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PublishedJuly 28, 2023

Helping NPEs PREVAIL Over Innovators

Last month, Senators Chris Coons (D-DE) and Thom Tillis (R-NC) introduced the Promoting and Respecting Economically Vital American Innovation Leadership Act (PREVAIL) Act. Under the guise of promoting efficiency and protecting the interests of the proverbial ‘little guy,’ the legislation’s proponents say that it will reform the Patent Trial and Appeal Board (PTAB) to better serve inventors, ensure that the patent system incentivizes American innovation, and allow U.S. innovators to compete on the global stage. These assertions, however, deserve a second look. 

In practice, the PREVAIL Act would severely limit access to PTAB review and make it more difficult to challenge invalid patents on their merits. In fact, similar proposals outlined in the U.S. Patent and Trademark Office’s April Advance Notice of Proposed Rulemaking (ANPRM) received an onslaught of critical public comments, highlighting a variety of concerns from a wide array of stakeholders. It is not clear how this legislation would help inventors and innovation as its proponents suggest, but non-practicing entities (NPEs) and their funders will surely welcome a new law that makes it easier to continuously engage in baseless infringement litigation, without being subject to review. 

Let’s take a look at just a few of the PREVAIL Act’s more significant changes to existing statute. 

First, the PREVAIL Act would impose a brand-new standing requirement to access PTAB review. Under the new law, parties would only be able to petition for PTAB review if they have been sued for patent infringement or threatened with a patent infringement lawsuit. This severs access to review for many parties who have a legitimate interest in challenging questionable patents. Do you want to challenge a patent that is being used to sue your customers or members for infringement? Sorry, can’t do it. Do you receive a threatening letter, but it is vague enough to avoid being covered by the PREVAIL Act? You are on your own. Want to clear the field of patents before you invest years of time and millions of dollars into developing a product? Too bad.

On top of standing requirements, the PREVAIL Act also wades into real party in interest (RPI) rules. The Act lays out that any entity financially contributing to a PTAB challenge is an RPI – regardless of whether they directly fund the challenge or just generally contribute to the petitioning organization – and that a petitioner and its RPIs can only bring one petition per patent. The added restrictions seem to be specifically directed at membership-based organizations, which help police NPE abuse and in doing so promote patent quality and discourage bad behavior.

Then there is venue. The PREVAIL Act would enshrine the spirit of the deeply-flawed NHK-Fintiv rule with forum restrictions. The PREVAIL Act would require that the PTAB deny a petition or dismiss a proceeding if a patent’s validity has already been upheld elsewhere – such as in federal court or at the International Trade Commission – and would require parties to choose between making validity challenges before the PTAB or in another forum. Both are direct roll-backs of the America Invents Act and strike at the heart of what makes efficient, expert PTAB review so valuable in the first place. But they’re also fundamental rejections of patent law.  A patent is never held “valid”.  It might be held to be valid in light of certain prior art, but other prior art might still invalidate it.

The new restrictions on where you can make your arguments are compounded by what you can say in your arguments. The PREVAIL Act would require that the PTAB reject petitions for review that raise the same or similar prior art or arguments that were previously presented to the USPTO, absent exceptional circumstances. The Act does not require that the prior art was considered or evaluated, merely that it was presented. This language is bound to cut off entirely independent and valid challenges based on previously-submitted evidence that was never actually considered, and opens up all sorts of new avenues for gamesmanship by patent holders who want to insulate themselves from challenges. Further, examiners often make mistakes—if they didn’t, the PTAB wouldn’t serve much purpose. Sometimes that mistake is not finding the right prior art, but sometimes an examiner simply misapprehends the prior art they do find.  And this isn’t a hypothetical – I have personal experience with this.  In an early IPR, we pointed out that a reference the examiner had cited against a dependent claim actually was anticipatory prior art for the independent claims.  The PTAB agreed, instituting review, and the patent owner (a subsidiary of well-known NPE Acacia) settled to avoid having their patent invalidated.  Barring the USPTO from reviewing its own work is, again, a direct roll-back of the America Invents Act.

These are only a handful of the PREVAIL Act changes that would upend post-grant review as we know it. The legislation appears to primarily be a response to oft-repeated assertions by certain interest groups that patent owners – particularly small patent owners – face repeated harassment through coordinated validity challenges and that current review practices create opportunities for abuse by petitioners.

For new legislative proposals to veer so wildly from a system that has been operating effectively for the past decade – rule changes that like Fintiv aside – one would expect to see long lists detailing patent owner harassment and PTAB abuse by challengers to justify such an extreme shift. But USPTO data on serial and parallel petitions tell a different story – that both are infrequent and declining – and in the rare instances where there has been petitioner abuse, it has been appropriately addressed by the agency within the confines of existing law. And small patent owners rarely face validity challenges—and when they do, they’re essentially always because the small patent owner has initiated litigation against the petitioner.

I am left scratching my head at why PREVAIL Act advocates are so much more concerned with the hypothetical harassment of patent owners and abuse of PTAB review by petitioners than they are with the frequent actual ongoing harassment of businesses and abuse of patent infringement lawsuits by NPEs.  Open access to PTAB review has been a critical tool in this battle.  PREVAIL would go a long way to making sure that innovators would lose the fight.

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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