VLSI/Fortress IP Patents Likely Invalid Despite OpenSky’s Bad Behavior

“[The PTAB] has been successful over the years in checking significant numbers of asserted invalid patents, by some measures saving the U.S. economy billions of dollars over…. And yet, many self-interested parties would rather the PTAB not exist, and are suggesting the OpenSky email is evidence of systemic malaise.”

https://depositphotos.com/31248541/stock-photo-opinion-business-concept.htmlYou’ve probably heard about all of the VLSI drama: the eye-popping $2.18 billion judgment won by non-practicing entity (NPE) VLSI (funded by Fortress IP), mysterious post-judgment inter partes reviews (IPRs) filed against the VLSI patents, and finally the now-notorious email from OpenSky offering to disrupt their own IPR in exchange for a fee. Folks have jumped all over the email from OpenSky for its obvious bad behavior, but they are also using it as an indictment of the entire Patent Trial and Appeal Board (PTAB). What is noteworthy here is not the email—this type of behavior is extremely rare. The real story here is what the system got right, and where it failed.

A quick background: VLSI filed against Intel in April 2019 and won at trial in March 2021, one of Judge Albright’s first trials in Waco. After being sued, Intel duly filed IPRs of all the patents asserted against them, but the Board, using their then-new discretionary denial power, refused to consider the merits of those challenges, based largely on the aggressively scheduled Waco trial dates. The date then slipped as the case was transferred to Austin and back again, COVID introduced delays, and the various cases shed patents, but trial moved forward on two patents (both originally challenged and denied under Fintiv), and the jury found against Intel.

Presumably to capitalize on the VLSI settlement, unrelated third parties have now picked up Intel’s IPRs and refiled the challenges the Board earlier refused to hear. The USPTO, now without parallel litigation, found the patents are both most likely unpatentable, and is moving forward with review. Recently, it came to light that one of these mystery entities, OpenSky, emailed opposing counsel suggesting a settlement, for pay, that could attempt to disrupt the Board’s ability to consider the merits. They suggested they might get paid and then work to frustrate the challenge.

Don’t Let Bad Behavior Distract from the Real Problems

Let’s be clear: This is bad behavior, and it deserves to be rooted out and dealt with. But let’s not go crazy. Out of the more than 14,000 filings over 10 years, you can count on one hand bad behavior. Some of us remember when the self-proclaimed king of the patent trolls, Eric Spangenberg, partnered with investor Kyle Bass to attempt to file IPRs to manipulate the stock market of pharmaceutical companies—and failed terribly. And, of course, lawyers in all forums occasionally engage in ethically questionable practices. For the Board’s part, they require parties to file all collateral and material agreements. And the statute dictates the Department of Justice can request copies of settlements at any time. The Office has many tools to deal with ethical issues.

In short, the attention here on a few bad actors misses the point. It’s not the petitioners. It’s the patents. Bad patents get used all the time. Over 65% of patent litigation in the tech-sector is brought by NPEs that mostly seek cost of litigation settlements on patents so broad they can sue, in some cases, hundreds of defendants.  A portion of those are challenged before the Board, and often result in simplification of the case.  In 2019, for instance, the PTAB invalidated all claims in just over half of all challenges instituted. Demand letter abuse is rampant enough that many states have passed laws addressing it. And patent litigation funding is prevalent and on the rise.

The PTAB, for its part, has accomplished great things to address NPE activity, just as Congress and stakeholders intended. It has been widely used, has kept to all statutory deadlines, and has received high marks for the quality of its work. It has been successful over the years in checking significant numbers of asserted invalid patents, by some measures saving the U.S. economy billions of dollars over. See Perryman Group, An Assessment of the Impact of the America Invents Act and the Patent Trial and Appeal Board  on the US Economy (June 2020) (Perryman Report). And yet, many self-interested parties would rather the PTAB not exist, and are suggesting the OpenSky email is evidence of systemic malaise.

The absurdity of getting so worked up over one email and using it to try to lobby for throwing the baby out with the bathwater is self-evident. OpenSky could withdraw today and the USPTO would have Congress’ statutory authority to continue this important review to its rightful conclusion, as they have done in the past. As it states in 35 U.S.C. § 318(a) and as the Board has in the past, “the Office may … proceed to a final written decision” absent a petitioner, much like they do every day in ex parte examination and reexamination. They do that to protect the public interest, not serve the interest of any of the parties before it. This is the USPTO’s mission. And it is working well.

The USPTO’s Error

But no system works perfectly. There’s at least one thing that the USPTO did get wrong here—it unilaterally implemented a policy, Fintiv, that complicated disputes, led to gamesmanship, and has led to the Board and parties spending countless hours and resources on addressing the new procedures. See Report, 45% of all 2021 Institution Decisions Analyze Fintiv.

Here, the Board decided not to look at the merits when it would have been most efficient to do so. It’s absurd—the Board, stripped of the ability to act as urged by the party with the most at stake, instead demurred, and now must consider the merits for an entirely unrelated party. That’s senseless, and it is problem is one of the USPTO’s own creation. The Fintiv rule was broken from the start, and this is exhibit A.

Indeed, as stakeholders and litigators on all sides will tell you, Fintiv had draconian impacts on patent litigation; this is a perfect example. And yet some are trying to use OpenSky’s behavior to suggest we should allow all major litigation to move forward without considering otherwise meritorious evidence that the Office may have made a mistake issuing one of its millions of patents.

The USPTO has an important civic responsibility to look at the merits of those challenges, and can do so regardless of who the parties who brought the challenge are, or their actions. Their duty is independent.

