Patent trolls abuse PTAB reforms to bully small businesses---turns innovation and growth.

Before Congress in April, Director Vidal testified that the U.S. Patent and Trademark Office’s (USPTO) recent Advance Notice of Proposed Rulemaking (ANPRM) on the Patent Trial and Appeal Board “contains a myriad of options, and we want to hear from stakeholders not only on how those provisions might affect them, how we should evolve them, but whether we even have the authority to move forward with them.” And boy, did the public respond. The Office heard from more than 14,500 comments, the most on record for any administrative patent-related action in the USPTO’s long history.

The response was overwhelming, broad-based opposition to the ANPRM’s proposals. More than 95% of all public comments—and nearly 85% of unique comments—opposed the proposals, according to analysis by Unified Patents.

It should not be surprising that stakeholders oppose the ANPRM. New economic analysis found that over the next 10 years the proposals would result in a net decrease in U.S. business activity of -$482.1 million in gross product, a net decrease of -$230.4 million in personal income, a net decrease of -2,000 job-years of employment, and $202.9 million in additional costs to the federal government – between lost tax receipts and higher procurement costs.

As the comments emphasize, proposals that make it more difficult to challenge invalid patents—including new standing requirements for petitioners—would be a drag on the economy, slow innovation, and burden productive businesses with increased costs. The ANPRM feedback shows, rather, that stakeholders would like for the Patent Trial and Appeal Board (PTAB) to be a more accessible, more efficient alternative to litigation, as was provided for in the America Invents Act of 2011. Despite lobbying efforts to the contrary, the record is clear—the ANPRM was wrong-footed, could raise drug prices, would serve to embolden NPEs, and would be a drain on the productive American economy.

Indeed, Director Vidal has repeatedly emphasized the importance of stakeholder input throughout her tenure; the USPTO now needs to seriously grapple with the public’s concerns, and must question whether to proceed with any rulemaking process that does not roll back ill-advised moves like the NHK-Fintiv and Valve rules, unpopular moves that have only served to limit objective review and the public’s right to petition the government.

And the USPTO isn’t the only governing body that must heed this clarion call against these motivated “reform” efforts. Just days after the ANPRM’s comment window closed, Senator Thom Tillis (R-NC) and Senator Chris Coons (D-DE), ignoring the clamor, introduced the Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act, a rebranding of the perennial go-nowhere “STRONGER” Act that would institute many of the same unpopular changes included in the ANPRM.

It would be undemocratic for the USPTO or Congress to justify proceeding with new restrictions for PTAB review on the heels of such a significant and decisive public outcry from stakeholders across a diverse array of sectors and with a wide range of backgrounds. It would serve special interests over a documented and overwhelming opposition; it would raise drug prices, embolden patent trolls, and prevent the USPTO from correcting its own mistakes. And the PTO likely doesn’t have the authority to make good on most of their proposals. In short: it’s bad policy.

Recurring themes from the thousands of public comments in opposition to the changes are summarized below, and clearly demonstrate the problem with either the USPTO or particular Congressmen proposing them.

Patent Trolls are a Major Concern

The need to protect businesses of all sizes against predatory NPE or patent troll lawsuits is a consistent theme across a majority of the comments. The term “patent troll,” “NPE,” or “non-practicing entities” appears in over 10,500 submissions (more than 73% of all comments), with the overarching concern that, on balance, the proposed changes to PTAB review would benefit patent trolls at the expense of economic growth and innovation.

Congress originally established the PTAB, in part, as a response to the widely-recognized pattern of abusive patent litigation. Any changes that add new procedural hurdles will leave businesses more vulnerable to costly, bad-faith patent infringement assertions. Public input expressing concern about the new changes further enabling patent trolls includes:

“...Over the past few decades, businesses like hotels, restaurants, and retailers have found themselves the target of lawsuits from non-practicing entities (NPEs), sometimes called patent trolls. These NPEs will threaten businesses with claims of patent infringement on vague old patents, which frankly never should have been issued in the first place. The trolls know they have no case, but they’re relying on businesses to make the calculation that it’s cheaper to settle out of court than wage an expensive (even if successful) legal battle.

IPR is a tool in businesses’ arsenal when it comes to defending against trolls. The program, which was created as part of the 2011 America Invents Act (AIA) allows anyone to file a challenge on an old patent to have it reviewed by the PTAB. Evidence from the first decade of the program shows that it works – 40 percent of patents challenged via IPR are ruled invalid, demonstrating that there is a robust need for a post grant review process at the PTAB.

Unfortunately, the recent ANPRM threatens to significantly weaken the IPR process, putting businesses like our members at risk. The proposed rules would make changes to a variety of elements of the IPR process, including who can file an IPR, how long they have to file it, and what the standard for instituting an IPR is. All of these proposed changes create uncertainty for small businesses across the county, many of whom now have to worry about emboldened trolls coming after them.” – I. Diaz, Tweedy Mile Association (Nonprofit organization focused on the downtown revitalization of the city of South Gate in Los Angeles County)

“...NPEs and PAEs (so called ‘patent trolls’) justify their practices by claiming to be the champion of the small, independent rights-holder. They claim that they give rights-holders the ability to assert their IP against large entities that would otherwise be able to violate at-will, relying on fixed cost staff attorneys and lengthy, costly litigation.

I don't dispute these claims. NPEs and PAEs can serve an important function.

The IPR process, however, has proven to be a successful counterbalance to the incentives that have driven some of these companies into unethical territory and damaged the ability of US companies to innovate and compete.

It would be a mistake to eliminate or reduce the effectiveness of the IPR.

We should be moving in the other direction and expanding this program, which has a decade of proven success.” – Ratio Software, LLC (Software design and development company)

“...From COVID precautions, to supply chain issues, to rising inflation rates, to chronic labor shortages, our members have overcome tough odds to continue to provide goods and services to the people of the Granite State. At a time when some of our members are just beginning to see the light at the end of the tunnel, weakening the IPR process will signal to non-practicing entities (NPEs, sometimes known as “patent trolls”) that it is open season on small businesses.

As you know, there are some bad actors out there who want to abuse the patent system – buying up old, vague patents from the earliest days of the internet, and using them to threaten or sue small businesses for alleged “infringement.” While most of these cases would easily fail in a real legal challenge, for small businesses it is significantly less expensive to settle out of court with a troll than it would be to go through an expensive trial. NPEs count on this, and can use the same old patent to extort thousands and thousands of dollars from retailers and other Main Street companies.” – NH Retail Association (Association representing more than 700 New Hampshire retailers)