US-MADE
August 7, 2021 at 4:39 p.m.
Bad, overly broad patents are harmful to U.S. manufacturing companies and are antithetical to their intended purpose of fostering and protecting innovation. Simply stated, poor quality patents disincentivize U.S. manufacturing and strain well-paying manufacturing jobs.
I recently testified at a hearing before the U.S. Senate Judiciary Subcommittee on Intellectual Property about how critically important it is to improve patent quality. Overly broad patents can create substantial roadblocks to innovation and stifle the widespread use of an idea that benefits the population. That phenomenon is most problematic where patents claim substantially beyond what was invented or claim technology already available.
These patents are often used by non-practicing entities, or “patent trolls,” to extort payments from manufacturing companies, which can add significantly to the cost of doing business and indirectly disincentivize products to be “Made in America.” In 2013, then Chief Judge Randall Rader of the U.S. Court of Appeals for the Federal Circuit recognized the problem of asserting bad patents against smaller companies with limited means, demanding a “license fee” that is far less than the expense of litigation defense, and called it litigation abuse. The defendants of these cases are faced with a Hobson’s choice: litigate and be vindicated after spending significant resources or pay the extortion fee to avoid the exorbitant costs of litigation.
Massachusetts-based Acushnet, the steward of golf brands Titleist and Footjoy, has been the target of many patent trolls. For example, Eclipse IP LLC alleged infringement of their patents because they ordered a golf club online and received an email about the club’s shipment. Innovatio IP Ventures alleged infringement simply because Acushnet used Wi-Fi. Helfrich Patent Licensing LLC alleged infringement of its patents because Acushnet sent tweets to its followers. Were these entities abusing the patent system? Absolutely! Another bad actor, Landmark Technologies, recently sent over 1,800 demand letters seeking $65,000 extortion fees. Contrary to popular belief, it is American manufacturers in the crosshairs more than any other sector due to abusive patent litigation. More than half of all troll lawsuits in the first quarter of 2021 were filed against American manufacturing companies of all sizes, up 20% from the year before.
Bad patents can also stifle innovation without ever being asserted because they impose barriers to the creation of products. Companies often avoid implementing technology in the presence of a weak patent because they know that juries can be unpredictable, particularly when faced with a claim of invalidity. Juries do not consist of people who are skilled in the highly technical and specialized areas that patents cover, nor are they familiar with patent law, so they can easily be confused in patent cases. Thus, companies will simply avoid deployment of many technologies and innovations, even though patent claims are clearly invalid. It is often substantially easier and less expensive to avoid a technology altogether than to prove patent invalidity to a jury.
Thankfully, there are solutions to reduce the problem. We need the U.S. Patent and Trademark Office to put forth the resources to stop bad patents from being granted, and we need legal tools like the inter partes review to be readily accessible so the Patent Office can remove bad patents that never should have been issued in the first place. The Patent Office understands its objective to provide patent protection to inventions, but it also recognizes that invalid patents can be granted even after a thorough examination if “prior art,” or information on what already exists, is unavailable to the Patent Office.
Valid patents, which stand up to scrutiny and encourage and protect innovation, are critical to our economy. Overly broad patents, in contrast, are detrimental to the economy, stifling innovations and employment. Litigation abuse is clearly the most visible way that bad patents harm companies, but bad patents also create roadblocks that prevent prudent companies from innovating and making products that would be appealing to and appreciated by consumers.
Stopping bad patents is critical to America’s economy and to incentivizing innovation. We need to get it right.
Troy R. Lester is chief patent counsel at Massachusetts-based Acushnet Co., manufacturer of golf brands including Titleist and FootJoy.
By Joseph Matal October 6, 2021, 4:52 PM EDT
Law360 (October 6, 2021, 4:52 PM EDT) —
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| Joseph Matal |
With Congress back in session, the newly introduced Restoring the American Invents Act, sponsored by Sen. Patrick Leahy, D-Vt., and Sen. John Cornyn, R-Texas, or Leahy-Cornyn Act, deserves prompt attention.
The bill would restore reliable access to expert patent validity review at the U.S. Patent and Trademark Office‘s Patent Trial and Appeal Board, protect the integrity of PTAB proceedings against political interference, and compel coordination between PTAB reviews and infringement trials.
In doing so, the bill would protect American manufacturers against the depredations of hedge funds and other unscrupulous actors that have been exploiting recent opportunities to leverage invalid patents against America’s industrial base. The Leahy-Cornyn Act deserves Congress’ support.
One lesson that we have learned during the last few years’ economic tumult is the importance of maintaining advanced manufacturing capacity in the U.S. Domestic manufacturing not only provides good jobs, it also ensures that our economy is not dependent on foreign nations and international events when a crisis arises. When critical components such as microchips or telecommunications equipment are available only from overseas, supply chains and entire industries can be disrupted.
