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Economists generally agree on the fact that trademark protection creates an incentive for the production of quality goods.46 However, this function is presented by economists in two different versions. Some authors claim that trademark protection induces firms to offer goods with a precisely defined and constant quality.47 For others, trademark protection makes firms produce high quality goods, and the aggregate effect is to increase the average quality of goods throughout the whole market.48 The adoption of the latter approach may be crucial to providing a rationale for the extended protection of “strong” and famous trademarks. Take, for instance, the primary finding of Landes and Posner: the higher the quality of products, the greater the incentive to invest in order to create a “strong” trademark.49 Although Landes and Posner put forth a seminal contribution in the economic literature on trademarks, their findings are affected by several limitations as related to the aims of our research. First, Landes and Posner tacitly assume that the activities that create a “strong” trademark, such as the production of high quality products and advertising, are perfect signals to consumers regarding the characteristics of products.50 Second, their model mainly concerns firms that are attempting to build a “strong” trademark;51 what really is at stake in real markets, though, is the extended protection of brands that are already “strong.” And third, their model deals with the use of trademarks within a product class; the possibility of non-homogeneous goods is included, but the phenomenon of brand extension is not considered.52 This same limitation characterizes the work of others as well.53

Amid a 40-percent surge in U.S. trademark applications during the pandemic, the U.S. Patent and Trademark Office (USPTO) has been working on several fronts to improve the security of the trademark filing system and protect trademark owners from fraud, theft, and abuse. While applicants previously enjoyed an examination process in which a first Office Action or approval for publication was issued in less than three months, the historic rise in the number of applications has increased average wait times to seven to eight months during the USPTO’s fiscal quarter ending March 2022. (See the USPTO’s data dashboard). In addition, the mounting number of applications has caused delays in other areas, such as renewals and overall pending application inventory, as well as an increase in fraudulent applications. The volume of fraudulent applications has raised a range of issues. One significant focus is on fake specimens and allegations of actual “use in commerce” found in applications and post-registration renewals. Other concerns include invalid attorney and applicant signatures, false addresses, and false, hijacked, or “rented” U.S. attorney credentials on applications and affidavits of use. The U.S. Department of Commerce, Office of Inspector General (OIG) audited the USPTO’s trademark fraud risk framework (looking at applications filed between October 2, 2019, and April 30, 2020) and in August 2021 reported that new controls were needed to combat this increase in suspicious filings. At the time, USPTO leadership stated that it had earlier recognized this trend and that it initiated steps to deal with suspicious filings beginning several years before the OIG’s report. In 2019, the USPTO created—and now has stated it is expanding—a special fraud task force comprised of attorneys, analysts, cyber investigators, and IT personnel to investigate suspected violations of U.S. filing rules. To improve trademark register integrity, the USPTO implemented a rule in 2019 requiring foreign domiciled applicants to be represented by U.S.-licensed attorneys for the purpose of increasing compliance with U.S. trademark law and USPTO regulations. Further, identity verification for all U.S. trademark filers—a step the USPTO has said is intended to safeguard the trademark registry—will become mandatory on August 6, 2022. The Trademark Modernization Act of 2020 (TMA) is also beginning to assist the USPTO in its efforts to battle fraud. As required under the TMA, and implemented on December 27, 2021, the USPTO has begun receiving petitions from third parties to cancel registrations believed to never have been validly used, through new non-use expungement and reexamination proceedings. At INTA’s 2022 Annual Meeting Live+, on May 1, 2022, USPTO officials reported on the status of the new non-use proceedings to members of INTA’s Trademark Office Practices Committee, USPTO Subcommittee. They noted that the proceedings have direct links to the USPTO’s anti-fraud efforts, including petitions that provide valuable information to the USPTO fraud task force on patterns and sources of fraudulent filings for referral to the USPTO’s Office of Enrollment and Discipline (OED), which handles U.S. attorney disciplinary matters, as well as evidence for USPTO Director-initiated non-use and sanctions proceedings. Further, both the USPTO and the OED have deepened anti-fraud efforts. The USPTO has issued numerous show-cause orders in recent years for suspected violations and final orders for sanctions if responses are inadequate. These orders have terminated tainted applications and blocked fraudulent filers’ access to the U.S. trademark filing system. In one notable recent order on January 25, 2022, In re Abtach, Ltd., the USPTO barred several entities and their parent companies from further communication with the USPTO. Their accounts were permanently deactivated and thousands of pending trademark applications handled by the respondents were terminated. In another show-cause order issued on June 30, 2022, the USPTO alleged that respondents Yanhua Chen and Huang Yuchen falsely designated certain U.S. licensed attorneys for more than 350 applications. The USPTO discusses its efforts and lists show-cause and sanctions orders here.

