“The system had been rigged all along, due to the unconstitutional actions of the Defendants named herein.” – complaint of Martin David Hoyle and B.E. Technology
A patent owner has filed a lawsuit in the United States District Court for the Western District of Tennessee against former U.S. Patent and Trademark Office (USPTO) Director Michelle Lee, and a number of other former USPTO officials, for allegedly depriving the plaintiffs “of their valuable property rights in quasi-judicial administrative proceedings before the USPTO’s Patent Trial and Appeal Board (‘PTAB’).” The complaint further claims that PTAB proceedings have been “tainted by various improprieties and underhanded tactics, designed to stack the deck against [plaintiffs] and in favor of their far more powerful opponents. In short, the system had been rigged all along, due to the unconstitutional actions of the Defendants named herein.”
The lawsuit seeks an unspecified amount of damages pursuant to Bivens v. Six Unknown Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971) for violations of the plaintiffs’ due process rights under the Fifth Amendment. The officials named in the lawsuit are: Lee; James Donald Smith, former Chief Administrative Patent Judge of the PTAB; James T. Moore, former Vice-Chief Administrative Patent Judge of the PTAB; and current and former administrative patent judges (APJs) Sally Medley, Kalyan Deshpande and Lynne Pettigrew.
The plaintiffs are Martin David Hoyle and his company, B. E. Technology, and the relevant patents are U.S. Patent No. 6,628,314 (“the ’314 patent”) and U.S. Patent No. 6,771,290 (“the ’290 patent”). The ‘314 patent relates to technology aimed at gathering user data online data “for the purpose of delivering demographically appropriate, location-based, and contextually-targeted advertising products via various web-based applications” and the ’290 patent is geared to personalizing the internet experience for users via features such as “a toolbar providing the user with icons to access programs, files, and search,” which in turn allows for the delivery of targeted advertising products to users.
According to the complaint, Google filed several patent applications in 2006-2007—when Michelle Lee was Head of Patents and Patent Strategy at Google—that were rejected by the USPTO because the technology described was already patented in the ‘314 and ‘290 patents. Google then abandoned its applications, but Hoyle discovered in 2007 that the company—along with other tech companies, such as Facebook, Microsoft and Samsung—had been using targeted advertising technologies that infringed on his patents and filed patent infringement suits against them in 2012, just after the America Invents Act (AIA) was implemented.
Also in 2012, Michelle Lee became Director of the USPTO’s office in Silicon Valley, and two years later was nominated by President Barack Obama to be Deputy Under Secretary of Commerce for Intellectual Property and Deputy Director of the USPTO. She was confirmed by the Senate in 2015. This was the same year that the PTAB issued decisions in seven separate inter partes review (IPR) proceedings that Google and the other companies filed against B.E. Technology to invalidate the patents. The same three-judge panel comprised of administrative patent judges (APJs) Sally C. Medley, Kalyan K. Deshpande, and Lynne E. Pettigrew ultimately invalidated the patents as anticipated by and/or obvious in all of the IPRs. The U.S. Court of Appeals for the Federal Circuit affirmed those decisions on appeal.
The complaint goes on to outline a number of “scandalous revelations” about USPTO and PTAB operations that came to light beginning in about 2017, including USPTO admissions about “panel stacking,” improper compensation structures for APJs, and discouraging dissenting opinions. At all times “relevant to the IP proceedings” at issue in the suit, Michelle Lee was Director of the USPTO, explains the complaint. After further independent research into the APJs who decided the IPRs, Hoyle found that APJ Medley had cancelled the challenged patents in 100% of the 64 IPR proceedings she had presided over; APJ Deshpande had cancelled the challenged patents in 100% of the IPR proceedings over which he had presided as of 2015; and APJ Pettigrew had a cancellation rate of 97% as of 2015.
Hoyle claims that the USPTO leadership at the time – including former Google executive Michelle Lee – thus chose these particular APJs on purpose.
SAWS and Salaries
In further revelations, the lawsuit claims that conversations between a private investigator and a patent examiner divulged that the examiner had been instructed to flag all patent applications covering targeted advertising technologies for increased scrutiny under the Sensitive Application Warning System (SAWS) program while she was at the USPTO. This decision was made during Lee’s time as Director, according to the complaint.
Hoyle’s complaint also points to a recent paper by Ron Katznelson in which the author claims the framework of the PTAB’s bonus system raises due process concerns by incentivizing the judges to make decisions adverse to patent owners.
The Deck Was Always Stacked
Ultimately, the complaint argues that the various factors surrounding B.E. Technology’s IPRs “amount to a particularly clear and egregious violation of Plaintiffs’ rights and leave no room for debate as to the unconstitutionality of those proceedings.” While the Office has taken recent actions to address some of the issues described, such as modifying APJ compensation structures, claiming to have discontinued the SAWS program, and taking steps pursuant to Arthrex v. Smith & Nephew to cure constitutional infirmities under the AIA, it has not addressed all of the issues and, in any case, “these corrective measures offer nothing in the way of relief or remedies to the Plaintiffs—who were deprived of valuable property rights after being forced to adjudicate the validity of their patents in a forum where the deck was improperly stacked against them, without their knowledge.”
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