There is reason for optimism this Patent Quality Week as intellectual property (IP) leaders in Congress contemplate options to strengthen the mechanisms in place to weed out weak and overly broad patents. Sen. Patrick Leahy (D-VT), chairman of the Intellectual Property Subcommittee, recently reflected on these priorities on the Senate floor on World IP Day in a speech describing some of the attributes he wants to see in the next United States Patent and Trademark Office (USPTO) director. In those remarks, he said he “look[s] forward to supporting a nominee for PTO director who shares [his] view that it is important to weed out poor-quality patents, void the potential for abuse, but at the same time reinforce the protection provided to high-quality patents.” We couldn’t agree more.
When enacting the America Invents Act (AIA) in 2011, Congress sought “to establish a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs.” Congress also recognized “a growing sense that questionable patents [were] too easily obtained and are too difficult to challenge.” Small businesses, the main drivers of the U.S. economy, were at the core of Congress’ decision to enact the AIA, especially the inter partes review (IPR) process. IPR provides a more affordable and efficient recourse for businesses of all sizes to exercise their rights – whether defending the validity of their granted patent or challenging a granted patent. Since its creation, IPR, administered by the Patent Trial and Appeal Board (PTAB), has worked as intended and has reduced unnecessary litigation, saving $2.3 billion over just five years.
The IPR process is popular with many large tech companies, but its financial benefits extend beyond the biggest fish in Seattle and the Bay Area. IPR offers a low-cost—and, more importantly, credible—pathway for challenging the validity of one or more claims in a patent. A complete IPR can cost in the low six-figure range compared to the millions of dollars required to take a typical patent case through a trial. Some App Association members faced threats from aggressive licensors and the presence of IPR enables them to stave off assertions involving what they know to be low-quality patents, without actually having to use the IPR process.
Unfortunately, as Chairman Leahy alluded to in his World IP Day comments, over the last few years the USPTO has taken a series of actions that impose requirements rejected by Congress in the AIA and that serve to reduce IPR’s effectiveness. For example, PTAB has recently issued a string of “discretionary denials” in which the USPTO has chosen to ignore the statutory deadline allowing an IPR to be brought within one year after service of the complaint upon the petitioner. In conflict with congressional intent, the USPTO has substituted its own policy preference and directed the “discretionary denial” of timely-filed IPR petitions if the district court dockets an early trial date in a parallel infringement suit. This practice results in meritorious petitions being denied on specious grounds and adds cost, complexity, and uncertainty that Congress specifically sought to avoid by adopting a clear one-year time bar. Section 314(a) discretionary denials have grown exponentially over the past three years and routinely result in denial of timely-filed IPR petitions, leaving invalid patents in force to be litigated.
Two years ago, we wrote about the importance of IPR for small companies like App Association members and noted three U.S. Supreme Court (SCOTUS) cases challenging the constitutionality of the PTAB. Just recently, SCOTUS decided another case, United States v. Arthrex, that cut to the existence of the PTAB. Considering whether the PTAB’s structure violates the appointments clause of the Constitution, the Court decided that the Director (Presidentially nominated and Senate-confirmed) should have the power to review its decisions. And Congress is contemplating statutory updates to harden PTAB against future constitutional challenges. While they’re at it, legislators could do a few additional things to ameliorate USPTO’s slide away from protecting the strength of the patent system. First, it could reestablish Congress’ original intent in the AIA by requiring USPTO to institute proceedings that meet statutory standards and tie its denial discretion to these statutory grounds. This would put a stop to the recent spate of discretionary denials that PTAB probably lacks the authority to issue. Second, it could expand the narrow bases on which PTAB can invalidate weak patents. For example, legislation could enable PTAB to invalidate patent claims on the basis that they are vague, or cover matter the inventor did not invent, which PTAB currently lacks the authority to do. Third, legislation could clarify that the burden remains with the patent owner to show that claims amended during an IPR proceeding are, in fact, patentable. These are some examples of what Congress could do to restore and enhance the strength of the PTAB.