Federal Circuit Faces an Old Challenge under New Chief Judge Moore. It Should Assume the Burden of Its Historical Mandate.
The law of patentable subject matter is a mess.
Prof. Mark A. Lemley — Stanford Law School (2019)
[This post is an amended version of a piece I published on IPWatchdog.com on 25 Oct. 2021.]
But while I used to receive calls asking about the procedure for getting a patent, I no longer do. I fear it’s because inventors no longer believe patents are worthwhile.
I get it: if I were to get a call today, I couldn’t paint a rosy picture for would-be patentees. What do we say, today, to someone who calls to ask about patenting their invention? Who wants to file an infringement litigation? What if they ask how much it’s going to cost?
Times change. So has patent law. And not for the better.
Yesterday, Gene Quinn published my satire, “Confessions of a Frustrated Patent Attorney: The Telephone Call,” on his blog at IPWatchdog. It’s a transcript of what an imaginary phone call with an inventor might sound like today. The news isn’t good for inventors, and while I enjoyed writing the piece, and I think its title is apt, times really are frustrating.
Satire is born of truth, they say. I hope my essay helps change people’s minds, and I’m encouraged by the thoughtfulness of the comments, too. Read it all here.
MIMI
That’s the issue the U.S. Supreme Court will consider in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, et al., No. 16-712 (2017).
On August 31, Tabet DiVito & Rothstein filed an amicus brief on behalf of the American Intellectual Property Law Association (AIPLA) in that case. I drafted the brief in support of neither party, requesting that the Court confirm the constitutionality of the PTAB’s inter partes review process.
The brief argues that Congress’s creation of an adjudicatory process within the USPTO for the limited purpose of reviewing and, if necessary, cancelling improperly issued patents violates neither the Constitution’s separation of powers nor its Seventh Amendment guarantee of a right to a jury trial. The brief also acknowledges that, while not unconstitutional, the current implementation of PTAB procedures is not ideal and does not seem balanced. However, AIPLA recognizes that the PTAB has been willing to work with the bar to rectify imbalances.
Oil States v. Greene’s Energy has far-reaching implications for all types of post-grant review—as indeed for non-Article III courts. A date for argument is not yet scheduled.
MIMI
This tale concludes today, but it remains to be seen where the real story will lead …
Read Part I: The Birth of an Idea, the Growth of an Industry
Read Part II: The Path of Innovation Leads to Competition
Read Part III: The B-Techs Hatch a Pernicious Plan
Part IV: The Demise of Innovation, Or, Perhaps, the Birth of Hope
The fairy tale one always wishes will have a happy ending. Will this one? We’re not sure.
For once it was known that the competitive position of the New Innovators could be undercut in the courts and that the B-Techs’ devious plan would become an unencumbered success, the B-Techs prepared a celebration. Everyone planned to celebrate the demise of the trolls. They promised joy throughout the land.
But underneath this manufactured joy was great sorrow, for the deeper truth was that New Innovators were the lifeblood of their country’s great success—and they always had been, ever since a revered 200-plus-year-old Foundational Document had enshrined patent rights in its first article (in section 8 to be precise).
And it came to be that the B-Techs’ ability to force the people to believe they should be happy would prove short-lived. For the B-Techs were destroying the very inventors and entrepreneurs who could provide the people with breakthrough toys. One can only imagine what would have happened if the B-Techs and the New Innovators had joined forces. However, without having anything new to feed to their people, the B-Techs lost the worship of the people, who of course had long ago tired or forgotten about the original amazing innovations of the B-Techs.
Nothing was new anymore for the people. Nothing was exciting. (After all, people thought, how many more megapixels do I need?) The future looked barren indeed, even if viewed through rose-tinted lenses in a virtual reality headset.
And so it was. A few small voices began whispering that it was time for a New Reality. Others began listening. And there was born A New Hope.
MIMI
And the story continues …
Read Part I: The Birth of an Idea, the Growth of an Industry
Part II: The Path of Innovation Leads to Competition
And so it came to pass that as the B-Techs grew and expanded, their ability to continue innovating with their toys began to wane.
Sure, they continued to make changes and updates, and the people continued to enjoy them. But increasingly these changes were not really new. They were incremental, like combinations of old toy elements or upgrades such as from four megapixels to eight megapixels. You know. Stuff like that.
Markets being competitive (although sometimes it doesn’t seem that way), it came to pass that the B-Techs increasingly became the target of a spritely new crew of smaller innovators who developed ideas of their own. These New Innovators dreamed of making new and improved toys, just like B-Techs. In fact, they often wanted to partner with the B-Techs, but the B-Techs shunned them as not worthy.
So, when the time came to protect their own innovations, these New Innovators decided they would go and seek the legal protections that were available for inventors.
They wrote down “claims,” and made detailed drawings called “exhibits,” and went to a place called the City of Magnificent Intentions or CiMI (pronounced “see-me”), where they applied for patents (and even copyrights and trademarks, too) from a big office called the PTO. And so these little innovators became patentees.
