No Justice for Small Company Innovators: Make Your Voice Heard on the America Invents Act, IPRs, and the CAFC’s Rule 36

By Robert Friedman
December 3, 2019

“There have always been reports of large corporations stealing inventions from small businesses, but it used to be possible via the courts to vindicate the patent rights of owners and obtain ultimate redress.  The AIA has turned into a weapon of deep-pocketed big businesses that enables them to steal with impunity inventions from small businesses and independent inventors.”

https://depositphotos.com/61369901/stock-photo-perspective-word-on-a-puzzle.htmlMy company, Chestnut Hill Sound Inc. (ChillSound), has been victimized by a U.S. patent system that for nearly a decade has been in a sorry state. Changes wrought by the America Invents Act (AIA) in 2011 and other recent developments cost my company, its investors and inventors millions of dollars. These changes have allowed a large company to reap great profits at our expense. Even more unfortunately, our story is too typical of many other inventors and small companies.

Small businesses are the backbone of our economy and need to be cultivated, as they are the most dynamic source of new jobs and competitive products and technologies. There have always been reports of large corporations stealing inventions from small businesses, but it used to be possible via the courts to vindicate the patent rights of owners and obtain ultimate redress.  The AIA—sold by the “efficient infringers” lobby as a measure to protect big business from the expense and nuisance of so-called “patent trolls”—has turned into a weapon of deep-pocketed big businesses that enables them to steal with impunity inventions from small businesses and independent inventors.

The AIA brought with it the Patent Trial and Appeal Board (PTAB) and Inter Partes Review (IPRs), a post-grant adversarial proceeding at the United States Patent and Trademark Office (USPTO). As has been amply discussed here on IPWatchdog, the Court of Appeals for the Federal Circuit (CAFC) recently opined that the so-called Administrative Patent Judges (APJs) were unconstitutionally appointed from the beginning. Yet these unconstitutionally appointed APJs continue to kill patents, especially when the patent owner is a small company that has sued a large company for infringement, as was the case with ChillSound.

The USPTO now issues patents following a fairly rigorous examination system. But—and this is a big “but”–at the request of infringers the USPTO turns around and cancels 80% of those patents challenged at the USPTO that are the basis for infringement litigation, thereby depriving the inventors and small businesses that own these patents-in-suit of even getting a chance to prove the merit of their infringement contentions in a district court.

Worse, when appeals from PTAB IPR decisions that were adverse to patent owners reach the Federal Circuit, patent owners are more than three times as likely to receive a one-word opinion, “Affirmed” than do petitioners who are typically those sued for patent infringement by patent owners. ChillSound has therefore filed a Petition for a Writ of Certiorari with the U.S. Supreme Court , which can be found here.

Some highlights from our petition follow:

Friedman article Chestnut Hill

These statistics come from Larry Sandell’s article, What Statistical Analysis Reveals About Winning IPR Appeals, in LAW 360 (August 8, 2019). A footnote in our petition explains that the likelihood of patent owner-appellants receiving a Rule 36 affirmance is actually closer to 3.6 than 3. “Since a losing Patent Owner- Appellant has a 66% chance of receiving a Rule 36 opinion, and a losing Petitioner- Appellant has an 18% chance of receiving a Rule 36 opinion, a Patent Owner- Appellant is 3.6 times as likely to receive a one- word affirmation than a Petitioner- Appellant,” says the petition.

There is also some evidence that the numbers above may be somewhat conservative. A narrower survey that we conducted between January 2019 and September 2019 “found that on a patent by patent analysis of appeals from the PTAB (versus the case by case basis in Sandell’s analysis), about 90% of all patents which were disposed of through Rule 36 were from appeals by Patent Owner. Only 10% of the patents disposed of by Rule 36 opinions were from appeals brought by Petitioners.”

Regardless of the precise numbers, this great disparity in reasoned opinions clearly implicates equal protection and due process clauses of our Constitution. Our petition states:

Under the Equal Protection and Due Process Clauses, a parity of procedural outcomes extends to all similarly situated litigants, and patent appellants should not be treated disparately based on whether they are Patent Owners-Appellants or Petitioner-Appellants. U.S. Const. amend. V, and amend. XIV, § 1. The Court is bound to offer appellants the same procedure, even if appellants are not guaranteed any particular substantive result. This result affects not merely the Patent Owner-Appellant by guaranteeing equal opportunities to make economic and legal decisions, but also guarantees the Public’s faith in the judiciary and the Rule of Law.

While we concede that the distribution of reasoned opinions versus Rule 36 judgments may not always be exactly equal, “there must be some parity.” The petition adds that both sides should get the benefit of well-reasoned opinions at a comparable percentage/ frequency.

Among its remaining points, the petition argues that “judicial economy does not trump the fundamental rights of Patent Owner-Appellants to well-reasoned opinions under the Petition Clause;” “Rule 36 opinions economically and legally harm Patent Owner-Appellants, leaving them at a disadvantage relative to Petitioner-Appellants;” “Non-Precedential decisions often lead to precedential decisions, to the detriment of all;” Rule 36 opinions hinder the passage of valuable legislation;” and that “Rule 36 opinions are harmful to the Rule of Law that underpins our society.”

Although time is short, we have been seeking amici briefs, which are due by Friday December 6, in support of our petition for certiorari.

Image Source: Deposit Photos
Image ID: 61369901
Copyright: iqoncept 

 

The Author

Robert Friedman

Robert Friedman is Chairman/CEO of Chestnut Hill Sound, Inc, a consumer electronics company.

For more information, please visit Rob's Firm Profile Page.

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 4 Comments comments. Join the discussion.

  1. Concerned December 3, 2019 5:15 pm

    Ironically many of these large companies were started by one or two people prior to AIA.

    Now those large companies get to play the other side of the fence post AIA to protect market share.

    Good luck in your efforts!

  2. Paul Johnson December 4, 2019 8:50 am

    And you wonder why rich people love socialism.

  3. Benny December 4, 2019 12:06 pm

    “now issues patents following a fairly rigorous examination system”
    And which patent system might that be? Certainly not the USPTO.

  4. Concerned December 4, 2019 5:00 pm

    Benny:

    And the USPTO does not follow the law either. To me it looks like reject the application post Alice at all costs.

    You pointed out on another thread by stating that you agree with their rejection on my application even though the rejection did not follow US patent law.

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