Addressing potential IPR abuses and hardships on the patent owner

Russ Slifer speaking at TPAC, June 10, 2016.

On Monday, March 20, 2017, I had the opportunity to go on the record with Russ Slifer, former Deputy Director of the United States Patent and Trademark Office during the Obama Administration. During Part 1 of our interview we discussed Slifer’s resignation and the mechanics of resigning from a political position at the end of a Presidential term. Below, in Part 2 of our 3 part interview, we discuss some of Slifer’s ideas for improving the IPR process and protecting patent owners from abuse or hardship, which include something akin to an interlocutory appeal to the Director for reconsideration of an IPR that has been instituted. We also discuss the 12 month versus 18 month statutory deadline to complete an IPR.  Slifer also compares and contrasts the difference between working for a major technology corporation as Chief Patent Counsel and working for the U.S. government. We also discuss the patent case that resulted in a six-figure damages verdict for Slifer in the Southern District of New York against Cantor Technology, a division of Cantor Fitzgerald & Co.

* * * * * * * * * *

QUINN: I think you had mentioned that you have some ideas and I don’t know whether you can give us a preview of those, but I’d be interested in hearing your ideas. And then, I suppose that you probably will still be engaged moving forward in whatever role you will have within the industry, is that correct?

SLIFER: Well, I hope – and to the later part of the question I certainly hope to continue to be involved with the future of patent law and policy and the operations of the agency in whatever way that I’m able to going forward. You know, to me – I’ll give you one example of something that I’ve suggested in the past and that would be a petition to the Director for reconsideration of institution. And as you know by statute the Director is tasked with making the institution decision on an IPR but that’s been delegated to the PTAB for obvious logistical reasons. There’s no way that the front office could read through all petitions and make a decision itself so it had to be delegated to the Board. But sometimes there are cases that probably should be reconsidered on whether institutions should have be made – and maybe it’s because the art that is relied on is the same or substantially the same as what was in prosecution. Or maybe there is a financial hardship of the patent owner or the IPR will not resolve all of the outstanding validity issues that are pending in a district court. So there could be certain categories of reasons that you could basically an interlocutory appeal to the Director for reconsideration. I think that is one way to help address some of the potential abuses or hardships on the patent owner if there’s been several IPRs that have been instituted against a patent from different parties. Right now the system does not allow for reconsideration once a decision has been made. That’s just one example.

QUINN: I think that would be a really good idea. I think the biggest criticisms that at least certain patent owners have is that the legislative history of the AIA made clear that there was going to be vested in the Director the authority to intervene if there was harassment of patent owners. And harassment maybe gets defined by different people in different ways,   so I don’t necessarily want to get into a discussion as to whether this was harassing or that harassing. But it’s my understanding that that authority of the Director to intervene has never been acted upon. And I think I understand that the Patent Office position has been that the Office doesn’t want to get involved with the Director putting her thumb on the scale. And while I understand that I do think that was a very important safeguard that was sold to the – maybe “sold” isn’t the right way, that’s the way I describe it, but sold to the patent owners. In any event, the AIA put those safeguards in place and if the Director doesn’t feel comfortable exercising that authority I do think that that authority has to rest somewhere within the Office whether it’s with petitions or somebody who has to be ability to protect patent owners who are being harassed. Because I think that there are some patent owners that have maybe a couple dozen patents and have been IRP-ed like three dozen – or more – times and it’s like well, okay, maybe they’re all legitimate but just on the face of it that seems like someone should look at what’s going on.

SLIFER: I concur. I think that there are other areas that could be improved. I’m happy to send you a list of some ideas that I’ve got by the way if you want me to.

QUINN: I think that would be great because I do think at some point in time over the next year or two, three whatever there is going to be an appetite to look at these issues. Don’t you agree?

SLIFER: I think so. I just don’t envision that Congress is going to get rid of IPRs or step into the middle of this. I don’t know what the appetite is for patent reform, I mean certainly there are pockets of strong interest but at the moment it seems like DC is quite busy with the new Administration and all of the issues that surround that. So it’s my personal belief that this is going to continue and if the improvements are going to be made the improvements need to be made through the patent office. And in cooperation with all of the stakeholders. Some of these suggestions to address abuse really shouldn’t be that controversial to either side. Putting in a fair system is what needs to be done and if you look at a district court it’s no different than there. Rules get amended and changed over time as litigation habits start forming and are shown to the courts that they’re abusive or that they’re not dealing with the parties properly and I think the PTAB is exactly the same. Over the course of several years these issues will continue to be addressed and corrected but unfortunately it takes time to address them, to identify the problems and then find the solutions and then see it actually starting to take effect.