Nonsense marks do not look like trademarks typically look or work the way the trademark system assumes they are supposed to. But because of that quality, rather than in spite of it, nonsense marks easily meet all of the formal requirements for trademark registration and may even receive stronger protections than do many more typical marks.60 Put another way, within the existing registration system, everything but common sense indicates that these words should be valid trademarks. II. The Harms of Nonsense Marks Though nonsense marks are at odds with the purposes of the trademark system, the ease with which they qualify for registration is not necessarily a problem in and of itself. Unlike marks that might confuse or deceive about a product’s source of origin, it does not seem that the presence of nonsense marks in the market will directly harm consumers or lead them to buy products they do not intend to. Since consumer protection has become the guiding normative justification for trademark law,61 the question for nonsense marks, as it is for other nontraditional proposed marks, is why not offer trademark protection?62 However, as scholars like Professors Rebecca Tushnet and Mark McKenna have noted, trademark law’s primary focus on consumer protection is both recent63 and limited.64 Any choice to expand trademark protection in a new way can impose burdens beyond those for consumers, including burdens on the USPTO, on competitors, and on the trademark system in general. It is along these metrics that the existence of nonsense marks on the Register presents the potential for tangible harm.

First, and most basically, applications for nonsense marks place further stress on an already-strained USPTO. Trademark applications have increased continually in recent years. In 2019, the USPTO received 485,444 applications, the tenth year in a row in which the number of applications broke the previous record.65 This means that USPTO examiners are receiving thousands of applications a day and are tasked with assessing whether they should proceed to the Register. Even under normal circumstances, “maintaining the registration system requires the investment of substantial government and private resources.”66 But faced with the twin problems of fraudulent filings and unused marks that remain on the Register, the USPTO has instituted reforms aimed at ensuring that the Register consists only of marks that are currently, actually being used in commerce.67 While these are welcome changes, they consume additional time and resources of the USPTO. Against this backdrop, when the owners of nonsense marks, many of whom are not seeking the traditional benefits of trademark registration, file applications with the USPTO, they impose a further burden on the agency. Indeed, examiners, wary of fraudulent marks from China in general, may spend even more time than usual reviewing nonsense marks from Chinese companies.68 By calling on the resources of the USPTO to achieve their owners’ Amazon-related objectives, nonsense-mark applications themselves impose costs on the USPTO, as well as on other applicants affected by examiners’ greater caseloads and slower review processes.69

As the U.S. economy shifts toward service- and technology-based industries, firm value is increasingly accounted for by intangible capital such as intellectual property. We examine a basic class of intellectual-property assets—trademarks—and present evidence on the effects of trademark protection on firm profits and strategy. Trademarks grant the holder a monopoly over a particular brand. The efficiency rationale for trademark protection is that it incentivizes firms to invest in product quality and development. On the other hand, stronger trademark protection inevitably insulates incumbents from competition. Whether the quality-incentive or monopoly-rent effect dominates is an empirical question with significant policy implications. To study the causal effects of varying trademark protection, we exploit the Federal Trademark Dilution Act (FTDA) of 1995, which granted additional legal protection to “famous” trademarks until its key provision was nullified in 2003 by a U.S. Supreme Court decision. We find that the act raised treated firms’ operating return on assets by an average of 1.7 percentage points, equal to 12 percent of their average pre-FTDA profits. The passage of the act was followed by a sharp increase in trademark lawsuits under the new provision and by reduced entry and turnover in affected goods and service classes, consistent with our hypothesis that the FTDA raised the expected cost of entry into affected product markets. We next examine the FTDA’s effects on product quality and innovation and product-market strategy. In theory, trademark protection incentivizes firms to produce high-quality products and prevents a race to the bottom. Alternatively, trademark protection insulates incumbents from competition, in which case stronger protection may lead to more exploitative behavior. We find that stronger trademark protection decreased product quality, as firms that were granted additional trademark protection had increased frequency and dollar value of recalls of unsafe products and were less likely to launch a recall voluntarily. This theory also predicts that trademark protection affects innovation. First, some inventions cannot be patented or are better protected via secrecy instead of disclosure. Second, patents expire whereas trademarks do not: pharmaceutical firms often continue to sell the branded drug at a premium after their patent expires. Third, trademark protection is a determinant of market power, which is a primary incentive for innovation. We find that treated firms reduced research and development (R&D) spending, patenting activity, and new product introductions—suggesting that stronger trademark protection led to lower competition and less innovation. We also find that treated firms altered their product-market strategy by introducing brand-extending products in new product categories. At the same time, these firms created fewer new products in their legacy-product categories. Taken together, our results suggest that firms responded to stronger trademark protection by pursuing a more exploitative and less innovative product-market strategy, at the same time extending their brands into all-new product markets. The main challenge for our research design is that the FTDA neglected to define the term “famous,” which has been previously decided in court on a case-by-case basis. Thus, there is no objective rule whether any given trademark qualifies as famous. There are two aspects of our research design that help mitigate this problem. First, the key question for the FTDA’s effects on firm behavior is whether the firm and its competitors believed a trademark would qualify. Guided by the legal literature, we explore three independent approaches to assigning treatment status as of 1995 and find similar results for all three. Second, in our research design, mistakes in assigning treatment status attenuate the estimates of the law’s impact toward zero. With this caveat, our results can be seen as a lower bound on the law’s true effects. Our analysis lets us identify the effects of the treatment on the treated—that is, the effects of granting additional antidilution protection to incumbent firms. Thus, our results do not speak directly to the effects of protection against infringement, which is the fundamental right associated with a trademark. However, our results are informative about changes to trademark policy at the margin in an environment (the United States) of strong intellectual-property enforcement. Interestingly, our results on product quality are consistent with those of economist Yi Qian in a very different setting: Qian finds that name-brand Chinese shoe companies responded to weaker protection against counterfeits by producing higher-quality products. Our findings that the FTDA was followed by lower product quality and innovation add to recent studies on the potential downside of intellectual-property protection and suggest that strengthening trademark protection may not deliver what is promised on the label.

