Some Small Entities Agree with Big Tech on PTAB Institution Rules: Congress Must Address Why

“Some small entities mirror Big Tech and foreign entities’ comments arguing that PTAB institution rules should not change at all. To the casual observer it is certainly confusing. But to those who have tried to launch a tech company in a market saturated by a handful of huge Big Tech monopolies, it is easy to understand.”

https://depositphotos.com/31248541/stock-photo-opinion-business-concept.htmlHistorically, startups bring more new technologies to market and create more new jobs than any other entity type. Investment is critical to any startup, and patents are often the only asset a startup owns to attract that investment. Patents are thus incredibly important for American economic growth and national security.

To risk investing in a startup, early stage investors must believe that their patents will keep big competitors at bay long enough for the startup to get a toehold in the market. If big competitors steal the technology anyway, the investor must believe that defending a patent is reasonable in cost and effort, and the outcome is predictable. Otherwise, investors will put their money elsewhere, thereby starving early stage startups of capital and limiting competition, slowing innovation, and fueling monopolization by incumbents.

The First Two-Hundred Years

For the first 220 years of American innovation, patents easily attracted investment. Based largely on patents, Edison built what became GE, Bell built a telephone company and Google built their search engine. Edison even sold rights to future patents that he had not yet invented.

While patents are critical to early stage investment, business models (sometimes called business methods) are also key to driving innovation. In the 1980s, a startup named Compaq outdid IBM for the PC by driving down prices. Then selling online, Dell outdid Compaq, Micron, Gateway, Apple and many other PC makers. Microsoft outdid all operating systems, becoming a monopolistic juggernaut, and then leveraged their monopoly to steal the market for web browsers, video players and many other technologies. In the 2000s, a startup named Google outdid Microsoft, Motorola, and many others, capturing the phone operating system market by leveraging the market power of their search engine. Only Apple survived the Android onslaught.

In American innovation, startups proliferate around a new technology or business models to challenge incumbents. The proliferation of startups proliferates a multitude of variations. As the market establishes, it consolidates into a few major players through mergers, acquisitions and weak player deaths. This competition in a free market spurs tremendous innovation.

Today, Big Tech Crushes Competition

However, in the last 15 years, there have been few, if any, challengers to Big Tech monopolies.

This damage to American innovation was levied by Big Tech lobbying that weakened patent rights for small competitors, raised taxes on small entities while lowering their own taxes, created laws to shield them from lawsuits, and much more. The result is that Big Tech has captured and privatized huge markets. These markets are magnitudes larger than any markets in history. Big Tech now crushes competition by leveraging these markets against small entrants. They are now monopolies yielding enormous power.

Like a sovereign nation, Big Tech has assumed sovereign power over these markets, including restricting access and forming their own quasi patent systems. Anyone wishing to participate does so at the pleasure of Big Tech. This is enormous leverage over the small entities who rely completely on Big Tech market access for their businesses. If they offend the pleasure of Big Tech, they lose access and lose their business.

Patents were once a bulwark against Big Tech monopolization, but a trifecta of significant changes to patent law allowed Big Tech to capture huge markets perpetuating their monopolies, and enabling them to take sovereign control over these markets.

The trifecta began in 2006 with eBay v. MercExchange, which eliminated injunctive relief. That means if your technology is stolen by Big Tech, or even a phone app on a Big Tech market, you cannot stop them. This insulates Big Tech and those on their markets from the U.S. patent system. Investors know it, so most will not invest in startups competing directly with Big Tech or one of their market participants.

Then in 2013 and 2014, the trifecta was completed with the double whammy of the America Invents Act’s creation of the Patent Trial and Appeal Board (PTAB), which kills 84% of the patents it reviews; and the Supreme Court’s radical interpretation of the word “any” in Section 101 to have an undefined exception called the “abstract idea”, which now kills over 65% of challenged patents.

This trifecta destroyed patent protection for virtually all tech inventions in the hands of a startup. You can’t stop an infringer and if you try, your patent will be invalidated, and you will pay millions for the privilege to try.

