America’s founding fathers had a deep appreciation for the value of inventions and their relationship with property rights. That much is made clear in historical documents and court decisions that provided patents with the same legal protections used for real estate.
John Locke, the English philosopher who inspired Thomas Jefferson and other prominent figures from the founding period, was himself a proponent of the view that writings and inventions should be treated as property rights.
With businesses now under pressure as a result of COVID-19, they can hardly afford to absorb the costs associated with patent allegations that cannot be substantiated under close scrutiny.
That’s why it’s important to preserve a trial-like procedure organized within the U.S. Patent and Trademark Office that makes it possible to review the legitimacy of patents through a streamlined, cost-effective process that avoids expensive litigation.
Unfortunately, some lawmakers (such as Democratic Sen. Chris Coons of Delaware) are pushing legislation that would gut and dilute what is known as the inter partes review process, which provides important safeguards against patents that should not have been issued.
A better solution would be for policymakers to provide those businesses harmed by the coronavirus with greater assurances and predictability. They can do this by defending and strengthening the inter partes review process as a tool to eliminate low-quality, wrongly granted patents that harm the economy, stifle innovation, and cost jobs.
There’s no disputing the fact that patent examiners are overburdened. Government records show that in 2018, there were 640,000 patent applications filed, but fewer than 8,200 patent examiners available to do a thorough review. On average, patent examiners only have about 19 hours to evaluate a patent application. Under these time constraints, a handful of ill-conceived applications are approved.
This is where the inter partes review process conducted by a Patent Trial and Appeal Board comes into play to prevent frivolous legal claims against companies that are genuine innovators. There are two reasons why a patent may not be eligible:
1) A patent could be “prior art,” meaning the item or process the patent covers already exists or is patented, but this was missed by patent examiners during the review process. 2) The patent item is not new, novel, or nonobvious, which is the required standard for a patent.
Unfortunately, so-called nonpracticing entities, which are often incorporated in foreign jurisdictions or in a manner that conceals their identity, have been permitted to abuse the patenting process. Nonpracticing entities invoke vague, low-quality patents they own to demand large royalty payments from productive businesses. When these pressure tactics don’t work, they then threaten to sue these same businesses. What they are really after is a quick payment, which is why the inter partes review process should be preserved in its current form and misguided legislation from Coons, and others, should be resisted. The alternative to the inter partes review process is expensive, protracted litigation that will cost companies that have already been victimized by bogus patent allegations.
The American Intellectual Property Law Association has done a survey that finds inter partes review processes are much less expensive than litigation, with the median cost for an inter partes review process sitting at around $100,000. What’s important to know here is that this figure is the total cost — including attorneys, expert witnesses, and the filing fee. Because the inter partes review process is user-fee funded, this means the expenses are borne by the petitioner and not the taxpayer.
The benefits of stopping bad patents from snaking their way through the economy certainly outweigh the costs associated with the inter partes review process. The fact that companies don’t have to pay what is, in effect, a ransom has significant economic dividends for innovative businesses and the customers they serve. The appeal board has rejected questionable patent claims over technology to clean up polluted groundwater and wastewater, over podcasting, and over a system that Los Angeles wanted to introduce that looks a lot like E-ZPass.
With the COVID-19 crisis now affecting business, the dangers of lawsuit abuse should be more apparent now than ever. While job growth was booming before the pandemic, manufacturing, which has traditionally been a major driver of the economy, actually found itself receding. The economy generated a booming 225,000 new jobs in February but lost 12,000 manufacturing jobs. The month before, 5,000 manufacturing jobs disappeared.
Bad patents stifle innovation and impose enormous litigation costs on businesses, which are now under added pressure from the coronavirus-related shutdowns. When Congress passed the America Invents Act creating the inter partes review process in 2011, lawmakers explained “that questionable patents are too easily obtained and are too difficult to challenge.”
The process is one that should be celebrated by lawmakers who have a genuine concern about the public interest and economic health of the private sector. The alternative to the process is expensive, protracted litigation that benefits narrow special interests. What the Coons bill fails to account for is the fact that the inter partes review process is only activated in a relatively small number of cases. In 2018, there were nearly 3 million U.S. patents in force, according to government records. But these same records show only 1,436 were challenged through the inter partes review process, and 577 of those challenges were thrown out without even having to go through a formal review. The remaining 859 (out of 3 million) then went on to be reviewed by the Patent Trial and Appeal Board.
These figures indicate genuine patent claims make their way into the marketplace without any undo obstruction, while problematic claims that feign originality where there is only duplication are ultimately rooted out. If lawmakers want to provide patent officials more latitude, time, and resources to absorb applications that require a harder look, that would be a welcome change. But in the aftermath of the coronavirus pandemic, businesses should not be saddled with expensive, counterproductive litigation that flows out of legislation undermining the inter partes review process.
Kevin Mooney (@KevinMooneyDC) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is an investigative reporter in Washington, D.C., who writes for several national publications.
