Has the PTAB compromised the integrity of the patent system?

uspto-building-angle-335 copyWhen President Obama signed the America Invents Act (AIA) into law over five years ago the U.S. embarked upon the most radical overhaul of the patent laws in the nation’s history. Much time was spent debating and ink spilled analyzing the largely philosophical move from first to invent to first to file, the unnecessary dismantling of the grace-period, and the fact that for the first time foreign filed patent applications can be prior art as of their foreign filing dates. Without any doubt the most monumental change was the introduction of three new post grant proceedings that allow for challengers to strip property rights from owners through an Article II tribunal rather than in an Article III court that makes up our independent federal judiciary.

While checks and balances have been turned on their head, and the agency tasked with issuing patents has also been striping those property rights at alarmingly high levels, an interesting question needs to be asked. Has the United States Patent and Trademark Office (USPTO), and in particular USPTO Director Michelle Lee, been following the law?

According to 35 U.S.C. 316(b), the regulations relating to the conduct of inter partes review (IPR) must take into consideration the effect on the economy, the integrity of the patent system, and the efficient administration of the Patent Office. The statute reads:

In prescribing regulations under this section, the Director shall consider the effect of any such regulation on the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings instituted under this chapter.

Although the Patent Office prefers to promote misleading statistics that erroneously suggest that the impact of IPR has been minimal, the truth on the ground in the real world is quite different. The way the Patent Office manages to convolute reality is by the unbelievably disingenuous assertion that claims not subject to a final written decision of the Patent Trial and Appeal Board (PTAB) remain patentable, which represents a win for the patent owner. But claims not subject to a final written decision can be challenged again because there is no estoppel, and those claims continue to have hang over their head a decision of the PTAB finding them likely invalid.


When the Office finds it necessary to paint a misleading picture in order to attempt to convince the public and popular press that things are not as bad as patent owners say they are how is the integrity of the patent system anything other than compromised?

Further, According to 35 U.S.C. 315(d), the Director has the authority to intervene and stop the harassing filing of inter partes review challenges. In relevant part, 315(d) says:

[D]uring the pendency of an inter partes review, if another proceeding or matter involving the patent is before the Office, the Director may determine the manner in which the inter partes review or other proceeding or matter may proceed, including providing for stay, transfer, consolidation, or termination of any such matter or proceeding.

In a 2015 Report to Congress titled Study and Report on the Implementation of the Leahy-Smith America Invents Act by the USPTO, the Office acknowledged this power to prevent harassment, explaining:

To protect parties from harassment, the AIA required the USPTO to establish regulations prescribing sanctions for abuse of discovery, abuse of process, and any other improper use of the proceeding. Further, the AIA protects patent owners from unwarranted multiple proceedings by providing that the Director may take into account whether the same or substantially same prior art or arguments previously were presented to the USPTO, and may reject the petition on that basis.

On multiple occasions Director Lee has been asked to exercise this authority, but has not yet found a single case where it would be warranted. This may lead the uninformed to erroneously conclude that there has yet to be any evidence of harassing filings, but that is simply not true. There are certain patent owners that face number post grant challenges, particular IPRs. In some cases the same patent will be challenged multiple times, by multiple challengers.

The truth is simple. Certain patent owners are being harassed; their patents – sometimes the same patents – are challenged repeatedly. Yet, Director Lee has not exercised her authority to say “enough.” It seems abundantly clear what is going on. If you are one of several disfavored patent owners you are almost certainly not going to receive a fair procedural shake at the Patent Office. Every courtesy and benefit will be extended to the challenger, including serial challengers. The patent or patents that took you upwards of 10 years to obtain at a cost of $50,000 to $100,000 will be presumed invalid by the agency that issued them. If this does not call into question the integrity of the patent system what ever could? See How the AIA requires the USPTO to be an arms dealer.

What a complete and utter waste of resources, both by the agency and by the private sector, to have to spend 10 years to obtain a patent on a cutting edge technology only to have that valuable property right wind up being stripped away by a panel of Administrative Law Judges without even a pretense of procedural fairness or due process. The Federal Circuit seems to have finally grown tired of the abused of the PTAB, ruling that certain decisions are arbitrary and capricious (e.g. PTAB arbitrary and capricious in denying motion to amend). Truthfully, many of the procedural decisions have been arbitrary and capricious, but to satisfy that legal standard is virtually impossible and should speak volumes about how much of a run-away tribunal the PTAB has become.

At what point in time does expediency so compromise the fairness of the outcome that something must be done? This question is one that the Patent Office, and in particular Director Lee, must be asking. Unfortunately, there seems to be little evidence that fairness considerations, or the impact post grant review as it is currently configured are having on the integrity of the patent system.