Legislative patent reform can be a costly proposition. Aside from the problem of special interest rent-seeking, the switching costs of adapting common practice to new legislation can be extraordinarily high. The America Invents Act offers a prime example of such switching costs. Although businesses will likely experience somewhat lowered costs in managing international patent filings, the legislation disrupts long settled law, creates new opportunities for gamesmanship, foments new litigation, and introduces new uncertainty into business decisionmaking. Perhaps ironically, this means that the true business of patent reform is left to the U.S. Patent Office and the courts, where it may have been better to have placed it in the first instance. The many ambiguities and inconsistencies will ultimately be given meaning by judicial interpretation. It will unquestionably take decades of litigation before we know what many of these statutory changes introduced into patent law mean for innovation. The political claim that the AIA will create 200,000 new jobs may well prove to be true, but they will be jobs for patent lawyers.

Standardization plays a fundamental role in developing and implementing the foundational technologies at the core of critical global infrastructure, such as 5G and Wi-Fi. The standard setting process generally includes a commitment from innovators whose new technology is included in the standard to license any applicable patents on fair, reasonable, and nondiscriminatory (FRAND) terms.42 This process enables those innovators to collect royalties to invest in further research and development. It also rewards the innovators for the risk they take in creating new technologies without knowing whether it will be included in the standard. SEP licensing involves complex incentives, highly sophisticated markets, and worldwide portfolio considerations. Critics of the system suggest that it is not working, pointing to the few licensing disputes that end up in court. But the fact that there is some litigation does not mean the system is broken. And in any case, data shows that SEP-related litigation has decreased when normalized to account for the growth of industries implementing SEPs.43 Purported solutions to this non-existent problem, such as the European Union’s recent release of a draft proposal to create a court to set a non-binding royalty rate44 or a similar proposal being informally circulated in the United States to have a single SEPs rate court, will most likely lead to the devaluation of innovator companies’ intellectual property. It will also signal to countries whose domestic industry is dominated by implementors of technology (rather than innovators of it) to create their own system that is explicitly designed to depress royalty rates. This is already occurring in a less systematic form in countries like China, and would predictably be accelerated if the United States signals that significant regulatory intervention in this space is needed.45 In other words, attempting to regulate these markets at home will almost surely guarantee that American IP is devalued abroad. Congress should avoid heavy handed legislation targeting standard essential patents and their licensing environment. The industry is working well on its own, and efforts to undercut it will stifle innovation.

Is all lost? Are we to give up innovation? No; there is plenty of literature explaining how innovation occurs in the absence of IP protections (Against Intellectual Property and Against Intellectual Monopoly). Non-profits can innovate, too. If a group of people observe that the private sector is innovating inefficiently according to their preferences, they can form or fund a non-profit corporation that engages in research regardless of IP protections. Furthermore, for-profit companies can take a lot of measures to make sure that their formulas are not copies, such as built-in obsolescence, un-replicability, and non-disclosure agreements. These are only some ways that companies can protect their formulas. Who is to say that a company will not hire a team of scientists to innovate more in order to stay ahead of competitors? Are we to suspect that pharmaceutical companies will simply give up? Definitely not; they will just adopt a different business model. There is no way to determine a priori how a company will alter innovation in the absence of IP. Some will not be affected, some will decrease innovation, and some will innovate more. The choice of potential innovators is not always between innovating or not innovating, it is between innovating here, innovating there, or going into some non-innovative yet productive endeavor. To say that there is an underproduction of innovation at any point is to suggest that there is a better quantity of innovation that exceeds the quantity of innovation desired voluntarily by consumers. If consumers are willing and able to support a higher degree of innovation, someone will find a way to exploit that desire, thus, profiting. The claim states that there is an efficient level of innovation outside of what human actors have voluntarily demonstrated. Efficiency, determined by voluntary actions of human actors, is opposed to the IP. Ultimately, many, many people are harmed in order to provide protection for someone else’s idea in excess of the free market quantity of protection. Such a thing harms consumers generally instead of enhancing their welfare. That alone is enough to be against IP. Prioritizing one innovation over another is nothing short of arrogance. It neglects the unseen effects of government intervention and subverts the ability of the market to fulfill consumer desires. All action aims at the satisfaction of human affairs. Choosing not to innovate is a beneficial decision just like any other, and we should not make it a matter of public policy.

