It’s Time to Stop PTAB Gamesmanship

“[T]he PTAB is inherently subject to gamesmanship — from all directions — that destroys systemic credibility, which is undeniably bad for all parties, not just the one whose ox got gored today.”

The next several weeks will see much wringing of hands and gnashing of teeth about Allergan’s transaction with the Saint Regis Mohawk Tribe designed to insulate drug patents from Inter Partes Review challenges at the Patent Trial and Appeal Board. Opponents of strong patent protections will use this transaction as an indictment of the patent system, arguing it was never Congress’s intent for this to happen. As is frequently the case, such criticism is half right – and misses the bigger picture. To give away the ending: the right place to adjudicate patents is long-established Article III courts[1] not the ill-considered PTAB.

Unquestionably Congressional intent is entirely quiet on the subject of transferring patents to a sovereign entity and then entering into an exclusive license. Equally unquestionable is that accusations of gamesmanship, like this one from Joe Nocera in Bloomberg, could be leveled at groups trying to kill patents too.

Our point is not to engage in futile “what about-ism…” but rather to illustrate how the PTAB is inherently subject to gamesmanship — from all directions — that destroys systemic credibility, which is undeniably bad for all parties, not just the one whose ox got gored today. As an administrative tribunal, the PTAB isn’t limited to resolving actual “cases or controversies” between parties like Article III courts are. The gates are open to all comers, and so are the unintended consequences.

Consider the mirror image of the tribal arrangement Nocera bemoans. Unified Patents describes itself as “The Anti-Troll,” whose goal is protecting its subscribers from bad patents. Unified launched in 2012 precisely to take advantage of the IPR process and exploit loopholes in patent owners’ protections that were ostensibly codified in the America Invents Act:

  • Alleged patent infringers have a deadline to file an IPR. Unified is a non-practicing entity (!), and won’t be sued. They can lurk and wait for the results of others’ petitions/trials and then tailor their arguments in response. How many bites before there’s no apple left?
  • The AIA included privity restrictions to prevent coordinately gang-tackling a patent owner. Unified may technically avoid privity, but why on earth would 181 companies subscribe to a service that doesn’t act directly on their behalf? Only a court winking and nodding – or a Casablanca casino – could be shocked! shocked! by this behavior.
  • One of the AIA’s laudable goals was encouraging settlements rather than litigation. So why does Unified file joinder requests substantially identical to others’ petitions? Because if the two parties settle, Unified wants to make sure – on behalf of their subscribers – that the IPR continues along to kill the patents. And how do the PTAB’s elastic definition of “one year” as a deadline or permission to join one’s own petition encourage negotiation?

An equally opportunistic player is the angelically named Coalition for Affordable Drugs. The unquestionably bright and successful people behind this do-gooder-sounding organization short drug companies’ stock. Then they file an IPR to kill the patents which constitute the company’s market value. Sometimes they’re successful, sometimes not. Regardless, though, the additional uncertainty has to factor into the discount rate used by financial analysts to present value drug companies’ future earnings.

Surveys routinely show terrible opinion ratings for Congress, but it’s unlikely that even Congressional drafters intended for speculators to use IPR to make statements like, “Nice little patent ya got there. Be a shame for something to happen to it….” Is there any reason we can’t send a demand letter to a patent owner suggesting they pay me $50,000 or else we’ll file an IPR? Any reason we can’t send thousands of those demand letters???

These are just three examples of clever people driving trucks through the PTAB’s loopholes. Article III courts are not without problems, but over the last couple hundred years, the opportunities to game the system have largely been identified and resolved. Allergen’s critics should trade some of their sanctimony for principled argument. Doing so would lead to the conclusion that patent law should go back to the courts, where gamesmanship – on both sides – doesn’t make a mockery of the entire system.

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[1] Federal District Courts, the U.S. Court of Appeals for the Federal Circuit, and the U.S. Supreme Court.

The Author

Gerald Holtzman

Gerald Holtzman is President of PMC. Mr. Holtzman coordinates the company’s licensing program. He served as General Counsel from 1996 to 2014. Since 1973, and prior to joining PMC, Mr. Holtzman practiced as a civil litigator, beginning his legal career with Fulbright & Jaworski in Houston, Texas. He then co-founded Houston’s Holtzman & Urquhart where he remained in private practice until 2001. Mr. Holtzman has since devoted his full time to PMC. He has been a frequent lecturer to business and professional groups and has co-edited a number of legal publications. He was also a lecturer at the University of Houston for five years. He has been named to IAM magazine’s “Top 40 Market Makers.” Mr. Holtzman holds a B.A. degree from Rice University and a J.D. from the University of Texas School of Law.

Gerald Holtzman

Aaric Eisenstein is Vice President of PMC. Mr. Eisenstein focuses on patent strategy and licensing. Mr. Eisenstein, who joined the company in 2012, has extensive experience in early-stage companies. Most recently, he founded Publishing Revenues, a sales and marketing consultancy for high-profile authors and media figures. Other technology experience includes positions with LibreDigital and Stratfor, where he was SVP of Publishing and Chief Innovation Officer. Mr. Eisenstein received his BA in Political Economy from Williams College and an MBA from the University of Texas at Austin.

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 8 Comments comments. Join the discussion.

  1. Edward Heller September 28, 2017 3:10 pm

    Hear! Hear!

  2. Irving Rappaport September 28, 2017 5:46 pm

    I agree with the points made. AIA has wrought many unintended consequences, which have significantly weakened the U.S. Patent System, from which it may never recover.

  3. Night Writer September 29, 2017 10:26 am

    I think that it is not going to stop. Google and the like have 10’s of billions in the bank and they want more. They are continuing to pour money into burning the system down. It isn’t going to stop. This is a lot like anti-trust law. Look what happened to it from 1950 to 1990. Same type of thing is going on.

