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Patent Office Ex-Chief, Judges Face Suit Over ‘Rigged’ IP System (1)

Aug. 9, 2021, 3:54 PMUpdated: Aug. 9, 2021, 7:40 PM

An Obama-era Patent and Trademark Office director and group of former and current tribunal judges are being accused of stacking the intellectual property system against inventors, according to a lawsuit provided to Bloomberg Law.

The lawsuit marks the latest court action over the agency’s Patent Trial and Appeal Board, a tribunal favored by generic drugmakers, major technology companies, and others for trying to invalidate patents they claim are obstacles for releasing their own products.

Computer engineer Martin David Hoyle, owner of B.E. Technology LLC, alleged that patent office behavior favoring Alphabet Inc.'s Google in challenges to his advertising technology patents violated his constitutional due process rights.

Core to the dispute are two patents covering user data collection processes for targeted advertising and a patent fight with Google. Former PTO Director Michelle Lee was head of patents and patent strategy at Google before being nominated to lead the agency.

Hoyle said the PTAB proceedings were “tainted by various improprieties and underhanded tactics, designed to stack the deck against them and in favor of their far more powerful opponents.”

“The system had been rigged all along,” Hoyle said in the complaint filed Monday in the U.S. District Court for the Western District of Tennessee. The suit is against Lee and other agency officers over allegedly “unconstitutional actions.”

Tribunal Troubles

The PTAB has been subject to several legal challenges in recent years.

Daiichi Sankyo Inc. and AstraZeneca Pharmaceuticals LP last week asked a federal district court in Virginia to throw out PTAB rules they argue make it harder to secure challenges to rival drug patents.

Big tech has taken swings at the patent office as well. Apple Inc. and Alphabet Inc.’s Google teamed up to push the U.S. District Court for the Northern District of California to tear down a PTAB rule they also found problematic to securing tribunal challenges.

The PTAB has also faced criticism for often favoring corporations over smaller inventors, particularly under the leadership of Lee, who had been nominated to the office by former President Barack Obama.

The PTAB largely shed its reputation as a “patent death squad” under the Trump administration, whose PTO director Andrei Iancu took steps many say made it easier to get a patent yet more difficult to challenge it.

The Biden administration has yet to name a PTO director. The pharmaceutical industry is closely watching the nomination, as policy watchers say the president’s choice will have a significant impact on lowering drug prices.

Former PTAB chief judge James Smith—a defendant in Hoyle’s lawsuit—was previously rumored by agency watchers to be a possible PTO director under President Joe Biden.

PTAB judges Kalyan Deshpande, Lynne Pettigrew, and Sally Medley were also named as defendants in the lawsuit.

Google Dispute

Lee, Smith, and the other judges “are being sued in their individual capacities for personally undertaking, contributing to, and conspiring or otherwise being complicit in the actions that violated Plaintiffs’ constitutional rights, under color of federal law, during their tenure as officers, agents, employees, or representatives of the United States,” according to the lawsuit.

The PTO had rejected Google’s patent applications because of B.E. Technology’s existing patents, the lawsuit alleged. Hoyle sued the tech giant in 2012 after it created software that infringed his company’s patents without getting permission to use them.

Google, meanwhile, spent $18 million on PTO lobbying. Around that time came a patent law overhaul that created the PTAB.

Lee played an “instrumental role” in creating the PTAB, which Google and others used to “short-circuit” Hoyle’s infringement lawsuit, the complaint said.

Hoyle also alleged the PTO stacked judge panels against inventors and has a compensation structure that incentivizes the invalidation of IP rights. The agency “specifically targeted” his company for “enhanced scrutiny and adverse actions” around other patent applications, Hoyle alleged.

Cause of Action: Violation of rights under due process clause of the Fifth Amendment.

Relief: Damages.

Response: A PTO spokesperson declined to comment.

Attorneys: Pollock Cohen LLP represents Hoyle.

The case is Hoyle v. Lee, W.D. Tenn., No. 21-cv-02512, complaint filed 8/9/21.

(Updated with PTO response and docket information.)

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com

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