USIJ Responds to Remarks Made by Senator Leahy on World IP Day Regarding Prior USPTO Administration

“USIJ members, as with nearly every user of our country’s patent system, have no interest in seeing abuse of the U.S. patent system through efforts to extort settlements based on patents that clearly are invalid… but we are equally concerned that access to the patent system itself has become overly hazardous and prohibitively expensive.”

https://depositphotos.com/159215852/stock-photo-time-to-respond-clock.htmlIn celebration of last month’s World IP Day, Senate Judiciary Committee Intellectual Property Subcommittee Chairman Patrick Leahy expressed his support for a determined effort to encourage more individuals and small companies across this country to invent new technologies and products. He also noted the need for the U.S. patent system to incentivize this effort. The Alliance of U.S. Startups and Inventors for Jobs (USIJ) strongly supports Chairman Leahy’s important objective of empowering startups and inventors, and we frankly think it has been underappreciated for many years.

From the very inception of our country, an important feature differentiating the patent system created by the U.S. Constitution from the those of England and other European countries was precisely the objective Chairman Leahy raised – to make it possible for ordinary citizens to invent things and to protect their inventions with patents obtainable without large outlays of cash for fees and lawyer’s charges, or large manufacturing plants, that only the wealthy in Europe could afford. Those patents, in turn, allowed U.S. inventors to develop new ideas that could be turned into products by raising capital or by licensing their inventions to larger companies that had greater resources for manufacturing and distribution. This ability to disclose and license new inventions to larger companies without fear of misappropriation is a critically important incentive for small companies, entrepreneurs, inventors and their investors, and has served us well for 230 years. Some of the most iconic names in U.S. history include individual inventors who made breakthrough discoveries and turned them into products that have enriched the lives of Americans for nearly two centuries. We applaud Senator Leahy’s attention to this group and would like very much to work with him and his Subcommittee to promote governmental actions that will implement and enhance the foregoing objective.

Choosing the Next USPTO Director

Senator Leahy also expressed the importance, in connection with the Administration’s upcoming selection of a new Director for the U.S. Patent and Trademark Office (USPTO), of the need to “choose a nominee that shares a commitment to increasing access,” noting further that “It is not just the huge companies that need it; it is the small inventors.” USIJ applauds that recognition as well. The USPTO Director wears many hats, all of which are important, and it is an extremely complex and important role. USIJ recently sent a letter to President Biden and Vice President Harris outlining what we regard as essential qualifications for any nominee for that position. We believe the Director must have a genuine commitment to: (i) the core principle that IP is the essential driving force for the U.S. economy, (ii) delivering high quality patents and supporting their predictable enforcement, (iii) encouraging and promoting the success of startups and smaller companies, and (iv) building a more diverse invention community. It should go without saying that the Director also should be an exceptional, experienced and respected intellectual property attorney who can serve as the voice of IP protection as it is needed throughout the U.S. government. The Director must also be fully conversant with the interplay between the U.S. judicial system and the litigation related activities of the USPTO. Finally, the Director should be someone who will command respect in international discussions on complex matters that often involve aggressive competitors. The USIJ letter is available here.

Andrei Iancu’s Example Should be Followed

However, we are concerned with one point raised by Senator Leahy without providing much detail – that the prior Administration took “steps to undermine the Leahy-Smith Act.” It is our view, and one shared by scores of startups, entrepreneurs and venture investors, as well as many large companies working in complex, R&D-intensive technologies, that over the past three years the USPTO has done a great deal to rebalance policies that had previously been heavily skewed to favor large incumbent technology companies that want the freedom to attack new market entrants by advocating for much weaker enforcement of American IP. The steps taken by former Director Andrei Iancu to address this imbalance, in our opinion, have brought the policies and procedures of the USPTO more closely in line with the language and intent of the Leahy-Smith America Invents Act. His actions have begun to address some notable abuses that have allowed large companies to harass inventors and small companies by attacking not just “bad patents” but the very best and strongest patents as well.

Exemplary of this type of abuse of the inter partes review (IPR) process was the practice employed by several very large infringers to bring multiple challenges against the same patent, a practice clearly not contemplated by Congress or permitted by the AIA. A 2018 study by USIJ titled, “How ‘One Bite at the Apple’ Became Serial Attacks Against High Quality Patents at the PTAB,” shows that large electronics companies – e.g., Apple, Samsung, Google, Microsoft, LG Electronics and a number of others – were among the worst offenders, with Apple filing multiple petitions against the same claim more that 50% of the time and the others also filing sometimes as many as 5 or 6 petitions against the same patent. Such practices were never sanctioned by the AIA. The House Report in the Congressional record makes this intent clear:

The Committee recognizes the importance of quiet title to patent owners to ensure continued investment resources. …  [T]he changes made by [the AIA] are not to be used as tools for harassment or a means to prevent market entry through repeated litigation and administrative attacks on the validity of a patent. Doing so would frustrate the purpose of the section as providing quick and cost effective alternatives to litigation. H.R. Rep. No. 112-98, at 48 (2011).