316(b) commands the Director to consider efficiency, but efficiency without fundamental fairness has always been unconstitutional. We simultaneously laugh and cringe when we hear the famous line from just about every Western movie – you know the one where the crowd yells: “Hang him!” The Sheriff replies: “No. We are going to give him a fair trial and then we are going to hang him!” Welcome to the PTAB where they seem to wear the moniker of “death panel” as a badge of honor because, after all, that is what they think the AIA commanded them to do to patents. Indeed, they have become the grim reaper of patents.


Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com.

Join the Discussion

14 comments so far.

  • [Avatar for Bruce Bent II]
    Bruce Bent II
    November 8, 2016 07:46 pm

    Rock on Gene!

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    November 2, 2016 07:17 pm

    Further to my point above about sanctions in IPRs for things like misrepresenting real parties in interest, this is an IPO CLE program announcement:
    ” Ethics in AIA Post-Grant Proceedings at the PTAB Thursday, 10 November, 2:00pm to 3:00pm ET
    In its amendments to the Rules of Practice for Trials earlier this year, the PTAB stiffened the rules concerning the duty of candor for attorneys who practice before the Board and set forth the process and conditions under which it will impose sanctions. The PTAB runs a tight ship: in the handful of years that the PTAB has held IPR and CBM trials under the AIA, it has already sua sponte sanctioned several petitioners and patent owners or their counsel.”

  • [Avatar for Anon]
    November 1, 2016 07:57 pm

    Endless mere grousing or fantasies that IPRs are going to somehow just go away with some kind of constitutional or other challenge [which has failed] is not helping any patent owners.

    In your dreams, Mr. Morgan. May I point you to some explicit words in several recent IPR appeals cases that may help you drop your rather inane anti-constitutional argument position…?

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    November 1, 2016 04:47 pm

    “Patent investor:” Thank you for some interesting specific examples.
    Also, from Wikipedia: “Since 2010, VirnetX has been in litigation with companies including Apple, Cisco, and Microsoft.[4] Separately, in December 2014, Microsoft and VirnetX settled patent disputes over Skype technology for $23 million.[5] In their Apple case, VirnetX worked together with SAIC,[6] and was awarded $368 million in damages for FaceTime infringement.[7] That ruling was partially vacated on 8/19/2014, but two patents were confirmed to be infringed by the United States Court of Appeals for the Federal Circuit.[8] ”
    Thus, this no small underfunded company being picked on that cannot afford opposing IPR petitions to prevent an IPR from even being instituted, leaving claims unchallenged except in court. They have apparently been quite successful both at doing that and at obtaining very large patent litigation recoveries. [The cost of opposing an IPR petition is less than a week of litigation billings for that kind of high stakes patent litigation in big suits for very large sums.]
    Furthermore, if any of the subject IPR petitioners were lying in denying that Apple is the real party in interest [as I understood you to be suggesting?], then even if the limited discovery provided in an IPR itself does not flush that out, the far broader discovery allowed in parallel D.C. litigation should, and any attorneys involved will be in serious trouble.
    But as previously noted if the patents are that broadly applicable it would not be surprising that several companies would be concerned enough to try to file their own IPR petitions independently. That is no more illegal or surprising than more than one threatened company filing declaratory judgement suits against the same patents, and IPRs are far cheaper.
    If there is something going on in IPRs that needs fixing, then please propose, via the AIPLA or IPO, specific PTO rule changes that might help. Endless mere grousing or fantasies that IPRs are going to somehow just go away with some kind of constitutional or other challenge [which has failed] is not helping any patent owners.
    The only even potentially successful IPR legal challenge to date out of numerous attempts is the Fed. Cir. taking en banc the subject of IPR claim amendments. But that is greatly overrated in potential. For one thing, the amended claims will be subject to the statutory intervening rights provision.

  • [Avatar for Pro Se]
    Pro Se
    November 1, 2016 03:58 pm

    The PTAB judges were accurate with 3 IPR institution denials I won, but 1 petition was time barred, but considered anyway. My motion for sanction due to frivolous argument was denied submission. The entities that lost miserably on IPR explained they will next attempt CBM under 101/112 when none of the patents ever received this rejection in prosecution. A 4th IPR I have pushed a comical position filled with false statements, but there are no sanctions and the OED brushed me off…

    And the good part is in district court, they can all motion to have the PTAB results omitted from a jury when it doesn’t go their way, but yet they all push for stays based on the benefit of someone else IPR filing.

    It takes accuracy in facts to get a patent, and only good storytelling in a petition to take them away.

  • [Avatar for Patent Investor]
    Patent Investor
    November 1, 2016 02:20 pm

    Paul F. Morgan,

    Look for small companies that had the audacity to sue Apple. Case in point, VirnetX. Patent #6502135, IPRs have been filed by 1) Apple (time barred), 2) New Bay Capital, LLC (a three month old company with no other obvious business purpose), 3) RPX Corporation (RPX denied any Real Party of Interest issues regarding Apple, VirnetX filed for additional discovery which showed Apple was an RPI and the IPRs were dismissed), 4) Microsoft (due to lawsuit since settled, Apple joined and was then removed due to the settlement), 5) The Mangrove Partners Master Fund (a hedge fund that has not filed an IPR except against VirnetX’s patents and has since become co-mingled with RPX, no additional discovery was allowed). Patent #7418504, same history as the ‘135 except remove Mangrove and add Black Swamp IP, LLC (another no business start up (where do Mangroves grow? Black Swamps, you can’t make this stuff up). Patent #7490151, all of the above. Patent #7921211, all but Mangrove. These four patents are all involved in an unsettled lawsuit which Apple has taken through the CAFC, where the patents were confirmed as not invalid.