Today, patent litigation is a game of big numbers and big money. Only huge patent portfolios owned by very rich entities and corporations can be enforced, while a patent in the hands of a startup is a liability. This has killed tech startups in the cradle by encouraging rampant infringement.

With no startups challenging Big Tech for their core technologies (who also have the advantage of enforcing their own patents), Big Tech monopolized.

Steps to Stabilization

USPTO Director Iancu appears to understand the inequity posed by Big Tech monopolies and has taken steps to correct what he can. First, he established new USPTO guidance attempting to define the undefinable “abstract idea” under Section 101.

And recently, the USPTO requested comments on the rules that guide the decision to institute a PTAB procedure.

If the abstract idea is defined and PTAB institution rates are reduced, there will be fewer invalidated patents. This would help stabilize the patent system and thereby improve investment in early stage startups with technologies that challenge the dominance of Big Tech. In the end, Big Tech’s hold on their captured markets and their monopolies would be broken. America would once again have free markets and tech innovation would increase.

In the comments on PTAB institution rules, it is understandable that Big Tech (here, here, here) and foreign entities (here, here) promote high PTAB institution rates including multiple attacks. After all, high PTAB institution rates mean more invalidated patents. While high PTAB institution rates significantly harm American innovation, it helps Big Tech and foreign entities.

It is not surprising that most small entities believe that the institution rules are unfair and should be reined in because it denies due process and takes property; they allow unending serial attacks; they deny adjudication in an Article III court even when the case is pending; they prohibitively raise costs and years to patent litigation; the PTAB invalidates 84% of the patents it reviews; and in the end, the rules make it difficult, if not impossible, to fund a startup that challenges Big Tech.

A Seeming Contradiction Explained

What is surprising is that not all small entities agree. Some small entities mirror Big Tech and foreign entities’ comments arguing that institution rules should not change at all. They want the mess to stay the same.

To the casual observer it is certainly confusing. But to those who have tried to launch a tech company in a market saturated by a handful of huge Big Tech monopolies, it is easy to understand.

The key to understanding this contradiction is in the business models. The operating environment of the market is, for many, completely controlled by Big Tech. Big Tech monopolies restrict access to their huge markets and protect those on the markets using a quasi-patent system. One advantage is that small entities selling on these markets do not need the U.S. patent system – they get one from Big Tech. Neither Big Tech nor the phone app companies find the U.S. patent system useful. In fact, it is a threat to their business models.

When you read the comments to the USPTO request for comments, almost uniformly, the small entities that argue to keep institution rates high are phone app companies or companies that leverage Big Tech markets in some other way to sell their products. They do the bidding of Big Tech in most cases willingly because they benefit from it in the operating environment created by Big Tech.

However, certainly there are those who disagree with the party line. But they can’t say it publicly because if they step out of line, Big Tech can remove them from their markets, which means the death of their company. Even if Big Tech does not explicitly threaten these companies, it is certainly implied. Many companies have been ejected from Big Tech markets for reasons unknown because they are hidden behind nondisclosure agreements signed to join a market and enforced when the company is removed.

Those who commented in the USPTO request for comments to limit PTAB institution decisions largely do not participate in Big Tech markets. Many do not have tech products and others have technologies that compete with Big Tech core technologies.

Congress Must Step In

The USPTO and Congress must seek to understand how the different business models perceive the value of the U.S. patent system and why this forms their contradictory opinions.

The USPTO and Congress must decide what is best for America – is it better for American innovation to encourage quasi-sovereign Big Tech monopolies with absolute control over the largest markets ever created? Or is it better to recreate free markets that are accessible by anyone without control by Big Tech monopolies?

America needs the latter, which is easily accomplished by reversing the trifecta that destroyed the patent system for small entities. Patents would once again earn injunctive relief and would not be easy to invalidate nor prohibitively costly to defend. Small entities could challenge Big Tech in a free market and break up their monopolies. American innovation would again rule the world.

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Author: tashatuvangoAuthor tashatuvango
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15 comments so far.

