Link Turn---PTAB is good for patent trolls---they tactially use serial petitioning

The PTAB system allows for repetitive challenges of the same patent — whether within the PTAB or in combination with lawsuits in the court system. These duplicative challenges are prevalent and include either multiple parties attacking the same patent or multiple challenges brought by the same party. These duplicative challenges impose immense burdens on patent owners and on the PTAB itself.

Recent research reveals both types of duplicative challenges within the PTAB: (1) multiple parties attacking the same patent and (2) multiple challenges brought by the same party. For inventions in the chemical, electrical, and computers and communication fields, for instance, most of the patents subject to petitions for review at the PTAB are in fact challenged multiple times again and again in filing after filing.60 In extreme cases, some patents are subjected to dozens of PTAB attacks in these serial petitions. One recent study illustrated this by comparing the share of petitioners who were previously sued (for patent infringement) with the share of petitions with at least one petitioner who had been sued on the patent. For patents related to drugs and medical technology, for instance, 48.5% of the petitioners had been previously sued on the patents they challenged, but 70.8% of the petitions had at least one already-sued petitioner.61 As a practical matter, this means petitioners who are not defendants (in court) are joining petitions that have been filed by prior defendants.62 At the very least, there are multiple petitioners challenging the same patent, and many were serial filings of petitions. Multiple challenges have real costs. When a company must spend financial resources to repeatedly defend the same patent again and again, it cannot invest those resources in additional innovation, recruitment of talent, or operational expansion, among other things.

One example of these duplicative PTAB filings on a single patent occurred when Microsoft filed three separate IPR petitions against U.S. Patent No. 8,144,182 (the ’182 Patent), which is owned by Biscotti, a small business in Texas.63 As early as 2010, Microsoft had been in commercial and legal discussions with Biscotti regarding use of its products and patented technology. Microsoft and Biscotti were in negotiations from 2011 through 2013. When Microsoft chose not take a license to use Biscotti’s patented technology, the small start-up company had no other choice but to sue Microsoft in federal court in November 2013.64 In addition to its vigorous defense of itself in court, Microsoft filed three petitions at the PTAB in April 2014 to invalidate Biscotti’s patent. Despite these efforts, Microsoft lost all three IPR challenges in March 2016.65 Although Microsoft is now precluded from making the same invalidity arguments in court, defending the PTAB actions imposed a significant financial and time burden on Biscotti and delayed the patent infringement trial for almost two years.66 The Microsoft story is just one example of many that illustrates how patent owners are subjected to serial filings at the PTAB (three at the same time in the Microsoft case).

The Microsoft story also illustrates how PTAB filings can duplicate ongoing federal court litigation as well. Accused infringers who are already sued for patent infringement in federal court can escape into PTAB review, with its more lenient standards (as detailed in the prior section), In so doing, they delay these court proceedings and impose additional legal and commercial costs on the patent owners, including ongoing costs from infringement. These PTAB petitions are generally filed quite late in the judicial process, after significant investment of judicial resources. Although Congress attempted to discourage this behavior by imposing time limits for filing and forbidding relitigation of issues already decided by the courts, the PTAB has interpreted these legal constraints quite loosely, making these legal rules a very weak protection against harassment.

The dispute between Wi-Fi One and Broadcom illustrates this problem of weakened legal protections against strategic abuse of the PTAB by defendants sued for patent infringement. This case has a long and complicated history, but it has its roots in ongoing litigation between Ericsson and several computer device manufacturers, such as Dell, Toshiba, Intel, and D-Link Systems, among others.67 In September 2010, Ericsson sued these companies for patent infringement. While this litigation was proceeding in the courts, Broadcom — which was not a defendant in Ericsson’s lawsuit — filed several petitions for PTAB review of the same patents Ericsson asserted in its lawsuit against Dell and the other computer device manufacturers.68 In 2014, Wi-Fi One acquired the patents from Ericsson and was responsible for the litigation going forward. Wi-Fi One also took over for Ericsson in the PTAB proceedings.

After Wi-Fi One took over the patents, it argued to the PTAB that Broadcom was time-barred because of Broadcom’s commercial or legal relationships with some of the original defendants in the district court litigation. The basis for this claim was that Congress imposed in the AIA a “time bar” on IPR petitions: if a petitioner (or its “real party in interest”) was sued in federal court for patent infringement, it has one year to ask for PTAB review. After that, the petition is time barred.69 In this case, Wi-Fi One argued that Broadcom failed to disclose all of the real “parties in interest” with respect to its petition. Wi-Fi One wanted to be able to conduct discovery of Broadcom to determine its relationship with the litigation defendants.

