2:57 pm

    Benny, it would be interesting to see just how many IPRs are actually “tried” to a final decision where the invention is disclosed in one reference.

    BTW, if the invention is disclosed in one reference, and that reference is shared with the patent owner and the patent owner still sues on the relevant claim, I think, under Octane Fitness, that the patent owner is going to have to pay the defendant’s attorney fees. As a result, no rational patent owner asserts an patent he knows that is invalid.

  46. Paul Morinville June 28, 2016 3:00 pm

    Benny, I think based on your comment that we can agree that the evaluation of an invention against prior art is supposed to happen in the PTO prior to issuing the patent. The problem, that is discounted by the anti-inventor crowd, is that once a patent is issued is must be presumed valid and durable or I can’t fund my company. Nobody invests in assets that are not known to be assets.

    In order for the PTO to perform a solid job of evaluating a patent in light of the prior art, the definition of what is or isn’t obvious in light of the prior art must remain fairly stable. Maybe our real problem is KSR?

    I think that there is much more going on here than just that thought. Perhaps the real problem is the ungodly number of Google people playing musical chairs with the Obama administration and lobbying firms. Or the number of PTAB judges and CAFC judges with roots in Google and other anti-inventor sources. Perhaps the massive dollars flowing into Washington plays a role. But the system is certainly rigged to invalidate patents.

  47. Edward Heller June 28, 2016 3:13 pm

    Paul, I believe that KSR was and perhaps still is a major problem — at least the way the PTAB applies it. Petitioners place two references side by side. They petition states that the two references discloses all the elements of the claims. Then the petition recites the magic words of KSR that the each reference is performing its predicted function in the combination — without actually providing any evidence of this. The result, the PTAB invalidates the claim.

    But of course, all this does is sanction hindsight, using the claims to find art that discloses the elements to invalidate a claim. A simple procedure.

    But the Feds have been insisting on more recently. They have been insisting that the petitioner also show a problem in the prior art that the invention solves. They also require showing that the way the inventor made the combination is disclosed or obvious — too often the PTAB sanctions reconstructions of a reference without regard to whether that reconstruction would render the reference inoperable for its intended function.

    Hopefully, these recent Federal Circuit cases will help. Otherwise hindsight is the watchword of the PTAB.

  48. Anon June 28, 2016 3:33 pm

    Mr. Heller @29,

    You attempt a difference without a distinction with your reply of “But the simple filing of an IPR is not a taking. It is the law itself that permits it that might be.

    What exactly are you considering the “simple filing?”

    Is the request TO the Office by the one seeking an IPR the “simple filing?” If so, then such is a strawman, as no one has made such an item any part of the discussion.

    Or do you mean to say that the initiation decision is the “simple filing?” If so, then you are not correct in your conclusion concerning that matter because it is precisely at that point in time that the taking is effectuated.

    Once again, I suggest that you brush up on your property and takings law. You may have a very real opportunity to make simple, direct, and very powerful point to the Supreme Court, but you really do need to be able to see what the “right question” to ask needs to be.

    Here, I think you do take a step closer to understanding that the Office is not prime target, although they represent the branch of the government applying the taking, it is more so whether or not Congress can write a law concerning property that allows for such a taking at the point of initiation.

    Other aspects of takings law to remind you of: improper remuneration for what is taken and lack of review of the government action.

    This is why I stress the separate initiation point. It is at that point that the taking occurs, there is NO remuneration of any amount, and as the Supreme Court just reminded all of us: there is no review.

  49. Edward Heller June 28, 2016 3:51 pm

    anon, AFAIK, taking requires taking possession, using or restricting use.

    Revoking title is not a taking in the abstract. But what is really happing is that the patent owner has disclosed his invention in exchange for exclusive rights, and then those rights are unilaterally abrogated by the granting authority for “mistake.” This leaves the invention in the public domain.

    The property one is losing is the exclusive knowledge and use of the invention. Before that is done, I think, one should have a right to a day in court and to a jury, both rights guaranteed to Englishmen/Americans since the Magna Carta.

  50. Anon June 28, 2016 4:41 pm

    Mr. Heller,

    Your “AFAIK” is deficient and is directly the point that I am making.

    You keep on wanting to reach for more without realizing that no such reach is required (this does not mean that any argument that does reach more is necessarily incorrect – it DOES mean that accepting ONLY the longer reach “as being correct” IS incorrect.

