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The U.S. patent system is being manipulated and exploited by non-practicing entities (NPEs), or “patent trolls,” who are attacking American manufacturers through the weaponization of low-quality patents.

By Dean Wegner, Guest Columnist

American manufacturers are on an obstacle course of supply chain setbacks, labor costs, labor shortages and price inflation. The last thing we need is one more stumbling block hindering our ability to contribute to the U.S. economy. 

As the Founder & CEO of Authentically American, an apparel company with a manufacturing network that stretches across 11 U.S. states, I’m passionate about creating American jobs.

Unfortunately, a threat to manufacturers’ support of more than 13 million jobs has been growing over the past decade. 

The U.S. patent system is being manipulated and exploited by non-practicing entities (NPEs), or “patent trolls,” who are attacking American manufacturers through the weaponization of low-quality patents.

“Non-practicing” is code for “shell company,” one that does not actually develop products or services, nor create jobs. In short, they add no value to the U.S. economy. 

How does the scheme play out?

Patent trolls acquire vague, overly broad patents, and then sue hundreds, or even thousands, of companies at the same time, accusing them of patent infringement where no such infringement exists. The goal is either a court ruling in their favor by a judge or jury with minimal patent knowledge or a remunerative, out-of-court settlement with the targeted victim.

Cornered in a lose-lose situation, U.S. manufacturers often choose to pay off the troll because doing so will cost less money and waste less time than duking it out in court – which can cost $5 million or more and take five to seven years. It’s truly an injustice, as these lawsuits are often baseless and rob manufacturers of the resources needed to innovate, invest and hire. 

Patent infringement lawsuits have climbed by 500% since 2002. The majority are not filed by inventors, nor companies aiming to protect intellectual property; they’re filed by patent trolls.

In 2021, the busiest year for NPEs since 2016, NPE patent litigation was up by nearly 10%. This means that American manufacturing companies – more than half of all patent defendants – are increasingly on the defense against these predators.  

Putting an end to paten trolls

Thankfully Sen. Patrick Leahy (D-VT) and Rep. Lamar Smith (R-TX) led the bipartisan charge on the America Invents Act (AIA) in 2011 to improve patent quality and help productive American employers like U.S. manufacturers be better equipped to defend themselves from patent trolls.  

The AIA discouraged frivolous patent litigation by improving access to the post-grant review process for weeding out lawsuits without merit. It created inter partes review (IPR), a process for challenging bad patents that’s far more efficient than going to court: the IPR process takes 12 to 18 months and typically costs less than $1 million.  

Patents that should have never been issued began being invalidated by the United States Patent and Trademark Office (USPTO), too. It’s no surprise that some weak patents undeservingly get the stamp of approval, since there are between 600,000 and 650,000 new patent applications every year and only 8,100 patent examiners to review them. 

Unfortunately, the rules for post-grant review have not been properly upheld by the USPTO in recent years. As a result, U.S manufacturers have been under assault with patent lawsuits against them climbing to their highest levels in a decade. While U.S. businesses face any number of challenges on a regular basis – many of which are unavoidable – this threat is stoppable. 

Congressional leaders are coming together on a bipartisan basis to disarm patent trolls and fortify the U.S. patent system. Sens. Leahy and John Cornyn (R-TX) recently introduced S. 2891, the Restoring the America Invents Act (RAIA), which revisits the intent of the AIA, protects American manufacturers’ rights to IPR proceedings and improves patent quality by invalidating bad patents that don’t pass muster. 

Rather than promoting invention and innovation, as intended, the patent system is becoming a hotbed for abusive patent litigation. However, when U.S. manufacturers come together as one, we can make a big impact and save American jobs.

This is a call to action for Congress to dig deep and eliminate this unnecessary obstacle to our success. Passing the Restoring the America Invents Act is critical to American manufacturing as an industry and our country’s economic engine. 