QUINN: I’ll tell you another thing that has always bothered me and I don’t know whether you can shed any light on this but it seems to me that procedurally the rules are all about speed. And I get it. Congress put a timeline into the statute and it seems that whenever the folks from the Patent Office will defend the procedures they will always point to the timelines and the need for speed. The problem I have with that is the statute also gives an extra six months if it is deemed necessary. I forget the exact language but it’s something along the lines of necessary or justifiable.

SLIFER: Um-hmm (yes).

QUINN: And as far as I understand that has never been used. And here we are four and a half years later and if there’s so much concern about speed and some corners have to be cut along the way procedurally to achieve that speed, it would seem like there should be at least one out of these many thousands of examples where it would have been necessary to go at least a day into an extra six months. And it almost seems to me, and maybe this is where you can comment or shed some light if you can, that there is an aversion to go into that extra six months at all almost as if it’s like a badge of honor. Congress told us to do it and by god we’re going to do it without any need for extra time.

SLIFER: I can’t really address the motivation that was driving the adherence to the one year timeframe before I joined the office. So when the trials were – when PTAB was originally created and the trials began, certainly there were reasons for Congress setting the one year date. Perhaps I’ll speculate a little bit here both between Congress’ intent and of course President Obama wanting to speed decisions, both making decisions on pending patent applications by hiring more patent examiners all the way through to the PTAB. The administration wanted us to do our job and do it as efficiently and fast as possible so that we could resolve any issues that are effecting business so that the business climate in the U.S. could improve. Adhering to that 12 months was important for judicial efficiency also, if we have stays granted in district court proceedings, and courts are making those stay decisions based upon the belief that the PTO will be done within 12 months. I would just say one of the suggestions that I have is to begin extending the duration of IPRs into that 18 months where it serves the interest of justice and due process. And get away from the belief that 100% of the cases have to be concluded in that 12 month time period. And that’s just moving the agency into the direction where they believe that’s not going to be counter to the stakeholder’s desires or what the PTO is doing.

QUINN: That seems like that would be a pretty big mindset change at the Patent Office.

SLIFER: It’s somewhat a mindset change – it’s not that hard to change, if the PTAB were instructed to start using that 18 months more then they would start using it more. But it’s also – let me spin off tangentially for a second into patent operations. There are metrics that the Secretary of Commerce and that the White House basically expect you to meet. For example, there was a strong push to bring the examination pendency down and backlog of patent applications to a certain level by a certain time. And that drives the hiring decisions at the agency and changing those metrics are not the easiest thing to do especially toward the end of an Administration. And the same thing would go with the PTAB. I’m not saying that the Administration or the White House is saying you can’t go beyond 12 months but they have expectations and see how the agency’s performing and, you know, any organization whether it’s a corporation or the patent office is going to lay out some metrics and measure yourself by it and all the employees are going to drive towards those metrics. And so, if the PTAB lays out that it wants to have these trials done in 12 months everybody’s going to drive toward it. If you tell them that you can deviate from that then we’d see a change.

QUINN: Yes. I think that they would probably embrace that, but then the question I suppose becomes you’ve got to make sure you don’t use it so much that it becomes the rule because obviously that’s not supposed to be the rule.

SLIFER: Exactly.

QUINN: So all these things come with challenges. Let me pivot again. You were chief patent counsel for Micron before you went to the Patent Office, correct?

SLIFER: That’s right, yes.

QUINN: One of the questions I definitely wanted to ask you, and it comes to mind here because we’re talking about the mindset at the Patent Office and how you get things done and we’ve talked about Federal Register notices and just government time to even accomplish anything. Was this what you expected when you were asked to do it? Or was it different and if it was different how was it different?

SLIFER: Well, it certainly was different than I expected. I had never worked in the government before I had the opportunity to join the patent office. And I started working as the director of the Rocky Mountain Office in Denver when we opened that regional office. But shortly after that Michelle was nominated by the President for Director and she was looking to put together a list of possible deputies and we were having a conversation and I basically threw my name in the hat and wanted to be considered for that role. She was really looking for a deputy to roll up his sleeves and be involved in the operations of the agency, which was something that I’ve done most of my career and something that I was interested in. So I knew going into the role that I would be able to work on some operational areas but didn’t quite expect the extent because I’d never managed an agency, or a team of that magnitude before. I wanted to be involved in our patent quality improvements because it’s an area that’s always been near and dear to me. So it was different. It was extremely rewarding. It’s the best job I’ve ever had. And I looked forward to getting up and walking over to the office every day and just working with the team to see what we could do to improve both the agency and improve the experience for the employees in the agency and improve the operation of the agency, and improve what we were doing for the stakeholders and the inventors and for businesses in both trademarks and patents. So it was more than I expected and I really did enjoy it.

