PTAB challenges are a costly, uphill battle for patent owners

On April 5, 2018, IPWatchdog published (with permission) my article Follow the Money, which was an essay I wrote and distributed to my own e-mail distribution list on April 4, 2018. This essay generated considerable attention. Many emailed support of my analysis, including a famous patent judge, who said “you nailed it.” Not surprisingly, others disputed the analysis, including Shawn Ambwani, co-founder and COO of Unified Patents.

On April 9, 2018, in a LinkedIn post Ambwani wrote:

If you are going to throw shade on the PTAB, get the facts right. Rob Sterne is a very successful and accomplished lawyer who I respect as the builder of Sterne, Kessler, Goldstein & Fox.  He recently posted an article in IPWatchdog, Inc which discusses the PTAB.  He made a number of statements which were “fair and balanced” :), but one which was factually incorrect was his statement that – “In most court suits, PTAB challenges are made by the accused infringer, especially in the cases where the patent infringement involves significant financial risk.” https://lnkd.in/eXpabS7

Unfortunately, there is no evidence or source for this statement.  Unified Patents analysis of the overlap shows more than 80% of patents in the PTAB has a co-pending litigation when filed.  The reverse shows less than 15% of the litigated patents has a PTAB petition filed against it.  To say “most court suits” is not based on any objective report that I am aware of.  Nor the “significant financial risk” modifier.  That is simply rhetoric to push a point of view without any source.

I respect the PTAB has effected his firm’s profitability, though Sterne continues to be one of the largest practitioners at the PTAB and has had a reasonable success rate on our ISIX score. https://lnkd.in/egiNh-r

Shawn’s assertion is centered on my sentence, “In most court suits, PTAB challenges are made by the accused infringer, especially in the cases where the patent infringement involves significant financial risk.” My point is critical to the PTAB’s impact and warrants reply on substantive grounds. As you will see, I stand by it, and here’s why.

First, Shawn states I lack the stats to support my statement and cites to Unified Patents’ stats – “The reverse shows less than 15% of the litigated patents has a PTAB petition filed against it.” This legal mud fight reminds me of Mark Twain’s famous adage: “lies, damned lies, and statistics.”

I well know what goes on at the PTAB. My law firm is one of the largest IP boutiques in the United States, have handled the second largest number of contested proceedings at the PTAB (according to Docket Navigator), I was/am personally counsel in 171 contested proceedings, and me and my team literally wrote the book – Patent Office Litigation 2^nd Edition. I know what is going on behind the closed doors of patent owners and petitioners alike, and the strategy and tactics used to drive desired outcomes. I know all of the PTAB stats bantered around and know their correctness and flaws. I approach the PTAB not just as a lawyer, but as an experienced businessman advising other business owners. All of my experiences with the PTAB are the reasons why I can say with great authority — what Ambwani says is at odds with what happens in the real world.

Second, Ambwani states that “less than 15% of the litigated patents has a PTAB petition filed against it.” Assuming his 15% number is true (who knows), it presents an incomplete, and frankly grossly misleading, statistic that begs the question of what is the impact of these proceedings on disputes involving U.S. patents.

PTAB challenges are very expensive, often topping 1M+ USD through Federal Circuit appeal. They add 2-4 years to most district court suits. Proceedings can be remanded to the PTAB by the Federal Circuit, causing additional delay. District courts often stay the lawsuit pending completion of the PTAB proceeding. The patent owner faces – even according to petitioner-biased statistics – roughly a 50% chance of success for a given claim and must win at every stage through appeal. But once the patent is found invalid in any PTAB proceeding, it is invalid forever. While a proceeding can be settled, the administrative record is not expunged, providing the public with a road map of the challenge while potentially creating a cloud over the patent.

Multiple proceedings can be filed against the patent by a petitioner. In addition, any third party can file a petition without a jurisdictional requirement. Serial filings by one petitioner and/or parallel filings by multiple petitioners are not uncommon, particularly involving a financially significant patent or a patent being asserted against more than one accused infringer. Joint defense groups are often formed in the later circumstance to coordinate the PTAB strategy against the common patent.

Against this backdrop, companies like Unified Patents were formed to aggregate the PTAB opportunity and threat of accused infringers. For a subscription fee, these enterprises launch PTAB proceedings against many asserted patents, particularly where the patent is being asserted against more than one accused infringer. These PTAB aggregators offer several benefits to accused infringers, including reduced PTAB cost, no estoppels, and the ability to circumvent the one-year challenge requirement. They act as a surrogate for the accused infringer, who never files a PTAB challenge.

All of this is known by experienced PTAB attorneys and their clients. Often, a PTAB proceeding is threatened by an accused infringer to successfully settle the dispute with the patent owner. Often, no PTAB petition is ever filed. When the patent is asserted in two or more district court suits, often only one PTAB proceeding is filed. Many valuable and infringed patents are not asserted because of the threat of PTAB challenge. Everyone knows the extreme threat of a PTAB challenge and the costly, time-consuming, uphill battle to win faced by the patent owner.

Thus, Ambwani’s 15% number is at odds with what happens in the real world of U.S. patent enforcement, monetization, and licensing. Perhaps he is playing word games with his caveat of “litigated patents” to exclude all these strategies and tactics that predominate the PTAB ecosystem. It reminds one of a carefully crafted sound bite where the word “litigated” excludes most of the circumstances where the PTAB threat drives the result of the patent assertion.