But lawmakers seemed hesitant to implement drastic legislation, with many suggesting they would prefer companies came to agreements among themselves. "I think it's important that we recognise, as with doctors, first do no harm," said Representative Zoe Lofgren. Representative Adam Smith seemed sympathetic to the issues faced by the internet companies. In their testimony, Oyama and Sieminski and others presented evidence of a growing issue of abusive takedown notices being used to censor critical commentary or interfere with "legitimate competition." Smith said there should be statutory damages for the abusive use of takedown notices, as there is for copyright infringement. "I hope you can all figure out a way to solve this problem without getting the government involved," said Representative Poe. Somewhat ironically for a Congressman, he added: "Because government makes it worse, not better."

Trade secrets provide a valuable opportunity to protect important intellectual property, while also maintaining their confidentiality. Car battery technology, proprietary software for vehicle management systems, and EV production techniques may all incorporate trade secrets that a company would like to protect. By protecting these important, commercially valuable assets, companies can maintain their competitive edge in this growing industry. As the EV market continues to explode, this trend of trade secret litigation is likely to continue. Competitors in the EV industry are seeking trade secret protection for their commercially valuable, and confidential, business information. Companies already in this space, or those trying to break into the EV market, should be aware of the likelihood of trade secret litigation. Additionally, companies should protect their own trade secrets by identifying them, implementing policies across the company to protect them, and ensuring compliance with those policies. This type of intellectual property protection can be done in conjunction with other intellectual property protections, such as obtaining patents on related technology. Enforcing intellectual property rights by protecting trade secrets is a strategic tool to protecting highly valuable business information and practices in the fast-paced EV industry.

This paper contributes to the debate on the role of intellectual property rights by means of a laboratory experiment. We recreate in the laboratory a sequential innovation environment, and use a word-creation task that combines the central features of innovation, investment and creativity, in one experiment. We use this task to investigate the effects of the presence or absence of intellectual property rights on innovation activity and welfare. We further assess the effect of communication with and without IP. Results clearly show that the introduction of intellectual property hinders innovation. In presence of IP the economy produces less valuable innovations, and welfare decreases. Introducing IP causes a shift towards more basic innovations and a higher degree of autarky – i.e., relying on the self-produced prior innovations rather than building on the best available opportunity within the economy at large. Conversely, the absence of IP results in more sophisticated and more valuable innovations and provides incentives to stand on the shoulders of giants, opening up more profitable innovation paths. Moreover, the negative effects of IP are not a short term phenomenon, but rather worsen over time as license fees tend to increase, leading to the breakdown of cooperative efforts and the use of autarkic strategies.

Institutional change is difficult – even when the change is known to be beneficial. Changing the institutions that govern the functioning of society is likely to generate short-term disruption, increase transaction costs, and cause errors and inefficiencies. Moreover, there might be losers – people who do not benefit from the change, either at all or in the short run. These losers could reduce their contributions to society because of their grievances against the winners and their feeling of relative deprivation to thus limit or erase the benefits of the institutional change (Dannenberg and Gallier, 2019). Reforms of intellectual property (IP) rights, particularly patents, are a case in point. Despite a broad debate, the net effect of intellectual property on innovation and welfare is unclear. It is thus even more unclear whether a reform would be beneficial. Already back in 1955, the U.S. Senate Judiciary Committee commissioned several reports from experts such as Vannevar Bush and Fritz Machlup on the effects of the patent system and the need to reform it. After surveying 200 years of economic theory on the patent system, Machlup (1958) concluded the following: No economist, on the basis of present knowledge, could possibly state with certainty that the patent system, as it now operates, confers a net benefit or a net loss upon society. [... ] If one does not know whether a system ‘as a whole’ [... ] is good or bad, the safest “policy conclusion” is to “muddle through” – either with it, if one has long lived with it, or without it, if one has lived without it. If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it. According to Machlup, in the 1950s, we did not know enough about the advantages and disadvantages of the patent system to take risks involved in its demise. Despite decades of research, Machlup’s conclusion still stands – we do not know enough about the effects of the patent system to be able to suggest a clear reform path. In the meantime, the stakes involved in taking action have steadily increased. In Machlup’s time, less than 150,000 patents were filed worldwide in a given year. This number increased 20-fold to over 3 million in 2018. Given the current size and impact of the IP system, are IP abolitionists such as Boldrin and Levine (2008a) or IP reformists such as Bessen and Meurer (2008) and Stiglitz (2008) playing with fire by suggesting that we should abolish or strongly reform IP? IP is now long established and has attained global reach. The disruption risk is therefore greater. Economic agents accustomed to the IP system could be destabilized, demotivated and, in the worst case, not compensated by the path opened by IP reforms.