Dean Wegner is the Founder & CEO of Nashville-based Authentically American, an apparel company whose products are 100% manufactured in the U.S. and a member of US*MADE. Authentically American shares its success and honors American heroes by donating 10% of its profits to veteran and first responder charities.  

This article was originally published by the Tennesseean.

By Beau Phillips, Executive Director, US*MADE

WASHINGTON – US*MADE, a coalition of manufacturers and American manufacturing trade associations focused on protecting job-creators from abusive patent litigation, praised President Biden and bipartisan leaders today for meeting with business leaders to discuss the American semiconductor industry today at the White House. US*MADE is urging Congress to send the President a bipartisan bill that invests in domestic semiconductor manufacturing and also move forward on legislation to address abusive litigation from patent trolls that is taking a damaging toll on the American semiconductor industry.

Beau Phillips, executive director of US*MADE, issued the following statement in response to today’s meeting:

“The events of the past few weeks have made clear just how much more work needs to be done so that we control our own supply chains. As our sanctions take hold in Russia, bringing their economy to its knees, it’s an important reminder that we cannot rely on goods produced in countries halfway around the world. We need to make things here in America and ensure that manufacturers have every opportunity to succeed.”

“That means that, in addition to investing in domestic manufacturing, policymakers need to finally crack down on non-practicing entities (NPEs), also known as patent trolls, that are forcing advanced manufacturers to waste their time and money defending themselves against frivolous
lawsuits. Just last year, Intel was targeted by a foreign-owned patent troll seeking a windfall of billions of dollars. That’s billions of dollars that would be better spent investing in semiconductor manufacturing here at home. We also know that patent trolls are manipulatingproceedings at the International Trade Commission (ITC) to threaten import bans on complex products that rely on hundreds or even thousands of underlying patents.”

“Enough is enough. If we are serious about creating jobs, protecting supply chains, curbing China, and making America the world’s leader in advanced manufacturing again, we need to do more to crack down on abusive trolls that too often target America’s chip manufacturers. In addition to sending the President a bipartisan bill that invests in our domestic manufacturing capacity, they should also send him the bipartisan Restoring the America Invents Act that Senators Leahy and Cornyn have introduced to give advanced manufacturers – and all companies sued by patent trolls – the tools they need to fight back.”

By Beau Phillips, Executive Director, US*MADE

The pharmaceutical industry has long opposed the practice of inter partes review (IPR) at the U.S. Patent and Trademark Office (USPTO). Now, their trade group, PhRMA, has announced opposition to the Restoring the America Invents Act (RAIA), which would have the IPR process function as Congress originally intended. But, in a recent blog post, PhRMA has highlighted why their objections are misguided and that it’s time for the pharmaceutical industry to rethink its position.

IPR, established through the America Invents Act (AIA), provides a fair and transparent patent review by Patent Trial and Appeal Board (PTAB) judges who are experts in patent law, science, and technology. This review process provides critical protection for manufacturers and other innovators who are often the targets of frivolous patent infringement claims. Through IPR, low-quality patents – that never should have been issued by the patent office in the first place – can be assessed on their merits by experts. If they are invalidated, this can avoid the expensive litigation and extorted settlements when such reviews are held in federal courts. 

However, over the last several years, the USPTO unilaterally implemented the so-called NHK-Fintiv rule. Requests for IPR are issued “discretionary denials” by the USPTO if litigation related to the infringement claim is already pending. This rule change flies in the face of the AIA law and prevents innovators from accessing IPR in precisely the situations where it is most needed. A new bipartisan bill, the Restoring the America Invents Act (RAIA), has been introduced to roll back the illegal administrative change made by USPTO and return IPR to functioning as intended by an overwhelming bipartisan majority in Congress. 

It makes no sense for pharmaceutical innovators to oppose the RAIA and a restored IPR process. Patents for truly innovative drugs face no threat of being invalidated by the patent experts at the PTAB, nor should they – that’s not what IPR was intended for. The IPR process is there to weed out poor-quality patents which were incorrectly granted in the first place. 