Prior to former Director Iancu’s taking the reins, that congressional objective was ignored by the PTAB. In some cases, the PTAB had held patents to be invalid even after the very same claims of a patent had been upheld against nearly identical challenges by the same company in district court litigation, and in a few instances, even after the Federal Circuit had upheld similar rulings of a district judge. In some cases, challenging or the mere threat of challenging a small company’s patents, even ones that were not being asserted, allowed incumbents to obtain grossly unfair settlements through infringement. See, e.g. “Weaponizing IPRs,” by Steven C. Carlson of the Robin Kaplan firm. These were the types of abusive situations in which the USPTO now properly declines to institute an IPR proceeding, leaving the petitioner to its right to challenge the patent in court. It is difficult to see how a patent that has withstood one or more challenges by a petitioner or a defendant in district court can – with a straight face – still be referred to as a “bad patent.”

The ‘Poor Quality Patents’ Debate

Senator Leahy stated his view that “it is important to weed out poor quality patents.” But this is not a license for multiple, repeat attacks on the same patent. Indeed, if a district court rules on the validity of a patent before the PTAB does so, there is no reason for the PTAB to proceed. Specifically, if the court rules the patent to be invalid, then the patent is cancelled and there is nothing left for the PTAB to “weed out.” On the other hand, if the court rules the patent not shown to be invalid, then this cannot be a “poor quality patent.” Whatever the definition of “poor quality” may be, it cannot be a patent that an independent Article III court reviewed and deemed not to be poor.

Senator Leahy also stated that the prior administration “acted outside [the AIA’s] statutory bounds,” presumably in denying the institution of petitions that result in repeated attacks on the same patent.  But the AIA expressly grants to the Director discretion on institution. The statute makes clear that institution is permissive, not mandatory. See, e.g., 35 U.S.C. 314(a) (“The Director may not authorize an inter partes review to be instituted unless . . .”) (emphasis added). This is not a mandate to institute an IPR, it is instead a prohibition against instituting unless the Director finds certain facts to exist. The Supreme Court has squarely ruled that “the agency’s decision to deny a petition is a matter committed to the Patent Office’s discretion,” and that there is “no mandate to institute review.” Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2140 (2016). And the Court of Appeals for the Federal Circuit recently stated in a precedential decision that “[t]he Director is permitted, but never compelled, to institute an IPR. And no petitioner has a right to such institution.” Mylan Labs, Ltd. v. Janssen Pharmaceutica, N.V., Docket No. 21-1071, Document #32, page 11, Order filed 3/12/2021. The Federal Circuit also noted recently that the petitioner “clearly has a readily available alternative legal channel [in district court] to raise its arguments concerning the validity of the asserted patents. While [the petitioner] prefers to raise those arguments before the [PTAB], it has no clear and indisputable right to do so.” Cisco Systems, Inc. v. Ramot at Tel Aviv University Ltd, Doc. No. 2020-148 (Fed. Cir. 2020).

All legislators that submitted formal comments to the USPTO on this issue likewise agree that the USPTO acts within statutory bounds when it denies institution of petitions in multiple attacks on a patent.  Senators Hirono and Coons, on December 3, 2020, authored a letter to Director Iancu confirming that “[b]y limiting serial and parallel petitions on the same patent claims and by denying petitions likely to extend rather than streamline litigation, the USPTO has respected Congress’s intent to provide a fair and efficient alternative to expensive district court litigation.” And Senator Tillis stated in a letter to Director Iancu on November 19, 2020, that “I fully believe you are within your statutory authority under the Leahy-Smith America Invents Act to make these changes and improvements to the PTAB process ….”

Rebalancing to Reverse an Unfortunate Trend

USIJ members, as with nearly every user of our country’s patent system, have no interest in seeing abuse of the U.S. patent system through efforts to extort settlements based on patents that clearly are invalid – so called “poor quality patents” – but we are equally concerned that access to the patent system itself has become overly hazardous and prohibitively expensive, both at the application and prosecution stage, and equally important at the stage when enforcement may become necessary. AIA proceedings must be properly balanced. Multiple proceedings are simply not necessary to remove “poor quality patents,” and they in fact violate the balance intended by the AIA.

