Summarizing from part 1, I argued that small inventors and start-ups (independent inventors) were innocent victims under the current state of patent law. Independent inventors follow all the rules and lose their patents when the patent proves valuable. Patents are overturned in IPRs for the simple and plain reason of ineffective fact finding. This is an issue of patent quality. That said, the root source cause of low quality patents and the creation of the PTAB is ineffective evidentiary fact finding.
I ended part 1 by asking how does Congress proposes to address this issue? Do we adjust legal rules making the process seem fairer to independent inventors or reform how we identify pertinent evidence before prosecution.
To be clear, the issue is independent inventors losing IP because of an intrinsic systemic flaw that fails to identify pertinent evidence before or during prosecution leaving an evidentiary hole. The hole is filled during an IPR by the infringing party.
Three Proposals
Congress apparently does not appreciate the problem. There are three pending patent reform bills directed to PTAB.
HR 5874 Restoring America’s Leadership in Innovation Act, proposes to abolish both inter parties and post grant reviews as well as the Patent Trial and Appeal Board. The system would revert back to pre-AIA rules. Patents would be invalidated in an Article III court applying a clear and convincing evidentiary standard. The presumption of validity not recognized at the PTAB would be restored by default. Under this scenario independent inventors would benefit. On the other hand, the same intrinsic failure would continue. Patents would continue to issue with broad claims unsupported by evidence leaving the patent vulnerable to invalidity despite a higher standard. We might even see the reemergence of bad faith actors commonly called patent trolls.
HR 3666/S 2082 the Stronger Patents Act, tries to eliminate features detrimental to small inventors by aligning PTAB and civil court evidentiary rules to a clear and convincing standard, restores the presumption of validity at PTAB and permits discovery. The bill also allows claim amendments. This bill addresses IPR features that hurt independent inventors. Never the less, this bill would allow patents to continue issuing with broad claims unsupported by evidence.
S 4417 The PTAB Reform Act directly addresses the scourge of multiple petitions against a patent holder but only to the limit of “from the same party.” The bill imposes the clear and convincing standard on IPR trials and provides sanctions against bad faith actors. The bill is silent on the presumption of validity. Of particular interest is § 320 Support for small and micro entities in inter parties and post-grant review. The bill authorizes payment to small and micro entities for PTAB trial expenses incurred by the patent owner. The payments will be funded by fees on portioners. As before, patents would continue to issue with broad claims unsupported by evidence.
Paying PTAB expenses is an interesting but misplaced idea.
First, damage to the patent holder has already been done because they received a patent easily overturned by a preponderance of the evidence standard. The evidentiary hole leaves a patent highly vulnerable to invalidity even if a clear and convincing standard is applied at trial. This bill does not mention the presumption of validity.
Second, the cost of a PTAB trial which I estimate here at $250K is not particularly dissuasive to a wealthy infringer and the threat of repeated petitions on the same claim(s) remain.
Another Option
None of these bills look to a solution to a known systemic flaw that directly affects patent validity. All three bills are efforts to adjust legal rules making the process seem fairer to the small inventors. The US patent system has evolved to a point where the PTO less and less adequately finds strong evidence over which claims can be allowed. This is evinced by the very existence of the PTAB.
Expert search skills developed in the private sector are employed against small inventors. Infringers pay private sector search experts to identify prior art subsequently applied against patents tried at the PTAB. Private sector searchers are a resource generally not utilized by inventors before examination for various legitimate reasons. Independent inventors would benefit by accessing those advanced skills. This would require an incentive.
Due to IT advances over the past decade finding applicable prior art has become much easier. It has become so easy that 67% of all winning IPRs are accomplished based on US and foreign patent documents. This does not include the 21% based on art of record, i.e. submitted by the applicant. Prior art patents have become low hanging fruit. Advantage goes to the infringer.
Incentivizing the applicant, through reduced fees etc., to utilize private sector resources pre-grant that infringers use post-grant goes directly to the evidence problem. With corresponding fee reductions it would be cost free to the individual inventor. Applicant incentives is not a new idea. The idea was proposed during AIA debate in 2009. In view of the damage cause by the AIA, it is an idea worth evaluating again as an option to even the playing field.