QUINN: That’s great to hear. You know, I’ve heard that from others who have been Director or Deputy Director, that it was one of the most rewarding jobs they’ve ever had if not the most rewarding job they’ve ever had. But I guess the follow up question would be is from a process standpoint was it frustrating? I mean is it easier to get things done in government or is it easier to get things done in the private sector? And I recognize that saying that probably sounds pretty silly, but you had risen to a level Chief Patent Counsel so a lot of decisions are on your desk are yours to make and you can implement them and you don’t have to have a committee meeting. Obviously there’s a whole bunch of things that you can just get done right away. But then there’s also a whole lot of things, perhaps decisions of a strategic nature, that you have to go through a whole lot of different hoops in order to move forward with. So can you give us a little compare and contrast?

SLIFER: I can try. Certainly government is different than the private sector. I mean, if a CEO of a company made a decision then immediately that decision takes effect and moves along. And that happens at the PTO far more than you probably or the public recognizes on a day-do-day basis. I mean, everything from – there are all of the different business units at the PTO and the different regional offices. There’s a lot of administrative decisions that have to be made every day and those administrative decisions aren’t necessarily run through Commerce or anything like that, they’re expected to be dealt with at the agency level. There are decisions that affect the public and that we have to publish a federal notice or go through another agency to get permission, if you will, from them such as the fee increases. There are things that you have to work through with Commerce like their shared services initiative and charges through the Working Capital account. Working with the Inspector General on their investigations and what they want to see done and then there is Congress. So there are a lot of other players that are impacting the decision perhaps more so than you would see in the private sector. But in the private sector of course you’ve got customers, you’ve got oversights also, you’ve got regulatory issues, SEC and others. So there’s always – regardless of what industry you’re in or government there are external forces that have to be considered in making decisions. The PTO has three labor unions so you want to take that into account when you’re making decisions and work closely in partnership with those unions to make sure that decisions that you’re making don’t surprise them and don’t treat the employees unfairly. So it is more complex. But the PTO is actually running very smoothly.

QUINN: Okay. That’s fair enough. It’s a complex situation. There are always external forces at play that you have to think about. People think you work for yourself and you do but that just means that you work for yourself and a whole bunch of bosses in the form of customers or clients. So it’s different. So before I let you go the one other thing I definitely ask you about is the patent case that you were involved in because that came to a head shortly after you left the agency I guess, or was it right before you left? It was right in around that timeframe I think.

SLIFER: You know, it’s been transpiring since 2013. And it’s more of a contract case than it was a patent case. It’s a contract over a patent. So a patent that I was the inventor on I had sold back in 2008 and we had a dispute in 2013 over payment of that contract. Which unfortunately I was forced to file a lawsuit in the southern district of New York and litigate for the last two years. And we did have a jury trial in January right before my resignation. We had a five day jury trial in New York and the jury came back and agreed with me on both counts of liability. So it’s just one of those things in business where you have a dispute and it’s funny because even though I view myself as pretty sophisticated in IP, putting that contract together and trying to do the right things sometimes it goes awry and I guess it really helped me understand even better the challenges that an independent inventor or a small startup are going to face when they’re trying to do the right thing and enter into a contract. And if they’re selling their asset what they might have to face down the road just trying to enforce that contract. So the case isn’t resolved at the moment. We had the jury decision and now we’re into the post-trial motions and waiting for a decision from the court on equity. In the meantime, the defendant has been asserting the patent in district court litigation so it is kind of a tangled web right now but.

QUINN: Okay, well, yeah, I won’t ask you any more about that just because the case is still ongoing. But I know some people have noticed that you were involved in that so I just wanted to find out what I could.

SLIFER: Sure.

CLICK HERE to CONTINUE READING… Up next is a brief discussion of Anthony Scardino taking over as Acting Deputy Director, and then some fun questions that let us get to know Slifer a bit more, ranging from hobbies, to music, movies and history.