Patent Law Practice Center

Architect of America Invents Act announces retirement from House

Longtime Texas Representative Lamar Smith (R-TX), chairman of the House Committee on Science, Space, & Technology, will be retiring from his duties on Capitol Hill and will not seek reelection for another term of service. Smith, a former Chairman of the House Judiciary Committee and powerful member of the Republican leadership, will leave a void. His retirement marks the end of a 30-year tenure of public service and will immediately create a leadership void on the House committee responsible for overseeing our nation’s science and space policies.

Smith was first sworn into office at the U.S. House of Representatives in 1987 and has served the 21st congressional district of Texas, which includes areas of Austin and San Antonio and parts of the Texas Hill Country, since that time. During his time in Congress, Smith has been involved with the sponsorship of legislation related to technology including the Stop Online Piracy Act (SOPA) and the STEM Education Act of 2014. Many readers of this blog will recall that Smith was an original co-sponsor to the Leahy-Smith America Invents Act (AIA) of 2011, along with Democratic Representative Patrick Leahy (D-VT). That piece of legislation created the Patent Trial and Appeal Board (PTAB), an Article I executive branch tribunal which is being challenged on constitutional grounds before the U.S. Supreme Court in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC.

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PTAB ineffective at eliminating low-quality patents

Those who engage in patent assertion activity are not per se bad actors, or patent trolls, simply because they choose to exercise the exclusive rights granted by the federal government. In fact, the FTC recently acknowledged the term “patent troll” isn’t helpful. “In the Commission’s view, a label like ‘patent troll’ is unhelpful because it invites pre-judgment about the societal impact of patent assertion activity without an understanding of the underlying business model that fuels such activity,” the report reads.

Of course, it is true that the number of patent infringement lawsuits are up significantly compared to the 1980s. It is also true, however, that the increase in patent infringement lawsuits that came after passage of the America Invents Act (AIA) was deemed desirable by Congress. Indeed, it seems that Congress specifically envisioned more patent infringement cases (i.e., a higher volume) because they made the conscious choice to make it difficult (if not impossible) for patent owners to sue large numbers of infringers in the same lawsuit. Thus, the spike in cases that came after 2011 was an intentional feature of the AIA. Even that being the case, quarter after quarter we see patent litigation declining. See here, here and here, for example.

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USPTO seeks comment on post grant initiation pilot program

The United States Patent and Trademark Office (USPTO) has published a request for comments on a proposed pilot program pertaining to the institution and conduct of post grant administrative trials. The America Invents Act (AIA), which was signed into law on September 16, 2011, provides for the following post grant administrative trials: Inter Partes Review (IPR), Post-Grant Review (PGR), and Covered Business Method Review (CBM). These new administrative procedures became available on September 16, 2012, one year after the signing of the AIA.

The USPTO currently has a panel of three Administrative Patent Judges (APJs) determine whether to institute a trial, and then normally has the same panel conduct the trial, if a decision is made to institute a trial. The USPTO is now considering a pilot program where the determination of whether to institute an IPR would be made by a single APJ. If the decision is to institute a proceeding, two additional APJs would be assigned to the IPR, joining the APJ who decided to institute the trial. (more…)

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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