These were the words from new USPTO director Andrei Iancu when I spoke to him last Thursday at the AIPLA Spring meeting in Seattle (Tangible IP was a sponsor). I’ll come back to this in a minute.
By now however, anyone who follows the IP world (even distantly) knows that a couple weeks ago, the Supreme Court issued its long-awaited decision in the Oil States case and came down 7-2 (with a strong dissent from Chief Justice Roberts and newly-appointed Justice Gorsuch) in favor of maintaining the PTAB, with warts and all. Justice Thomas, not particularly known for his IP chops, wrote the majority decision. The Court was careful to point out that its decision should be construed narrowly and should not prevent arguing that the invalidation of patents by the PTAB may constitute a “taking” of a property right under the US Constitution, or that it violates due process. Nevertheless, with the stroke of a pen, SCOTUS reversed a century old precedent by declaring that a patent was, in its very essence, a “public franchise” (whatever that means) rather than private property. This statement by itself is certainly not what patent owners wanted to hear because it now makes it clear that the government can take away (at any time) what it granted in the first place, and this may further muddy the waters as to what a patent really is. Some pundits have read in the decision a not too subtle invitation to reargue the issue more squarely on the constitutional aspect, and this is precisely what happened last week when an inventor whose patent had been invalidated by the PTAB filed a class action lawsuit against the USPTO and the PTAB. So, here we go again!
However, on the same day it issued the Oil States decision, the Supreme Court also decided another patent case, SAS, where it concluded by the narrowest of margins (5-4) that the PTAB must address and decide on ALL patent claims that an Inter Partes Review petitioner raises as being invalid. Until now, it would only address a subset of claims that it wanted to discuss, leaving a lot unresolved. Opinions diverge a bit as to what this means in practice, but the consensus seems to be that this will favor patent owners by forcing petitioners to do their homework on all claims they intend to challenge, knowing that an adverse decision will provide the patentee with a stronger estoppel protection in a subsequent court case. On the other hand, it gives the PTAB even more discretion and, especially if the standard of proof for invalidity in IPRs is reconciled with the one used by the courts (see below), this could make PTAB decisions even harder to challenge down the road. This wouldn’t be such a bad thing if any of us had faith that the PTAB could act as a neutral and competent tribunal. But sadly, that is not the reputation it has earned over the last 5 years.
Which bring us back to my discussion with Director Iancu. On behalf of all inventors and patent owners out there, I told him, in no uncertain terms, that I talk to you day in day out and hear your deep frustration and anger about your valuable inventions being copied with impunity by more established players. I told him that you have lost faith in the US patent system’s ability to protect your investment and innovations. “Can I tell our readers that help is on the way”, I asked him? His response was a clear “yes, you can” and so far, he seems to mean it. Indeed, we have already seen several initiatives launched since Mr. Iancu took office 3 months ago, such as the new guidelines regarding Alice (following the Berkheimer decision), as well as a May 9th proposal (currently open to public comments) to finally reconcile the PTAB standard for determining validity (aka as the BRI for Broadest Reasonable Interpretation) with the one used by the Courts (aka the “Philips” standard), something the Supreme Court had the opportunity to fix last year in Cuozzo, but refused to do.
Other highlights about my conversation with Director Iancu worth mentioning are that he seems to believe the patent-troll narrative is pretty much a thing of the past and that there is growing bipartisan support behind passing *some* version of the STRONGER Patents Act in Congress, which was filed a few months ago. It is also clear from his public remarks thus far that the PTAB is up for an in-depth review of its practices and, shall we say, agenda.
What is the net effect of all this?
Time for a prediction: I believe that the IPR institution rate at the PTAB will continue to fall gradually (it has already gone from 80% to slightly above 60% according to the latest USPTO statistics (see table below).
More importantly, having been on the other side of the fence during my 15 years in the patent group at Microsoft, I know how large corporations approach these matters and I strongly believe that once the invalidation rates fall below 50%, which should occur in the next year, we will have reached a tipping point where lawyers will have to start telling their management that filing an IPR is a less than 50% proposition (i.e. no longer the slam dunk it used to be) and that it could damage their chances in court if the PTAB refuses to institute a petition, let alone decides to uphold the validity of the claims being challenged. If you add to this some reasonable expectations that the impact of Alice might also decrease rapidly if the recent case law making this an issue at trial (vs. summary motion) continues to hold, we may soon live in a different environment than the one we have seen in the past 5 years, which is none too soon!
So, if you are looking to acquire patents, you should hurry, as we have already seen a lot more interest lately from buyers who are trying to close deals while valuations are still relatively low. If you are looking to sell, this is a good time to start engaging as the next months should offer gradually more favorable market conditions.
We are off to INTA, the largest annual meeting of IP professionals (close to 10,000) who are descending onto our beautiful city of Seattle for what promises to be a packed event. Tangible IP is also a sponsor of INTA and I will be present through the conference. For those who have asked to meet, I and others on the team will be at booth #349 and we look forward to talking to you.
Buyers & Sellers:
Undoubtedly, the biggest news of the last few weeks was HGGC’s proposed acquisition of RPX for roughly half a billion dollars. Many RPX shareholders are not happy with this valuation and have sued or threatened to sue the company.
Meanwhile, Altaba Inc. (formerly Yahoo Inc.) has had to reduce the valuation of its Excalibur Portfolio for the third time this year, dropping the price from $675 million to $640 million. The decision to reduce the portfolio’s valuation comes as a surprise following the company’s addition of Thomas McInerney as the new president last year, who firmly held his strategy to become more aggressive towards IP infringement.