  • [Avatar for Brad A Baker]
    Brad A Baker
    January 30, 2021 09:56 pm

    I get a little heated when I hear the defenders of our patent system. Obviously a person that either is involved in the fraud or has never experienced what it is like to have your source code stolen and used presently by Apple. Multiple Law firms in Dallas exporting IP like it’s theirs to do so. Then turning around and suing American company’s and hiding behind shell company’s in name only and nothing is being done. The real tragic part is the foreign countries do not have to steal our IP it’s for sale. It’s not hard to look at the US and figure out where the you can really make an impact on taking our most valuable assets. The people who control it are perfect for this mission because the only thing that matters is them. Don’t worry about the lives and families you have crippled for years to come. The years of life they have stolen. The awards in some cases are a joke. Dallas Texas is the worst place in the U S for a small inventor to find a Practitioner. If you do and your customer number is 25883 you just went to the graveyard of inventors. How the USPTO allows this and they do is unreal. So when you want to make an argument of fairness you are the lucky one I guess. Respectfully
    Brad A Baker

  • [Avatar for Anon]
    Anon
    December 19, 2020 11:25 am

    TFCFM,

    Your answer has its limitations IN our constitutional republic.

    I have pointed this out to you in the past (with your desire to go PAST the limits of our constitutional republic and elevate Common Law law writing powers to the judiciary that are just not there).

    Your admonition of “The USPTO employs fallible human beings” is easily extended to the Supreme Court (and thus the reason why OUR constitutional republic has such concepts of “a government of limited powers” and “Separation of Powers.”

  • [Avatar for TFCFM]
    TFCFM
    December 17, 2020 10:51 am

    Jacek@#12: “WHO is the authority to decide which patent is garbage and which one is valid?

    In our constitutional republic, the answer to that question is “Whomever Congress appoints to decide such issues.”

    Congress has appointed at least the federal court system, the PTAB, and the USPTO, with specified hierarchy, jurisdictions, and systems for appeal.

    The USPTO employs fallible human beings, as do we all.

  • [Avatar for Jacek]
    Jacek
    December 16, 2020 11:49 am

    “folks having valid patents have nothing to fear and much
    to gain from PTAB proceedings. It is folks attempting to use garbage patents to “take hostages” that threaten small businesses.”

    Of course
    Inventors have “Nothing to Fear” after their patents are executed by PTAB death Squad. It is too late to do anything and

    There is significant GAIN. Now you may sleep well. There is nothing more to lose, no more dealing with PTAB. The highway robbery already occurred. Now be happy and start again.

    And WHO is the authority to decide which patent is garbage and which one is valid? Of course, TFCFM. Apparently, USPTO employs only idiots who do not know what they DO.

  • [Avatar for TFCFM]
    TFCFM
    December 16, 2020 09:33 am

    PM@#10: “You provided no example of a PTAB petitioner because there are no small entities challenging patents at the PTAB.

    Your article proposes that small businesses like PTAB procedures because they “do the bidding of Big Tech.” That is simply false and is the issue I dispute.

    Small businesses favor PTAB proceedings for the reasons I touched upon (relatively quicker and less expensive than district court proceedings, with well-qualified folks deciding issues (rather than non-expert district court judges and sometimes-idiot jurors). Not because small businesses universally seek to “do the bidding of Big Tech.”

    Furthermore, regardless of the reasons small businesses like PTAB proceedings, folks having valid patents have nothing to fear and much to gain from PTAB proceedings. It is folks attempting to use garbage patents to “take hostages” that threaten small businesses.

    Reasons for seeking to limit PTAB proceedings are

    – to prolong the lifespan of garbage patents (and the period of time they can be held over the head of small businesses);

    – to make challenges to garbage patents so expensive and risky that small businesses cannot rely upon them;

    – to make it more likely that non-expert judges and juries will “take that Patent Office’s word for it” and decline to invalidate invalid patents.

    No one is fooled by garbage-patent-blackmailers’ arguments to the contrary.