The PTAB rejected Wi-Fi One’s argument that Broadcom should be barred under the AIA from filing an IPR petition, or that it should be permitted at least to engage in discovery to determine if Broadcom counted as a “party in interest.” Wi-Fi One appealed to the Court of Appeals for the Federal Circuit, but it lost, but not on the merits. Rather, it lost solely on the basis of a procedural technicality: a prior ruling by the Federal Circuit concluded that a court will not review questions about whether the PTAB properly instituted an inter partes review.70 In other words, the Federal Circuit said it did not have the judicial authority to review the PTAB’s decision, regardless of its potentially harassing effect on Wi-Fi One. In January 2017, the Court of Appeals for the Federal Circuit granted en banc review of the PTAB post-issuance proceeding decisions in the case,71 which reveals that some judges recognize the unintended harmful effects of this type of automatic judicial deference to administrative tribunals like the PTAB that are capable of being abused for the purpose of harassing patent owners.

The problem of harassment of patent owners in the PTAB by defendants sued for patent infringement is particularly hard-felt by individual inventors — the innovators working in their garages, like Steve Jobs and Steve Wozniak in the 1970s when they started Apple Computer. One example is father-of-eight Josh Malone and his “Bunch O Balloons” invention: a device that attaches to a water hose and can fill one-hundred, sealed and ready-to-use water balloons within 60 seconds. Josh applied for and received a patent in 2015. With his patent, he ran a successful crowd-funding campaign on Kickstarter to start his business. With his startup funding, he went national, and he ultimately licensed a manufacturing company, ZURU, to make and sell his invention. It has been a smash success, and his invention has been featured on the Today Show and Good Morning America. As with all success stories, copycats immediately began selling knock-off versions, such as the “Balloon Bonanza” made and sold by TeleBrands.72

Like all innovators, Malone did not take lightly the infringement of his property rights, and he sued TeleBrands in court. The judge issued a preliminary injunction against TeleBrands, prohibiting it from selling its knock-off product. TeleBrands responded in typical fashion by appealing the injunction to the Federal Circuit and it also reissued its infringing product with slight variations and under a different name, “Easy Einstein Balloons.” But TeleBrands also did something that companies sued in court for patent infringement could not do before 2011: it filed a PTAB petition challenging the validity of Malone’s patents.

While TeleBrands’s court appeal was still pending, the PTAB granted TeleBrands’s petition, held a hearing, and canceled one of Malone’s patents.73 Later, the Federal Circuit issued its own opinion and it upheld the district court’s injunction against TeleBrands, and it rejected the PTAB’s ruling as not binding on it.74 Unfortunately for Malone, this did not bring an end to the infringement or to the ongoing costs imposed on him in defending his patent. In response to the multiple challenges filed by TeleBrands, the PTAB has continued to review Malone’s other patents on his invention. TeleBrands also went back to the trial court and is now arguing that, since the PTAB is invalidating Malone’s patents, it should rescind its injunction.

In a recent article, Malone reported that he has been forced to spend $17 million just to defend his patent rights against infringers like TeleBrands.75 He writes that “the PTAB simply encourages infringers like TeleBrands to double down on the expense of litigation,” and that this kills individual inventors and small innovator companies who do not have the resources to fight for their patent rights. He asks rhetorically: “What can I tell someone who has an invention and is preparing to scrape together $5,000 to $10,000 to file a patent application? . . . . If a patent’s costs are in excess of $17 million, and it still is not secure, how can we innovate?”76

As a result of multiple PTAB filings challenging an individual inventor’s patents, a classic American success story has become a legal nightmare. Malone’s tale is all too typical, as accused infringers and commercial competitors now exploit the PTAB as a way to harass inventors, small businesses, and other innovators. Paul Michel, the former Chief Judge of the Federal Circuit, recently testified to Congress that changes to the patent laws like the PTAB have made patents the “sport of kings,” and that the “impacts on start-ups, research universities, university spin-offs, small and medium sized businesses and nearly all but giant multi-national corporations has been devastating.”77