As things stand right now, a declining number of investors and entrepreneurs are willing to make significant investments of time and resources to explore many of the most important and challenging technologies based on the likelihood that patents on their inventions will not protect them against infringement. USIJ will be pleased to work with Senator Leahy and the subcommittee staff to try to achieve proper outcomes on these issues and reverse this unfortunate trend.

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The Author

Robert Taylor

Robert Taylor is the founder and owner of RPT Legal Strategies PC in San Francisco and Palo Alto, providing legal and business advice to companies and investors with respect to all aspects of intellectual property, competition law and related fields of endeavor.
For more than 40 years, Bob has focused primarily on intellectual property litigation, serving as lead trial counsel and/or appellate counsel in dozens of patent, copyright, trade secret and antitrust cases involving a wide range of technologies and industries. He is a Fellow of the American College of Trial Lawyers and a Lifetime Member of the American Law Institute.
Bob has written and lectured extensively on the business and legal problems associated with both intellectual property protection and the laws related to competition. He served for several years as the co-chair of the Antitrust Committee of Intellectual Property Owners Association and also as a Member of IPO’s Amicus Committee. Bob served as a member of the 1992 Commission on Patent Law Reform. He is a former chair of the Antitrust Section of American Bar Association and a long-time member of the Institute of Electrical and Electronics Engineers. He is one of the founding board members for the U.S. Intellectual Property Alliance and is member of the Advisory Board to the Alliance of U.S. Startups and Inventors for Jobs.

Robert Taylor

Chris Israel is a partner at American Continental Group, one of Washington’s top government affairs and strategic consulting firms. Chris is an accomplished public and private sector executive with senior-level appointments by the President of the United States, service on Capitol Hill and a senior-level experience within a Fortune 50 company.A frequent speaker on IP and innovation issues, Chris was named one of the 50 most influential people in IP by Managing IP Magazinein 2006. He was also the first U.S. Coordinator for International Intellectual Property Enforcement, appointed to the position in July 2005 by President Bush.

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 as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 15 Comments comments. Join the discussion.

  1. mike May 17, 2021 7:22 pm

    Fantastic article and analysis of the AIA’s original intent. Senator Leahy should be in support of Iancu’s attempt to balance the system, which was in accordance with the intent of the AIA, as this article clearly exposes. Unless Leahy doesn’t support what he previously supported anymore.

  2. Anon May 17, 2021 7:43 pm

    You have a major flaw in your “one shot” argument.

    There is a reason why the courts never declared that a patent was “VALID,” but instead employed the (purposeful) double negative of “not invalid.”

    The Ends do not justify the Means.

    No matter whose Ends.
    No matter how much one might desire those Ends.

  3. Paul Cole May 18, 2021 11:18 am

    In the UK, Section 65 of the Patents Act, 1977 provides for a certificate of contested validity, the effect of which is that a subsequent unsuccessful challenger is obliged to pay the whole costs of the patentee for the unsuccessful challenge on a solicitor and own client (indemnity) basis.

    Introduction of something along these lines into US law might have a beneficial effect.

  4. George May 18, 2021 2:35 pm

    “. . . but we are equally concerned that access to the patent system itself has become overly hazardous and prohibitively expensive.”

    Humans (especially lawyers) can’t and/or WON’T solve this problem! Time to bring in the computers and AI!

    Yes Google, IBM, and others – you’re on the right track! There’s a whole new market out there for you – another multi-billion dollar market. We’re optimistic and we’ll be investing in all of it (and possibly contributing too).

  5. George May 18, 2021 2:39 pm

    The AIA is a disaster (especially when it comes to the PTAB, ‘interference’ protections and IP theft). It needs to be repealed and Congress needs to start all over again (this time with 21st century proposals).

  6. Jacek May 18, 2021 2:41 pm

    What are you going to do with “eBay” and illegal “Judicial exemptions?
    What will we do about Supreme court judges “bench legislating” our property rights and patent system into oblivion?

  7. Max Drei May 18, 2021 4:20 pm

    Looking on from Europe, one is struck by the problem under the AIA of multiple sequential assaults on the patent post-issue, at the USPTO. Why doesn’t it also occur in Europe?

    As Paul Cole observes, there are sanctions, at least in the UK.

    But another reason might be that in Europe, the more failed assaults, the greater is the presumption of validity. I’m known as one who thinks the C+C standard applied to patents issuing from the USPTO is counter-productive to the orderly functioning of a well-planned patent system. But what if a failed assault raises the presumption from the ordinary civil litigation standard to a higher one, such as C+C? Might those rushing to assault duly issued patents then think twice about the advisability of such a course of action?

