Making Post Grant Extremely Expensive for Challengers

The America Invents Act (AIA) created three new ways to challenge the validity of claims in already-issued patents. The AIA was signed into law on September 16, 2011, but the new post grant proceedings did not become available until one year after the signing, on September 16, 2012. These three new post grant proceedings are post-grant review, inter partes review, and covered business method review (the latter a variety of post-grant review that is limited to business methods relating to the financial industry).

Inter partes review has been extraordinarily popular due to the fact that the rules are stacked in favor of the challenger. Indeed, recently, Scott McKeown (a partner at Oblon Spivak and co-chair of the Oblon post grant practice group) wrote on his blog that the Patent Trial and Appeals Board (PTAB) “offers unprecedented speed with none of the patentee safeguards of the district court.” The biggest safeguard that a patentee enjoys at the district court is a presumption of validity. The presumption of validity does not attach in a post grant administrative proceeding. That’s a significant benefit to the challenger.

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The Cost of NPE Litigation

Written by James Bessen, Boston University School of Law, and Research on Innovation, and Michael J. Meurer, Boston University School of Law.

The America Invents Act requires the GAO to “conduct a study of the consequences of litigation by non-practicing entities… and assess [t]he economic impact of such litigation on the economy of the United States ….” Although we found it hard to get very excited about the smorgasbord of patent reforms bundled together in the AIA, this provision made us smile, and feel a little bit hopeful. Perhaps this signals a growing taste on the part of Congress for evidence over anecdote as the basis for patent policy-making. We’ve recently conducted two empirical studies of NPE patent litigation which we hope will prove useful to the GAO and other policy-makers.

One study, The Direct Costs from NPE Disputes, estimates the costs of NPE assertions based on a survey of defendant firms. We find that the aggregate accrued payments for outside counsel, licenses, and other direct payments to resolve patent disputes are large and growing rapidly; they totaled $29 billion in 2011, up from $6.5 billion in 2005.

The other study, The Private and Social Costs of Patent Trolls, estimates the cost of NPE litigation based on stock market reaction to the filing of lawsuits. We find that the filing of NPE patent lawsuits is associated with an $80 billion average annual loss of share value for defendant firms over the years 2006-2010. The higher costs in the second study are not surprising because rational investors take account of the direct costs enumerated above and also indirect costs such as business disruptions arising because researchers’ and managers’ attention is diverted from productive activity to litigation related issues, delays in product development and new product introductions caused by litigation concerns, and costs arising from litigation worries that spill over to suppliers and customers.

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Next Wave of AIA on Patent Exam Starting Oct. 2, 2012

By now you have certainly heard about the most revolutionary change to the U.S. patent laws since at least 1952, and most likely since the inception of the first patent laws in the U.S. in 1790.  The America Invents Act (AIA) is poised to change patent practice from the ground up.  The bill was signed into law by President Obama on September 16, 2011, and some minor provisions went effective immediately, or nearly immediately.

The next wave of changes comes online on September 16, 2012, and the United States Patent and Trademark Office is feverishly working on multiple final rules packages that will be required for the implementation of that next wave of changes.  So far, the only one that has been released is the final rules package relative to third-party submissions of prior art during prosecution. See USPTO Publishes Final Rule on Preissuance Submissions.

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USPTO Plans National Roadshow on AIA Implementation

The United States Patent and Trademark Office will once again take to the road in the Fall of 2012 to discuss implementation of the America Invents Act (AIA). The USPTO is planning to host eight (8) roadshows during September 2012 to share information about new final rules implementing provisions of the America Invents Act that become effective on September 16, 2012. The Roadshows are free and open to the public, and pre-registration is not required. Nevertheless, seating will be limited and is available only on a first-come, first-served basis. The USPTO has posted the agenda
for these Roadshows on their website.

The USPTO will webcast the roadshows during the first week (from Minneapolis, Alexandria, and Los Angeles) and post videos of those events on the micro-site. Copies of any written materials will also be made available on the USPTO micro-site devoted to the AIA Roadshows.
While attorneys are certainly invited to attend these Roadshow presentations, no CLE credit is available for attending any Roadshow event.

