USPTO Withdrawals Support for Telebrands at CAFC, Actively Considering PTAB Practice

A little over a month into his term as Director of the United States Patent and Trademark Office, new USPTO Director Andrei Iancu, has signaled he is taking potentially significant steps to reconsider and reenvision post grant proceedings conducted by the Patent Trial and Appeal Board (PTAB).

We have chronicled the legal battles between Josh Malone, the inventor of Bunch-o-Balloons, and Telebrands Corporation, the power behind As Seen on TV. Malone, through his company Tinnus Enterprises, has created one of the most popular new toys on the market in years. Using Malone’s innovation it is possible to fill 100 water balloons in under 60 seconds. The invention works like a charm, and it flies off the shelves of big-box retailers like Costco, who during the warm weather months prominently display Bunch-o-Balloons at the entrance.

Telebrands, a company with a reputation within the industry for making knock-offs of successful products without regard to the existence of proprietary rights, has lost repeatedly in federal district court to Tinnus, and has lost at the United States Court of Appeals for the Federal Circuit. Indeed, every judge and every jury that has decided cases in this ongoing battle have ruled for Tinnus.

Not surprisingly, when not in front of federal judges and juries, Telebrands has faired better (i.e., at the Patent Trial and Appeal Board). Notwithstanding Telebrands successes at the PTAB, this week the PTAB published final written decisions (here and here) upholding claims from two of Tinnus’ patents — U.S. Patent No. 9,242,749 and U.S. Patent No. 9,315,282 — the same patents that a federal jury found infringed and which lead to an awarded of $12.4 million in damages last November. These decisions represent a rare case where the PTAB agreed with a jury, which ought to really give Telebrands pause.

But what really ought to give Telebrands pause is the fact that they have lost the support of the USPTO at the United States Court of Appeals for the Federal Circuit.

On August 29, 2017, the United States Patent and Trademark Office filed a brief at the Federal Circuit as an Intervenor in PGR2015-00018, arguing on the side of the PGR petitioner Telebrands. While it was disappointing to see the USPTO side with an entity with a reputation for making money knocking-off proprietary products, it was not particularly surprising given how the USPTO has since at least 2012 favored those challenging patents rather than standing behind the patents that have been duly issued by patent examiners.

Notwithstanding, earlier today USPTO Solicitor Nathan Kelley filed a motion with the Federal Circuit seeking to withdraw from the appeal in PGR2015-00018. Substantively the motion reads:

The Director of the U.S. Patent and Trademark Office (“USPTO”) respectfully requests to withdraw as an Intervenor in this appeal and further requests that the brief filed by the Director in this appeal be withdrawn. The USPTO stands by the position that the indefiniteness approach advocated in our brief is correct in the context of examination. But because the PTAB’s approach to claim construction and indefiniteness during post-issuance proceedings under the America Invents Act is something the agency is actively considering, the Director has decided not to advocate for a particular approach in this appeal.

The approach to indefiniteness mentioned above is a reference to the fact that the USPTO does not follow the Supreme Court’s most recent pronouncement on determining indefiniteness in Nautilus, Inc. v. Biosig Instruments, Inc. Instead, the PTAB explained that they believed that the proper test for indefiniteness remained the test outlined by the Federal Circuit in In re Packard, which was decided prior to the Supreme Court’s Nautilus decision. The PTAB has also issued a precedential decision in Ex parte McAward, which explains that the USPTO does not follow the Nautilus decision, but rather believes Nauitilus is the proper standard during litigation, not examination.

Director Iancu is known to be engaging in something that might be called a listening tour, speaking with various interested parties and groups as he attempts to formulate his own strategies and anticipated rulemaking efforts. It is widely expected by insiders that Iancu will bring change to PTAB proceedings in an effort to realize a more balanced procedure; perhaps even sweeping change. That the USPTO is now openly announcing that they are actively reconsidering the PTAB’s approach to claim construction and indefiniteness should be welcome news to all inventors.

How far will Director Iancu go to reconstitute PTAB proceedings? Time will tell. Nevertheless, it is worth noting that up to this point the America Invents Act (AIA), which created the PTAB and post grant administrative trials, has only been administered and interpreted under a single Administration — the Obama Administration. With Director Iancu in place it will be interesting to see what the patent system will become as it begins to be molded by President Trump’s point man on innovation policy. I’m betting we see something rather different than experienced during the Obama Administration, specifically something quite different from the patent system that evolved during President Obama’s second term.

Stay tuned!


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Join the Discussion

8 comments so far.

  • [Avatar for Joachim Martillo]
    Joachim Martillo
    March 31, 2018 09:44 pm

    BTW, the reference to 5 CFR 1201.34 was mistaken in comment #6, and I meant 35 USC § 326 in comment #7. When I study a lot of material in a short time period, it takes a while to get all the references straight in my mind.

  • [Avatar for Joachim Martillo]
    Joachim Martillo
    March 31, 2018 07:23 am

    The USPTO stands by the position that the indefiniteness approach advocated in our brief is correct in the context of examination.

    If the PTAB had correctly applied BRI, the PTAB would have found in favor of Tinnus. The PTAB found in favor of Telebrands not on the basis of any correct indefiniteness analysis but on the basis of linguistic chicanery, which is commonly known in legal circles as pettifogging or shyster-lawyering. Other applicable terms are quodlibet or pilpul.