    Time for you to do more than accept that limitation.

  51. Benny June 28, 2016 4:53 pm

    Paul, if I must assume the validity of an issued patent, regardless of whether or not it meets the requirements of 102 (103 is too subjective for me to argue) , then I must accept the tardiness of negligent government employees without question. I’m not happy with that. I’m not happy with the idea that you must accept the validity of a patent granted to me, protecting an invention which you earlier publicly disclosed, just because your publication didn’t turn up in a brief search.

  52. Paul Morinville June 28, 2016 5:23 pm

    Benny, If it is an issued patent, it has been already examined by the PTO and the PTO has ensured that it meets 102, 103 (subjective or not) and 112. That is the primary mission of the PTO and has been since the Patent Act of 1836.

    You keep coming back to a failure within the PTO as the crux of your support for an IPR. If the problem is in the PTO, why not fix the PTO?

  53. Paul F. Morgan June 28, 2016 5:27 pm

    Re: “The taking happened when Obama signed the America Invents Act.”
    Actually, if an IPR is to be considered a “taking” it had already occurred for many years from long ago under a very different President by another highly bi-partisan Congressional vote – back when the first reexamination statutes were enacted and signed. Numerous patent claims have been invalidated in reexaminations on the same kind of prior art used in IPRs over all the many years since then.
    I understand why IPR is unpopular, but hyperbole and personal blog opinions about constitutional law is not going to cure it.

  54. Ron Katznelson June 28, 2016 5:29 pm

    Ned,
    I think you are missing an important point on takings when you claim that IPR reults in mere “revocation.” As my explanation in the IEEE-USA Amicus Brief shows in detail, a cancellation of patent claims in IPR is not merely a “revocation” of patent rights – it also constiututes dedication to the public and the IPR petitioner, rights that they would otherwise not have for many years during the patent term. These are private rights which the government takes and dedicates to the petitioner and the public. There is no difference between this and eminent domain takings.

  55. Robert June 28, 2016 5:34 pm

    Why is it just the PTO? Doesn’t the patent holder have an interest in assuring to the best of their ability the validity of their patent? In the case that Patent Investor @25 brings up the patent holder did not even evaluate the art they submitted. Is that not their fault? The IPR petitioner evaluated the art the patent holder submitted and found invalidating art. The problem with prior art can not fall exclusively on the PTO.

  56. Edward Heller June 28, 2016 5:52 pm

    Ron, you are absolutely right — and to the extent the reexamination and IPR are conducted as a “do-over” by the PTO of its original examination (to correct mistakes) instead of a formal validity trial with Article III judges, a clear and convincing standard of proof, and with a trial by jury as guaranteed to the English by the Magna Carta and to Americans by the Seventh Amendment, then we agree. Stripping a patent owner of his patent after disclosure of the invention places that invention into the public domain without the patentee’s consent.

  57. Edward Heller June 28, 2016 6:03 pm

    Robert, the inventor has every incentive to protect his invention with a valid patent, and it is only protectable to extent its claims define over the prior art.

    But it also seems that the patent profession wants to protect inventions in a manner that others cannot even achieve the same result by different means or methods. This leads to very broad claims that naturally read on a lot of prior art.

    The inherent conflict between scope and prior art is part of the problem here. Perhaps inventors would be happier with less scope if their patents could be more easily enforced. But once broad claims are issued, the inventor may not know the trouble he is really in and may prematurely begin counting his millions.

  58. Anon June 29, 2016 12:08 am

    Mr Morgan @ 53

    Your “don’t talk” cheerleader routine (as witness the plea of “I understand why IPR is unpopular, but hyperbole and personal blog opinions about constitutional law is not going to cure it.” is beyond the pale.

    The purpose of these types of blogs is to show the infirmities in the law as written, to explore with critical thinking. What exactly do you mean by “cure”…? Oh wait, I had forgotten, you are not comfortable expressing your thoughts on such matters.

    I “get” that you do not want the IPR system changed let alone dismantled. But you need to come to grips that people who are actually employing critical thinking ARE talking about the constitutional infirmities.

    But just because you may find the rigor of critical thinking unpleasant to your desired ends does not mean that you should be encouraging people to NOT engage in such conversations.

    That is not a “cure” that you seek.

  59. Anon June 29, 2016 12:10 am

    And as to reexaminations, well, the differences have also been pointed out to you, so your attempt here and now to equate what happens with the AIA is fallacious at best.