And there is also a certain irony in a wealthy $900 million patent litigation fund—one who hasn’t disclosed the details of their arrangements with VLSI or their investors or their stake in the original case—crying bloody murder when another entity tries to use the legal system for financial gain. People in glass houses—even very expensive ones—must be careful with their stones.

The True Cost

In the end, the very evidence that might have short-circuited or simplified this dispute was ignored; it seems clear in hindsight that the Fintiv rule will likely end up costing everyone, both defendant and plaintiff, extensive resources trying to use the courts to monetize patents that either never should have issued in the first place or could have conclusively resolved those same validity questions. And data shows Fintiv is now being addressed in almost half of all Board decisions, normally for more than 10 pages, adding substantially the agency’s already stacked plate. See Report supra.

As a result, in my opinion, Fintiv failed us all here. OpenSky’s behavior is both wrong and rare; what’s far less rare is how often Fintiv has left potentially invalid patents unreviewed by the people best positioned to weigh their validity.


Image Source: Deposit Photos
Author: tashatuvango
Image ID: 31248541 

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9 comments so far. Add my comment.

  • [Avatar for R. ALAN BURNETT]
    R. ALAN BURNETT
    March 25, 2022 11:23 am

    This is self-serving and not objective. I have personally had to deal with bad behavior by PTAB APJs, and to pretend they are objective arbiters of validity is patentably absurd. Parties that file IPR petitions with so called “expert” declarations primarily written by patent counsel are bad actors, particularly when those declarations contain objectively false testimony, which isn’t that rare. The APJs are often not skilled in the relevant art and cannot tell a lie from the truth – something a jury is much better at.

  • [Avatar for Name withheld to protect the innocent]
    Name withheld to protect the innocent
    March 24, 2022 04:55 pm

    Get a hold of yourselves, your unhinged whining is getting old
    Shawn A? Is this you? Not surprised by the nom de plume. I see you are projecting again. Next time, throw in same blatantly racist comments so I know that it is you.

  • [Avatar for Anonymous]
    Anonymous
    March 24, 2022 10:01 am

    A jury found these patents valid and infringed. Arguing that Fintiv wrongly allowed invalid patents to stand is misguided in this case and many others. That argument assumes the PTAB is the only arbiter of patent validity, which is self-serving (for the author and many accused infringers), and an abrogation of decades of patent policy that are enforced in the courts but side-stepped in the PTAB. See, e.g., presumption of validity.

  • [Avatar for Patent Investor]
    Patent Investor
    March 23, 2022 11:28 pm

    I too fell into the trap Pro Say mentions above. I was reading this on my phone and didn’t immediately scroll to the bottom. The amazing thing is we now know the Mouth of Sauron did NOT perish at the gates of Mordor.

    I’m sure Josh could have written pages of scathing diatribe, but he left it short and sweet. In a nutshell this article says, “Patent extortion bad. Patent protection racket good. Come see us at UP.”

  • [Avatar for Peter North]
    Peter North
    March 23, 2022 11:27 pm

    I see the usual lunatics are here pretending every patent issued is earth shattering. And the under-resourced, 26 year old examiner’s judgement is equivalent to unassailable word of god himself. ?

    The idea of the “tech-sector” stealing from companies incorporating as the “Marshal Texas Benevolent Innovators” two weeks before filing suit is cult-level delusion.

    Get a hold of yourselves, your unhinged whining is getting old

  • [Avatar for Curious]
    Curious
    March 23, 2022 11:05 pm

    The CEO of a company dedicated to wiping out all patents blames the patents for being bad. Color me unsurprised. Regardless, the publicity associated with this shakedown of a patent owner must have been really bad for you to beg Gene to get this article published.

    Fintiv has left potentially invalid patents unreviewed by the people best positioned to weigh their validity.
    LOL. You mean unreviewed by the people who have a vested interest in invalidating patents (in order to get their production credits/bonuses). Also, I am fairly confident that Unified Patents has never met a patent that they thought was valid.

    You do realize that the Courts have been resolving patent invalidity challenges for a couple of centuries without the IPRs. The patent system isn’t going to break if the Director exercises his/her discretion to deny a challenge.

    Over 65% of patent litigation in the tech-sector is brought by NPEs that mostly seek cost of litigation settlements on patents so broad they can sue, in some cases, hundreds of defendants.
    You do realize that it is the JOB of a good patent attorney to get as broad of coverage as justified by the patent disclosure and prior art? I didn’t think so.

    You do realize that the tech-sector brings this upon themselves by choosing to turn a blind eyes to all patents — preferring instead, to employ hired guns like yourself to make these patents/problems go away?

    Unified Patents and all who work for them are, IMHO, a blight on the patent system.

  • [Avatar for Ziggy]
    Ziggy
    March 23, 2022 09:34 pm

    “The PTAB, for its part, has accomplished great things to address NPE activity, just as Congress and stakeholders intended.”

    Who are these “stakeholders” who intended this legislation to “address NPE activity”? Certainly not patent owners. Are serial infringers considered “stakeholders” in the patent system? Are thiefs “stakeholders” in the criminal justice system?

  • [Avatar for Josh Malone]
    Josh Malone
    March 23, 2022 08:57 pm

    I can count on one 300-fingered hand the number of IPR abuses by the author and founder of Unified Patents, the biggest patent troll in the U.S.

  • [Avatar for Pro Say]
    Pro Say
    March 23, 2022 04:59 pm

    Me bad. The next time I find myself reading such self-serving, b.s. clap trap, I’ll be sure to stop to quickly scroll down . . . to see who the author is.

    “Unified Patents, a company that deters inventors and patent owners from receiving fair compensation for their innovations.”

    There. Fixed.

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