Just this year, for example, American automobile manufacturers are expected to lose almost $300 billion in revenue because of a lack of access to the semiconductors that control so many of the functions on a modern car.[1]
While America has taken some steps to secure its industrial base, in one area it has gone backward: Recent policies have immunized asserted patents against review in PTAB proceedings. The USPTO has refused to consider hundreds of patent validity challenges brought by American businesses, even though they were filed within statutory deadlines. The USPTO has taken the view that it has discretion to decide that it would be more efficient not to review these patents on their merits.
The Leahy-Cornyn Act would correct this administrative aberration and require the USPTO to consider the merits of challenges that are filed within statutory deadlines.
Arbitrary restrictions on validity review are undermining critical U.S. industries.
The last year has shown us what happens when access to high-quality patent validity review is cut off: Some of America’s most important manufacturers have been hit with judgment for millions or even billions of dollars for patents that never should have issued.
Consider last year’s suit by the hedge fund Fortress Investment Group LLCagainst Intel Corp., VLSI Technology LLC v. Intel Corp. in the U.S. District Court for the Western District of Texas. Fortress’ patent claimed simple insights into the voltage needs of integrated circuits.[2] Intel responded with a PTAB petition that showed that these things had been understood by electrical engineers years before the patent was filed.[3]
But the USPTO refused to consider this challenge on its merits. The result: Fortress went on to secure a $2.2 billion judgment against Intel — the second largest infringement verdict in U.S. history.
Approximately two billion dollars is a substantial portion of the cost of building a new microchip fabrication plant. Before we transfer that amount from the nation’s premier chip manufacturer to a hedge fund, shouldn’t we at least want an accurate and technically reliable assessment of whether the patent is valid?
Another beneficiary of these policies has been Huawei Technologies Co. Ltd. After it was excluded from the U.S. market, Huawei began suing on some of its thousands of U.S. patents. Huawei’s first set of lawsuits, brought against Samsung, was stopped by PTAB reviews — Samsung Electronics Co. Ltd. successfully showed that Huawei’s claimed telecommunication protocols were previously disclosed in the technical specifications of standard setting organizations.[4]
When Huawei later asserted similar patents against Verizon Business Network Services, demanding a billion dollars in licensing fees, that company also filed PTAB challenges making the case that Huawei’s patents are invalid. Verizon, however, received a total of six discretionary denials from the USPTO[5] — the agency refused to consider Verizon’s challenges on their merits. Last July, Verizon was forced into a settlement with Huawei.[6]
Allowing Huawei to leverage invalid patents against American technology companies is not a path to winning the race to 5G cellular communications. It is a path to making America and other countries dependent on Huawei for telecommunications equipment.
Regardless of who is asserting a patent, the public interest demands that we only award infringement damages for valid patents — those that claim a technological advance. Allowing invalid patents to be monetized does not reward innovation — it simply corrupts the system and encourages more investment in this type of litigation. A hedge fund’s decision-making matrix is fairly straightforward. If Fortress can obtain $2 billion by suing on an invalid patent, it will bring more such lawsuits.
The Leahy-Cornyn Act also protects due process in patent cases.
The Leahy-Cornyn Act would give businesses a reasonable opportunity to use PTAB proceedings, protecting the manufacturers that are the backbone of the American economy. The bill would also safeguard patent judges’ independence by prohibiting political interference in pending PTAB cases — abuses that are currently the subject of a bipartisan Government Accountability Office investigation.[7]
In addition, the act would create a uniform national standard for staying infringement cases when PTAB review is instituted, ending the wasteful practice in some courts of forcing PTAB and district court trials to take place simultaneously. When the USPTO finds that it is reasonably likely that a patent is invalid and initiates a PTAB review, that threshold question of the patent’s validity ought to be resolved before a district court assesses infringement and damages.
Americans are a highly inventive people. There is no shortage of strong patents that are being issued and enforced in the U.S. Providing access to accurate and technically proficient validity review ensures that the patent system’s rewards flow to the true innovators rather than to legal opportunists and ultimately preserves the integrity and credibility of the U.S. patent system.
PTAB review also gives manufacturers the assurance that they need to invest in plants and heavy equipment in the U.S. The Leahy-Cornyn Act’s reforms are a much-needed course correction that will help secure America’s economic future.
Joseph Matal is a partner at Haynes and Boone LLP. He previously served as the U.S. Patent and Trademark Office’s acting director and acting solicitor.
Disclosure: Matal was counsel for the USPTO in the two Huawei Technologies Co. Ltd. v. Iancu matters cited in this article.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] “Auto industry set to lose $290 billion in revenue this year amidst shortage of computer chips,” Just the News, Sep. 28, 20201.
[2] See U.S. Patent No. 7,523,373. The patent — which was filed in 2006, 45 years after integrated circuits were first developed — purports to apply the “discovery” that the memory in a microprocessor sometimes needs a higher minimum voltage than the processor. See id. at 2:4-9.
[3] See Intel v. VLSI Tech. , IPR2020-00158, Paper 3 at 7-8 (Nov. 20, 2019).