Trademark and patent reserve funds may last different lengths Stakeholders used to office’s ability to weather a shutdown The US Patent and Trademark Office can continue operating for about three months if the government shuts down because Congress fails to enact funding legislation by Saturday night’s deadline. The agency would draw from its $1.04 billion operating reserves, which should cover about three months of patent operating expenses and slightly more than four months of trademark operating expenses, according to a submission it made to Congress in March. That would allow for full staff and operations to continue—at least temporarily—including at the administrative tribunals that hear challenges to patent validity and resolve trademark disputes. The PTO is self-funded mostly through patent and trademark filing fees, but it is still subject to the annual appropriations process. Congress allocates those collected fees to the office through the annual Commerce-Justice-Science spending bill. For fiscal 2023, the office received appropriations equaling its full fee collection estimate of $4.1 billion, which fully offset its spending and funded its reserve balance. The PTO stayed open during the most recent government shutdown, which lasted 35 days from December 2018 to January 2019. But some patent attorneys began to worry about the office’s ability to function as the appropriations lapse wore on. “At the very end of it we started to think, ‘Well if this goes on for much longer, maybe they will have to stop,’ said Jonathan Stroud, the general counsel of Unified Patents. “But it would have been a historic shutdown.” The expected stability through a short-term shutdown represents a change from the PTO’s past. Because the PTO’s fee revenue and other income have often exceeded its total estimated spending needs, Congress in past decades diverted part of the revenue to fund other government spending. Former PTO Acting Director Joseph Matal said there is “currently nothing in the law that would prevent appropriators from again diverting fees.” “While the America Invents Act originally included a provision that would take the USPTO out of the appropriations process and prevent fee diversion, that provision was stripped out of the bill,” he said. During the passage of the AIA in 2011, however, he said, appropriators “made a commitment that they would not divert USPTO fees going forward, and they have stuck to that ever since.” “If that were to go away, then a shutdown would matter more because then the money is kind of technically going directly into the general” government funding, Stroud said. A PTO spokesperson didn’t respond to Bloomberg Law’s request for comment. Practitioners Unconcerned Matal, now a partner at Haynes & Boone LLP, said none of his clients have asked how a shutdown might affect any work involving the patent office because “everyone’s used to the USPTO being able to weather any kind of shutdown.” The reserve fund and other PTO practices “have now been in place for over a decade, and it looks like the agency has found its way out of these past messes,” Matal added.

THE US COPYRIGHT OFFICE We also do not anticipate that the overruling of Chevron will have a significant impact on copyright law and the Copyright Office because judicial review of Copyright regulations has not regularly applied Chevron deference. Congress has expressly delegated authority to the Copyright Office to develop regulations regarding many facets of copyright law. This includes the music compulsory licensing rates set by the US Copyright Royalty Board, the formation and implementation of the Copyright Office’s Copyright Claims Board, and the registration of different types of copyrighted works. Every three years, the Copyright Office issues exemptions for Section 1201 of the Digital Millennium Copyright Act (DMCA), specifically to the prohibition on circumvention of technological measures that control access to copyrighted works. These exemptions cover issues including right to repair, unlocking cellphones, “jailbreaking,” and ripping DVDs for archival or educational purpose. These regulations, to the extent that they do not interpret statutes, are unlikely to be affected. Though the Copyright Office falls within the Library of Congress, which is part of the legislative branch and thus not an agency within the meaning of the Administrative Procedure Act (APA) judicial review provision, the Copyright Act itself states that the actions of the Register of Copyrights are subject to APA review. In June 2024, the US Court of Appeals for the DC Circuit confirmed that “[i]rrespective of whether the Library is an ‘agency,’ . . . Congress has specified that copyright regulations . . . are subject to the APA.”[10] Further, the DC Circuit held that the Triennial DMCA rulemaking regarding the Section 1201 exemptions are subject to APA review.[11] Similarly, the actions of the Copyright Royalty Board are reviewed under the standards of the APA. Notably, these actions are typically reviewed under the APA’s “arbitrary and capricious” standard.[12] Courts have applied Chevron deference to Copyright Office regulations where they interpret ambiguous statutes via formal rulemaking,[13] a relatively rare occurrence. Many Copyright Office decisions, however, do not involve formal rulemaking, and have not received Chevron deference.[14] For example, a court refused to apply Chevron to the Copyright Office Compendium’s construction of the meaning of “preexisting work” where no formal rulemaking occurred.[15] Another court determined that the Copyright Office’s “[i]ndividual decisions about the copyrightability of works are not like ‘rules carrying the force of law,’ which command Chevron deference.”[16] In sum, the Court’s decision is anticipated to impact few regulations or decisions set by the Copyright Office.

