Patent Office Proposals Put the American Economy at Risk

Here, the foxes are non-practicing entities (NPEs) — or patent trolls — that prey on the public by weaponizing overbroad, invalid patents. NPEs engage in legal extortion, initiating patent infringement lawsuits en masse and angling for lucrative settlements, often against small companies, but really, against all productive American businesses. 

The hens — productive American companies of all sizes — face the uncomfortable decision between fighting an expensive lawsuit or paying to settle unfounded patent assertions. Defending against NPEs can cost on average $5 million for a single lawsuit and NPEs have filed tens of thousands of litigations over the last 5 years, including about 2,000 lawsuits against small and medium-sized businesses. Even when companies have the resources to defend themselves, NPE activity diverts money from constructive uses to pay for lawyers and settlements in unproductive patent litigation. NPEs use well-worn tactics to further exploit the productive parts of the economy, including targeting companies going public and seeking funding from litigation financiers and private equity to fuel their campaigns.    

The fence is a bipartisan patent law called the America Invents Act (AIA) that Congress passed a decade ago to help address NPE activity—something the U.S. Patent and Trademark Office (USPTO) now seeks to gut in a recent Advance Notice of Proposed Rulemaking (ANPRM). With the AIA, Congress said anyone can petition the government to review granted patents. This review looks at, in the words of Supreme Court Justice Neil Gorsuch, “bad patents” that “slip through,” and shouldn’t have been issued. This process takes objectively bad patents out of NPEs’ hands—which otherwise would have been used to sue innovative, productive defendants.  

Congress’s fence is working as designed. At one point, NPE litigation was nearly cut in half from its peak in 2015, largely because of AIA review processes. This public, open review is far less expensive than defending against lawsuits, but there is still an ever-increasing cost and knowledge barrier in accessing it. That is where third parties stepped in.

As CEO and Founder of Unified Patents, we have built an independent, private, market-based solution to protect the most vulnerable companies and deal with the worst of the worst NPEs. Our mission is to deter NPE activity in important technology areas. One way we do this is by using Congress’s review process to revisit overbroad and invalid NPE patents, which the USPTO issued in error and lead to thousands of lawsuits and demand letters. We focus on the worst abusers in the patent system and never pay NPEs. This breaks the cycle of NPEs using settlement profits to fund even more litigation. There are no other actors in the patent system operating quite like Unified, and we have been successfully deterring wasteful, frivolous NPE litigation for over a decade.  

But suddenly, the USPTO proposed rules that limit access to government patent review for all and specifically target Unified.  

Despite lacking the authority to implement its proposed changes, the USPTO has suggested a standing requirement that would exclude non-market competitors from accessing patent validity review. Congress explicitly rejected any standing requirement in earlier drafts of the AIA. For the agency to now propose policy contrary to Congressional intent is administrative overreach of the highest order. 

The USPTO also proposed a new “substantial relationship” standard that would prevent patent review if another entity previously sought review, even if there was no knowledge of the earlier challenge. The agency offers no definition of what it means by “substantial relationship,” other than to single out membership organizations like Unified. Again, Congress foresaw this scenario, and already explicitly provided the standards it saw fit to prevent potential conflicts. This newly minted, vague legal standard would restrict review access to the public and companies alike, in ways Congress never intended. 

These are just two of the many ANPRM proposals that violate Congressional intent. Others include changing standards to initiate review, putting a shortened time limit on enforcing USPTO rules, and blocking review if there has been any other prior reviews in different forums.   

The upshot of these inventive restrictions is that Unified, and other third parties and companies targeted by NPEs, could no longer petition the government for review of an invalid patent. Small and medium-sized businesses would be vulnerable once again, caught up in new bureaucracy that limits access to review.  

Congress always intended for groups like Unified Patents to seek patent validity review and help protect against abusive, baseless litigation. For over a decade, this review has helped keep the foxes at bay. But now, the USPTO wants to cut holes in the fence and give the foxes free rein of the coop.

Kevin Jakel is CEO and Founder of Unified Patents.