Firing Patent Office Judges Stymies Innovation, Saves No Money

President Donald Trump’s efforts to reshape the federal government continue at a breakneck pace, with agencies submitting plans to slash their own workforces. The president promised staff cuts would be performed with a “scalpel” instead of a “hatchet.” But even federal employees performing congressional mandates to increase efficiency find themselves on the chopping block.

The US Patent and Trademark Office may not be the best-known government agency, but its mission of promoting US innovation and global competitiveness is essential. Alarmingly, the PTO’s ability to perform core duties is in jeopardy, as its administrative patent judges have been told to expect staff reductions.

During his confirmation hearing, Commerce Secretary Howard Lutnick raised concerns about the PTO’s “unacceptable” patent application backlog, and he was absolutely right to do so. Patent applications must be processed quickly and accurately, but PTO examiners aren’t the only ones working to ensure that US patents continue to advance US innovation.

A bipartisan congressional majority in 2011 passed the America Invents Act, which established the Patent Trial and Appeal Board at the PTO. The PTAB consists of expert patent judges, now under fire, who review patents challenged by members of the public. The judges confirm whether the patents are valid in a process known as inter partes review.

Congress could not have been clearer that it established the PTAB to improve patent quality and provide “a more efficient system for challenging patents that should not have issued” as well as reduce “unwarranted litigation costs.”

Firing the patent judges who carry out this vital work without guaranteeing that the PTAB can do its job effectively directly contradicts the Trump administration’s efforts to promote efficiency and defies the president’s demand to use a scalpel.

Patent infringement litigation is expensive, time consuming, and prone to abuse. More than half of all US patent cases are brought by shell companies making infringement accusations and using the potential litigation costs as leverage to extract lucrative settlements. The PTAB weeds out frivolous accusations more quickly, more reliably, and at a lower cost than a traditional lawsuit.

The agency can also correct its own mistakes, invalidating patents it never should have issued to begin with.

The most innovative US industries have long recognized the PTAB’s value. Indeed, Elon Musk’s Tesla is a repeat PTAB petitioner. And the review process costs taxpayers nothing. The PTO is funded entirely by fees, not taxpayer dollars, so laying off judges wouldn’t reduce the federal budget deficit by one penny.

In the America Invents Act, Congress was clear about the PTAB’s responsibilities: A person who isn’t the owner of a patent can file a petition for inter partes review, and the PTAB will “conduct each inter partes review instituted.”

The law also specifies timelines. The PTAB has at most six months to decide whether to institute a review and must reach a final determination no later than one year following institution (six months can be added in exceptional circumstances).

It is difficult to see how patent judges will be able to carry out their congressionally mandated obligations following firings, unless the agency plans to outright deny more requests for review.

During the first Trump administration, PTO leadership operated outside of the notice-and-comment rulemaking required by the Administrative Procedures Act when it implemented rules that arbitrarily reduced the public’s access to the PTAB. In recent weeks, these rules were restored.

Then the PTO’s acting director went a step further and invented an entirely new, non-statutory process during which she, or the director who follows her, would personally review PTAB petitions and decide whether to reject them on discretionary grounds.

This move creates a serious risk of conflicts of interest and unequal treatment, with reviews being denied for reasons having nothing to do with the merits.

Firing PTAB patent judges essentially would kill a public service that is required by law and routinely reduces unnecessary cost and waste. Overloading patent judges to the point where they can’t make sound, timely decisions—or are forced arbitrarily to deny deserving petitions for review to keep caseloads in line with reduced staffing—produces the same ultimate outcome. More invalid patents will be used to stymie innovation and drag down productivity and economic growth.

Using a scalpel instead of a hatchet when it comes to the federal workforce means preserving essential, legally-mandated services and supporting tools that already produce greater efficiency.

As the PTO moves forward with its restructuring plans and as its director-designate John Squires prepares to lead the agency, it would be wise to retain the administrative patent judges who deliver efficiency and reliability at no cost to the US taxpayer.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Donald B. Verrilli Jr. served as Solicitor General of the United States from 2011 to 2016. He is a partner with Munger, Tolles & Olson, and the founder of its Washington, D.C., office.

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