[4] See, e.g., Huawei Techs. Co., Ltd. v. Iancu , No. 19-1493 (Fed. Cir. 2020); Huawei Techs. Co., Ltd. v. Iancu
, No. 19-1497 (Fed. Cir. 2020).
[5] See Verizon Bus. Network Servs. v. Huawei Techs. Co. , IPR2020-01290 (Jan. 25, 2021); Verizon Bus. Network Servs. v. Huawei Techs. Co.
, IPR2020-01291 (Jan. 25, 2021); Verizon Bus. Network Servs. v. Huawei Techs. Co.
, IPR2020-01292 (Jan. 25, 2021); Verizon Bus. Network Servs. v. Huawei Techs. Co.
, IPR2020-01278 (Jan. 26, 2021); Cellco Partnership d/b/a Verizon Wireless v. Huawei Techs. Co. Ltd.
, IPR2020-01352 (Mar. 2, 2021); Cellco Partnership d/b/a Verizon Wireless v. Huawei Techs. Co. Ltd., IPR2020-01356 (Mar. 5, 2021).
[6] See “Huawei, Verizon Strike Patent Deal Mid-Trial in Texas,” Law360, Jul. 12, 2021.
[7] See “Lawmakers Seek Probe of USPTO Director’s Sway Over PTAB,” Law360, Jun. 3, 2021.
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US*MADE today announced its support for the Restoring the America Invents Act bill introduced by Senators Leahy and Cornyn.
“Senator Leahy and Cornyn’s patent bill introduced today will restore the intent of the AIA, improve patent quality and protect American manufacturers and the jobs they create from abuse of the patent litigation system,” said Beau Phillips, US*MADE executive director.
US*MADE today announced its support for the Restoring the America Invents Act bill introduced by Senators Leahy and Cornyn.
“Senator Leahy and Cornyn’s patent bill introduced today will restore the intent of the AIA, improve patent quality and protect American manufacturers and the jobs they create from abuse of the patent litigation system,” said Beau Phillips, US*MADE executive director.
US*MADE has filed comments at the USPTO and supported ongoing litigation aimed at rolling back the PTAB’s discretionary denials of otherwise meritorious IPR petitions. The Leahy-Cornyn bill would restore the Congressional intent behind the original America Invents Act, codify the Supreme Court’s recent Arthrex decision and begin to address the role the patent system can play in lowering drug prices for employers and consumers.
“The manufacturing companies that make up US*MADE will be working to help Senators Leahy and Cornyn pass this new bill into law because it protects American jobs, bolsters U.S. innovation, and improves the quality of our patent system,” Phillips said
By Blake Britain
Senator Patrick Leahy, a Democrat from Vermont, said Wednesday that he would introduce legislation “restoring” the Patent Trial and Appeal Board’s inter partes review process “to what Congress intended,” addressing what he said were efforts to “hamstring” challenges to low-quality patents.
Leahy said he wanted to limit discretionary denials of IPRs, “bring more transparency to the process,” and “prevent politicized meddling with IPR decisions.” He made the remarks at an event in Washington, D.C. commemorating the 10th anniversary of the Leahy-Smith America Invents Act that created the PTAB.
Leahy’s office didn’t respond to a request for additional information, and a text of the bill wasn’t immediately available.
The PTAB is a tribunal within the U.S. Patent and Trademark Office that has the authority to review patents’ validity. IPRs before the board have become a relatively quick and cheap way for companies often targeted by infringement suits, such as Apple Inc and Google LLC, to try to invalidate patents.
Some have criticized the PTAB for favoring challengers over patent owners. But, Leahy on Wednesday said the board is “working to curb the type of abusive behavior that patents enable” from “bad actors” that use “poor patents” to “extort money from small startup businesses and nonprofits.” He also said that IPR is important to address low-quality patents that drive up the price of prescription drugs.
Leahy said the last director of the U.S. Patent and Trademark Office, Andrei Iancu, “took actions that were designed to undermine the IPR process” that “hamstring the ability of the public to challenge poor-quality patents.”
Iancu, now a partner at Irell & Manella, declined to comment.
The percentage of rejected IPR petitions rose under Iancu, in part based on PTAB precedent that gives the tribunal’s judges discretion to deny reviews based on parallel court litigation and other factors. Apple, Google, Cisco Systems Inc, and Intel Corp sued the PTO in federal court last year over the rule, which they said violates administrative law.
Leahy said he intends to limit discretionary denials, which are “gamed often by parties.”
President Joe Biden hasn’t yet nominated a permanent PTO director. Biden’s choice will have more power over the PTAB than previous directors as a result of the U.S. Supreme Court’s June ruling in Arthrex Inc v. Smith & Nephew Inc. The high court said that PTAB judges had been appointed unconstitutionally, but solved the issue by giving the PTO director the authority to review their decisions.
“We have to ensure that future PTO directors are not able to unduly influence the process,” Leahy said, because “whether a patent is valid or not” shouldn’t “depend upon who serves as director.”