Marathon Patent Group assigned a number of patents to Fortress Investments Group. Unwired Planet International and Samsung also made transfers. Unwired Planet made headlines last year with a significant decision providing guidance on fair, reasonable, and non-discriminatory (FRAND) royalty rates for patents (Unwired Planet v. Huawei Technologies).
Winners & Losers:
The courts have been busy these past few weeks… A divided SCOTUS was called to determine whether a company’s loss of profits can be obtained as a result of patent infringement that occurred overseas. The dispute involved two oilfield service industry giants, Schlumberger, and ION Geophysical Corp. The bench ultimately reversed the appellate court’s decision to bar Schlumberg from recovering $93.4 million in lost profits.
Additionally, a judge has rejected a jury’s verdict which awarded more than $200 million in damages to Merck. The decision was based on the equitable defense of “unclean hands.” The judge invoked Mercks’ misconduct both in their business practices and during litigation. Ouch.
Also noteworthy, a ruling from a federal district court punctuated the paramount importance of meticulously drafting your patents in a decision affecting Droplets and E*Trade Bank. Due to the incompleteness of its priority claim dating back to 1999, Droplets’ patent claims were ultimately invalidated over its own PCT. This provides a teachable moment, noting in today’s volatile market, every detail counts.
Finally, the Berkheimer Ruling has played against Hulu this past week. A district judge denied the summary motion presented by Hulu establishing that the patent eligibility was a question of facts to be determined by a jury. Regardless of the outcome in the Hulu case, there is no denying this will be a much more expensive endeavor for Hulu now.
A couple recent and notable transactions include Tel-Aviv-based Corephotonics, a pioneer in dual camera technologies, who shook hands on a significant licensing deal with Oppo, the Japanese smartphone’s manufacturer. Meanwhile, in the US, Corephotonics is embroiled in alegal battle with Apple over dual-lens cameras utilized on several iPhone versions.
Similarly, TiVo entered into a second crucial licensing agreement with Australia-based company, Telstra. TiVo’s increased efforts in Research and Development in 2017 are paying off!
I’ll See You in Court:
Following a lengthy collaboration, Microsoft is now being sued by video developer, Infernal Technologies for game engine patent infringement while developing popular video games such as Halo 5 and Gears of War.
From the Bench:
A terminal disclaimer does not create a presumption that the continuation patent is indistinct from its parent patent. That is what the court held in SimpleAir v. Google. The court added that the filing of a terminal disclaimer does not necessarily vacate the issue of claim preclusion. The trier of fact must complete a thorough comparison of claims before applying, or not, the Kessler Doctrine.
Around the world:
In Europe, the UK has ratified the United Patent Court Agreement, which will enable the International Court’s jurisdiction over all patent disputes involving participating states. As of today, five countries have ratified the agreement; a total of thirteen states must ratify the treaty for the court to become a reality. In Asia, China’s Office of Intellectual Property is working to establish high punitive damages in an effort deter infringement practices.
Finally, closer to home, Canada’s new IP strategy will focus on educating Canadian entrepreneurs. The Canadian government hopes that this legislative initiative will cultivate innovation growth in Canada.
On the Legislative Front:
In a recent memorandum, the USPTO tried to reconcile the ambivalent question of whether “an additional element represents well-understood, routine or conventional activity” (Berkheimer v. HP Inc.) with the Alice Test. The guidance sets forth the necessity to make a factual determination of an element’s prevalence or common use in the relevant industry.
These and other relevant news below.
Facebook has hired Google patent data analytics specialist Jeremiah Chan as its new head of patents. The move follows the social media giant’s … (more…)
Are patents property rights, or are they governmentally created privileges that can be altered without judicial proceedings? The Supreme Court recently decided … (more…)
Nikola Motor Company filed a lawsuit this week against Tesla over allegations of design-patent infringement, Reuters reports. In the filing, Utah-based … (more…)
The U.S. government has authority to make or buy a patented invention without the permission of the patent holder, in exchange for reasonable compensation … (more…)
American Technical Ceramics Corp. told the U.S. Supreme Court members of the public will be “lost at sea” and could be sued for infringing unclear patents … (more…)
IHS Jane’s 360
China has released a second large batch of previously classified military-technology patents as part of its continuing efforts to stimulate private-sector … (more…)
RPX Corp. on Tuesday announced a deal to be acquired by private equity firm HGGC for $555 million, the latest in a series of shake-ups at the San Francisco-based … (more…)
The U.S. Supreme Court’s June 2014 landmark decision Alice v. CLS Bank International, 134 S.Ct. 2347 (2014), altered the course and viability of software patents … (more…)
After all, under the UPC it is perfectly possible that we will see a court in Germany hearing a case in German deciding in favour of a German patent … “It is not … (more…)
The Globe and Mail
For example, the evidence demonstrates that women are less likely to hold patents or other forms of IP and that only one in seven Canadian female inventors … (more…)
In a joint statement, Secretary of Commerce Wilbur Ross and Andrei Iancu, Undersecretary of Commerce and USPTO Director, have released a joint statement … (more…)
This is the third piece in a week-long series on intellectual property. You can read the previous pieces here, here, and here. The forthcoming Unitary Patent … (more…)
The U.S. Supreme Court on Tuesday gave its stamp of approval to a government review process prized by high technology companies as an easy and … (more…)