Studying IPRs Not Enough, PTAB must be Repaired, Replaced or Repealed by Congress

Under Secretary of Commerce, Michelle Lee has launched an initiative to further shape and improve the Patent Trial and Appeal Board (PTAB). Her Senior Advisor at the PTO will be “coordinating this effort.” Because her tenure is ending the timing of her “effort” has caused some to wonder whether she plans to fix AIA’s second windows or to preserve them. Whatever her unspoken motives, an official in-depth look at the PTAB’s past performance is underway and warranted. But is the PTO looking in all the right places?

Inter Partes Review (IPR) is viewed by many as late-stage destruction of fully developed early-stage investor ROI in patented property. The Lee study will presumably weigh the costs of the PTAB and IPR against its benefits, but the worst far-reaching costs will not show either in its records or dialogue with its “users.” Examining “PTAB files and user experience” cannot reveal the indirect harm the PTAB has inflicted on our innovation ecosystem through the threats to file IPR petitions during licensing negotiations, the impact on declining patent values, the weaponization of the PTAB by the infringement defense bar and its unexpected heavy utilization. Discovering what the PTAB hasn’t seen and why it never saw it would be more informative and more relevant.

The PTAB nullification record demonstrates its many canceled patent claims, but Lee’s review will not show how many claims have been abandoned for lack of patent holder capacity to assert them despite their infringement. Therefore, this initiative will not reveal patent holder disappointment and investment data critical to understanding the drag on the innovation ecosystem that is the PTAB.

The PTAB’s claim destruction has destabilized investment’s keystone contribution in our nation’s innovation ecosystem. The correlative conclusion that PTO examiners are not “getting it right” the first time is compelling. It also might suggest that instead of post investment nullification, the PTAB’s budgetary drain on PTO resources may be better dedicated to improving PTO examination at its front door instead of studying its back-end post-grant second windows.

Indeed, if Director Lee’s inquiry into PTAB’s track record will show it is “as efficient and fair as possible” how does she escape the conclusion that PTO’s initial examination process is flawed? If as some have said IPR is where patents “go to die,” the lower standards applied by the PTAB and expedited proceedings are not just nullifying sound post development patents, they are nullifying patents’ pre-development investment.

The AIA’s legislative history tells us the PTAB was established to “clean-up” the so-called “bad patents” then allegedly infecting our patent system by supporting troll abuse. Deployed by the efficient infringer lobby, the “bad patents” narrative amplified projected false concerns about “ubiquitous patent trolls” abusing our patent system and causing a “litigation crisis.” Other measures minimize abusive troll activity but not by PTAB. Conjured royalty stacking, patent delays and patent thickets were academically theorized but never materialized (See Barnett). Their absence was not the PTAB’s doing. Junk science-based assertions of a “tax on innovation” was debunked by better economists, not by PTAB. These issues drove the infringer’s “bad patent” narrative, which gave birth to PTAB.

Offered as a means to address patent trolls and their “bad patents,” the PTAB was created to deter all patent enforcement by increasing its costs and adding more delay. It has worked well. But if PTAB was intended to rid the patent landscape of misused “bad patents” why do we still need it.? If patent quality is improving why is PTAB’s “bad patents” repair job still incomplete? How can Director Lee explain its continued utility without admitting her initial examiners aren’t doing their job? See Why hasn’t the Patent Office done anything about low quality patents?

Before she leaves, Lee had to find a way. The infringers successfully conflated “bad actors” who admittedly were abusively wielding “bad patents” with their profound antipathy to all patents. Their narrative continues, and it serves the PTAB’s anti-patent purposes. Patent uncertainty plagues our entire innovation ecosystem with doubt. By reviving the” bad patents” story, Director Lee’s inquiry can confirm continued need for the PTAB and its post-developmental destruction without impugning her examination staff.

The PTAB is doing as Congress has directed because Congress did as directed. Since Director Lee must establish a PTAB purpose other than its built-in anti-patent objective and must avoid the corollary existence of flawed initial examinations, she needs another justification. Enter “bad patents.” PTAB’s record thus confirms Congress’ wisdom and its continued need. And that depends on returning “bad patents” and their troll abusers to the Congressional top of mind. Expect the study to resuscitate the “bad patents” narrative.

There is no set time announced for ending Ms. Lee’s tenure. Similarly, the study’s announcement failed to establish a completion time. But when completed it will reflect the PTAB’s indirect destruction of our patent system. By focusing on its record and its “users” half of whom probably prevailed in IPR proceedings but all of whom were able to afford its transaction costs. At its conclusion do not be surprised if PTAB duties are retained or expanded, to address a revived “bad patent” narrative. Whatever the study’s outcome the next PTO Director must do whatever it takes to end the “bad patents” story. It is poisoning our innovation ecosystem.