Under Loper, judges "must exercise independent judgment in determining the meaning of statutory provisions." Loper, 603 US __ at *16. Loper states that "courts [should] use every tool at their disposal to determine the best reading of the statute and resolve the [statutory] ambiguity." Id. at *23. However, in many ways the framework courts use to analyze statutes will not change. As explained above, under Chevron, "step zero" requires the court to decide whether a statute is ambiguous. If the statute is not ambiguous, then the court should apply the plain meaning of the statute. Arguably when a statute is "clear and unambiguous" a court using "every tool at their disposal to determine the best reading of the statute" should reach the same result under Loper as it did under Chevron, because even under Chevron, agency interpretations of an unambiguous statute get no deference. As one example, in Facebook, Inc. v. Windy City Innovations, LLC, the Federal Circuit considered the PTAB's interpretation of 35 USC. § 315(c). 973 F.3d 1321, 1338 (Fed. Cir. 2020). In Facebook, Petitioner Facebook filed a petition for IPR for each of four asserted patents. Id. at 1328. After Facebook's IPRs were on file, Patent Owner Windy City asserted additional claims in a parallel district court case. Id. Some of these new claims "were claims that Facebook had not challenged in its petitions for IPR." Id. Subsequently Facebook prepared two additional petitions for IPR challenging these additional asserted claims. Id. However, "[b]ecause the petitions would otherwise have been time-barred under 35 USC. § 315(b)," Facebook filed the new petitions along with motions asking the Board to join each new proceeding to the already-instituted IPR on the same patent under § 315(c). Id. The question therefore arose whether 315(c) allowed "same-party joinder"—i.e., whether Facebook could join an earlier Petition filed by Facebook under 315(c). Id. The Board instituted Facebook's new petitions and granted Facebook's motions for joinder. Id. In particular, the Board found that Facebook "ha[d] established good cause for joining this proceeding with the [existing] IPR." Id. In a concurring opinion, two Administrative Patent Judges ("APJs") stated that "§ 315(c), when properly interpreted, does not authorize same-party joinder" but that "the Director repeatedly has taken the position ... that such same-party joinder is permitted by § 315(c)" and the concurring APJs agreed to follow that position in this case, "[d]espite [their] disagreement with the Director's interpretation." Id. The Board's Precedential Opinion Panel also analyzed this issue in Proppant Express Investments, LLC v. Oren Technologies, LLC, No. IPR2018-00914, Paper 38, 2019 WL 1283948 (P.T.A.B. Mar. 13, 2019), and concluded that "315(c) permits a petitioner to be joined to a proceeding in which it is already a party." Id. at 1335. In Facebook, the USPTO director also argued that Chevron deference should apply to at least POP decisions. However, on appeal the Federal Circuit explained that "§ 315(c) does not authorize same-party joinder, and also does not authorize joinder of new issues." Id. at 1338. To reach this conclusion the Federal Circuit relied on "traditional tools of statutory interpretation." Id. In particular, the Court explained that "the clear and unambiguous language of § 315(c) does not authorize same-party joinder" and, therefore, "we need not defer to the PTO's interpretation of § 315(c)." Id. The Facebook decision, therefore, represents one way a Court's analysis of statutes will not change in light of the Loper decision. Where a statute was found to be "clear and unambiguous" Chevron did not afford any deference to the agency interpretation. This will arguably stay the same under Loper. Likewise, as noted in the Loper decision, "Chevron does not apply if the question at issue is one of 'deep economic and political significance.'" Loper, 603 US __ at *27. Therefore, the Loper decision should have less of an impact on these questions of "deep economic and political significance."

The Supreme Court overturned 40-years of Chevron deference. Courts will now exercise independent judgment over agency statutory interpretation. Courts can still defer to an agency's statutory interpretation under Skidmore deference based on "the thoroughness evident in [the agency's] consideration." The decision expressly carves out "prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful… are still subject to statutory stare decisis." A challenger must provide a "special justification" to overrule Chevron-era cases.

