Patent reform must ensure legitimate patent challenges remain affordable

The patent system is rife with abuse by patent trolls and patent assertion entities.  Reform is desperately needed.  Unfortunately, some seek to change critical laws regarding Inter Parties Review (“IPR”), an important process by which any company, regardless of its size, can affordably challenge the validity of bad patents—patents of such poor quality that they never should have issued in the first place.  The proposed changes would severely weaken, if not cripple, the existing IPR process.  We cannot allow such an important tool to be destroyed or even weakened, especially under the cover of patent reform.

Small and medium businesses will be severely impacted if IPRs are weakened. For those not yet aware, patent litigation is expensive.  It can last 2-3 years or more, and typically costs $2 million to $10 million dollars.  Few small companies can afford such costs.  Accordingly, most settle when threatened with a patent lawsuit, even if the patents they are threatened with are clearly invalid because they are poorly written or attempt to claim ownership of inventions previously created by others. 

{mosads}As in-house counsel for a small company, I have seen the abuses perpetuated by bad patents.  These abuses come from patent trolls seeking to monetize bad patents by demanding settlements valued at less than the cost to defend, to competitors seeking unfair advantage by filing serial litigations against smaller companies who cannot afford to defend themselves even when the patents are of such poor quality that a court would likely find those patents invalid.  This latter tactic is particularly egregious, as it does not support the legitimate purpose of excluding others from practicing a novel invention.  Instead, it is used to bleed smaller companies of all available resources which would have otherwise been used to grow their company and create jobs, with a result that even if the smaller company wins the first of many lawsuits, it no longer has the resources to fight and is forced to sell its business to the competitor for pennies on the dollar.  The tragedy is that this occurs even when the patents are of such poor quality that they never should have issued.  My company has fought and survived such baseless attacks, but it has cost us millions of dollars.  It is therefore critical to have effective, cost-efficient avenues to challenge poor-quality patents so as to defend against such extortionary tactics.

The current IPR framework was laid out in the 2011 America Invents Act, and was designed to help eliminate poor quality patents being issued and abused.  Previously, there were few good options to challenge bad patents.  Patent litigation is expensive and risky, as juries are reluctant to overturn a patent which is presumed valid once issued, regardless of the merits of the defense.  Reexaminations, while less expensive, are extremely slow and not very effective.  This formed a vicious cycle subject to abuse: since bad patents faced low risk of invalidation, small businesses were forced to settle for less than the cost of defense, keeping bad patents intact to be asserted again, which encouraged others to file and obtain poor quality patents to continue the abuse.

Today, IPRs provide a cost-effective weapon for small businesses to challenge bad patents.  Preferable to litigation, IPRs usually cost between $125,000 – $350,000, and must be completed within 12 months of institution.  Significantly, parallel (and far more costly) district court litigation is frequently stayed while an IPR is pending.  In addition, IPR proceedings present a more favorable forum for challenging patents: as the Patent Office is performing the review, there is no presumption of validity for a challenged patent, and a broader standard for interpreting claim terms applies—the same standard used to evaluate the patent before it originally issued.  The effectiveness of IPRs is clear: 87 percent of all IPR proceedings have some claims cancelled, and 65 percent cancel all challenged claims.  These statistics demonstrate the poor quality of the patents being challenged, and reinforce the need for a cost-efficient tool to eliminate patents that should never have been allowed in the first place.

IPRs are not, as some contend, a “death squad” for patents.  Very few of the hundreds of thousands of patents that issue each year are challenged in IPR proceedings. Well-written patents survive.  Poor quality patents that never should have issued fail.  IPRs are also decided by three qualified patent attorneys serving as judges at the Patent Trial and Appeal Board (“PTAB”) over the course of a year-long proceeding, instead of by a single district court judge or lay jury often having no technical background or experience in patent law and having limited time or resources to evaluate the merits.  Moreover, because patent owners are able to amend their claims, there is no presumption that a previously issued patent claim is valid, and the broadest reasonable interpretation of the patent claims’ terms—the same interpretation used by the examiner who originally granted that patent—should prevail.

IPR provides an affordable and effective mechanism for small businesses to eliminate bad patents which never should have issued.  This benefits everyone but those who would use such patents to engage in abuse.  IPR are critical to small businesses in this country—the backbone of our economy—and we must not allow any patent reform bill to cripple or weaken this important tool.

Kirk is the associate general counsel/director of litigation for ABBYY US Software House, Inc.