Whenever we discuss the U.S. patent system, it’s critical to recall that while these patents are U.S. patents, anyone in the world can obtain one. And they do. In fact, in FY2020, of the 399,055 patents issued by the USPTO, 210,695—more than half—were obtained by residents of foreign countries. Any changes that are made to U.S. patent law will equally affect foreign entities which own U.S. patents; if the changes make it easier to assert patents against companies doing business in the U.S., they’ll also make it easier for foreign entities to do so.
That brings us to Fintiv and Huawei v. Verizon.
Huawei v. Verizon
In 2019, reports emerged that Huawei was pressing Verizon to take a license to more than 200 of its patents, many of which were allegedly standard-essential. Verizon, which isn’t a Huawei customer, was reportedly told: “We trust that you will see the benefit of taking a license to our patent portfolio.” The negotiations apparently did not end in an agreement, because in early 2020, Huawei brought a set of patent lawsuits against Verizon. It filed suits in the Eastern and Western Districts of Texas, favorite venues for patent trolls, asserting seven patents in each case.
Around four months later, shortly after receiving Huawei’s preliminary description of how it thought Verizon infringed Huawei’s patents, Verizon filed petitions for IPR against 10 of the 14 patents.
The PTAB’s precedential Fintiv decision describes a set of factors to be considered when the PTAB decides whether to discretionarily deny an IPR based upon co-pending litigation. And the PTAB has been using discretionary denial at an increasingly high rate, leading to increases in litigation frequency and cost.
So it isn’t surprising that many of Verizon’s petitions were denied on the basis of Fintiv. Effectively, Verizon had their IPRs denied because they had been sued and the trial could happen a few months before the IPR would conclude. There was no weight given to the likelihood of a stay if the IPR was instituted, no significant weight given to Verizon’s filing of its IPRs in a very short time frame, and no weight given to Congress’s clear intent to have the PTAB conduct reviews of patents that were asserted in parallel litigations.
So at the end of the day, the Fintiv rule is being applied in a way that harms an American company to the benefit of a company that the U.S. government has alleged to be a national security threat. And this could simply be the start of the problem—Huawei could use its patent portfolio to try to monopolize the network infrastructure market in the same way that Qualcomm has used its portfolio to eliminate competitors in the baseband chipset market.
U.S. patent policy can’t be protectionist—it has to consider that around half of all U.S. patents go to foreign applicants, and those patents can effectively only be asserted against companies with a U.S. presence. A patent system that goes too far may harm U.S. companies more than it helps them, allowing foreign patent owners to assert patents without concern for cross-exposure to U.S. patent suits.
If national security is threatened by Huawei becoming a dominant player in 5G, then national security is also harmed by patent policies that make it harder for U.S. businesses to defend themselves against assertions. And national security is harmed by patent policies that make it easier for Huawei to exploit its patents to harm U.S. competitors and U.S.-based customers of competitors.