    If anything, “Big Tech” can resist hostage-taking efforts far more easily than small businesses can. That “Big Tech” chooses to take advantage of PTAB procedures that significantly protect small businesses is not the least bit surprising, given the greater economy, efficiency, and validity-parsing features of those PTAB proceedings.

  • [Avatar for Paul Morinville]
    Paul Morinville
    December 15, 2020 09:58 pm

    TFCFM, You provided no example of a PTAB petitioner because there are no small entities challenging patents at the PTAB.

    But you argue that they are.

    I am impressed at your ability to lie and then attempt to cover the lie with new lies so eloquently.

    What is there to fear if your small business is attacked by a PTAB troll? Loss of the patent. Loss of investors. Loss of your company, career and income.

    Those are things that folks like you have no experience in. You live in a world of minimal risk doing day to day legal work. Nobody threatens to invalidate your law license in an administrative tribunal of fake judges with no experience in law who are incented to invalidate it.

    But that is the world of early stage tech companies.

  • [Avatar for TFCFM]
    TFCFM
    December 15, 2020 10:39 am

    Curious@#6: “You are your comments are derided here because you are an unrepentant shill for big-tech who shows no concern for the patent rights of small companies.

    I never fail to be amused by the ways in which the insecure project their fears onto all who disagree with them. I have no connection with “Big Tech” (and believe that most of their patented “inventions” are as garbage-y as most of the patents that get challenged in the software/doing-stuff-using-a-computer “arts”).

    I deride scoundrels who seek to profit from patent office shortcomings in issuing invalid patents in these fields. It is such scoundrels who deride PTAB proceedings. Holders of valid, defensible patents have no more to fear from PTAB proceedings than they do from prolonged trial proceedings. Holders of garbage patents, by contrast, have much to fear from a potentially quick, inexpensive release of hostages.

  • [Avatar for TFCFM]
    TFCFM
    December 15, 2020 10:31 am

    PM@#2: “You claim that small entities file PTAB procedures. That is a false and ignorant argument. The vast majority are filed by Big Tech and big corporations…

    The majority of virtually everything at patent offices are filed by larger entities. That is the nature of patent practice.

    The fact that large entities can take advantage of the same procedures as can smaller entities is meaningless. Folks having valid patents have nothing to fear (and everything to gain, estoppel-wise) from having their patents tested quickly before the PTAB.

    The fact remains that PTAB procedures are far more economical an escape from garbage patents than full trials. That large companies recognize this economy every bit as much as small ones is utterly unsurprising.

    The fact that the alternative is economy and efficiency is not a convincing argument for sanctioning hostage-taking and blackmail.

  • [Avatar for Pro Say]
    Pro Say
    December 14, 2020 08:34 pm

    Thanks Paul — a clear-eyed explication of how bad things are, how they got this bad, and what needs to be done to restore America to its former World-leading innovation perch.

    “Stakeholder compromise?”

    Pe-shaw. As I’ve pointed out previously, when one compromises with the devil (in this case Big Tech) . . . the only one who benefits . . . is the devil.

    What is needed is not “compromise,” but restoration.

    Merely, and simply, a return to the way things were.

    Then, and only then, will American innovation once again flourish.

  • [Avatar for Curious]
    Curious
    December 14, 2020 04:56 pm

    when the asserted patent is the sort of garbage which is commonly and easily obtained merely by fooling a gullible patent examiner
    LOL … your ignorance of patent prosecution in these arts is astounding. Patents in this art are rarely easily obtained. The examiners how long been trained to reject, reject, reject … regardless of the merits.

    In the absence or efficient PTAB resolution, getting sued by a patentee — meritlessly or not — means many hundreds of thousands of dollars of expense and years of uncertainty.
    It is no cheap affair for the patent holder either. Regardless, there are other inexpensive avenues open to patent owners who want to challenge a patent, such as an ex parte appeal.

    The problem with the current PTAB system is that it is rife for abuse … by the big infringers, and there is no mechanism to stop that abuse. A patent holder can be subjected to serial challenges … the winning of which by a patentee merely subjects the patentee to another potential round of challenges. A patent holder doesn’t “win” at the PTAB — at best, they don’t lose.

