The Top Trends in Patent Law for 2017

By Steve Brachmann
December 29, 2017

Trends 20172017 certainly was a year of revelations in the world of U.S. patent law. Before her resignation in June, reports in January indicated that U.S. Patent and Trademark Office Director Michelle K. Lee was trying to remain in her Director role even to the point of potentially revoking a letter of resignation she had submitted prior to President Trump taking office.

Then in the months following the International IP Commercialization Council symposium at the U.S. Capitol in early May, where the deleterious effects of the erroneous “patent troll” narrative were given full discussion, the summer seemed to be full of revelations about the Patent Trial and Appeal Board (PTAB), an agency which equates executive branch employees with federal judges despite a glaring lack of a code of conduct, where conflicts of interest among those “judges” started to appear and which is considered by more and more patent system stakeholders to be a rogue agency in service to the efficient infringer lobby, especially the tech giants which dominate Silicon Valley.

Finally, unrest among inventors and patent owners was on international display this August when inventor advocacy organization US Inventor staged a protest of the PTAB on the steps of the USPTO where many patent owners burnt the patents which they had been issued by the PTO. Another inventor protest was held in late November on the same day that the U.S. Supreme Court heard oral arguments in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, a case which will determine the constitutionality of America Invents Act (AIA) patent validity trials at the PTAB.

As we mark the close of yet another year, we’re provided with a perfect opportunity to look back on the previous twelve months and see what has transpired, with an eye toward identifying the top trends that mattered during 2017. No one could call it a good year for patent owners (except those with the largest pockets, of course) starting with the United States’ 10th-place ranking among national patent systems in the U.S. Chamber of Commerce’s IP Index, and it didn’t appear as though any weaknesses in uncertain patentability across the U.S. technological landscape were addressed in a positive manner this year. It’s inevitable that the ball will drop on New Year’s Eve and calendars everywhere will turn from 2017 to 2018. Whether the U.S. federal government will be able to stop the death knell sounding doom for our nation’s patent system, however, is still anyone’s guess and it seems far from likely.

The PTAB 2017: A Patent Killing Field Which Has Become a Hall of Legal Nightmares

As the Supreme Court held oral arguments in Oil States, Chief Justice John R. Roberts got into a very interesting exchange with Malcolm Stewart, the deputy solicitor arguing on behalf of the federal respondent in the case. Stewart referred to David Ruschke as Chief Judge of the PTAB, which is the role he holds as stated by the USPTO. This honorarium, however, gave Chief Justice Roberts pause. Instead, he referred to Ruschke as “an executive employee,” which is what he is, and noted that the Supreme Court did not consider such an employee to be a “judge.”

That type of arrogance in considering itself an arbiter of vested property rights has led to many problems at the PTAB, an Article I tribunal with the ability to extinguish vested property rights outside of an Article III court. It’s a tribunal where perhaps more than 90 percent of all property rights adjudicated are then rendered defective. Where gang-tackling petition tactics can eliminate 100 percent of challenged claims even when the institution rate on AIA trials challenging those claims is less than 100 percent. Where administrative patent judges (APJs) have sat on panels adjudicating patentability in cases which have been petitioned by former employers, setting up a clear conflict of interest which has paid off handsomely in favor of the petitioner/former employer. Two such APJs have been discovered, and it’s interesting to note that Apple seems to have been the beneficiary in both situations. Of course, it’s not surprising that such situations would come to pass given that APJs are not subject to judicial rules of conduct which would require recusal in cases involving former employers.

The effects of the PTAB on stakeholders in the U.S. patent system have been horrific. Patent owners who have seen their patents declared valid and enforceable in district court have then spent millions defending the validity of those same patents at the PTAB. These trials don’t simply use different standards than district courts on issues like claim construction or standing, they’re also operated without adherence to Congressional statutes laid out in the AIA as has been noted by former Chief Judge Paul Michel. And it’s not just that patent owners are spending millions to defend their patents – billions of dollars’ worth of intellectual property has been invalidated by the PTAB, largely in the service of large infringing corporations.

Visiting the U.S. Capitol this May for the IIPCC conference, I was lucky enough to meet David Ruschke in person for a brief moment. He seemed extremely affable and was very civil despite the fact that, just days prior to that meeting, we had published criticism of his PTAB update he gave to the Patent Public Advisory Committee (PPAC) around that time. But PTAB trials continue to give plenty of reason for critique, such as the stacking of APJ panels to achieve Directory policy positions and decisions to expand those panels being conducted in secret. Small-entity patent owners can only hope that the new Director, Andrei Iancu, can bring some balance to the PTAB when his tenure begins.