  8. Randy Landreneau May 18, 2021 5:13 pm

    Surely Senator Leahy didn’t intend for the PTAB to be used to crush independent inventors. Surely Senator Leahy didn’t intend for the majority of independent inventors to lose access to justice due to the disappearance of contingency representation because of the current long-shot of getting to an actual court with an intact patent after multiple PTAB attacks, and then there, the low probability of having enough of a case to overcome the extra time and money already spent before the unlikely court appearance. Surely Senator Leahy is upset about the severe unintended consequences that have resulted from the PTAB. Surely Senator Leahy will welcome an effort to restore the rights of inventors.

  9. Anon May 18, 2021 6:45 pm

    Randy,

    Surely you jest.

    (And stop calling him Shirley)

  10. Randy Landreneau May 19, 2021 9:56 am

    Max Drei – The real reason you don’t have “multiple sequential assaults” in Europe is that multi-national corporations don’t have as much control over lawmaking in Europe, yet.

  11. PTO-indentured May 19, 2021 11:51 am

    So to show how this year’s ‘World IP Day’ should be fittingly honored and celebrated — we got this words from our head of the Intellectual Property Subcommittee (who):

    ‘expressed’ his support for a determined effort ‘to encourage’ more individuals and small companies across this country ‘to invent’ new technologies and products. — (more likely than not to ensnare them) in a system he knows is afflicted by court decisions, congressional inaction and an AIA cancer that renders ‘inventions’ of such “individuals and small companies” knowingly powerless.

    To all but the most naive: patenting in the US patent system for “individuals and small companies” is a pay-to-play shell game where 99 times out of hundred there’s not even a pea — for one’s PTO-issued patent. Read: if you’ve got a ‘small entity’ PTO-issued patent — it will get hammered. We’ve been informed this is because “powerful forces” want it this way, and that, AIA and its PTAB was known to have gone awry ten yours ago: where patentees not getting fair treatment was “horribly clear”.

    Senator Leahy: For World IP Day we would like to express — as “individuals and small companies” — that congress, led by his resolute support and example, demonstrate a determined effort now that can rightly be viewed as a real-world encouragement> “to more individuals and small companies across this country ‘to invent’ new technologies and products” where their U.S. patents are clearly made equitably defensible, not only once again, but in short order.

    Please, no more responses that begin and end with words.

  12. MaxDrei May 19, 2021 1:06 pm

    Randy, we do have in Europe multiple sequential assaults. But only in rarely occurring adversarial situations. And there, they are proportionate and appropriate.

    One example: at the EPO there was a stent case, in which Applicant filed a precautionary divisional, then took the case to issue, then got opposed. On each divisional, Applicant did the same thing. After about six iterations of this, with each successive issue being revoked by the EPO, the infringement court (in The Netherlands) refused to entertain yet another infringement suit until the patent owner came to the court with a patent that had survived the entire opposition process at the EPO.

    Don’t underestimate the lobbying power of the big corporations in Berlin and Brussels. Does the name Volkswagen ring any bells?

  13. Anon May 20, 2021 10:54 am

    World IP day, and even though the current administration set a record of Executive Orders that likely will never be broken, we all still await a new Director of the USPTO.

    Is this but a reflection of a person that has a long history of plagiarism (lack of respect for the work of others)….?

    https://www.dailymail.co.uk/news/article-9598795/amp/Presidents-Coast-Guard-joke-left-dull-class-groaning-cracked-REAGAN-1988.html

  14. Model 101 May 20, 2021 12:39 pm

    To Senator Leahy… reform 191 retroactively.. Everything else is lip service..

  15. Daniel Wilton May 24, 2021 10:08 am

    Rebalancing to Reverse an Unfortunate Trend

    USIJ members, as with nearly every user of our country’s patent system, have no interest in seeing abuse of the U.S. patent system through efforts to extort settlements based on patents that clearly are invalid – so called “poor quality patents” – but we are equally concerned that access to the patent system itself has become overly hazardous and prohibitively expensive, both at the application and prosecution stage, and equally important at the stage when enforcement may become necessary.

    Leahy is a full partner in the institutional effort to thwart a thriving small inventor community in the US. The paramount purpose of the Leahy’s AIA was to empower the Apples an Googles of the world with overwhelming dominance in the world of patent power. What we are now witnessing in the politics of power patents is a form of requiem style lip service to the intended victims of the AIA.

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