IMPLICATIONS FOR IP LAW IN THE UNITED STATES The reversal of Chevron deference will impact US IP law, and it is likely to have the most impact at the ITC. While the reversal will also affect how courts review interpretations of statutes made by IP administrative bodies like the US Patent and Trademark Office (USPTO) and the US Copyright Office, we expect a lesser impact for those agencies. THE ITC The ITC hears IP cases pursuant to 19 USC § 1337, which authorizes the ITC to investigate alleged wrongdoing that involves importing an article into the United States that violates patent, trademark, copyright, trade secret, and other unfair competition laws. Drawing on this authority, the ITC has become a popular forum for IP cases given the speed of the cases[1] and the remedies that are difficult to receive in district court: injunctive relief and cease-and-desist orders. The ITC’s authority has not gone unchallenged. For example, in Suprema v. ITC,[2] the US Court of Appeals for the Federal Circuit considered whether the ITC could ban the importation of articles that do not infringe as imported but would later infringe post-importation. The Federal Circuit concluded that the statutory language was ambiguous, and relying on Chevron, determined that the ITC’s broader interpretation of Section 337 to allow for jurisdiction of post-importation infringement was reasonable.[3] On June 24, in anticipation of the Supreme Court’s Loper Bright and Relentless decision, Google petitioned the Federal Circuit for an en banc rehearing,[4] asking the Federal Circuit to reconsider “[w]hether the International Trade Commission’s authority under 19 USC § 1337(a)(1)(B)(i) is limited to articles that infringe a patent as imported, or instead extends to cases where infringement can occur only when additional features are added or additional steps are performed after importation.”[5] The Federal Circuit will have to consider this question and any future challenges to the ITC’s interpretation of its authority. This could lead to further limitations on what cases can be brought before and succeed at the ITC. THE USPTO Unlike with the ITC, neither patent law in general nor practice before the USPTO is likely to be affected significantly by Chevron being overruled. As the Federal Circuit has held, the USPTO was never granted substantive rulemaking authority by Congress and, as a consequence, the agency’s interpretations of the substantive patent law have never received deference[6] and are reviewed de novo on appeal.[7] In contrast, overruling Chevron may impact how the Federal Circuit treats the USPTO’s interpretations of procedural statutes. Previously, the USPTO has enjoyed deference to its interpretations where the Federal Circuit has found ambiguity in the procedural statute,[8] although the Federal Circuit frequently holds there is no statutory ambiguity.[9] The overruling of Chevron deference is not expected to impact the USPTO’s creation of procedural rules that Congress has authorized the USPTO to promulgate in areas where statutes are silent. We may, however, see an increase in challenges at the Federal Circuit on how the USPTO implements its procedural requirements, but we anticipate those challenges to be specific and narrow.

Patents have long been a part of the conversation over skyrocketing drug prices and America's increasingly unaffordable healthcare system. Experts often blame patent "thickets"-dozens or hundreds of patents for one drug-for high drug prices and anticompetitive behavior. But a key reform enacted more than a decade ago, the America Invents Act, established the PTAB as a pathway to administratively challenge the correctness of issued patents before panels of expert administrative patent judges who sit on the PTAB within the U.S. Patent and Trademark Office (USPTO). The intent was to create an "efficient litigation alternative for addressing ongoing questions of patent quality," Duan notes. R Street's report findings suggest a potential relationship between administrative PTAB patent challenges and the speedy entry of generic, low-cost drugs to the market. Using publicly available patent, drug approval and pricing data from the U.S. Patent and Trademark Office, the Food and Drug Administration and the Centers for Medicare and Medicaid Services (CMS), the report demonstrates several key findings: "When a successful drug patent challenge is brought before the PTAB, an average of seven additional products are approved within five years and the price drops by around 20 percent. Within three years of a successful challenge, 16 percent of drug formulations drop by 75 percent or more. Additionally, large price increases-of 25 percent or more-are fairly rare," Duan explains. Importantly, this study also finds that PTAB drug patent challenges are not the only cause of these outcomes. These proceedings likely act as part of broader litigation strategies intended to enable generic entry. This suggests that PTAB drug patent challenges play an important role in the healthcare ecosystem. Duan concludes that, moving forward, any legislation that might limit the usability or availability of PTAB challenges must account for this vital role.

