PublishedAugust 1, 2018

Finding A Few Problems In New “Inventor Protection Act”

There’s a bit of a glut of anti-innovation bills in Congress right now, ranging from the STRONGER Patents Act to Rep. Massie’s RALIA bill (which I hope to write about at a later date) and now, Rep. Rohrabacher’s H.R. 6557, the “Inventor Protection Act.”[1. The linked document is a discussion draft; the bill has been introduced but text is not yet available via Congress.gov.  To the extent there are substantive differences between the discussion draft and the introduced bill, I will revise this post to reflect them.]  

The bill begins with legislative findings.  Unfortunately, the “findings” that are proposed are not factually sound.

404 Error: Facts Not Found

The most significant findings are the statements that (1) “the Patent Trial and Appeal Board declares 85 percent of granted patents invalid in postgrant reviews,” (2) “many patents are subjected to multiple postgrant reviews,” and (3) “most inventors cannot afford the costs of defending a patent challenged in a single postgrant review, as these costs can reach hundreds of thousands of dollars.”  Let’s take them in turn.

It Isn’t 85%

The Rohrabacher bill appears to be relying upon IP Watchdog’s numbers here.  (This isn’t the first time incorrect numbers from IP Watchdog have made it to Congress.)  The PTAB is not invalidating 85% of patents challenged in post-grant reviews.  In calculating the rate at which patents are invalidated in post-grant reviews, IP Watchdog excludes the significant number of patents where the PTAB said that not only is this patent valid, but it is so clearly valid that the petitioner hasn’t even been able to show a reasonable likelihood of invalidity—the roughly 35% of patents where the PTAB doesn’t institute a review at all.

Once those patents are included, what’s the real answer?

The Patent Trial and Appeal Board declares around 45% of challenged patents to be invalid.  Given that challengers pick and choose which patents they want to challenge based on the likelihood of success, that number isn’t surprising at all—the patents where validity isn’t really in question never get challenged in the first place.

Claiming that the PTAB invalidates 85% of granted patents it reviews is simply false.

Multiple Reviews

The proposed findings also state that “many patents are subjected to multiple postgrant reviews.”  

In reality, that’s just not the case.

Very few patents are subjected to multiple post-grant reviews.  70% are only subjected to one petition; another 19% see 2 petitions.  Multiple petitions just aren’t that common to start with.

The other problem is that most multiple petitions don’t result in multiple reviews.

Of those instances in which a patent faces multiple petitions, the majority of multiple petitions (64%) are filed on or nearly on the same day.  This is typically caused by the strict word limits on petitions.  When faced with hundreds of claims or extremely long claims, you simply need more words to adequately address the issues.  To address this, petitioners file multiple petitions, which are then joined together into a single review.  But those 64% of multiple petitions aren’t multiple post-grant reviews—they’re a single post-grant review which has to be split into multiple parts at the time of filing, but which are handled as a single review.

Of the 36% of multiple petitions that aren’t filed on the same day, 24% are filed after the patent owner responds, but before the PTAB makes a decision.  These are typically filed by the original petitioner due to some deficiency in their original petition that is only made clear when the patent owner responds.  They are typically either consolidated with the original petition or else the original petition is denied in favor of the revised petition. Again, this isn’t multiple reviews, but instead a single review that requires multiple petitions for procedural reasons.

The other 76% of multiple petitions not filed on the same day are filed after the PTAB makes a decision.  But even here, there usually aren’t multiple reviews. That’s because, in 60% of these cases, the additional petitions are filed by other parties, or by the original party due to some change in accompanying litigation triggered by the patent owner.  The other parties file because the patent owner sued them too, and they’d like to be able to participate in the original proceeding (and ask for a stay of the district court litigation while the PTAB determines validity.) So even here, we don’t have additional reviews, but simply more parties added to the original review.

The end result?  Around 5% of challenges represent multiple reviews of a patent.  The problem simply isn’t there.

The Cost Of IPR

Another error in the proposed findings is that “most inventors cannot afford the costs of defending a patent challenged in a single post-grant review, as these costs can reach hundreds of thousands of dollars.”

First off, this ignores that roughly 80% of patents are invented at large companies.  Those inventors and their companies can afford the costs of defending a patent challenge.  The findings claim to be about inventors, but exclude the vast majority of American inventors.

It is correct that the cost of a post-grant review can reach hundreds of thousands of dollars.  AIPLA’s survey estimates a median price of around $250,000 to defend a patent in a post-grant review.

But you can’t look at that in a vacuum.  Post-grant reviews are almost always filed against patents that are being litigated—85% of post-grant challenges have related district court litigation (and many of the other 15% are related to litigations more indirectly).  And litigation costs far, far more—even an inexpensive litigation can easily run into seven figures. In reality, the availability of IPR and other post-grant reviews has actually saved patent owners more than $1 billion in legal fees since it was made available by reducing the cost of litigating patents overall.

That’s due to two simple things.  

First, post-grant reviews provide a cost-effective alternative to litigation by determining the validity of a patent far more cheaply than district court litigation.  Patent owners save money by not having to litigate validity in district court, just like challengers do.

And second, post-grant reviews have reduced the median cost of litigation.  Since post-grant review became available, the cost for a patent owner to assert their patent has dropped significantly—by 25-50%, depending on the scale of the litigation.

A few inventors might not be able to afford the cost of defending a patent challenge—but those same inventors would nevertheless face even higher litigation costs if they attempted to enforce the patent through litigation.  And inventors who don’t sue people don’t have their patents challenged. Given that the vast majority of patents challenged at PTAB belong to operating companies and large NPEs, this finding seems to describe a situation that rarely, if ever, occurs.

Denying Reality

The bill also states that “Inventors are denied the fundamental right to ‘exclude others’.”  This finding is made despite recent decisions like Tinnus v. Telebrands in which an inventor was not only granted an injunction but a preliminary injunction.  In reality, inventors can exclude others in the same circumstances that they can do so in every area of law—when they meet the traditional common law test for an injunction.  

Far from restoring a fundamental right, Rohrabacher’s bill criticizes the long-standing principle that injunctions issue when appropriate, not whenever they’re asked for.

Efficient Inaccuracy

The bill also makes the ‘efficient infringement’ argument, stating that “these obstacles have given rise to an ‘efficient infringement’ business model whereby large corporations infringe patent rights held by inventors without concern for any legal consequences.”  

The problem here?  It’s usually impossible to know whether relevant patents even exist when you’re designing a modern product, and once you know what relevant patents exist, it’s often unrealistically expensive to determine which ones you might infringe and which you definitely don’t.  That process is called a “freedom to operate” or “clearance” analysis. And many businesses can’t afford to conduct one, as Patent Progress covered yesterday.

There’s a reason large companies employ teams of attorneys to license patents from other people.  When someone identifies a relevant patent, that team takes a look at it and decides whether the patent covers their product and should be licensed, or whether the patent owner is asking for money they have no right to.  That’s not efficient infringement—it’s just defending yourself from someone who thinks their patent covers more than it does.

That’s Just The Findings, Not Even The Substance

All of this, and we haven’t even made it past the problems with Rohrabacher’s summary of the facts.  Tomorrow, I’ll get into the meat of what makes the legal changes made by this bill such a problem.

Josh Landau

Patent Counsel, CCIA

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

Follow @PatentJosh on Twitter.

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