  4. Eric Berend September 29, 2017 12:11 pm

    These IP pirates desire to freely steal the hard-earned genius works of others is so strong that there is something of a Tourette’s Syndrome like quality to their obsessiveness.\

    The individual inventors are, or have already, fled this treacherous system in droves. Huge mobs of online digerati decry inventors as “evil patent trolls” who would be ‘better off dead’ – and gang up with fervent vitriolic hatred and occasional threats of violence against anyone who expresses the slightest hint of respect for property rights.

    ‘Big Tech’ sycophants in high positions of academia, routinely exploit the milieu to further their agenda for tenure, fun, cash and prizes (as merely one example, see the recent NY TImes article about Google’s payouts of $5,000 to 400,000 to writers of anti-patent ‘think tank’ and academic position papers).

    CAFC Judges have regularly enjoyed special regard in their appointments by Congress and the President, for political advocacy against patents, rather than being valued for impartiality; as is traditionally called for in U.S. judicial appointments.

    Yet, here they are – for another year’s grandstanding for the record and captive interests; holding Congressional Subcommittee hearings without a single inventor’s testimony, for only the TENTH year running. The media coverage continues to promulgate unexamined rubric such as the debunked nonsense claim of $28 Billion dollar drain “every year” due to so-called “patent trolls” in the U.S. economy – a figure so large a portion of the overall IT spend in any fiscal year, as to render the statement instantly ludicrous – yet, repeated verbatim and ad nauseum by lazy, so-called “journalists” whose attitudes and actions bear greater resemblance to PR flacks, than to actual reporters.

    Their actions amount to the equivalent of running the score up by four more touchdowns in an American Football game where the IP Pirates team is already up some 77-0: brutally vicious, overboard to the extreme, pathological in its obsession – and, truly insane in the consequences of its outcome, not only for inventors and the progression of technology; but also, for the U.S. economy going forward. It is quite possible that whatever harm has been perpetrated here is irreparable, and will never be restored.

    I used to be inspired by the potential to do great good in my works as an inventor: I wished the world well and worked very hard towards what seemed like a more beneficial future – for everyone.

    Now: after being derogated, excoriated, denigrated, insulted unceasingly, castigated, excoriated and even my more modest financial expectations and prospects utterly destroyed – so typical of the real-world experiences of myself and other inventors – I no longer wish to benefit anyone else in this world. In fact, it is my hope that what I have created, will die with me and never be re-discovered nor re-created in this world. The rest of the lot of you treacherous human beings (present patent-holder and inventor friendly advocates excepted, of course), DO NOT DESERVE the gifts of the inventors – rather, the rest of you, all deserve to die sooner in sickness and in pain, worried for your children’s futures, and freighted with a life of strife and sorrow for the lack of even basic technology that NONE of you would ever have – if not for genius inventors working away for no certain gain, in all of history.

    Not to worry! Just the ‘mere’ disaffected ‘rant’ of a useless “evil” inventor!!
    I’m sure that “fire of genius” (A.Lincoln, bless his heart) inventing new technologies, will be amply supplied by the ‘don’t be evil!’ Googles of the world. They’re obviously, “SO GOOD” at it.

  5. Night Writer September 29, 2017 12:36 pm

    @4 that is what Google is selling Congress. They are saying they can take care of all that innovation stuff.

    The full effects of the demise of the patent system have not been felt yet. Funding is going to dry up more and more for anything. And who wants to put in a lot of work just to have what you did taken.

  6. Thomas H. Jackson September 29, 2017 1:50 pm

    There was a brief discussion yesterday at a GWU PTAB Symposium. The alleged soverign immunity of the Saint Regis Mohawk tribe derives not from our Constitution because native Americans were not a part of the Constitutional process and have been treated as second-class citizens for at least two hundred years. Their soveriegn immunity may be taken away by Congress. State-supported university licensing programs have state soverign immunity. If an entity wants to assign their patents, assign them to a state university licensing program.

  7. Gene Quinn September 29, 2017 4:41 pm

    Thomas Jackson-

    I think you are right in terms of the strength of the sovereign immunity. The problem, however, is finding a state university that would be willing to engage in this type of activity. I’ve talked to some attorneys familiar with state universities and a deal like this would in many states likely have to go all the way up to the State Attorney General for approval. Getting anything of consequence done on any relevant business timeframe with a university is difficult (what an understatement). Having said that, if there are universities so inclined there certainly would be an opportunity.

  8. Paul F. Morgan September 30, 2017 4:27 pm

    I’m curious how this would work out: “Is there any reason we can’t send a demand letter to a patent owner suggesting they pay me $50,000 or else we’ll file an IPR? Any reason we can’t send thousands of those demand letters???”
    One reason is that it is similar to the patent license demand letters of that amount that had been sent to thousands of small businesses with infringement suit threats by a true troll, and you know how that came out. An FTC suit, state AG suits, fraudulent extortion accusations, and several new state statutes.

    Re: Filing a second IPR petition against the same patent claims solely to request joinder to prevent an IPR settlement by the patent owner with the original petitioner, so as to avoid an IPR decision. This should be denied if no significantly new and better prior art or supporting evidence is being proffered in the second IPR petition and a settlement was effected. If not it could be fixable by a rule or practice change.

    I have yet to see any rational legal support for escaping an existing IPR [no longer being “a real party in interest or its privy”] by a so-called “assignment” of the patent to an Indian tribe which “assignment” retains sufficient rights in, and control over, the patent to continue to sue on it in a district court. It is not credible that the assignor corporation would gave up all control over its patents for all IPRs to the tribe, and even if they did that alone would not necessarily stop exising IPRs from proceeding. I would love to see the arguments to the contrary.

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