Patents, and the window of exclusivity they offer, are essential for incentivizing the development of new technology and new medicines. But patents must be high-quality, covering only novel, nonobvious, and useful technologies. When they are not, everyone suffers, including pharmaceutical innovators and the public that relies on them to develop groundbreaking treatments and cures. 

In a recent blog post announcing why they oppose the RAIA, PhRMA instead makes a powerful argument for why it’s time for the pharmaceutical industry to rethink its historical opposition to IPR. Citing research from the Robins Kaplan law firm, PhRMA notes “only a minuscule 8 out of 604 relevant PTAB trial institution decisions had mentioned Fintiv” and that discretionary denials of IPR under Fintiv “are relatively rare in the biopharmaceutical industry.”

PhRMA acknowledges that research shows the RAIA would not negatively impact their industry. As a result, it’s hard to understand why they are opposed. This is especially true given that the legislation also has significant positive implications for manufacturers and American innovation. As I have discussed previously about both the AIA and the RAIA, restoring IPR improves the quality of our patent system, bolsters U.S. innovation, and protects American jobs. Congress should prioritize the RAIA and protect American manufacturers from abuse of the patent litigation system. 

By Laura Bradford

American manufacturers need the protection patents provide, but they don’t need bad actors trying to extort money from them by filing bogus patent infringement suits. That’s why, as the owner of a small, innovative manufacturing company that has been book-ended on the frontlines of two medical crises — first, the AIDS epidemic and now the COVID-19 pandemic — I support a new bill in Congress aimed at reining in the destructive tactics of patent trolls.

When the AIDS epidemic struck, it became apparent that dentists like my then-boss needed better personal protective equipment to safeguard both patients and caregivers against the disease. As a single mom in the 1980s, it was a struggle to get a Small Business Administration loan to start making protective gear. The system was clearly not set up for people like me, even to the extent that a woman’s application required the signature of a spouse!

But I persevered and today I am the president of the company I founded, ProSafe Products in Grand Junction. We are experts in engineering, manufacturing, inspecting and packaging the highest quality products for the medical, dental and dialysis industries. During the height of COVID, our company had some of the most efficacious products then available and was the only source U.S. caregivers and patients could turn to for them.

Companies like mine deserve to have their innovative designs protected by patents. But patents can also be misused to take advantage of manufacturers. In fact, very unfortunately, there is an active industry composed of companies known as non-practicing entities (NPEs), or patent trolls, that exist solely for the purpose of making money off of patent infringement claims.

These shell corporations produce no products and offer no services, but instead clog the courts with baseless patent lawsuits. They hope to obtain a monetary settlement from their targets — legitimate businesses that actually do contribute to the economy. Even though no one wants to settle, companies frequently do so to avoid the expense and resources wasted on mounting a legal defense. On average, patent lawsuits drag on for five years and cost more than $5 million in legal fees.

Patent trolls are a growing problem. Patent litigation increased by over 43% from first quarter 2020 to 2021, with the frivolous, meritless claims of patent trolls making up the majority of those legal actions. Their victims range from large high-tech and pharmaceutical companies to small manufacturers like me.

I am so concerned about patent trolls that I joined the US-MADE coalition to work with other manufacturers on this issue. It is an organization specifically focused on protecting U.S. manufacturers from frivolous patent litigation.

A promising new development is the recent introduction of the bipartisan “Restoring the America Invents Act” (RAIA), legislation that would reaffirm the benefits of a previous law that has been rendered less effective by counterproductive actions from the U.S. Patent and Trademark Office (USPTO) in the previous administration.

Ten years ago, Congress passed the America Invents Act (AIA). It worked, successfully improving patent quality (far too many patents misused by patent trolls should never have been granted in the first place) and enabling legitimate American employers to better defend themselves from unscrupulous legal actions. Abusive patent litigation dropped thanks to improved access to a post-grant review process the AIA established.

