How the Patent Trial and Appeal Board Harms Inventors

By Paul Morinville
September 13, 2016

scales-justice-erase-copyToday, any patent can be challenged to a PTAB procedure by anyone at almost any time, which dramatically harms inventors. The more valuable the invention, the higher the risk of a PTAB.   Inventors cannot adjust their own behavior to reduce the risk of a PTAB being launched. That risk remains as long as the patent is in effect. Since most PTAB procedures are launched against patents being enforced against large multinational infringers, the only behavioral change an inventor can make is to not enforce patent rights even if a large multinational corporation steals the invention. Perhaps that is the point of the AIA.

Once a patent is challenged to a PTAB and it is instituted, the patent is effectively invalidated. The patent cannot be reasonably enforced for the pendency of the PTAB and its appeals. Most infringement suits are stayed until the PTAB resolves. This can burn five years of the patent’s enforceable life and that lost time is not added back to the patent’s term. In many cases, a third or more of the patent’s active life is just lost altogether. A patent’s value is often directly proportional to its term, so cutting the term by a third or more cuts the value of the patent proportionally.

Despite the plain words of the U.S. government on every patent stating that “…requirements of law have been complied with” and the fact that the inventor has likely spent many years (in some cases well over a decade) along with tens of thousands of dollars proving to the Patent and Trademark Office (PTO) that the invention is worthy of a presumed valid patent, once a PTAB is instituted the inventor must reprove that the patent is valid all over again. And they must reprove it to the very same government body that issued it in the first place and affixed the seal and promise of the United States government. This absurdity should not go unnoticed.

Prior to the AIA, a challenger to a patent had to prove with clear and convincing evidence that the patent is invalid. The challenger had to be related to the patent in some way and generally that meant they needed to be sued for patent infringement. It was the challenger’s burden to prove the patent invalid. The challenger bore a significant cost – often as much or more than the inventor bore.

The AIA reversed that. Today, a challenger can submit a petition for a PTAB and if the PTO accepts the challenge, the inventor gets hit with costs averaging more than $300,000. Depending on how many patents are challenged, how many challengers, and how litigious the challengers are, costs can exceed a million dollars. There are not many inventors with a million or so of loose cash just laying around to pay for this and investors have largely left the patent business, so for most inventors cost alone is an insurmountable burden forcing capitulation to infringers or abandonment of the patent.

PTAB procedures have rendered worthless around 90% of the patents they see by either invalidating the patent altogether or invalidating the most critical claims. The infringer lobby and the PTO would have us believe that is not the case, but they measure total claims in all challenged patents against total claims invalidated. They ignore that a petitioner selects specific claims and those selected claims are the most critical to the defense of the patent right. This means there is a deliberate, thoughtful and strong selection bias on which claims are challenged and only the most critical are challenged. The strength of most patents hinges on only a couple of the claims so patents with dozens of claims can be rendered worthless by invalidating only one or two claims. Thus invalidating only one claim can doom the entire case and set the infringer free. The PTO’s numbers are either produced with no knowledge of patent litigation or are deliberately misleading. See Misleading PTO statistics hide a hopelessly broken PTAB.

The AIA promised 400,000 jobs. I suspect it did the opposite in spades, however it did bring about the birth of two new industries. Each of these industries generates their profit by attacking patents to PTAB procedures. In one business model, third party companies challenge patents infringed upon by the large multinational companies (the same multinationals that funded the company challenging the patent) for the purpose of harassing the inventor or patent holder and beating them into submission. A second AIA created business model shorts pharmaceutical company stocks and then challenges key patents of the shorted company to PTAB procedures in an effort to drive the stock price down. If the challenge is instituted, stock prices drop sometimes by 25%, pumping millions of dollars into the company that shorted the stock and challenged the patent. Both of these business models contribute to the collapse of patent values and the resulting collapse of the patent system for inventors.

The real damage to inventors is the crashed value of the patent asset as it related to funding their company to commercialize the invention. A patent, a transferable private property right, once attracted investment from angel investors at the earliest high-risk stages of commercialization. It no longer does. This is because if the invested company fails, the patent is transferred to the investor and that investor must accept all of the risk that the AIA created. A patent could impose hundreds of thousands of dollars of costs and tie the investor up in litigation for years, and just like the inventor, the investor can do nothing to avoid that risk. For the most part, the patent cannot be sold unless the investor can bundle it into a larger portfolio. If the patented invention has the legs to make a market, investors are more likely to end up owning the stinky patents of a doomed company because it is more likely to be run out of business by infringement from larger competitors. And why not just steal it? There are few disincentives to stealing patents so if there is money in the patented invention, it will be stolen. The perverse reality of the AIA means it is better to invest in the company that steals the patent than it is to invest in the company that invents it.

