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PublishedJune 16, 2023

New Patent Office Proposals Will Backfire on Small Businesses

When my business was sued for patent infringement, I was caught off guard. In my case, we happened to be the target of a baseless lawsuit from a larger competitor, but for many businesses in a similar situation, the lawsuit comes from a non-practicing entity (NPE). I run a small fishing business. We don’t have a big legal department we can ask to analyze accusations against us, so I had to pull from personal savings to help pay for patent lawyers. 

This is why less expensive alternatives to litigation, like inter partes review (IPR) at the Patent Office, is so important. Small businesses like mine need a lifeline when we are confronted with bogus infringement lawsuits. 

The Patent Office’s new set of proposed rules has an entire section titled “Micro and Small Entities: Protecting Under-resources Inventors and Petitioners,” but the rules would actually work against small- and medium-sized businesses, not for them. 

In general, any rules that will make things easier for NPEs will be bad for the small- and medium-sized businesses they frequently file lawsuits against. By creating new rules about who is and isn’t allowed to ask the Patent Office to review patents being used by NPEs and creating higher standards for getting petitions for review accepted, more bad patents will go unreviewed and NPEs will benefit. 

More specifically, the way that the Patent Office’s proposals are set up will actually make small businesses more attractive targets for NPEs. The suggested rules say that if one business is sued and petitions for an IPR, but not all claims on the patent are canceled, later businesses will be prevented from challenging the patent as well. NPEs are well-financed patent law experts. They will soon realize that if they sue smaller, under-resourced businesses first – that aren’t set up to bring the strongest challenge at the Patent Office – they could shield their bad patents from being reviewed in the future. Inevitably, more small- and medium-sized businesses will be sued first, before NPEs move on to larger, potentially more profitable targets. 

The Patent Office proposals also suggest a small inventor carve out. Intended to protect startups, small businesses, and independent inventors, the rules would make it more difficult to get a patent reviewed if it is owned by an under-resourced business. NPEs will take advantage of this loophole as well. NPEs commonly operate as shell companies and try to present themselves as small businesses. If new rules give them an additional advantage for doing so, they will certainly capitalize and it will be harder for the actual small businesses that they sue to get the Patent Office to initiate a review. Small businesses will again more often be left with the choice: pay a settlement or go to court.

Small businesses need the option of accessible, fair patent review at the USPTO. New rules that create loopholes and advantages for NPEs, which are experts at navigating the patent system and have a financial interest in bending the rules in their favor, will ultimately backfire and be used against small businesses. 

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Jeff Queen

Co-Owner, Queen Tackle

Jeff Queen is the owner of Queen Tackle — a fishing business in Catawba, North Carolina.

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