But since its passage, the AIA has been weakened by USPTO rule revisions that run counter to congressional intent and the law. Their unilateral changes have made it harder for manufacturers to challenge bad patents that should have never been issued in the first place, resulting in the highest number of patent lawsuits filed against manufacturers in years. The RAIA, if passed, would restore the AIA’s protections for manufacturers and help curb patent troll activity. Congress should act urgently.

U.S. manufacturing is the lifeblood of our country’s economy and vital to communities across Colorado and throughout the country. Let’s keep it that way.

Laura Bradford is the founder of ProSafe Products and was the first tenant in the Mesa County Small Business “Incubator.” She has been co-director of the state Women’s Economic Development Council and represented House District 55 in the Colorado General Assembly from 2009 to 2013.

Washington, DC –November 30, 2021 – Outlining how she will protect America’s position as an innovation leader and preserve manufacturing growth in the U.S. should be the top priorities for Kathi Vidal, President Biden’s nominee to lead the U.S. Patent and Trademark Office (USPTO), at her nomination hearing before the Senate Judiciary Committee on December 1, 2021.

The U.S. Manufacturers Association for Development and Enterprise (US*MADE) – a coalition of manufacturers and American manufacturing trade associations focused on protecting job-creators from abusive patent litigation – outlined several questions important to American manufacturers that should be answered at the hearing.

“American manufacturers and job creators deserve a strong leader and partner at the U.S. Patent and Trademark Office. In recent years, thousands of manufacturers, both small and large, have been the target of frivolous, predatory patent litigation practices. At the same time, manufacturers have been denied I fair access to Patent Trial and Appeal Board (PTAB) patent reviews provided for in the America Invents Act (AIA). At her nomination hearing, Ms. Vidal must outline a vision to rein in abusive patent litigation, increase patent quality, and restore the safeguards intended by Congress in the bipartisan AIA,” said Beau Phillips, US*MADE executive director.

Phillips added, “We hope Ms. Vidal recognizes how important manufacturers are to the U.S. economy, job creation, and innovation. All of the members of the US*MADE coalition look forward to supporting her efforts to defend U.S. manufacturers from patent abuses.”

Below are 7 key questions that should be answered by Vidal at her nomination hearing:

• Non-practicing entities (NPEs), also known as patent trolls, are now responsible for nearly 60% of all patent litigation nationally. How can the USPTO work to reduce the harm caused to American manufacturers and businesses by patent trolls?
• Are you concerned that over 1 in 4 patent cases are now presided over by a single judge in the Western District of Texas who has publicly declared his disdain for the PTO’s post-grant review process? If so, what can the Undersecretary of Commerce for Intellectual Property do to address this situation?
• What is your plan to improve the quality of patents, particularly before they are granted?
• Are you concerned about the rise in investor-funded patent litigation and the impact this has on American manufacturing and ultimately American innovation? If so, what can the Undersecretary of Commerce for Intellectual Property do to address this situation?
• Do you support efforts to increase transparency in patent ownership – such as the recently announced Pride in Patent Ownership Act, sponsored by Senator Leahy and Senator Tillis – that would allow the public to know who the true owners of patents are?
• Do you support the continuation of the NHK-Fintiv rule, unilaterally issued by the previous USPTO director, that has unlawfully restricted access to transparent, efficient, and expert review of patent claims at the Patent Trial and Appeal Board? If so, why? If not, what can the Undersecretary of Commerce for Intellectual Property do to address this situation?
• The Patent Act specifies the conditions under which a patent may be granted and sets procedural and substantive standards for using PTO proceedings, including PTAB trials. Do you believe that these statutory provisions are binding on the agency, or do you believe that the agency has the discretion to depart from the statutory framework and adopt its own interpretation of how patent law ought to operate?