    No linguistics expert was involved in the proceedings. The expertise of the Telebrands’ expert lies in the rheology of granular solids — a field that was completely irrelevant. Without expert analysis of the grammar and semantics issues, there was no particularly reason to adjudicate in favor either of the petitioner or of the patent owner.

    The statute (35 USC § 316) is precise in this situation.

    (e)Evidentiary Standards.—

    In a post-grant review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.

    The PTAB should have judged all the patent claims to be valid.

    I can only conclude that the APJs were either incompetent (and should be terminated), corrupt (and should be facing indictment), or directed perhaps by other APJs in shadow packing of the panel (and therefore unethical practitioners, who should be at least stripped of USPTO registration).

    [I argue in USPTO’s New Motto: “You Innovate – We Expropriate!” that a coffee shop barista, who routinely filled coffee cups, i.e., containers for liquid, would have had an intuitive grasp of the phrase “substantially filled” and far more relevant expertise than the Telebrands’ expert.]

  • [Avatar for Joachim Martillo]
    Joachim Martillo
    March 30, 2018 11:31 am

    Both the PTAB’s final written decision and also Matal’s intervenor brief in the Telebrands v Tinnus PGR were ridiculous and worthy of total scorn.

    USPTO’s New Motto: “You Innovate – We Expropriate!”

    35 U.S.C. § 143 and 5 CFR 1201.34 permit the Director to intervene on behalf of the patent owner.

    The Director should now request leave to file on Tinnus’ behalf. The policy grounds are simple. The CAFC must cease deferring to the USPTO until the USPTO is cleansed of corruption.

    I now have evidence of APJs, who lie in their written decisions. In post-grant review proceedings, the PTAB is not performing any reasonable gatekeeper function with respect to expert testimony or expert reports.

    Yet the CAFC believes that the USPTO has a right to its own experts, and the CAFC defers to USPTO’s experts on the basis of that alleged right even when the expert to which the USPTO or PTAB is giving credence is a clown as was the case in the Telebrands v Tinnus PGR.

    I have evidence the USPTO Solicitor is coaxing its experts to provide expert testimony and expert reports not on the basis of expertise but in conformance to the desired opinions and conclusions of the USPTO Solicitor.

    Such coaxing seems extremely close to a violation of 18 U.S. Code § 1622 – Subornation of perjury.

    Please correct me if I am wrong. IANAL.

  • [Avatar for Gene Quinn]
    Gene Quinn
    March 30, 2018 10:59 am

    I want to echo the comments of Bemused. One of the most frustrating things is knowing about inventors getting screwed and not being able to tell the stories. It is really impossible to tell the story without the cooperation of the inventor or their legal representative, or at least to tell the story in a way that does justice to the injustice that is occurring. And I don’t know how many times I’ve heard terrible stories and then asked not to write about them because the inventor is in litigation or at the PTAB or wants to stay under the radar. We are never going to write something that violates a trust, just not our style. But it does get frustrating. There are many other Josh Malone’s out there.

    One of the refrains I hear with some frequency is this: No one ever questions the rulings of the PTAB, just the process, so what’s the harm in the end? It is odd to hear an attorney say that because if the process is so screwed up how can you have any confidence in the end result? In any event, I know there are decisions that are just flat wrong. An MRI machine is not abstract, for example. With the way the USPTO virtually hides its decisions and makes it impossible to search in any useful way we really need the power of the industry to identify not only the procedurally unfair, but the factually wrong.

  • [Avatar for Bemused]
    March 30, 2018 09:00 am

    There’s a larger lesson here for all of us: When Tinnus Enterprises was getting screwed at the PTAB, Mr. Malone did not “go quietly into the night.” Instead, he got very vocal and very visible in the patent and political world: Constantly posting stories about what his company was going through and getting articles published in the mainstream media and on this blog (thank you again Gene for providing all patent holders such a highly regarded and well-read forum for this purpose).

    While I can’t say for certain that their is a direct link between Mr. Malone unceasingly shining the light on the PTAB abuse he was going through and this recent move by Director Iancu, I would bet a lot of money that the USPTO management had come to the conclusion that the more they messed with Mr. Malone the more this negative media blitz would increase.

    Many posters on this blog have (rightfully) claimed that the PTAB cannot be “fixed” because as an administrative entity it is subject to shifting political winds. Let’s use that infirmity to our advantage. If Director Iancu is serious about fixing the PTAB (fingers and toes crossed), now is the time to take a page out of the Josh Malone play-book and heavily publicize any PTAB misdeeds that you or your client are being subjected to (hat’s off to Michael Shore for already doing that and quite well too).

    Submit a story on PTAB shenanigans to this blog (or, at a minimum, contact Gene Quinn or Steve Brachmann to see if they’ll write an article about your PTAB battle); contribute to US Inventor (which is funded solely by contributions); do something! Between a new director at the USPTO and with the constitutionality of the AIA hanging in the balance at SCOTUS, now (more than ever) is the time to act.

  • [Avatar for JPM]
    March 30, 2018 08:08 am

    It looks like things may finally be going in the right direction for inventors and other patent owners.

  • [Avatar for Name withheld to protect the innocent]
    Name withheld to protect the innocent
    March 29, 2018 06:34 pm

    Notwithstanding, earlier today USPTO Solicitor Nathan Kelley filed a motion with the Federal Circuit seeking to withdraw from the appeal in PGR2015-00018.
    That must have been hard for him to swallow.

  • [Avatar for Paul Morinville]
    Paul Morinville
    March 29, 2018 06:32 pm

    This may be light at the end of the tunnel. Finally. Now for Alice.