Does Our Patent System Really Need a Revamp?

A bipartisan group of senators just introduced a bill that'd make profound changes to America's patent system.

As its name — the "Patent Trial and Appeal Board Reform Act of 2022" — suggests, the bill concerns the PTAB, an adjudicative body within the U.S. Patent and Trademark Office. Congress created the PTAB over a decade ago, hoping it would serve as a cheaper, quicker, out-of-court venue for companies to contest the validity of patents.

Since its inception, the PTAB has sparked an enormous amount of controversy for frequently invalidating many of the patents it reviews. Some legal experts maintain the PTAB is working as intended and that it's only throwing out bad patents, while others argue the board's approach is too hostile to patent holders — and too friendly to Big Tech companies that file a majority of board's patent challenges. 

So who's right? Well, first consider the recent behavior of many Silicon Valley tech titans, which have grown increasingly bold in infringing on their less-powerful competitors' patented technologies. 

Just last year, Google was found liable for stealing intellectual property from speaker-maker Sonos for use in its own line of smart speakers. Cisco was found guilty of "willful and egregious" infringement and ordered to pay nearly $2 billion to cybersecurity startup Centripetal. And Apple, meanwhile, has faced patent-infringement allegations from innovators on everything from the iPhone's modem to the company's use of wireless messaging.

It's often more cost-effective for giant tech firms to simply help themselves to promising technology, rather than license it or innovate for themselves. And most start-ups and small inventors lack the financial resources to defend themselves against such deep pockets. 

When victims of IP theft do fight back, companies like Google and Apple try to drag out legal proceedings in the hopes that patent holders will either run out of money or cut their losses and move on. And the USPTO's administrative law body has played a role in facilitating such aggressive behavior. 

The PTAB began operating in 2012 after passage of the Leahy-Smith America Invents Act. Its purpose was well intended — to provide a way to adjudicate certain patent disputes without resorting to costly, complicated courtroom litigation. But it didn't take long for giant companies, particularly those in the tech industry, to wield these PTAB proceedings against smaller inventors.

Rather than treating the new body as an alternative to traditional litigation, firms like Google, Apple, Intel and Cisco started filing PTAB challenges to attack the smaller companies that had sued for infringement. 

For instance, if a smaller firm sues a Big Tech company for infringing on a patent, the Big Tech company can turn around and challenge that company's entire patent portfolio at the PTAB. This is plainly intended to add a new layer of complexity, delay, and cost to the patent owner.

In 2020, the USPTO intervened to curtail these sorts of bad-faith challenges. Prompted in part by Apple's attempt to weaponize the PTAB in a dispute with a smaller firm called Fintiv, the USPTO adopted its "NHK-Fintiv factors," which allows the PTAB to reject taking on a patent challenge if the patent in question is already the subject of litigation in federal courts.  

The NHK-Fintiv factors effectively deny tech giants one of their preferred maneuvers for targeting smaller competitors — jumping back and forth between district courts and proceedings at USPTO with the same or similar arguments to delay, or entirely avoid, having to pay damages for patent infringement. Expectedly, Big Tech has fought back against the NHK-Fintiv factors with vigor, including multiple court challenges — all of which they have lost. 

The newly introduced PTAB Reform Act would effectively give Big Tech firms what they want, by functionally eliminating the NHK-Fintiv factors and thus rescinding the USPTO director's discretionary authority on PTAB reviews. As a result, Big Tech firms could once again use bad-faith PTAB challenges as part of their legal attacks on innovative startups. 

That isn't the goal of the bill's well-intentioned sponsors, of course. They are operating under the impression that this reform will "address problems for small businesses and ordinary Americans caused by poor-quality patents."

But the idea that the United States is beset with "poor-quality patents" simply isn't true. In USPTO's most recent survey of actual patent applicants, 65% rated overall patent quality as excellent (an all-time high) and only 6% rated it as poor. Patent litigation in the United States remains at historically low numbers, and the use of the Fintiv factors to deny the institution of IPRs is actually declining. 

At a time when both political parties are eager to check the power of Silicon Valley, the PTAB Reform Act represents an unnecessary, and perhaps even unintentional, step backwards. There's no reason to enable Big Tech to erode smaller competitors' IP protections — and deter innovation and economic growth in the process.

Chris Israel is the executive director of the U.S. Alliance of Startups and Inventors for Jobs and a former U.S. Intellectual Property Enforcement Coordinator.