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Patent Practitioners: You Are Free to Move About the Country

On November 29, 2011, the United States Patent and Trademark Office (USPTO) published a notice in the Federal Register requesting comments on where they should locate the additional satellite Patent Offices authorized by the America Invents Act (AIA).

Earlier today, Acting Secretary of Commerce Rebecca Blank and USPTO Director David Kappos announced three new locations for satellite Patent Offices, which will join the Detroit Patent Office scheduled to open just days from now, on July 13, 2012. The winners in the satellite Patent Office sweepstakes were San Jose, California; Denver, Colorado; and Dallas, Texas.

“By expanding our operation outside of the Washington metropolitan area for the first time in our agency’s 200-plus year history, we are taking unprecedented steps to recruit a diverse range of talented technical experts, creating new opportunities across the American workforce,” said David Kappos, Director of the USPTO. “These efforts, in conjunction with our ongoing implementation of the America Invents Act, are improving the effectiveness of our IP system, and breathing new life into the innovation ecosystem.”

The locations selected by the USPTO and Department of Commerce are hardly shocking, and certainly should help the Patent Office recruit high-caliber patent examiners and others who might not be willing to relocate to the Northern Virginia area, or commute there periodically as they work primarily from home.

All three of these locations were on my Top 10 List of possible locations published in December 2011 — sort of.

It was easy to predict that there would be a location in Northern California in or around Silicon Valley, which was my #1 of 10. Describing this no-brainer selection, the USPTO explained:

Silicon Valley provides the USPTO with a pacific time zone hub in the heart of California’s most vibrant innovation center. Silicon Valley, and the areas that surround it, contain many of the USPTO’s top filers as well as legions of start-up and small tech companies that depend on the USPTO. Further, Silicon Valley’s great quality of life and abundant population of engineering talent will provide fertile recruiting grounds for the Agency.

Similarly, Denver was easy to guess because back when the Detroit Satellite Office was announced, there were very disappointed people in Denver who had either been lead to believe they would get the location, or convinced themselves of that fact. I had Denver at #6 of 10. In explaining the selection of Denver, the USPTO explained:

The Denver area provides the USPTO with a mountain time zone hub from which to operate. Empirical evidence demonstrates that Denver is a sought-after place to live and work with relatively low cost-of-living—a critical combination for the recruitment and retention of top talent. Further, the economic impact of a USPTO satellite office in the Denver region is projected to be disproportionate relative to most other cities. Denver also boasts an above average population of potential Veteran employees.

The one that I sort of got right was Dallas. I had “Houston or somewhere in Texas” as #9 of 10. Given the importance of energy technologies for our nation’s future, a location in the heart of American energy country makes perfect sense. With a low tax burden, growing economy and numerous world-class Universities, Texas seemed to be a sure-win, and I would have put it higher on the list if there had been a true, clear-cut city as a front-runner.

The USPTO said this of their Dallas selection:

The Dallas area provides the USPTO with a southern, central time zone hub from which to operate. The region is exceedingly rich in engineering talent, patent applicants, and patent grants. Dallas boasts an above average population of potential Veteran employees.

The Patent Office could easily also have made a case for Houston, Dallas, San Antonio or Austin, but placing the satellite office more inland from the threat of adverse weather seems wise, as does putting it near a major airport.

So now the United States Patent and Trademark Office is going to be a truly National Patent Office. The headquarters will remain in Alexandria, Virginia (of course) and there will be another location in the Eastern Time Zone, but substantially north, in Detroit. There will now be Patent Office satellites in each time zone in the lower 48 — Central (Dallas), Mountain (Denver) and Pacific (San Jose).

I wouldn’t hold my breath for an Alaskan Satellite location, but members of various USPTO oversight committees could perhaps, down the road, be persuaded that a satellite location in Hawaii would make sense. While it would make for a very nice junket, it would also make a USPTO location more convenient to Asia, which is certainly a big USPTO constituency given the amount of filings from overseas. But that is almost certainly just wishful thinking on my part, the same way it was when I added Orange County, California to my top 10 list. How great would it have been for a satellite office in Laguna Beach, Newport Beach or Huntington Beach? Even Irvine or Costa Mesa! Oh well. I suppose that is what vacations are for.

Patent attorneys, patent agents and would-be patent examiners — in the words of Southwest Airlines, “you are now free to move about the country.” See Registration No. 2927614.