Finally, the PTAB’s deleterious effects have been so egregious that, this year, patent owners have tried sovereign immunity defenses at trials to varying degrees of success. This January, an APJ panel sided with the University of Florida Research Foundation when it argued that the Eleventh Amendment gave state university entities the right to avoid such federal trials. Then came the arbitrage deal between pharmaceutical firm Allergan and the St. Regis Mohawk Tribe, a move designed to shield patents covering the Restasis eye treatment while a Hatch-Waxman trial on the same issue was occuring in the Eastern District of Texas. The response to the whole affair, from petitioner Mylan calling the transaction a legal sham to the introduction of a bill into the U.S. Senate to abrogate tribal sovereign immunity to calls from representatives in the House and Senate for a probe into the patent deal, is evidence of not only how serviceable our federal government has been to the efficient infringer lobby but also how threatened those well-vested infringer interests feel at the notion of a successful sovereign immunity defense. Of course, with the PTAB’s December 19th decision to waive sovereign immunity in a case involving the University of Minnesota, a trial featuring an expanded panel including Ruschke, seems to have darkened the prospects for such a defense, but the case would likely make for an interesting appeal to the Federal Circuit and even the Supreme Court.

Apple v. Qualcomm: A Patent Infringement Battle Spanning the Globe

One particular legal battle over patent infringement which has slowly gathered steam starting with the beginning of 2017 is the squabble between Apple and Qualcomm over licensing for patents covering mobile device technology. This January, both Apple and the Federal Trade Commission (FTC) filed lawsuits against Qualcomm alleging that the semiconductor designer was operating licensing activities in violation of its fair, reasonable and non-discriminatory (FRAND) obligations for licensing standard-essential patents (SEPs). Apple’s suit asked for the court to award it $1 billion in damages for payments withheld by Qualcomm under the terms of a previous business arrangement.

Then in April, Qualcomm fired back with a suit alleging that Apple engaged in tortious interference in some rather unseemly ways. Qualcomm’s complaint argued that Apple had both mischaracterized Qualcomm’s business model and had misrepresented the performance of Qualcomm chips to foreign regulators in order to induce fines. This includes a $912 million fine levied against Qualcomm by the Korea Fair Trade Commission, a fine which was upheld by South Korean courts this September. Then in July, Qualcomm filed a Section 337 complaint with the U.S. International Trade Commission (ITC) alleging Apple’s infringement of six non-SEPs owned by Qualcomm; the ITC instituted an investigation on the complaint that same month. In October, Qualcomm filed a patent infringement suit in China’s IP courts against Apple to ban the sale and manufacture of iPhones in that country. Qualcomm asserted three non-SEPs in that case; the assertion of non-SEPs is a tactic Qualcomm is employing to fight the notion proffered by Apple and fair trade regulators that Qualcomm is licensing SEPs in a monopolistic way. And it doesn’t look as though Qualcomm’s licensing demands are overly onerous given that company’s October announcement of a new licensing deal for 3G/4G technologies with Turkish mobile provider General Mobile.

Apple is not alone in its efforts to try and undo Qualcomm’s very successful space in the mobile technology supply chain. This July, Intel filed a public statement with the ITC in its Section 337 investigation against Apple which called Qualcomm “blatant in its anticompetitive aims” in order to “accomplish something quite different from the ordinary vindication of patent rights.” Intel would have every reason to wish harm upon Qualcomm’s market position as an Apple technology supplier as reports indicate that Apple has been considering the use of Intel chipsets in its devices.

The legal battle between Apple and Qualcomm expanded further in late November when both entities filed legal actions in their respective cases against each other, all of which occured in the Southern District of California. In early November, however, an interesting twist to this story became possible with Singapore-based semiconductor firm Broadcom making an unsolicited bid to buy Qualcomm for about $130 billion at the same time that the company announced it would bring its headquarters to the United States. Although it doesn’t appear at this time that Qualcomm will change ownership, if it does, it would be interesting to see how the company handles its legal battle with Apple moving forward.

China: A De Facto Communist Nation takes on the United States on Patent Law

“I’ll now note that I’ve now heard that China is the country that we’re going to base the high mark [laughter] of patent tolerance on.” Those were the words and sheer mirth spoken by efficient infringer ally and patent troll Rep. Darrell Issa (R-CA), chair of the House IP Subcommittee, during a subcommittee hearing on June 13th regarding the Supreme Court’s recent decision in TC Heartland LLC v. Kraft Foods Group Brands LLC. The laughter which Issa worked so hard to choke back came in response to an inconvenient truth presented by George Mason University’s Adam Mossoff: that, in 1,700 cases spanning various industries, there there is inventive subject matter that is patentable in Europe and China but not the U.S.

Issa should work much harder to wrap his head around the implications of the fact that there are nearly 2,000 valuable technologies that can be properly commercialized in China and not the U.S., long considered the bastion of market-based capitalism. Uncertain patentability in the U.S. is a major reason behind the country’s 10th place ranking among national patent systems after having been 1st every year prior to this one. If our federal government doesn’t start coming to terms with the reasons behind that low ranking, China is going to eat our lunch because their leadership is showing remarkable signs of “getting it.”

