The U.S. Patent and Trademark Office, the federal agency charged with securing certain intellectual property, has become an enemy of America’s inventors.
How is it that an office charged with protecting innovation is now subverting it?
In 2011, Congress passed the America Invents Act. This far-reaching law included a number of provisions harmful to IP rights.
Perhaps the worst of the bunch was the establishment of new administrative procedures for challenging a patent’s validity. The abuse of this system has now reached epidemic proportions. It’s time for Congress to step back in and restore integrity to the patent system.
The new administrative process for challenges to existing patents, known as inter partes review, centers on a review by the Patent Trial and Appeal Board, which proponents sold as a faster, cheaper alternative than taking patent challenges to court. The trouble is that Patent Trial and Appeal Board proceedings are wildly unbalanced in favor of patent challengers.
Federal court procedures provide a balanced, fair process and operate on a presumption that the patent, having been duly granted after review by the Patent and Trademark Office, is valid. Yet the inter partes review procedures at the Patent Trial and Appeal Board, as one commenter put it, “are plagued by what in any other forum would be considered to be ‘procedural irregularity.'”
First, anybody may file a Patent Trial and Appeal Board challenge. There are no requirements of standing. This has enabled speculators, such as hedge funds that have no interest in the patent or the invention, to short the stock of a patent owner, then file for review simply to make a profit on the devalued stock.
Second, the Patent Trial and Appeal Board sets a low standard of proof, so petitioners can easily wipe out someone’s property rights. This differs significantly from the tougher standards that apply in federal courts.
Finally, there’s no protection of a challenged patent from “double jeopardy.” At the Patent Trial and Appeal Board, a patent may be challenged again and again, rehashing the same patent claims over and over. Thus, a patent owner may face a never-ending battle over the validity of the patent.
The same patent can face a challenge in both the Patent Trial and Appeal Board and federal district court. Mortifying as it is, a federal court’s decision to uphold a patent doesn’t preclude the Patent Trial and Appeal Board from instituting a proceeding on the same patent — or even from overruling the court.
At the end of the day, should the patent owner prevail, the victory consists entirely of the right to keep the patent — no damages or expenses for all the trouble of an invalid challenge. Only now, precious time has been lost on the patent term, so there’s less opportunity to gain from it.
What has the Patent Trial and Appeal Board regime led to, besides a clear and present danger to secure private property rights? More than one in three patents hauled into inter partes review has faced more than one request for review. Companies whose business centers on intellectual property frequently find themselves facing one or several inter partes review actions each time they seek to defend their patent rights.
The inter partes review process invalidates an incredible 76 percent of the patent claims challenged. In contrast, district courts toss out 30 percent of challenged claims. Such uncertainty over IP rights has devalued patents by two-thirds since the AIA became law. There is also evidence that investment in higher-value, sophisticated inventions is drying up.
Thankfully, bipartisan legislation would address many of the excesses of the Patent Trial and Appeal Board regime. The STRONGER Patents Act brings the balance and fairness of the federal courts to administrative challenges to patents.
The purpose of a patent is to secure a private property right. Chief Justice John Marshall, in 1813, said “vested in the inventor, from the moment of discovery,” is “indefeasible property in the thing discovered.” The U.S. Supreme Court ruled in 1898 that an issued patent “has become the property of the patentee, and as such is entitled to the same legal protection as other property.”
Nobody but lawyers likes expensive litigation. But if something is important and entails high stakes — for example, billions of R&D dollars, years of trial and error, and the potential revocation of someone’s property rights — the proceedings making the determination between disputing parties must be fair. As it currently operates, the Patent Trial and Appeal Board regime isn’t.
James Edwards is executive director of Conservatives for Property Rights and advises Eagle Forum Education and Legal Defense Fund on patent issues.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.