“While the questions asked by the Senators are very good, they could have, and probably should have, specifically encouraged Director Iancu to do something to adopt the Federal Circuit view of who is a real-party-in-interest.”
Senators Thom Tillis (R-NC) and Chris Coons (D-DE) have written U.S. Patent and Trademark Office (USPTO) Director Andrei Iancu raising a concern about what can really only fairly be characterized as the weaponization of the Patent Trial and Appeal Board (PTAB). Although the USPTO has vehemently disagreed that there is a problem over the years, everyone in the industry familiar with post grant challenges knows there is a very serious problem with serial challenges. Indeed, there appears to be a concerted effort—perhaps even collusion—to challenge the patents of certain patent owners over, and over, and over, and over again.
The Problem is Real
“We continue to hear from patent stakeholders about abuse of the inter partes review process in the form of ‘serial’ petitions,” the Senators wrote. “We have heard from both large companies with tremendous innovation pipelines as well as small companies and patent-intensive startups that they are facing extensive serial attacks on their patent portfolios.”
Despite the USPTO dismissing complaints of serial challenges over the years, we know that they happen. In fact, anyone who is interested can verify the existence of serial challenges by noticing that the same patent owners have their patents challenged over and over again. One of the more egregious cases was the 125 inter partes review (IPR) petitions filed against the patent portfolio owned by Zond over a seven-month period from Feb 2014 to Sept 2014. Per the PTAB statistics, the institution rate for the Zond patents was 88.6%. (1,377 claims challenged, 1,220 instituted.) An 88.6% institution rate is obviously a high number. But look at the same data from Zond’s perspective. Before the America Invents Act, they owned 371 claims. By the end of the 125 IPRs filed against them, they owned 0.0 claims. 0% survival. Every claim Zond had ended up dead. But that can’t be particularly surprising when they had to defend 125 IPR petitions.
Another example of serial challenges relates to Finjan Holdings, Inc (NASDAQ: FNJN). Finjan has been subject to over 100 IPR petitions relating to less than a dozen Finjan patents. In the six dozen or so IPRs that have already concluded, they have lost three patent claims total. The Finjan patent portfolio, one of the most thoroughly litigated patent portfolios of all time, has claims that have been found valid and infringed in federal courts, have claims that have been identified by the Federal Circuit as pioneering, and are almost universally withstanding one of the most comprehensive harassment campaigns the PTAB has ever seen. Of course, that does not seem to influence the likelihood that the next IPR petition will be instituted.
When Will the Persecution End?
Senators Tillis and Coons seem to essentially want an answer to this question, and have asked Director Iancu to answer five specific questions. One point blank asks whether he will adopt a presumption that once the PTAB has refused to institute on a particular patent it will not institute a challenge on that patent absent compelling circumstances. Other questions ask whether he will consider affiliates of a prior petition to be the same petitioner, and whether a sworn affidavit will be required to identify all parties a petitioning entity has collaborated with—both directly and indirectly—regarding an IPR filing. The Senators also want to know whether Director Iancu intends to make Valve Corp. v. Electronic Scripting Products, Inc., IPR2019-00062 (PTAB Apr. 2, 2019) precedential. Valve Corp. held that “serial and repetitive attacks”, even by different petitioners weigh against institution.
While the questions asked by the Senators are very good, they could have, and probably should have, specifically encouraged Director Iancu to do something to adopt the Federal Circuit view (which is supposed to be binding on the PTAB anyway) of who is a real-party-in-interest, as defined in Applications in Internet Time, LLC v. RPX Corp., 897 F.3d 1336 (Fed. Cir. 2018). It was an embarrassment that the PTAB ruled that Alphabet was not a real-party-in-interest with Google, which, while all too predictable from the PTAB, is still nonetheless tragically comical. While on the surface this is not a serial IPR issue, once the layers of the onion are peeled and those who are funding challenges by third-party providers are known, it may well be that the benefactors of these third-party providers have been behaving in ways the law prohibits. Of course, it is impossible to know, which is precisely why the REAL party is supposed to be identified.
More Arrows In the Quiver
What Director Iancu has done in little more than one year on the job is remarkable. Still, there is much left. He has only scratched the surface with respect to what it is that he has the authority to do, particularly given the establishment of a Precedential Opinion Panel (POP), which has the authority to review PTAB decisions and make them precedential and binding on the entirety of the PTAB.
While the USPTO believes serial challenges are not a real concern, the only reason they have been able to reach such a clearly erroneous conclusion is by ignoring the fact that the overwhelming majority of patents challenged to date have fallen. Either the claims have been lost or patent owners have capitulated and settled by giving challengers no-cost licenses. When a challenger prevails so frequently on the first petition, there has been limited need to resort to second, third, fourth, or even eighth, ninth or tenth petitions –or in the case of Zond and Finjan, many dozens more. But for those patent owners that have been subject to repeated challenges, serial challenges are a very real and extraordinarily harassing problem from which there appears to be no remedy. These patent owners are helpless.
Director Iancu and the USPTO should not convince themselves that serial challenges are not a significant problem because they only happen to a handful of patent owners. Many of these patent owners, like Finjan for example, now have thoroughly vetted patent portfolios, yet the challenges never stop. What message does that send to those with lesser resources? Any patent that is commercially relevant can and will be challenged, and courtesy of a coordinated effort, the patent owner will be mercilessly harassed until they capitulate, find a panel that finally agrees with the challenger, or they run out of money and go bankrupt. Is that really the American Dream? Is that really what the American patent system is supposed to foster and encourage? The harassment of innovators until they capitulate or go bankrupt?
There are many arrows left in the quiver worn by Director Iancu. Hopefully prodding by the leaders of the Senate IP Committee, and the political cover they can no doubt provide, will lead to swift action on these and perhaps other action items.