USPTO files brief at CAFC supporting patent-infringing respondent Telebrands

By Steve Brachmann
September 6, 2017

Josh Malone, inventor of Bunch O Balloons, at Inventor protest at the USPTO on August 11, 2017. Picture by Julie Ann Pixler © 2017.

For most of the nearly 250 years of the existence of the United States of America, our nation’s patent office has worked to issue patents that are defensible in federal courts and could be enforced to ensure that innovators profited from the disclosure of their invention to the U.S. federal government. However, a brief recently filed by the U.S. Patent and Trademark Office in a case before the U.S. Court of Appeals for the Federal Circuit is further proof that the current incarnation of the USPTO is more interested in protecting its own interests to the detriment of inventors.

The appeal in question has been brought before the Federal Circuit by Tinnus Enterprises, the entity holding the patent covering the award-winning Bunch O Balloons water balloon toy invented by independent inventor Josh Malone. The appeal follows a post-grant review (PGR) trial petitioned by Telebrands Corporation, a direct response television advertising firm previously been found to be likely infringing upon the Bunch O Balloons patent in U.S. district court. That finding of likely infringement and a grant of preliminary injunction because the patent is likely valid ordered at the district court level was then affirmed by the Federal Circuit this January. That January decision by the federal circuit, however, came a few weeks after the Patent Trial and Appeal Board (PTAB) issued a final written decision concluding the PGR trial in which claims challenged by Telebrands were deemed invalid under the same argument of indefiniteness under 35 U.S.C. § 112 which was dismissed as unpersuasive by the Federal Circuit.

Already, there is plenty about this case that should give all patent owners a great deal of concern. Given the previous strength of the validity of Tinnus’ patent in Article III federal courts, the PTAB’s finding of invalidity lends further credence to the narrative that the Article I tribunal is a patent killing field which renders more than 90 percent of challenged patents defective. Decisions from an Article I tribunal are appealable to Article III courts but the Federal Circuit has shown itself to be less than consistent on PTAB appeals in recent months, to put it mildly. The court’s recent decision in Return Mail, Inc. v. United States Postal Service provides evidence that the Federal Circuit’s determination of the proper scope of PTAB review varies widely among the court’s judges. District court findings of infringement and no invalidity are no match for PTAB findings of invalidity, as is proven by the Federal Circuit’s early August decision in Personal Audio, LLC v. Electronic Frontier Foundation. Days before the Personal Audio decision, the Federal Circuit showed itself willing to double down on the PTAB’s high rate of patent invalidation by invalidating patent claims which were upheld in a PTAB final written decision in Homeland Housewares, LLC v. Whirlpool Corporation.

Amazingly, the USPTO has decided to file a brief in Tinnus’ recent appeal to the Federal Circuit which supports the respondent Telebrands, the entity which has been found as infringing the Tinnus patent issued by the USPTO. The USPTO, currently under the supervision of interim Director Joe Matal, urged the Federal Circuit to affirm the PTAB’s decision to apply the Federal Circuit’s standard on indefiniteness stemming from that court’s May 2014 decision in In re Packard. The next month, the U.S. Supreme Court amended the Federal Circuit’s indefiniteness standard in Nautilus Inc. v. Biosig Instruments, Inc., finding that the previous standard didn’t satisfy the Section 112 definiteness statute. However, because the PTAB applies the broadest reasonable interpretation standard during PGR trials, the USPTO argued that the Packard standard is more appropriate than the Nautilus standard because “it demands at least as much, and sometimes more, clarity than the Nautilus standard.”

Acting Director Joe Matal (tie) speaks with Paul Morinville (hat) and Randy Landreneau of U.S. Inventor, at Inventor protest at the USPTO on August 11, 2017. Picture by Julie Ann Pixler © 2017. 

