This commentary is by Beau Phillips, executive director of US*MADE, a coalition of U.S. manufacturing companies and trade associations who produce their products in America and are working to curtail abusive patent litigation.
Sen. Patrick Leahy writes the final chapter of his career in Congress this year, after serving the American people for nearly half a century. While he has tackled a variety of issues, intellectual property has held a top spot on his priority list, from patent to copyright to trademark law.
Most notably, Sen. Leahy sponsored and expertly led the bipartisan Leahy-Smith America Invents Act, which was signed into law by President Obama in 2011. It ushered in the most significant reform of the patent system in the past 50 years, fostering a new era of innovation and leading to needed improvements in patent quality.
As part of Patent Quality Week, it’s important to recognize the impact Sen. Leahy’s actions have had in protecting U.S. companies from “bad” patents. High-quality patents can be an asset for companies bringing new ideas to market, while low-quality patents that are vague and overly broad erect stumbling blocks for competition and innovation.
The America Invents Act strengthened our nation’s patent system by weeding out bad, low-quality patents, and it created a way for manufacturers to defend themselves against abusive patent litigation in cases where the bad patents should have never been granted in the first place.
Sen. Leahy’s legislation limited the ability of non-practicing entities, known to many derisively as “patent trolls,” to pursue frivolous lawsuits by creating a streamlined post-grant review system, including inter partes review, to challenge the validity of a patent before the U.S. Patent and Trademark Office.
The vast majority of suits filed by patent trolls weaponize low-quality patents against productive American companies. In fact, more than half of all patent lawsuits filed in the U.S. are against American manufacturers who create millions of good jobs and generate about 11% of U.S. GDP. Contrast that with non-practicing entities — who add no value to the economy — filing more than 60% of all patent lawsuits.
These extortionists often sue hundreds or thousands of companies at once, alleging patent infringement where none exists. The goal is to pressure the defendant to pay off the troll to avoid even more costly litigation.
Thanks to Sen. Leahy’s leadership, patent litigation brought by patent trolls dropped significantly — at first. In the initial five years after passage of the America Invents Act, access to the inter partes review process helped patent owners and accused infringers avoid at least $2.31 billion in deadweight losses by providing an efficient system for challenging low-quality patents.
The average cost of inter partes review through a hearing before the Patent Trial and Appeal Board is around $275,000 — significantly less than the $600,000 to $5 million cost of District Court litigation. What’s more, the inter partes review process takes 12 to 18 months, compared to the average patent lawsuit, which can grind on for five years or more. That process helps U.S. companies stay in business.
Unfortunately, some of Sen, Leahy’s signature achievements were unraveled by the previous director of the U.S. Patent and Trademark Office. In the words of the senator, Director Andrei Iancu “took actions that were designed to undermine the IPR process” and “hamstring the ability of the public to challenge poor-quality patents.” The patent board implemented discretionary denials of inter partes review petitions, depriving U.S. manufacturers and others of the mechanism to defend themselves against predatory patent litigation.
The benefits of the America Invents Act have begun to wane to the advantage of patent trolls, whose attacks increased by nearly 10% in 2021, their busiest year since 2016.
The clock is now ticking before Sen. Leahy enters his well-deserved retirement. Congress should take action now to honor all that Sen. Leahy has done to protect American manufacturers and improve patent quality by restoring balance to the patent system with policies designed for progress.
Only high-quality patents should be issued, but when a bad one manages to slip through the cracks, it should be taken out of the system. Doing so would take productive U.S. companies out of the chokehold of patent trolls, and it would honor Sen. Leahy’s impressive legacy and dedicated leadership on intellectual property issues.
Let’s get the patent system back on track before another Patent Quality Week comes to pass.