“These activities represent clear abuses of the IPR system. Yet, to date, it does not appear the USPTO has taken any steps to sanction those involved or otherwise act to deter future copycats.” – Senators Hirono and Tillis
Senators Mazie K. Hirono (D-HI) and Thom Tillis (R-NC) sent a letter yesterday to U.S. Patent and Trademark Office (USPTO) Director Kathi Vidal to express their concern over the Patent Trial and Appeal Board (PTAB) decisions to institute inter partes review (IPR) proceedings in OpenSky Industries, LLC v. VLSI Technology LLC and Patent Quality Assurance, LLC v. VLSI Technology LLC. “The facts and circumstances around these proceedings suggest petitioners OpenSky Industries, LLC (OpenSky) and Patent Quality Assurance, LLC (PQA) brought the proceedings to manipulate the U.S. Patent and Trademark Office (USPTO) for their own financial gain,” explains the letter.
VLSI has been successful in U.S. district court, including a jury finding that one of two asserted patents was not invalid for anticipation. However, the company has faced a total of 39 petitions for IPR proceedings at the PTAB. While most of those petitions were filed by Intel, the defendant in the district court infringement suit, other petitions have been filed by OpenSky and PQA, both of which were incorporated after the date of the infringement verdict against Intel and have no discernable business operations beyond challenging VLSI’s patent claims.
The American Intellectual Property Law Association (AIPLA) has reported that the average cost of IPR proceedings through a PTAB hearing is $300,000. Thus, if every IPR petitioned against VLSI were to reach a PTAB hearing, that would be nearly $12 million in costs just to defend against the IPRs. VLSI currently ranks 33rd among all patent owners for the number of AIA validity trials that it has faced at the PTAB.
The senators’ letter charges that the OpenSky and PQA challenges of U.S. Patent Nos. 7,523,373 and 7,725,759 are “an apparent attempt to extort money” from VLSI. They note five examples that suggest this was the motive:
- The companies were formed shortly before filing their petitions.
- The companies did not make, use, sell, or import any products, let alone any products that could subject them to claims of infringement.
- The companies filed their petitions only after VLSI had secured a $2.2 billion infringement judgment against Intel.
- And, most egregiously, the petitions filed by the companies were near “carbon copies” of petitions previously filed by Intel that had been rejected by the USPTO.
The letter also references a recent attempt by OpenSky attorneys in IPR2022-00645 to secretly come to an agreement with VLSI wherein OpenSky would refuse to pay their expert, guaranteeing that the expert would not appear for the scheduled deposition. After the expert did not appear, OpenSky would join the patent owner in a motion to dismiss, presumably based on the understanding that, without an expert, OpenSky would not prevail. See Paper 8, Exhibit 2029 (VLSI’s Opposition to OpenSky’s Motion for Joinder). The attorney then proposed cash payment in exchange for what IPWatchdog Founder and CEO Gene Quinn called “this sham manipulation of the PTAB process,” and the possibility of an additional payment if the PTAB were to nevertheless order joinder and the proceeding ultimately resulted in claims being affirmed.
“These activities represent clear abuses of the IPR system. Yet, to date, it does not appear the USPTO has taken any steps to sanction those involved or otherwise act to deter future copycats,” says the senators’ letter.
Despite strides made to improve the balance needed at the PTAB, such as adopting the Phillips claim construction standard and the Fintiv factors, Tillis and Hirono express continued concern about the PTAB process and are asking Vidal to respond to the following five questions by no later than May 27, 2022:
- Does the USPTO consider filing an IPR petition for the purpose of profiting from a
resulting decrease in the price of the patent owner’s stock a proper use of the IPR system? Why or why not?
- Does the USPTO consider filing an IPR petition for the purpose of extorting money from
the patent owner a proper use of the IPR system? Why or why not?
- The America Invents Act gives the Director of the USPTO discretionary authority to
deny IPR petitions. Do you consider it a proper use of that discretion to (1) deny an IPR
petition filed for the purpose of profiting from the resulting decrease in the price of the
patent owner’s stock; or (2) deny an IPR petition filed for the purpose of extorting money from the patent owner? Why or why not?
- What sanctions can the USPTO impose on parties that file IPR petitions in bad faith? Has
the USPTO exercised this authority to date? If so, please describe the circumstances.
- What additional authorities, if any, does the USPTO require to ensure that parties do not file IPR petitions in bad faith and for reasons outside the intent of the America Invents Act?
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