It was all very above board. All very legal and proper.
But the B-Techs didn’t see it that way. They didn’t see it that way at all. They saw these New Innovators, the patentees, as pesky rebels, and as a real threat to their domination of the toy world. Even though the New Innovators had followed all the rules, done all their due diligence, disclosed all known prior art, written detailed claims, and come up with very good drawings of their novel inventions, the B-Techs didn’t care.
The B-Tech’s frustration became so intense that many leaders were heard proclaiming, just like nasty Bolingbroke in Shakespeare’s play:
Who shall it be that rids us rebel fire—
These pesky patentees? Infringe, you say?
We face such terr’ble inconvenience
And cannot rule the world as wont with such
As patent holders. Enough! Now people
Will not worship us as they should—
No longer will they want our toys.
We must act.
“A fairy tale?” you ask. Well, yes. Because every once in a while, even though the work has piled up, you feel energized and spirited about something enough during breakfast on a Sunday morning that ideas just well up and the words spring onto the page. And if you have a couple of spritely, cheerful teenage daughters who occasionally read stories, narratives intersect and you just have a little fun with things. And that’s what happened here. So, a fairy tale … of a sort. And here goes.
Both courts erred in overlooking valid claims, although in the wake of the wacky Alice ruling, such a decision might not have been unexpected.
IPWatchdog, which readers will know as a leading intellectual property law blog that recently has been featuring extensive content about obstacles facing software patentees and smaller innovators these days, posted my letter request for amicus support on behalf of Evolutionary Intelligence on March 31.
My letter and posts point out how the decision in Evolutionary Intelligence is symptomatic of a disturbing trend in patent protection that’s upending longstanding legal doctrines and harming America’s innovating community.
Alice and AIA together now permit larger companies to infringe the patents of smaller entities virtually at will, since it’s having deep pockets that matters. Don’t have capital to defend your patents? Your IP rights go out the window. The law is no longer blind.
Responses to my letter and these posts show that many in the innovating community agree. One commenter, the founder and president of an Ohio software development company, noted:
IANAL [sic: “I am not a lawyer”], but I would support Evolutionary Intelligence because the consumer of the information generated by the method is a server operating system, which is a non-human actor, assuming the method is proven new, non-obvious, useful, and fully described. [Emphasis mine.]
The brief supports the Federal Circuit interpretation of the general venue statute at 28 U.S.C. 1391 as providing a definition of “resides” applicable in the patent venue statute later in that chapter at 28 U.S.C. 1400(b).
Although the Supreme Court in 1957 held that the two statutes worked independently, Congress changed the law in 1988 by adding to the general venue statute the language “for purposes of venue under this chapter.” In 2011, Congress rewrote section 1391(b) to provide a definition of “resides” specifically applicable “for all venue purposes.”
The Association recognizes there may be problems with the current venue rules, but suggests these current rules are better than a return to the antiquated patent venue rules of the mid-20th century, as espoused by Petitioner. If changes are needed, they should come from Congress.
TDR filed the brief on AIPLA’s behalf on February 6. Argument is set for March 27, 2017.
MIMI
Stop the presses!!! One patent troll is disrupting the safety of thousands, and its victims are urging Congress to legislate. Help!
Anyone else hear a crying wolf? Unfortunately, we are seeing a lot of this untruthful press about this country’s patent system. It’s time to put a stop to it.
The article reports that 911 Notify owns a patent covering a technology that automatically notifies a parent, adult child, neighbor, or colleague when a subscriber places a 911 call. The article then jumps to the absurd conclusion that, by asserting its patent, 911 Notify is jeopardizing American lives in its attempt to extract unjustified licensing fees from more than 40 companies.
I find that premise hard to subscribe to. Asserting a patent is jeopardizing lives? Well, not this one. And the article is a tough read for other reasons—notably, its grammar and syntax.
Start with this claim, which I find suspect: “The United States Patent and Trademark Office granted 911 Notify a patent on the idea of notifying family, friends and first responders that there is an emergency and someone has called for help.”
I didn’t know the USPTO granted patents for “ideas.” Isn’t that a big issue these days? Even abstract ideas, about emergencies and cries for help. Sounds fantastic. (Literally.) Can I call?
C’mon. An editor should have caught that. Whatever the merits of the patent, it should be dealt with through the legal system, not with inaccurate journalism.
To the substance. What exactly is this “briefing on the urgent need for reform” to which Ciccatelli is alluding? Might that be one sponsored by large technology companies that employ lobbyists to promote patent reform? Don’t know. Don’t have the “Who-What-When-Where.”
Perhaps that’s the strategy. Keep us confused. However, far more important than sloppy syntax and slippery details is the tone of this article. Puerile writing is annoying and unhelpful. Reductive writing is unethical and dangerous.