    If someone is frivolously sued in district court by a patentee for patent infringement, there are financial remedies (i.e., Rule 11 sanctions) that can help make an alleged infringer whole. There is no such guiderail available with the current PTAB system.

    The PTAB isn’t the only solution to help someone getting sued for infringement. On the other hand, there are no other options for someone whose patent is getting infringed aside from a lawsuit in court. For this reason, the PTAB should be subject to greater scrutiny as to its potential to being abused.

    We all agree that someone who is getting unfairly sued should have a remedy available to them. However, I cannot remember you ever recognizing to plight of small patent holders who are being subject to abuse based upon how the current PTAB system has been set up.

    Compromise arises when one puts oneself in his/her opponents shoes and recognizes their concerns. However, I cannot ever recall when you (or the high-tech oligopolies you seemingly represent) have recognized the concerns of small patent holders.

    There was recent article that quoted Senator Tillis as stating Section 101 patent eligibility law “stalled because stakeholders refused to compromise. They let the great and perfect get in the way of the good.” My response then as it is now is that the efficient infringer stakeholders have no reason to compromise. The likes of Facebook and Google already have their ideal situation. They get to own intellectual property (which they can assert against others) but they can easily destroy the intellectual property of others.

    You are your comments are derided here because you are an unrepentant shill for big-tech who shows no concern for the patent rights of small companies.

  • [Avatar for Jacek]
    Jacek
    December 14, 2020 04:32 pm

    “when the asserted patent is the sort of garbage which is commonly and easily obtained merely by fooling a gullible patent examiner, ”

    Everybody is an IDIOT except the WISE man “TFCFM ” without enough courage to disclose his name.

  • [Avatar for Reginald D Chatman]
    Reginald D Chatman
    December 14, 2020 02:39 pm

    Okay start the depositing processes$$

  • [Avatar for Reginald D Chatman]
    Reginald D Chatman
    December 14, 2020 02:38 pm

    What is the world coming to Watch Dog,Will this case ever end,and why am I Struggling and they are living the Good Life off My Contents,Whatever happen to one Nation under God and Justice and Justice for all!! Are you saying they can still your copy and property rights at will Because they are ABOVE THE LAW!!

  • [Avatar for Paul Morinville]
    Paul Morinville
    December 14, 2020 11:34 am

    TFCFM, You claim that small entities file PTAB procedures. That is a false and ignorant argument. The vast majority are filed by Big Tech and big corporations against small entities, making the PTAB primarily a Big Tech killing field.

    It is not used for protection by small entities who are accused of patent infringement. The number of small entities filing PTABs is minuscule at best.

    Perhaps you can shore up your argument by posting a PTAB filing filed by a small entity.

    Prove your case.

  • [Avatar for TFCFM]
    TFCFM
    December 14, 2020 09:55 am

    Article: “Some small entities mirror Big Tech and foreign entities’ comments arguing that institution rules should not change at all…To the casual observer it is certainly confusing.

    Allow me to cut through the pretended-“confusion.”

    Patents aren’t asserted ONLY against “Big Tech;” they are asserted against all kinds of entities — including small and start-up businesses.

    In the absence or efficient PTAB resolution, getting sued by a patentee — meritlessly or not — means many hundreds of thousands of dollars of expense and years of uncertainty. These are not terribly amenable to operating a small or start-up business.

    Where one genuinely infringes a valid patent, this is fair enough — that’s why we have a patent system. However, when the asserted patent is the sort of garbage which is commonly and easily obtained merely by fooling a gullible patent examiner, the costs and uncertainty can be the utterly unjustifiable death of a small business, even when the meritlessness of the suit is reasonably apparent to patent professionals (try getting investors to pour in $$$ based on a lawyer saying, “take my word for it…”).

    The current PTAB system does a good job of knocking over garbage patents — at relatively low cost and on a reasonably quick schedule. This saves many of the small and start-up businesses that our valiant author pretends to champion.