We Need a More Permanent Solution to Inter Partes Review Overreach

U.S. Patent and Trademark Office (USPTO) Director John Squires stated in his Senate confirmation hearing last year that “with born strong patents and robust quality marks we can reclaim America’s primacy, revitalize industry and growth, proudly export our culture, boost national security and improve our lives.” If the goal is to have “born strong patents”, we must be honest about what is born with patents and what is not. For instance, a credible mark of novelty is born with every patent—that much is clear. However, novelty is not just technical newness—it is also market impression. If novelty were only technical newness, people would own patents without their technology ever being used in the market. There would be no point to the patent system. This means that the rest of patents—their assertion power, damages recovery power, term limitation, claim bundling provision, inter partes review (IPR) fee requirement, and more—must also be part of the birth. This is how to create born strong patents.

Two Big Steps Forward

Recently, the USPTO has taken two steps to help inventors. One step addresses claim bundling by accounting for market impression, while another addresses IPR overreach without accounting for market impression. While both steps should be applauded by inventors, only the step that accounts for market impression has the potential to survive different administrations. In a recent article, I discussed how the USPTO’s Streamlined Claim Set Pilot Program offers an incentive to inventors who filed patent applications with one independent claim and ten or fewer total claims. Inventions that do not leave a significant impression on the market do not need large numbers of claims. Here, the USPTO has begun to recognize a right to have an exact number of claims, rather than forcing inventors into the 3/20 bundle. This step has staying power.

On the other hand, several months ago Director Squires issued an open letter to colleagues, inventors, and Americans, in which he reclaimed his statutory role to institute IPR and post grant review (PGR). He invoked 35 U.S.C. § 314, which provides that the “Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition…shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” The Director’s move here is a great one for inventors. IPR is a primary tool used by defendants in litigation to invalidate patents, and the Director has helped to guard against its overreach. However, there is nothing to stop a future Director from taking a different approach. This means that while the solution is great, it does not address the core issue when it comes to IPR, and likely does not have staying power.

Inventors Can Determine Value of Their Patents

Inventions that leave deep impressions on the market have greater need to guard against IPR overreach. Patent law today does not account for this because the right to require future defendants to pay for IPR is currently not born with patents. Instead, it is the same for all patents. Defendants in litigation all have to pay a fixed IPR request fee of $23,750 and a fixed IPR post-institution fee of $28,125. These fees are a nominal expense for many defendants, which is the real problem with IPR.

The solution is simple—the right to require future defendants to pay fees for IPR must be variable by accounting for market impression. This would involve allowing inventors to increase these fees for future defendants in exchange for increased payment to the USPTO. The increases may be in filing fees, maintenance fees, or another form of payment. Importantly, the exchange would happen at the birth of a patent—its filing date. As a result, patents would be given a measure of net present value early on, which would be the difference between investing with discipline and gambling. Inventors do know how to make these determinations. It is insulting to think they are incapable of figuring out how much firepower they need in their patents, particularly if they have competent counsel and software to guide them.

The USPTO has already experimented with net present value in the Streamlined Claim Set Pilot Program. An increase in future IPR fees in exchange for increased filing and maintenance fees is a logical extension of this experiment, and one in which an inventor’s inside knowledge of market impression would again be factored in.

Making Patents More Durable

These two reforms—eliminating the 3/20 bundle and making IPR fees variable—are part of the broader reform called Patent Durability, outlined in earlier articles. Patent Durability is not only geared for indigent inventors and inventors of low value inventions—it is also geared for inventors of high value inventions. Its mechanism is an actuarial tailoring of patent strength and costs to invention value in order to provide inventors with large numbers of solutions to their invention needs. In the case of IPR, the USPTO and Congress would be tightening securities around the flow of money by giving inventors the option of paying more in exchange for a patent with more teeth. This would be a more permanent solution to address IPR overreach, and would result in more complete, born strong patents.