A bipartisan group of senators just introduced a bill to crack down on Chinese companies that steal hundreds of billions of dollars in American intellectual property every year. Unfortunately, another urgent threat to American inventors’ IP is emerging here at home—Big Tech—and it’s unclear if legislators will protect innovators’ rights from duplicative attacks.
In 2011, Congress established the Patent Trial and Appeal Board (PTAB) within the U.S. Patent and Trademark Office. The PTAB was supposed to offer companies that want to challenge the validity of patents—typically patents owned by a rival company—a more efficient alternative to the court system.
The PTAB has proved extraordinarily useful to patent challengers. The board has invalidated as many as 84% of the patents, partially or entirely, that it has fully adjudicated. That figure suggests that either the USPTO is really bad at its job of deciding whether to issue a patent in the first place—spoiler alert: it isn’t—or there’s a thumb on the scale.
That thumb belongs to Big Tech.
Big Tech Infringes on Smaller Companies’ Patents
Most of our tech giants were once small innovators themselves, but these days, they often prefer to use technology developed by smaller, more cutting-edge companies, without bothering to seek a license.
Those smaller businesses, which have had their patents infringed upon by Big Tech firms, respond with a lawsuit if they can. Big Tech companies realized that if they found themselves in such a legal tangle, they could try to get the disputed patent invalidated at the PTAB—with great odds of success.
With deep pockets and armies of lawyers, Big Tech made a habit of challenging smaller companies’ patents in two venues at once—the federal courts in addition to the PTAB—often spending them into the ground, and often with repeat challenges at the PTAB. For example, Apple has filed hundreds of petitions with the PTAB, 56% of which are duplicative. Out of the PTAB petitions filed by the top 10 petitioners during 2021, Samsung, Apple, Google, Intel and Microsoft collectively accounted for 81% of all such petitions.
To prevent this abuse, the USPTO implemented some limited safeguards in 2020. The Fintiv precedent, as it’s called, provides a set of factors that the PTAB can consider when deciding whether to hear a patent challenge. It employs discretion Congress expressly granted in the America Invents Act.
In particular, the Fintiv precedent effectively clarifies that PTAB doesn’t need to hear a challenge if the patent in question is already part of a parallel court proceeding that is well underway.
Fintiv helps ensure a fair shake for patent holders in a system that, until recently, tilted against them, requiring them to fight a two-front war.
Fintiv Is Not to Blame
Unsurprisingly, Big Tech firms hate the Fintiv precedent, and are advancing a slew of hollow arguments to convince lawmakers and regulators to overturn it. The chief legal officers of 23 tech firms, including Intel, Twitter, and Netflix, recently issued a letter calling on Commerce Secretary Gina Raimondo to repeal Fintiv, saying it causes “immediate and irreparable harm to American innovators.”
This is nonsense. Only three of the letter’s signatories have ever even had a request for PTAB review turned down because of Fintiv. What they really mean is that they can no longer count on their old strategy of violating a patent, then getting the PTAB to declare it invalid even if there is an ongoing court proceeding with the court decision expected before the PTAB’s.
Big Tech lawyers also argue that Fintiv must be repealed to save us from “patent trolls.” That’s what they call companies that acquire and hoard dubious patents, in order to spring weak infringement claims on innocent, unsuspecting tech giants at opportune moments.
But the idea that this is a widespread problem today is a myth. To be sure, a small number of malicious actors have acquired overly broad patents that they’ve later used to launch lawsuits. But Big Tech seems bent on painting anyone who doesn’t immediately commercialize a patent in a negative light. Patent law, however, does not require patent owners to manufacture products. Instead, they may license others to do so.
Many inventors file for patents but hold off on commercial applications. They wait for the right time to commercialize or license their patents, which can hinge on other technological developments. For example, DD Therapeutics has multiple patents on their nanotechnology to potentially treat brain disorders, but they’re still conducting clinical trials to ensure their drugs are safe before bringing them to market.
Other entities specialize in inventing, but never intend to manufacture, including universities, research institutes, hospitals, engineering firms, technology developers, start-ups, and independent inventors. Think Alexander Graham Bell.
Big Tech’s latest gambit is to blame Fintiv for high drug prices, which has no real basis in fact. As of late 2021, the PTAB had applied Fintiv in more than 600 rulings, and of those, the PTAB denied hearing challenges to only four drug patents, all of which were already in litigation. But tech company lawyers hope that if they wave their hands around this hot-button issue, it will make the Fintiv precedent go away.
To protect America’s innovative entrepreneurs, the Commerce Department can begin by rejecting Big Tech’s absurd pressure campaign to get rid of the Fintiv rule. Legislative action could go further, and end the practice of allowing serial attacks on the same patent even after the PTAB or a court has ruled it valid. Congress should also require the PTAB meet the same court standard of “clear and convincing evidence,” rather than the status quo “preponderance of evidence,” when invalidating patents.
Finally, we must require that companies have “standing"—a legitimate financial or business reason—to bring a case before the PTAB. This would stop Big Tech from benefiting from proxy shell companies that do nothing but attack inconvenient patents.
Our biggest technology companies may be homegrown. But if they succeed in their multi-front war on Fintiv, they’ll do as much harm to American innovation and our economy as any foreign IP threat.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Judge Paul R. Michel served on the U.S. Court of Appeals for the Federal Circuit for 22 years, and as its chief judge from 2004 until his retirement in 2010.
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.