    VirnetX’s patents for which Apple has filed IPRs that are not involved in any current litigation include, #7188180, #8504697, #8051181 (these three were originally in litigation then removed), #7987274, #8458341, #8504696, #8516131, #8560705, #8843643, #8850009, #8868705, and #8904516.

    Grand total of 66 IPRs the little guy had to pay to defend.

    The RPX/Apple misrepresentations of no RPI seem almost fraudulent to me and there was email metadata that proved it false. The lack of discovery allowed in the Mangrove/Black Swamp IPRs is almost comical in light of the RPX/Apple rulings. A large number of these patents have gone before the same panel (Siu, Easthom ,and Tierney, none of which has any expertise in the field) and many other panels include, at least, Easthom. And as might be expected in this saga, the patents are not doing well at the PTO.

    As a final note, of the four patents in suit, there have been 31 IPRs terminated/denied, two Final Written Decisions, and two are currently Instituted. This certainly helps pad the PTAB’s stats while most likely gutting all four patents.

  • [Avatar for Curious]
    November 1, 2016 01:33 pm

    that could not have reasonably been found earlier
    Who wants to take a bet as to how liberal the Federal Circuit will construe that clause?

    where the patent owner had filed patent suits against multiple different defendants, and their respective attorneys failed to cooperate on a single IPR
    Perhaps they cooperated and chose to have the single patent owner defend multiple suits instead of a single suit.

    If Small is suing Big, why would Big team up to save Small the cost of defending multiple IPRs? It is hard enough for Small to find an attorney to sue Big and to defend even a single IPR.

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    November 1, 2016 10:34 am

    This is a serious charge, with no actual evidence or statistics, and no cite to anyone even attempting to challenge for abuse of discretion a repeat IPR on the same claims. If it is true then it ought to be documented and addressed.
    The IPR estoppel statute does not allow the same party or any privy thereof to bring a new IPR against the same patent unless it is for new prior art that could not have reasonably been found earlier. Thus, the only repeat IPR’s I have seen filed against the same patent are where the patent owner had filed patent suits against multiple different defendants, and their respective attorneys failed to cooperate on a single IPR, since each separate defendant is entitled to its own defense unless the D.C. judge induces better cooperation. In some cases the PTAB has combined or joined IPRs by different parties on the same patent. Also, the PTAB has refused to initiate further IPRs on the same patent where the first IPR held the claims to be patentable and the prior art submitted for a second IPR is not any better. If they are not doing so regularly that should indeed be pointed out and addressed.

  • [Avatar for Night Writer]
    Night Writer
    November 1, 2016 09:05 am

    To the article, I absolutely agree that the IPRs need to be refined.

  • [Avatar for Valuationguy]
    November 1, 2016 08:39 am

    Bravo Gene on this article…which hits directly at an issue which the PTO Director has pointedly ignored.

    Unfortunately….Ms Lee is so compromised…that you article won’t provide any benefit while she remains in place. Hopefully it will inform the NEXT Director of the PTO.

  • [Avatar for Peter Ryan brady]
    Peter Ryan brady
    November 1, 2016 08:17 am

    Perfect analysis of current conditions. Current horrific conditions.
    Nicely done.

  • [Avatar for Night Writer]
    Night Writer
    November 1, 2016 07:48 am

    @2, I think that this blog has posted a couple of articles of optimism regarding HRC and patents. I don’t think that is going to happen. I think there are some things we can do to help mitigate the damage, but we need to be realistic for what is coming. Lemley will probably move into the Oval Office.

  • [Avatar for Eric Berend]
    Eric Berend
    November 1, 2016 05:43 am

    The compact of exchanging the value of a temporary market making advantage for disclosure to the public domain, of a property that the Constitution says is mine the moment I complete its invention; as originally wrought by several of the Founding Fathers; has been broken, perhaps irreparably so.

    As far as Alphabet/Google goes, they have become the China of domestic U.S. corporations: it dares claim for itself, entitlement to any technology; however created, in the world today; for free.

    “Don’t be evil!” Uh-huh. Careful now, don’t read the liar’s lips.

  • [Avatar for Night Writer]
    Night Writer
    October 31, 2016 09:55 pm

    OT, but did you see the wikileaks about Google and Clinton? It is certain that Clinton will be implement Google’s policy goals of weakening the patent system, which, by the way, is self-interested. As if Google’s “Moon-Shot” team is all we need in innovation.