Even Congress seems to understand the extreme weakness of the U.S. patent system today, having just this year passed federal trade secret legislation for the first time ever. For 220 years the U.S. patent system encouraged inventors to disclose their inventions in exchange for exclusive rights so that society could benefit from the knowledge and the public could freely use those inventions after a short time of exclusivity had passed. Today, as the patent system continues to weaken, those remaining in the innovation business have the exact opposite incentives – keep everything a secret for as long as you possibly can because the prospect of patent rights is at best an illusion and at worst a path to the poor house.

Of course, even as incentives to keep innovations secret work their way into the law and independent inventors are suffering, the PTO just doesn’t understand, or chooses to remain blissfully ignorant. Case in point, a friend forwarded an invitation from the PTO to celebrate the five-year anniversary of the AIA. The first two lines state in Orwellian fashion: “Five years ago, President Obama signed the Leahy-Smith America Invents Act (AIA) into law to modernize the U.S. patent system and strengthen America’s competitiveness in the global economy. Together, we have worked to improve our nation’s intellectual property landscape to ensure that America remains the hub for the brightest ideas and most ambitious endeavors in the world.”

Not so surprisingly, I was not invited. I suspect few inventors will be celebrating with them.

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 26 Comments comments.

  1. Pro Se September 13, 2016 10:50 am

    “Inventors cannot adjust their own behavior to reduce the risk of a PTAB being launched.” – pure facts Paul, the bottom line is this:

    If you think you have a (millions of dollars) valuable patent that others infringe, your IP better be ready to be battle tested in the PTAB.. there’s no way around it.. a Utility patent today is considered Troll level (worthless) unless it has convincingly survived a PTAB challenge.

  2. Edward Heller September 13, 2016 1:21 pm

    Paul, the infringer lobby is been playing games with post grant reexaminations for years. While a patent is in the reexamination and claims rejected, which they usually are, the patent becomes almost unenforceable. Patent term wastes. The inventor is harmed simply because of the delay.

    What IPRs have done is amp up the harm of re-examinations tenfold. It is almost easy to find prior art that shows all the claim limitations, and given KSR, one can almost guarantee that the patent office will find a claim invalid unless the patent owner proves patentability all over again. They clearly have placed the burden of proof on the patent owner. Anybody who has participated in the IPR process knows this. Recent Federal Circuit cases demonstrate that this is in fact the case.

    The presumption that a patent is valid is effectively gone – gone with the wind. Unless the Supreme Court acts in MCM Portfolio LLC v. Hewlett-Packard, the patent system in United States is permanently crippled.

  3. Anon September 13, 2016 3:35 pm

    Mr. Heller,

    Once again, you complain about something and I have to point out to you that the timing of the item that you complain about is of critical importance – and is altogether separate from any later adjudication on the merits.

    You do realize that what you (once again) are doing is effectively complaining about a taking AT the initiation point, do you not?

    Have you brushed up on your property law concepts and takings law, yet?

  4. Pro Se September 13, 2016 7:06 pm

    I’ll tell everyone from the front line as a independent inventor:

    I had one judge stay a case on just the “promise” of the filing of an IPR was going to happen a month after the stay was entered (and a frivolous IPR was filed, wont hold up but that’s 7 months of free time gained for the infringer);

    I had another judge terminate (meaning CLOSED) the entire proceeding on a stay due to 3 IPRs that was all terminated..

    I just won a design patent, I will never invent utility level inventions again.. its just too far gone.

  5. Patent Noob (2L) September 14, 2016 3:42 pm

    “This can burn five years of the patent’s enforceable life and that lost time is not added back to the patent’s term.”

    But assuming the patent is found valid by PTAB, then when the infringement case is unstayed by the district court, the patent owner would be able to get damages for the five years of infringing activity by the defendant. Is that how it works? So there’s really not any loss of years of patent protection.

  6. Edward Heller September 14, 2016 5:07 pm

    Patent Noob, of course if a lawsuit is filed and then stayed, the damages that one can recover in the lawsuit would include not only the damages six years prior to the filing of the lawsuit, but damages that occur during the period of the stay. But the real problem is that during the entire period of time of the IPR, or of the re-examination, the patent is effectively unenforceable against others. Everybody sits on the sidelines watching what is going on in the patent office. All this time, damages period is running. Effectively, the patent owner has to sue everybody simply to preserve damages.

    But the vice of re-examinations and of IPRs is that, due to broadest reasonable interpretation, many times the patent owner has to amend the claims simply to avoid the broader interpretation. This can result in intervening rights and the loss of past damages. That is why broadest reasonable interpretation is so fundamentally unfair.