The USPTO’s defense of Telebrands’ argument is more than a little awkward given the fact that USPTO Director Matal likely has personal knowledge of Josh Malone. At least one picture from the US Inventor protest of the PTAB staged this August shows that Matal met with Paul Morinville and others attending the protest, an event at which Malone’s presence was prominent as a main organizer. At the very least, the initial returns seem to be clear that the pleas of U.S. patent owners demanding an end to the disastrous eminent domain-style tactics of the PTAB have fallen on deaf ears.

Then there are the procedural issues at the PTAB that Tinnus notes in its appeal, an issue which is glossed over in the USPTO’s brief. “The Packard approach followed by the Board here is only applicable to post-grant reviews and would have no application against a patented claim subject to an inter partes review,” the brief reads. Yet Tinnus argues in its appeal that the PTAB panel applied standards for inter partes review (IPR) proceedings to a trial that was instituted as a PGR. “In its institution decision, the Board incorrectly applied the lower ‘reasonable likelihood’ standard used for IPRs, rather than the higher ‘more likely than not’ standard governing PGRs,” Tinnus’ appeal reads, adding that the PTAB panel didn’t recognize this error in its final written decision.

The high stakes game being played by the USPTO in supporting patent invalidity findings at the PTAB is well outlined in an brief filed by the Cato Instituteamici with the Supreme Court in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC:

“The operation of the PTAB and the security of patent rights therefore depends not on stable and neutral adjudication as is the case in Article III courts, but on the prevailing political winds… It is certainly true that each incoming administration seeks to harmonize the administrative state with its own political and policy goals. The PTO is no different. What is different is that in no other agency does such harmonization affect vested property rights.”

Changes to the leadership at the USPTO can alter U.S. property rights based not on rulemaking but rather the prevailing policy on patents which are favored or disfavored, the Cato Institute contends. The recent brief filed by the USPTO in favor of Telebrands comes during the tenure of interim Director Matal but President Donald Trump recently nominated Irell & Manella managing partner Andrei Iancu, an intellectual property lawyer with engineering experience, to serve as the next Director of the USPTO. Given the Trump Administration’s recent activities in IP policy, which appear to be following in the same disastrous footsteps as the Obama Administration, close scrutiny will need to be paid to the early days of Iancu’s tenure as USPTO Director if he is confirmed to see if patent owners like Josh Malone have any reason to trust that the U.S. patent system will properly protect the rights of inventors.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

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 5 Comments comments. Join the discussion.

  1. Joachim Martillo September 6, 2017 9:23 am

    Doesn’t this action by the USPTO mean that the USPTO is now subsidizing infringement — especially when we consider USPTO arguments about attorney fees in 35 U.S.C. § 145?

  2. Anon September 6, 2017 10:18 am

    Joachim,

    The term is “agency capture.”

    For a comparison, see the Savings and Loan debacle.

  3. Valuationguy September 6, 2017 10:30 am

    Steve – I would like to recommend that you divorce what Acting Director Matal is doing at the PTO from any real link to President Trump’s patent policies.

    1) Matal is an Obama (Google vetted) holdover.
    2) Matal was the chief Republican ARCHITECT of the AIA….so of course he is going to defend IPR and all other aspects of the AIA.
    3) (I suspect) Matal owes his Acting Director position to
    a) his close personal relationship with AG Jeff Sessions
    b) the fact he is the highest profile Republican Obama-regime leftover at the PTO
    c) he is well-liked by other PTO senior staff (all of whom as Google vetted and AIA loving)
    d) the vote horse-trading going on in Congress in June around the Obamacare repeal/Trumpcare passage shenanigans made him the TEMPORARY choice for Acting Director to lock down the votes of certain key Republicans in the House (Goodlatte/Issa…both Google/large tech water carriers).

    The fact that Iancu was nominated to fill the permanent job is much more reflective of the Trump administration’s view of patents in my opinion.

  4. The Time Is Now To Act September 6, 2017 4:47 pm

    @Valuationguy – you nailed it.

  5. HeartPTAB September 6, 2017 8:18 pm

    Valuationguy – RE: Jeff Sessions – interesting in light of Trump being unhappy with Sessions last month. How high of a priority are patents for Trump?

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