Tag Archives: patent validity

Costs to establish clear patent ownership are soaring – Here’s why

It has never been easy for American innovators hoping to generate a return on their inventions, but new hurdles have made it impossible to license even the best patents.

Despite increased availability of capital and access to data, IT patents today have a much more difficult time proving themselves than a decade or a century ago. The vast majority of the public, stakeholders if indirectly, are not aware of the situation or its impact.

With the enactment of the American Invents Act (AIA) in 2012 and several supreme court decisions setting an ambiguously higher bar for patent certainty, licensing began to resemble scaling a high peak, with enough challenges even the most innovative business or inventor.

Two such obstacles are the Patent Trial and Appeal Board (PTAB) and inter partes reviews, created to validate patents already issued by the United States Patent and Trademark Office. Until the AIA came along, USTPO-issued patents had enjoyed a “presumption of validity,” the standard since 1952.

Second Look

In theory, a “second look” for issued patents is not a bad idea. Examinations are not always as thorough as they could be. If it were fairly applied, these re-examinations would kill any dubious patents that should not have been issued by time-constrained examiners, and affirm those that deserve to be. This would make it easier for owners to license without resorting to costly litigation. In practice, however, is not the case.

Patents that the PTAB chooses not to review, and even those whose reviews are instituted and claims affirmed, still, are rarely seen as licenseable, and are subject to subsequent IPRs and/or protracted litigation. New and even more onerous obstacles to patent certainty have added to the time and cost of resolving disputes. How much time and cost?

 

Steep Climb

The illustration on this page, courtesy of Brody Berman Associates, IP communication specialists, is an illustration of the just how difficult patent licensing has become. That is not to say that every licensor must go through all of the steps, all of the time, but many do, especially those who believe the infringement warrants significant damages or a potential licensor believes the royalty costs outweigh the expensive legal ones. Many accused infringers have the capital and constitution to withstand a protracted dispute, which can last five years or more.

Defendants who take their time engage in what is known as “efficient” infringement. For a patent holder to prove patentability, validity, infringement and damages is frequently too costly and time-consuming a climb, so why bother? For many IT patent holders, licensing without litigation is no longer an option.

From Edison to Alexander Graham Bell to Nicola Tesla, market leaders have been reluctant to accept new ways of solving old problems if it may hurt their bottom line. An expensive challenge with many impediments along the way is one way of mitigating a threat. Patents that are held by businesses and individuals but are not used (enforced) are seen as less threatening to established businesses. To them, the best patents are seen but not heard.

An overly arduous path to patent certainty not only tilts the playing field, it dissuades competition and dims the future.

Image source: Brody Berman Associates, Inc.

 

PTAB instituted IPRs are flat after declining slightly in 2015

After declining 9% in 2015 from the 2014 fiscal year Patent Trial and Appeal Board-instituted inter partes reviews (IPRs) have leveled off.

Instituted reviews were at 74% in 2014, went to 65% in 2015 and are thus far at 66% for fiscal year 2016. This is according to, “PTAB Grants Lower Rare of IPRs as Patent Owners Fight Back,” by Erin Coe in Law 360.

Coe reports that patent holders have “an 86 percent chance of seeing the PTAB find some or all of the instituted claims unpatentable, according to the total number of IPR trials that reached final decisions in the review period.”

The declining rate has been attributed to among other things, improved quality of the patents being put before the PTAB, although it still is reviewing about two-thirds of the patents that petitioners request.

An analysis through August 2015 showed that instituted reviews result in invalidation of one or more claims 88% of the time; invalidity success rate for patents with fully instituted petitions is 82%.

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The Kill Rate Analysis

According to Amy Simpson and Hwa Lee, attorneys at Perkins Coie LLP, the key take-aways or recent IPR activity:

1. Very few petitioners are walking away empty-handed: 88 percent of petitions with final written decisions resulted in at least one claim being invalidated.

2. A notable percentage — 21 percent — of all final written decisions resulted in complete invalidation of the patent.

3. Success starts and ends with the petition. The invalidity success rate for fully instituted petitions is 82 percent while the invalidity success rate for partially instituted petitions plummets to 52 percent. The PTAB’s first impression of the petition’s strength appears to affect the entire preceding and ultimate outcome.

Simpson and Lee analyzed all of the approximately 404 final written decisions on instituted IPRs from September 2012 through Aug. 1, 2015 to explore the factors behind IPR kill rates.

Image source: Law360.com via USPTO

Patent quality puzzle is dissected in new WIP0 magazine article

A good patent is becoming increasingly harder to find.

In the current issue of WIPO Magazine my article, “The puzzle that is patent quality,” looks at how the importance, market value and reliability of a patent can vary with perspective, as well as its right to exist.

Patent quality may start with validity but it does not end there.

“[With patents] the discussion is typically about validity, not the quality of an invention or its market value,” I write. “When someone speaks of a ‘good’ patent they could be referring to one or more characteristics: the patent’s likelihood of being upheld if enforced (litigated), the importance of coverthe invention it excludes others from practicing; or its relative value (in terms of protecting profit margins or generating direct licensing revenue) to a particular holder at a given time.”

Defining a patent that is worthy of scrutiny, and provides a degree of certainty, is no easy feat.

More work is needed on the legal and market implications of patent quality, as is a better system for determining patent quality and value earlier and more efficiently for a broader range of technologies. The uncertainty associated with patents costs companies billions and dissuades innovation and investment.

The August issue of WIPO Magazine is available here. My piece begins on p. 16.

For the slightly shorter web version go here.

Image source: iplawleaders.com; wipo.int.


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