Granted, InsideCounsel’s audience can be presumed to be fairly savvy. I trust its readers can make up their own minds. But when a publication like InsideCounsel looks to sway opinion rather than inform readers, that’s crossing the line. From its click-bait headline to its failure to use the neutral term “non-practicing entity” instead of the pejorative troll, the article fails to uphold established principles of accuracy, objectivity, and fairness.
One might call InsideCounsel’s publication of such an article reckless. InsideCounsel claims to be an outlet that informs 40,000 in-house legal professionals about the business risks companies face today, and it’s published by a division of legal and business media powerhouse ALM Media Properties, LLC. Now it’s informing its readership that patents disrupt safety!
Shouldn’t InsideCounsel’s coverage abide by broadly accepted journalistic principles? Aren’t reporters supposed to relay facts—and tell both sides of a story?
However, unbiased reporting simply is not happening these days in coverage of patent reform. Smaller businesses, inventors and entrepreneurs are getting short shrift. So are the NPEs that invest in intellectual property, and who as a result continue to support our innovation ecosystem. Sure, there are bad apples (or bad trolls); I’ve acknowledged that before. But the majority of patent holders are looking to enforce intellectual property rights guaranteed under the U.S. Constitution—for good reasons and, of course, commercial reasons.
A marketplace of ideas should be a level playing-field and a marketplace that promotes and supports innovation. Patent assertion entities actually help do that—despite what recent propaganda would have us believe.
In fairness to InsideCounsel, this tilt from the truth is not just about one article from one perhaps inexperienced reporter at one publication. I’ve written before about the overwhelmingly reductive and incorrect media coverage concerning the patent system. It’s had its effect on Congress, the courts, and the public at large.
We need balanced information to create rules that protect innovation equally for everyone. I’m not alone in this view. Gene Quinn, founder of IPWatchdog, has articulated this point in detail, for example here and here. So do law professors Stephen Haber and Ross Levine in their commentary in The Wall Street Journal. It’s heartening when mainstream publications like PCWorld, Silicon Valley’s own San Jose Mercury News, and outlets aimed at policy makers such as The Hill, can offer a counterpoint to the prevailing anti-NPE sentiment in the media.
Still, it’s fair to suggest the reporter and her editor need a primer on patent law. My advice to InsideCounsel? Look inside your own house.
MIMI
He’s a little late to the party. A market for patents as valuable commodities has existed for at least two decades, maybe longer. And he’s a little off in the nomenclature: patents aren’t a “license to sell …”. They confer the right to exclude others from selling the patented invention.
But in principle, it’s important to recognize as Sehgal does that tranches of patents—or patent portfolios of entire companies—that are classified as intangible assets have become something buyers give tangible value for.
Chicago’s own Ocean Tomo, for example, has been in the intellectual property valuation game since 1987. It founded its intellectual property merchant banking arm in 2003, and established its IPXI, an auction marketplace for IP, in 2005.
Technology companies also have long placed specific values on patent portfolios, often buying them to lock them up and forestall competitors. Remember Rockstar Consortium, the coalition of Apple, Blackberry, Ericsson, Microsoft, and Sony that submitted the winning $4.5 billion bid for the patent portfolio of bankrupt Nortel?
$4.5 billion is a pretty big number. And it’s a tough playing field. Rockstar turned around and sued Google, Samsung, and Chinese mobile handset makers Huawei and ZTE, among others. That’s patent assertion. A non-practicing entity.
Sehgal includes some notable statistics on intangible assets, stating: “… Notably, 75% of the value of publicly listed U.S. companies comes from intangible assets, a jump from 40% in the 1980s.”
Companies like those in the Rockstar Consortium—and Google, IBM, Yahoo! and others—view their stockpiles of patents as defensive weapons against competitors. If a competitor enters a market these patent-holders are already innovating in, the patent-holders can sue for infringement—raising the cost of entry.
Now these same companies are putting a value on patents for brokers, investment bankers, hedge funds, and retail investors, and increasing the value of the company in the process. And there are more plays on offense—including infringement lawsuits (which recently ticked up, by the way), inter partes proceedings at the PTAB, and strategies like those of Google, offering patents in exchange for non-compete agreements. (More on this interesting defensive strategy later.)
That said, all those interested in patent markets and in encouraging an entrepreneurial and innovative business ecosystem should be concerned about the direction on Capitol Hill toward trimming the sails of patent owners. Free markets find ways to set and exploit commercial value. Patents protect that value, by securing to inventors the right to exclude others from practicing their invention. And I’ve said before that innovation is the primary driver of successful business.
Just because you own a patent and look to assert it doesn’t mean you’re a troll. Rockstar asserts its patent portfolio to business advantage, and to protect the collective innovations of its own members. A cartel? Maybe to some. But owning and asserting a patent should not be made more difficult. Patents are a vital cog in America’s innovation machine.
Congress needs to hear a balanced message. The media need to be corrected. Those of us close to the world of patent law should help to provide that balanced message. Let’s let the market—not legislators or special interests—determine patents’ value.
MIMI
