PTAB allows for Big Tech Companies to exploit startups – district court standards application stops this

The Promoting and Respecting Economically Vital American Innovation Leadership Act

While the Supreme Court was establishing the Alice/Mayo framework, Congress implemented a second major reform to the patent system: the America Invents Act of 2011, which created the Patent Trial and Appeal Board (PTAB). The PTAB was established as a faster and cheaper alternative to district court for deciding patent validity. However, according to detractors, lawmakers unintentionally included several design flaws that are being exploited today to harass start-ups, small businesses, and individual inventors, making the system more complicated and expensive. Critics of the PTAB refer to it as a “death squad” killing property rights, as it invalidates over 80 percent of patents it agrees to review.

The PREVAIL Act would correct these perceived design flaws. For instance, it would raise the “preponderance of evidence” standard for invalidating a patent currently employed by the PTAB to the district courts’ standard of “clear and convincing” evidence. The PREVAIL Act would also prevent repeat challenges of the same patent in the PTAB, which PTAB critics claim is often practiced by large companies to drive up litigation costs for smaller patent owners. PTAB cases cost patent owners between $300,000 to $450,000 on average to litigate, making duplicative hearings costly. Indeed, approximately 80 percent of patents challenged through the PTAB have already been brought to trial in district court. Finally, critics of the PTAB assert that it is largely utilized by big tech companies to attack start-ups and small businesses. Large tech companies, including Chinese companies Huawei and ZTE, are the leading users of PTAB.

Taken together, critics of PTAB assert that it is detrimental to U.S. start-ups and small businesses, and therefore U.S. innovation and international competitiveness. These same critics support the PREVAIL Act as introducing much needed changes to the PTAB to bolster IP protections and innovation.

On the other hand, as in the case of PERA, critics of the PREVAIL Act assert that the PTAB is a key tool for start-ups and other small businesses to defend themselves against NPEs. In their view, an invalidation rate over 80 percent indicates that the PTAB is functioning as intended. Further, while an average litigation cost of $450,000 is certainly expensive, patent litigation in courts often costs significantly more. In this sense, they argue the PTAB may be serving its purpose as a cheaper alternative to court.