Across the entire intellectual property space, China is showing signs of being much friendlier to IP owners, especially foreign ones, than it has in years past. This was made clear this July when President Xi Jinping said publicly that “wrongdoing should be punished more severely so that IP infringers will pay a heavy price” at an important Chinese national economic forum. Through last July, foreign plaintiffs at Beijing’s special IP courts won 100 percent of the cases they brought since that court was first established in recent years. This August, New Balance secured the largest trademark infringement damages ever awarded by China and the amount was multiples higher than the statutory maximum. Even Chinese copyright regulators have been telling foreign and domestic firms to adhere to international standards on music licensing to the benefit of copyright owners. A strict adherence to the rights of IP owners has been paying off in the form of more licensing deals, such as the increase of copyright licenses seen at this year’s Beijing International Book Fair.

It’s the patent space, however, where China is making the greatest inroads towards international IP dominance. New patent examination guidelines going into effect in China this year relaxed prior barriers to patent applications for software and business methods, an area where recent U.S. Supreme Court case law has rendered nearly unpatentable here. This July, China’s State Intellectual Property Office (SIPO) issued new regulations to streamline the process of patent applications covering Internet, big data, cloud computing and other valuable technologies. Statistics on global patent application filing levels recently released by the World Intellectual Property Organization (WIPO) shows that not only was 40 percent of the world’s patent applications filed in China during 2016, but that Chinese entities are increasing their foreign patent application filing activities. Effective IP protections are proving to be very valuable to burgeoning tech giants like Huawei, a company which earns about 30 percent of all Chinese patent royalties for its portfolio of mobile phone patents. China’s patent system ranking in the 2017 Chamber of Commerce IP Index was 20th, ten places behind the U.S. When the new index comes out early next year, it shouldn’t be shocking to see that gap close.

Federal Circuit 2017: PTAB Affirmations and Rule 36 Affirmances

The PTAB is not the only judicial forum has been vexing to patent owners this year. The Court of Appeals for the Federal Circuit deserves some very honorable mentions in this regard. At some points during 2017 it almost seemed that both the PTAB and the Federal Circuit work in concert to the detriment of patent owners.

This August, both Intellectual Ventures and Whirlpool saw the Federal Circuit invalidate claims on appeal that had survived challenges at the PTAB. In August, the Federal Circuit decided that a nonprofit third party had standing in an appeal before Article III courts (even though there is no case or controversy) as long as the patent owner is the one appealing a PTAB decision. And also in August, the Federal Circuit even went so far to declare that the U.S. federal government is a “person” who has standing to challenge federally-issued patents at the PTAB.

If the Federal Circuit observed a continuous standard on its review of appeals from the PTAB, that would be one thing. However, a split within the court itself developed this year on the review of certain validity trials, especially covered business method (CBM) reviews which are designed to adjudicate the validity of financial and business method patents. In August, the Federal Circuit affirmed the PTAB’s decision in a CBM review which invalidated claims covering a system of returning undelivered mail. In 2016’s Unwired Planet v. Google, a different Federal Circuit panel noted that “the patent for a novel lightbulb that is found to work particularly well in bank vaults does not become a CBM patent because of its incidental or complementary use in banks.” The fact that a different Federal Circuit panel would look at another CBM appeal and not take issue with the argument that a system of returning undelivered mail was a business method because the patent’s specification noted that the system could potentially be used by insurance companies is enough evidence to suggest that the judges of the Federal Circuit may want to have a discussion among themselves as to what a covered business method even is.

None of this is to say that there haven’t been some bright spots in Federal Circuit decisions issuing this year. An en banc decision by the entire Federal Circuit issued in October’s Aqua Products, Inc. v. Matal confirmed that the burden of proof on claims amended in AIA trials at the PTAB remained with the petitioner, not the patent owner. But these moments have been few and far between. The Federal Circuit has done a lot to restrict venue in district court patent infringement proceedings, striking down a four-factor test for determining venue coming from the Eastern District of Texas and determining that the Supreme Court’s ruling in TC Heartland changed controlling law, giving infringer defendants a new pass at making motions to dismiss for improper venue. (Depending on how the Supreme Court decides in Oil States, it will be interesting to see whether the Federal Circuit would make a similar determination on changes in controlling law if a patent owner were to appeal a PTAB decision, if the PTAB were to be found unconstitutional.)

Finally, the Federal Circuit’s use of Federal Rule of Appellate Procedure 36, which grants the court the ability to render a judgment without an opinion, has been very troublesome in recent months. Rule 36 affirmances have been used to decide nearly half of all patent cases appealed to the Federal Circuit, leaving the appealing parties without any opinion on the merits of the appeal. Despite limitations to Rule 36 affirmances, including the stipulation that such judgments would not have precedential value, those affirmances create precedent when they uphold the invalidation of patent claims. The Federal Circuit even confirmed the precedential nature of such Rule 36 affirmances in an April decision, which found that a previous Rule 36 affirmance had a preclusive effect on a patent infringement case involving different defendants. There are those who have wondered aloud as to why the Federal Circuit doesn’t award attorney’s fees and costs in cases ending with Rule 36 affirmances if the appeal truly was a blatant loss.

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.

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