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PublishedMay 12, 2023

USPTO Invalidates VLSI Patent—So Why Didn’t They Review It The First Time?

Earlier today, the USPTO issued its final written decision in IPR2021-01064.  The final written decision found that all challenged claims in VLSI’s patent were in fact invalid.

So what makes this IPR special?  Well, the challenged patent was one of the patents underlying VLSI’s $2 billion verdict against Intel.  And what’s more, the petition filed by OpenSky was a cut-and-paste of an earlier petition filed by Intel.  But the PTAB, under Director Iancu, decided that it was fine with leaving in force a patent we now know is invalid just because a judge claimed he’d get to trial before the PTO could rule.  It denied Intel’s petition under the Fintiv rule.

(Spoiler alert: that didn’t happen – the trial occurred months after the PTAB would have ruled.)

So Intel’s petition was denied, but not on the merits.  And of course a denial on a discretionary basis is effectively an admission that the patent is likely invalid.  After all, if the patent wasn’t likely to be proven invalid, then the PTO could simply deny on the merits—there’s no need for discretionary denial on a valid patent.

So, with Intel’s IPR petition denied, the case eventually went to trial, and VLSI—a subsidiary of the hedge fund Fortress, backed by SoftBank and likely to soon be sold to an Emirati sovereign wealth fund—obtained a $2 billion verdict.  That’s a big number, and people took notice.

Some of those people formed an entity called OpenSky.  After all, there was a perfectly good IPR petition, publicly available, and denied in a way that made it quite likely that absent a discretionary denial, the patent wouldn’t survive IPR.  So OpenSky took that petition, hired the same expert, and effectively re-filed the IPR.  But because OpenSky wasn’t involved in litigation with VLSI, their petition couldn’t be discretionarily denied based on a court date.

Lo and behold, the patent actually was invalid.  But because of the Fintiv denial—a denial based on a rule that both violates the AIA and was put into place improperly—that determination came years later than it otherwise would have.

In the interim, Director Iancu left the PTO and went back to his old firm—the same firm that was litigating on behalf of VLSI and stood to benefit from the IPR denial.  And people began to complain that OpenSky was abusing the IPR system.

But here’s the thing: if not for the Fintiv rule, OpenSky never would have had a petition to copy.  The ultimate source of any abuses that occurred wasn’t the AIA or Intel or even OpenSky.  The abuse that led to all this was the abuse of discretionary denials.  If not for Fintiv, Intel and VLSI wouldn’t have had to spend tens of millions of dollars in legal fees.  There wouldn’t have been a judgment that now has to be reversed.  The system would have worked more efficiently and in the way Congress intended.

Given all the negatives of Fintiv, it’s very confusing why the current PTO Director, Director VIdal, seems to want to keep Fintiv around.  Her recent ANPRM proposes making Fintiv a formal rule.  But even she doesn’t seem to know why she would want to keep it, telling a Congressional committee that the PTO might not even have the authority to do so and that the rules weren’t even the PTO’s proposal.

I have a simpler suggestion.  Get rid of Fintiv entirely.  Go back to the IPR system that worked efficiently and saved American industry billions of dollars.  If a patent actually contains a new and innovative invention, it has nothing to fear from IPR.

And if it isn’t new and innovative?  The Constitution tells us it shouldn’t have existed in the first place.

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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