Tech Companies Sue Patent Office To Restore Patent Review Process
TLDR: A lawsuit filed yesterday against the U.S. Patent and Trademark Office by four tech companies seeks to restore review procedures that enhance patent quality and combat abusive litigation brought by so-called “patent trolls.” If successful, the case would restore inter partes review (IPR), a process that makes it easier for startups to push back against frivolous lawsuits brought by patent trolls.
What’s Happening This Week: Google, Intel, Cisco, and Apple filed a complaint against the U.S. Patent and Trademark Office (PTO) yesterday challenging recent PTO decisions that have restricted access to patent review procedures and improperly shielded low-quality patents from cancellation. If successful, the case could restore balance to the patent system, improve quality, and save startups from increases in abusive litigation.
For years patent assertion entities, or so-called “patent trolls,” have abused the patent system. Patent trolls do not develop new technologies or make products. They merely purchase patents—often low-quality patents that the PTO should not have granted in the first place—and use them to extract settlements from U.S. innovators, manufacturers, and small businesses. Startups were—and still are—a prime target for patent trolls looking for a quick settlement.
Congress understood the problems caused by patent trolls, and after years of negotiation and with broad bipartisan support, created inter partes review (IPR) in 2011. In IPR, patent-specialist judges take a “second look” at low-quality patents and cancel invalid ones. IPRs cost an order of magnitude less than federal court cases, and—by reducing the costs of challenging low-quality patents—have leveled the playing field in litigation and curbed abusive practices. Many startups cannot assume the costs and risks of defending against even a frivolous patent case. IPR opened a more accessible alternative for startups to fight back against patent trolls.
Why it Matters to Startups: For nearly a decade, IPR had proven successful for startups. As yesterday’s lawsuit correctly notes, low-quality patents threaten innovation, and “IPR has served to enhance the U.S. patent system and strengthen U.S. technology and innovation by weeding out thousands of invalid patent claims.” And until recently, rates of patent troll-related litigation had been on the decline, startups reported seeing fewer abusive patent demands, and the overall health of the startup ecosystem reached new highs.
But the PTO has been quietly dismantling IPR over the past few years, with policies and decisions that leave invalid patents in force. For example, the PTO is increasingly exercising its discretion to deny IPR petitions, shielding low-quality patents from cancellation. Instead of looking at the merits, assessing whether a patent should be cancelled, the PTO has found excuses to avoid scrutinizing many patents. Yesterday’s complaint details how these decisions have “undermine[d] the purpose of IPR as a streamlined and specialized alternative to litigation over patent validity.” And the end result is that more low-quality patents have survived to be used as a threat against more startups.
Indeed, at the same time these recent PTO policies took root, we have seen a stark increase in patent troll litigation. In the first half of 2020, patent troll-related litigation increased 30 percent compared to 2019. And in one district in Texas, patent litigation has increased over 300 percent this year. Through recent PTO decisions, patent trolls have found ways to IPR-proof their patents, allowing them to continue asserting low-quality patents in court.
If successful, the lawsuit filed yesterday would restore IPR as a viable mechanism for challenging low-quality patents, as Congress intended. The four companies who brought the suit ask the district court to set aside recent PTO decisions that have undercut IPR. And likewise, with IPR restored, startups would have renewed access to this more affordable defense, could expect to see fewer abusive patent demands, and would be able to continue focusing on innovation instead of wasting time and money on patent trolls.
On the Horizon.
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