In January of this year, the Supreme Court denied a request for certiorari on the Federal Circuit’s decision regarding its first two challenges. And, on April 1, the Northern District of California again dismissed the remanded claims against the director, now Kathi Vidal. Judge Edward Davila stated that Fintiv was excluded from the APA’s notice-and-comment rulemaking requirements because Fintiv was a general statement of policy and not a substantive rule. Apple Inc. v. Vidal, No. 20-CV-06128-EJD, 2024 WL 1382465, at *13 (N.D. Cal. Mar. 31, 2024). A substantive rule requires notice-and-comment rulemaking under the APA. Davila found that a substantive rule affects individual rights and obligations and does not leave the PTAB free to exercise discretion and consider the individual facts before it in a given case, and that a general statement of policy must be only prospective and must not establish a binding norm or be finally determinative of the issues or rights. Davila ruled that because IPR institution is never required (referencing § 314(a)), the Fintiv factors do not affect individual rights or obligations, and because the Fintiv factors are referred to as “nonexclusive,” they are not determinative and leave the PTAB free to exercise discretion. On April 19, the PTAB finally followed up on the ANPR and issued a notice of proposed rulemaking (NPR). Notably absent from the NPR was any mention of the Fintiv factors. It appears that, considering Davila’s order in the Northern District of California, Vidal and the PTAB are content leaving the Fintiv factors in their current state. Moreover, the denial of institution under Fintiv has declined following the guidance issued by Vidal, and petitioners can now utilize Sotera stipulations to avoid denial. See Sotera Wireless, Inc. v. Masimo Corp., IPR2020-01019, Paper 12 (PTAB Dec. 1, 2020). As a result, the criticism that Fintiv discretionary denials frustrate the purpose of IPRs to provide a more efficient venue for patent issues no longer packs the same punch.

Our patent system has been relentlessly attacked for the better part of the last 20 years. Patents have been blamed for everything from the creation of patent litigation abuse to high prescription drug costs. There is scant evidence of an actual causal relationship, yet the attacks continue. Knowing that it would be impossible to outright ban patents, the popular argument is that poor quality patents that should not have issued are responsible for a majority of litigation issues and drug prices. In response, Congress created the Patent Trial and Appeal Board (PTAB) at the United States Patent and Trademark Office (USPTO) in 2011 to make it easier to invalidate “low quality” patents without the need for federal district court litigation. Yet, after more than 10 years of invalidating issued patents through the PTAB, the criticism of our patent system has not abated. These patent critics have called for new policies to change the behavior of inventors. The USPTO recently announced substantial fee increases and new “rules” that many argue actually amount to legislation to force behavior changes and decrease the number of patent applications that have historically been available to inventors. If implemented, these changes will significantly increase the cost and complexity of obtaining patents, but they will not address the perceived deficiencies in the patent system. Improving the operations of the USPTO, however, is the best opportunity to improve the patent system. An Alarming Trend Recent workplace rankings by USPTO employees in the Best Places to Work in the Federal Government, a little-known survey outside of the government, should be a red flag for supporters of our patent system. Twenty years ago, the USPTO’s overall survey result was very poor but improved dramatically until the USPTO reached the top place for employee satisfaction in 2013. The improvement was the result of focused efforts by leadership to improve the agency. In the last 10 years, the USPTO’s overall survey score has steadily decreased. While the current state is not back to the lows of decades ago (the USPTO ranked 236 out of 459 subcomponent agencies), the downward trend is alarming. I had the pleasure of being a leader of the USPTO and working with exceptional patent and trademark examiners. Examiners have scientific degrees; many are attorneys, and they perform a detailed study of technical documents every day. It should not be a surprise that their workplace satisfaction is reflected in the USPTO work product. Quality starts with employees. This is true for manufacturing cars and examining patents. A belief in the agency mission, having meaningful input and enough time to perform a quality job are important. The USPTO reports to the Commerce Department and Secretary of Commerce Raimondo has received well deserved accolades for her leadership of Commerce policies. Among her top achievements are working to get affordable, reliable high-speed Internet service to everyone in America, revitalizing the U.S. semiconductor industry, and building a climate-ready nation. In addition to these important achievements, the Commerce Department has been a top ranked place to work among large federal places to work. But, for some reason, those leadership achievements haven’t extended to the USPTO. Looking Ahead The next administration faces a difficult situation. The drop in the USPTO ranking continues under President Biden and reversing that in a second term will require changes in both policy and leadership. Neither is easy to achieve in a second term. Likewise, a second Trump administration would return to the Republican platform of shrinking government and a hostility toward government labor unions. This is not a recipe for improving federal employee engagement. Improving America’s patent system starts with supporting the front-line employees of the USPTO. Given the right support, tools, and leadership, the agency can attract the best talent to carefully examine and issue the world’s best patents and trademarks.

Over the long term, the USPTO needs to be resourced to handle the high volume of patent applications it receives and focus on patent quality, only granting patents when an idea is novel, useful, and non-obvious. On average, examiners now only spend 19 hours to reviewing each application. We must also improve transparency in the patent system so that the public knows who the true owners of patents are and patent trolls are prevented from misrepresenting their identities. But the director of the USPTO, Kathi Vidal, also has an opportunity to take immediate action that will substantially improve how our patent system functions and advance U.S. innovation.