    Outside the United States – everywhere outside United States – one does not lose past damages simply by narrowing the claims in a post-grant procedure. This encourages a patent owner to narrow the claims to avoid prior art. But because of intervening rights in the United States, infringers are encouraged to file re-examinations and IPRs simply to game the system because of intervening rights.

    The whole system is ugly and unfair to patent owners. People who are involved in patent enforcement know what is going on. The people who are in favor of IPRs and the like are talk of reduced cost to litigate validity, bad patents and bad claims, trolls, NPE’s and all the other lingo and sleight-of-hand that diverts intention from the real problems of IPRs and re-examinations.

    At some time, the patent bar has to understand just how vile the infringer bar is, and the lengths they will go to game the system. But their games, and re-examinations and IPRs, do fundamental harm to the patent system into the United States.

  7. Patent Noob (2L) September 14, 2016 7:01 pm

    Heller —

    Focusing on your second paragraph, the reason the patentee doesn’t want a broad interpretation of the claim is that it may then become so broad that it crosses the line and steps on prior art, in which case the whole claim gets thrown out. Is that right? But I thought that’s the reason patents should include broad, medium, and narrow claims. You ask for the world in the broad claims, but if that gets knocked out in litigation, you have the narrower claims as a backstop. I understood that that’s how patents have always been drafted, before IPR, PRG, etc. Is there something new in the new post-grant procedures that makes the traditional approach not work any more?

  8. Edward Heller September 14, 2016 7:53 pm

    Noob, claim terms have multiple meanings, even to one of ordinary skill in the art. In court, the meaning given the term in the specification by definition or by usage, is always used. Not so with BRI, where the PTO typically adopts the “broadest” meaning of a term as understood by one of ordinary skill in the art — one that reads on the prior art — unless the specification (or prior prosecution history) forces a narrower interpretation by making the PTO construction unreasonable.

    I had a reexamination once where the claim was to two independent clocks on the same IC as a CPU, one for the CPU and another for IO. The point of the invention was to allow the clocks to operate independently — asynchronously. But the PTO read the claim to only require the clocks be physically spaced on the IC, and then read the claims on prior at that did not disclose asynchronous CPU/IO clocks.

    We were forced to limit the claims to avoid this art, which, on its face, was ridiculous.

    Now, of course infringers asserted intervening rights.

    Back to your point, why of course dependent claims are there if the broader claims are invalid over the prior art. But the problem in the PTO is that valid claims are being invalidated simply because of the PTO’s use of broadest reasonable interpretation.

  9. Patent Noob (2L) September 16, 2016 9:05 am

    “In court, the meaning given the term in the specification by definition or by usage, is always used. Not so with BRI, where the PTO typically adopts the “broadest” meaning of a term”

    This sounds almost like an Erie situation, where you have one rule of decision in PTAB and another in the fed. courts. Has anyone tried that sort of argument as a way to force PTAB to adopt the same rule of decision as used by the courts (well, adopt it on paper anyway)?

  10. Anon September 16, 2016 9:48 am

    Noob,

    It is less an “Erie” thing and more of an Agency thing.

    This too is one of the critical changes that occurs at the point of initiation of the IPR: the “home rules” change because your home forum has changed.

  11. Patent Noob (2L) September 16, 2016 10:28 am

    There’s no federal-vs-state aspect here, but Erie was also about forum shopping and the idea that we want the same rules of decision whatever the forum. That logic should apply here as well.

  12. Anon September 16, 2016 12:35 pm

    Noob,

    If the set up precludes the notion of forum shopping (because, say Any and All forums are allowed per the nature of the item – a Federal item), then you do not even get to the “issue” of forum shopping.

    This is quite aside from any actual “shopping for a forum” that may happen.

    You have a different problem – you have a forum either acting properly within its levels of latitude or not. If ANY forum is acting within its latitude, and happens to be more beneficial to one side or the other, then with items of a Federal nature, it will be fully expected – and without issue – that such a forum is chosen more often.

    If on the other hand the “popular forum” is doing something wrong (in order to be popular), then the answer is to fix that thing being done wrong.

    With the Supreme Court constantly wanting more “latitude” (view this as less bright line rules), you should expect MORE of this natural diversity between forums.

    You cannot have it both ways: a lack of bright line rules and a more uniform distribution for an item of Federal nature.

  13. Anon September 16, 2016 12:37 pm

    …so no, the logic does NOT apply in the same manner.

  14. Edward Heller September 16, 2016 3:04 pm

    Noob, the issue went to the Supreme Court: https://scholar.google.com/scholar_case?case=10304817610393287255&q=Cuozzo&hl=en&as_sdt=4,60

  15. Patent Noob (2L) September 16, 2016 5:00 pm

    Heller, got it. Thanks.

