‘It Is a Mess’: Recapping the U.S. Patent System’s Race Toward Uncertainty

Following are remarks delivered by Gene Quinn during the ITech Law 2019 European Conference in Dublin, Ireland. The three-day conference included discussion of various technology and legal issues ranging from how technology is disrupting the legal world to privacy and data matters and blockchain enabled innovation and fintech.

Gene Quinn speaking at the ITech Law 2019 European Conference.

What I tried to do for this presentation is figure out in about seven or eight minutes how I could convey to you what’s really going on in the United States. Because, frankly, it is a mess. The patent system in the United States, for those of you who are unfamiliar, is extraordinarily weakened from where it was 12 years ago. Getting an injunction in the United States is simply not possible anymore in litigation, except for in the most extreme situations.

Over the last 12 years, the U.S. patent system largely has become a compulsory licensing system, and increasingly so. This obviously has ramifications for all patent owners. And during this time period, Congress also passed the America Invents Act, which created what’s known as the Patent Trial and Appeal Board (PTAB), which has made it more easy to invalidate patents in the United States. As it turns out, 90% of patents that actually get to a final decision at the PTAB are found to have a mistake.

The Disconnect

So, we have a patent office that says the patent examiners get it right more than 96% of the time, and a PTAB, when they actually review the patents finally, that finds errors in 90% of those patents. That’s obviously a disconnect, so there is a mess on that side. Also along the way, the Supreme Court has been changing the laws with respect to what is fundamentally patent eligible in the United States, affecting software and a lot of biotechnology.

As a result, the U.S. patent system has become extraordinarily weaker than what you have over here in Europe. Even, I would say, weaker than the system that is developing in China. So, it is against this backdrop that we see that a lot of things are being affected in the standard essential patent (SEP) world.

The Innovator-Implementer Dynamic

There are two different philosophies that have always existed in the patent world. One is the belief that you don’t really need patents, patents are unnecessary and innovation will happen anyway. The other says, “we need patents, because if we can’t have patents, we don’t have rights. And if we don’t have rights, we can’t monetize them. And if we can’t monetize them, what’s the point in innovating, because we can’t make money doing it?” Because innovators— pure innovators—don’t make anything, they innovate purely and then they license to others who control the channels of distribution and marketing.

And that’s largely what we see in the SEP world today. We have the innovators who innovate— the scientists and engineers. And then they pass it along to the implementers, who bring it to the consumers. And that whole process and ecosystem has to work. Unfortunately, in the United States, it doesn’t work. I think that that’s why, from the U.S. perspective, we talk an awful lot about the Unwired Planet v. Huawei case. That is a very pro-patent owner case, because at least you have a judge and courts here in the UK, across the Irish sea, that are willing to do something. That, from our perspective, is important. And that’s why I think you’re starting to see the UK courts becoming a more important forum. If that case stands, it’s only going to become a more and more and more important forum, in the SEP world, certainly, but maybe in patent litigation overall.

Cases to Watch

FTC v. Qualcomm is a big case in the Northern District of California where Judge Lucy Koh ordered that Qualcomm was engaged in unlawful licensing practices by not offering competitors fair, reasonable and non-discriminatory (FRAND) licensing terms. Now this is the first case, at least in the United States, that ordered an innovator to grant a FRAND license to a competitor. So, this is going to be overturned. It has to be overturned. It is contrary to U.S. antitrust policy and U.S. antitrust law.

The Federal Trade Commission (FTC) brought FTC v. Qualcomm several days before President Obama left office. And then one of the new members of the FTC had to recuse himself and it was a 2-2 vote when President Trump took over, so the case continued. Now the Department of Justice (DOJ) has filed a brief taking the position that the judge got it wrong. And the Department of Energy (DOE) also filed a brief saying the judge got it wrong. A whole host of other luminaries—former judges and antitrust scholars—did the same. The U.S. Court of Appeals for the Ninth Circuit is a rather liberal court, although it’s getting more conservative over the last several years with new appointees. But they are not known to dip their toe in and overturn these types of things. They have ordered a stay in this case, which was not expected by anyone really, at least initially, until the DOJ and the DOE intervened, because now you have agencies against agencies. And that seems to be a telltale sign that the panel seems to be favoring the DOJ approach and is likely to overturn this case.

The next case just came out on October 21 and is not yet public, really. The only thing that’s public so far is a one page, double-spaced Final Initial Determination. Now, those of you who are not familiar with how the U.S. International Trade Commission (ITC) works, an administrative law judge (ALJ) will sift through tens of thousands, sometimes hundreds of thousands of documents, and they will eventually come out with a decision that is several hundred pages long including findings of fact and conclusions of law. But what they come out with first, once the decision is made, is one page saying, this is what I decided, and this is what I am going to decide. That is what’s come out publicly. Any day now, probably next week sometime, we will get the 200-page decision, which will be redacted as requested by the parties to preserve confidential information.

What we do know in that case is that U.S. Patent No. 9606907, has been infringed and SK hynix Inc. is going to be excluded by the ITC, meaning that the products covered by the patent will not be allowed to enter into the United States for infringing claims of the ‘907 patent. That’s relevant because it’s an SEP. This is only the second time that the ITC has granted an exclusion order dealing with an SEP. The only other time this happened was six years ago. So, these are extraordinarily rare.

Looking to Europe for Stability

This gives you some perspective of what’s going on in the United States—you have the FTC off in one direction, you have the DOJ in another direction. The ITC, meanwhile, has signaled potential willingness in certain circumstances to issue an exclusion order. Now the ITC is becoming a much bigger forum—it has always been a big part, but it’s a much bigger part of patent litigation in America now because you can get an exclusion order, which is essentially an injunction. Due to procedural machinations I don’t need to go into, the ITC does not have to adhere legally to the same rule that makes getting an injunction in federal district court impossible.

With all of these different people and agencies and courts going in different directions in the United States, we’re looking to all of you in the UK and in Germany to hopefully provide certainty. In the United States, there is no certainty, which continues to make it very difficult for businesses.