Vidal’s Open Invitation to Extortionists is Not Helping the PTAB’s Perception Problem

The Patent Trial and Appeal Board (PTAB) has a well-earned and perfectly appropriate problem with perception, and U.S. Patent and Trademark Office (USPTO) Director Kathi Vidal seems to be doing her level best to make that problem of perception even worse. It isn’t bad enough that petitioners do not owe the PTAB or the Office itself a duty of candor, but now they can stay in a case as a petitioner even if they are found to have engaged in extortion.

There has long been a systemic bias against patent owners, who have for many years suffered through lengthy examinations of their innovations. But ever since former PTAB Chief Judge James Smith embraced the moniker of “patent death squad” as a badge of honor, the PTAB has suffered from a perception problem, and really now lacks all credibility. Whether that is due to patents enjoying a presumption of validity everywhere except in proceedings at the agency that awarded the patent; whether it is the fact that a former Administrative Patent Judge ruled on dozens of IPRs in favor of a former client;  whether it is because the Office purposefully mischaracterizes its statistics by counting a settlement as a victory for the patent owner since the claim hasn’t been invalidated (just hopelessly compromised once instituted and forced to suffer the indignity of the PTAB concluding the claims are likely invalid); whether it is the reality that the PTAB is more than twice as likely to invalidate claims as obvious than a district court; whether for years patent owners were not allowed to submit evidence of any kind to challenge the propriety of institution; or whether it is because there is never any end to the number of IPR challenges a single patent can face, leaving patent owners to conclude that the process isn’t over until they lose—the reason doesn’t really matter anymore.

Indeed, there is so much systemically wrong with the PTAB because of the statute that created a system that was never legitimately intended to be a litigation alternative. Of course, that was the plan—IPR is a litigation alternative was the message from advocates and Members of Congress, but that was fiction from the very beginning. IPR was not designed to be an alternative to litigation, with  burdens and standards intentionally different compared to litigation, all for the purpose making it easier for patents to be invalidated at the PTAB. And then there are the regulations that at nearly every turn prioritize speed to the detriment of anything that approximates due process for a property right owner, or APJ biases because they know they were hired to get rid of bad patents—whatever that means. And with all of this perception problem comes the reality that the largest filers of IPRs are not constricted by finances and have the financial resources to challenge any patent they choose, while many innovators are cash strapped and must win every challenge, nearly prohibitively raising the cost of patent acquisition, because after all you never really have perfected the patent if a mega-giant multinational corporation simply refuses to pay for their implementation of it.

A New Era of Errors

But even with all the well-deserved perception problems that have plagued the PTAB since the very beginning, none are as egregious as the unforced errors Director Vidal is making relating to OpenSky, a party she found was engaged in extortion.

Director Vidal promised to sanction OpenSky “to the fullest extent” of her power because “OpenSky’s conduct evinces a singular focus on using the AIA proceeding to extort money, from any party willing to pay, and at the expense of the adversarial nature of AIA proceedings.” But like Jason of Friday the 13^th fame, OpenSky is resurrected, and reinstated, after having suffered only modest financial penalty.

Those familiar with Director Vidal’s October 2022 ruling will recall that Vidal decided to continue to allow OpenSky to nominally remain in the IPR as a “silent understudy” in the inter partes review that they filed, and without the ability to file any papers or really participate as a party. Then, on December 22, she dismissed OpenSky from the IPR altogether, “to ensure that OpenSky does not benefit from its abuse of the IPR process.”

On February 3, 2023, however, Director Vidal reversed her previous ruling without any explanation and OpenSky is again a full-fledged participant in the IPR they filed against VLSI.

It was wrong for Director Vidal to allow the VLSI IPR to continue where OpenSky engaged in extortion and the only remaining party—Intel—was time barred and could not have filed an IPR on the patents themselves. It is recklessly foolish to an entirely new level to restore OpenSky as a party, and without any explanation. It is as if the public and the parties don’t deserve an explanation as to why OpenSky is back, put in a position to again wreak havoc, but this time presumably much wiser. Indeed, like every good horror movie with a villain that simply won’t ever die, there was not even an attempt to justify the absurdity. OpenSky is restored to the status of petitioner—no explanation needed. The best Director Vidal mustered was to merely state that she previously dismissed OpenSky pending issuing sanctions, and now she vacates that decision, which restores OpenSky as a petitioner.

It’s Official: Extortion Pays at the PTAB

It is true that Director Vidal has now sanctioned OpenSky by ordering them to pay a small subset of VLSI’s attorney’s fees, but the inescapable conclusion is that extortion pays, and the next time petitioners and their attorneys won’t be so stupid as to put the extortion scheme in writing together with a promise to throw the case if they are paid.

After promising sanctions to the fullest extent possible, which would have been to dismiss the IPR entirely, the culmination of this too-bizarre-to-imagine scenario is that there really was very little penalty for engaging in extortion at the PTAB. All OpenSky must pay are the reasonable attorney’s fees incurred by VLSI to raise the issue of OpenSky’s misconduct, which Vidal previously found to be the act of extortion, and the reasonable attorney’s fees for the Director review process in its entirety.

What about all the other attorney’s fees VLSI has been subjected to as the result of a petition that was the foundation of extortion? And what about the risk of VLSI losing its patents—patents the district court has already found to be infringed and that have survived all challenges at the district court?

I suppose one benefit of this ridiculous escapade is the realization that Fintiv discretionary denials are dead. After all, the entire premise of denying an IPR in reliance on the trial date set by the district court was because the PTAB wouldn’t be able to reach a decision before the district court ruled. Here, however, we do not have to wonder what the district court may eventually rule, because the district court trial is already over, and VLSI has won and its patents remain intact. Still, the PTAB will continue to adjudicate patents already adjudicated in federal district court on a petition filed by a party Director Vidal found to be engaging in extortion, not to mention fraud on the Office itself.

The Next Extortionist Will Be Smarter

Given the upside potential associated with PTAB subterfuge, the next party that will use an IPR as part of an extortion ploy will simply not put anything in writing. Without anything in writing there won’t be any evidence of the extortion, and the system is simply not set up to believe the patent owner. Of course, this isn’t to suggest—apparently—that extortion is particularly wrong, given the party who engaged in extortion remains in the IPR and is now in the same position as they were before this charade in the first place.

Image Source: Deposit Photos
Image ID: 85666208
Author: gustavofrazao