    So will be upshot be that claims will become more complicated, with the atty adding more conditions and qualifications to give PTAB as little room as possible to broaden things out. “By motor, I mean something having this characteristic and that and not that, unless it’s made of aluminum, in which case . . . ”

    So more claims, longer claims?

  16. Edward Heller September 16, 2016 5:14 pm

    I think the best way to combat BRI is to be clear what a claim term means in the spec, and to only use terms in claims that are actually used in the specification.

  17. Patent Noob (2L) September 16, 2016 5:16 pm

    No, that can’t be right because the initial examination already uses BRI. So whatever you have to do make the examiner happy is what PTAB is looking for too. Hmm . . .

  18. Patent Noob (2L) September 16, 2016 5:16 pm

    I was correcting myself, not you.

  19. Patent Noob (2L) September 18, 2016 11:53 am

    Heller — “We were forced to limit the claims to avoid this art” (#8)

    PTAB and examiners both apply the BRI standard, so in an ideal world (yeah, I’m new at this but I know we don’t live in an ideal world) they would come to the same conclusions re. allowability of claims. But that didn’t happen here. Is that because

    (1) at PTAB, the wannabe infringer presented new prior art that the examiner hadn’t found, or

    (2) same prior art, but wannabe infringer made a better case for its relevance than examiner had concluded on his own, or

    (3) different people see things differently, so it’s just a random fluctuation that PTAB came to different conclusion than the examiner, or

    (4) PTAB had an anti-patent agenda, or

    (5) something else?

  20. Edward Heller September 18, 2016 5:20 pm

    Noob, in this case we had an examiner (reexamination) who did the claim construction and applied it to the reference supplied by the petitioner in a way that did not address the issue for which the reference was submitted by the petitioner. Thus the question of patentability raised by petition was not actually addressed in the reexamination.

    This is actually one of the problems with broadest reasonable interpretation – the claims as construed in the patent office are not the same claims one finds in court because claim construction makes them different claims.Thus, the reexamination/IPRs can be most times is irrelevant in subsequent litigation because the issues being decided are entirely different.

  21. Patent Noob (2L) September 18, 2016 6:36 pm

    “the claims as construed in the patent office are not the same claims one finds in court”

    But it would be the same words, right? In your case, you had to amend the claim during reexamination. Then, if there’s an infringement action, the new amended wording would be what the dist. court would be interpreting in the Markman hearing. So when you say the claims are not the same, it’s the same words but different interpretations?

  22. Edward Heller September 19, 2016 2:19 pm

    Noob, they may have the same words, but with different instructions they are different claims and different inventions.

    This seems to be an underlying assumption that the construction in the PTAB is simply a broader version of the construction in court – a larger circle surrounding a smaller circle. But that is not exactly what is going on. The PTAB is drawing circles somewhat randomly depending on the prior art so the circle they draw may not even have any overlap with the circle a court may draw. Thus the claims being examined/judged are not necessarily the same claims as being litigated in court.

  23. Patent Noob (2L) September 20, 2016 7:12 pm

    OK, maybe I’m starting to understand. Or at least I’m understanding that I’m not understanding.

    Why wouldn’t the approach you recommended earlier (“I think the best way to combat BRI is to be clear what a claim term means in the spec, and to only use terms in claims that are actually used in the specification.”) fix the situation? I.e. you pin down the meanings of all the important terms so that both PTAB and the courts have very little wiggle room, no more than is inherent in the fuzziness of language itself. Is there an example you could point me to of what you’re talking about? My background is EE.

  24. Patent Noob (2L) September 20, 2016 11:56 pm

    OK, I think I’m starting to understand. Or at least I’m understanding that I’m not understanding. Why isn’t the approach you had suggested earlier (“I think the best way to combat BRI is to be clear what a claim term means in the spec, and to only use terms in claims that are actually used in the specification.”) the way out? I.e. tightly define all the terms that matter in the spec, so that the PTAB and courts have little wiggle room to redefine them.

    Is there a concrete example of all this you could point me to? My background is EE.

  25. Edward Heller September 21, 2016 5:20 pm

    Patent Noob, it would fix BRI. But it would not fix the basic lack of due process of having the PTO invalidate one’s patent.

  26. Anon September 22, 2016 11:35 am

    Noob,

    “Fixing” fuzzy language is a misnomer and a virtual impossibility given that by its very nature of being on the cutting edge, innovation may very well necessitate “fuzzy” words.

    You mention that you have a EE background – does that background include innovation work “out in the real world,” or only the “academic” side? (Not a slam – just curious)